nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒01‒23
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Budget Cycles in the European Union and the Impact of Political Pressures: A dynamic panel regression analysis By Georgios Efthyvoulou
  2. Public Goods and Voting on Formal Sanction Schemes: An Experiment By Louis Putterman; Jean-Robert Tyran; Kenju Kamei
  3. Habit formation, strategic extremism, and debt policy By Egil Matsen; Øystein Thøgersen
  4. Is there any Relationship between Environment, Human Development, Political and Governance Regimes? Evidences from a Cross-Country Analysis By Mukherjee, Sacchidananda; Chakraborty, Debashis
  5. The political economy of imperialism, decolonization, and development By Erik Gartzke; Dominic Rohner
  6. Political ideology and economic freedom across Canadian provinces By Christian Bjørnskov; Niklas Potrafke
  7. Earthquake propensity and the politics of mortality prevention By Keefer, Philip; Neumayer, Eric; Plumper, Thomas
  8. Oil and the duration of dictatorships By Crespo Cuaresma, Jesus; Oberhofer, Harald; Raschky, Paul
  9. Do international labor standards contribute to the persistence of the child labor problem? By Matthias Doepke; Fabrizio Zilibotti

  1. By: Georgios Efthyvoulou (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: This paper investigates the presence of political budget cycles (PBCs) in the European Union using a data set encompassing all 27 current member states over the period 1997-2008, and analyzes what may explain their variability across countries and over time. Conditioning on partisan considerations and several socio-economic variables, we find evidence in favor of a systematic electoral cycle in fiscal policy (i.e. spending and budget deficits are raised in election years). Furthermore, we find that PBCs are much larger in the Eurozone countries than in the countries that have not yet adopted the euro. Finally, we discuss an interesting area for future research, namely, fiscal policy manipulations are influenced by the information available to the market before elections. Specifically, we show that the size of PBCs is inversely proportional to the relative weight voters assign to non-economic issues prior to an election and positively correlated with the uncertainty over the electoral outcome. Once we account for these two features, the aforementioned differences between the Eurozone and the non-Eurozone countries seem to disappear.
    Date: 2010–01
  2. By: Louis Putterman (Department of Economics, Brown University); Jean-Robert Tyran (Department of Economics, University of Copenhagen); Kenju Kamei (Department of Economics, Brown University)
    Abstract: The burgeoning literature on the use of sanctions to support public goods provision has largely neglected the use of formal or centralized sanctions. We let subjects playing a linear public goods game vote on the parameters of a formal sanction scheme capable both of resolving and of exacerbating the free-rider problem, depending on parameter settings. Most groups quickly learned to choose parameters inducing efficient outcomes. But despite uniform money payoffs implying common interest in those parameters, voting patterns suggest significant influence of cooperative orientation, political attitudes, and of gender and intelligence.
    Keywords: public good; voluntary contribution; formal sanction; experiment; penalty; voting
    JEL: C91 C92 D71 D72 H41
    Date: 2010–01
  3. By: Egil Matsen; Øystein Thøgersen
    Abstract: We suggest a probabilistic voting model where voters’ preferences for alternative public goods display habit formation. Current policies determine habit levels and in turn the future preferences of the voters. This allows the incumbent to act strategically in order to influence the probability of reelection. Comparing to a benchmark case of a certain reelection, we demonstrate that the incumbent’s optimal policy features both a more polarized allocation between the alternative public goods and a debt bias.
    Keywords: Budget deficits, voting, extremism, habit formation
    JEL: D72 D78 H62
    Date: 2010–01
  4. By: Mukherjee, Sacchidananda; Chakraborty, Debashis
    Abstract: The current study attempts to understand the relationships among Environmental Quality (EQ), Human Development (HD) and political and governance regime in a cross-country framework. The underlying hypothesis is that in addition to income, as reflected from the literature on Environmental Kuznets Curve (EKC) hypothesis, several other factors, including social and political ones, may influence environmental decision making, and thereby environmental sustainability, in a country. The EQ of the countries in the current study is denoted by their Environmental Performance Index (2008). Human development is represented by Human Development Index (2007) and Human Poverty Index (2006). Democracy Index (2008) and Corruption Perceptions Index (2008) are considered as proxies for political transparency in a country and its susceptibility to rent-seeking activities respectively. The regression results confirm the closer association between the socio-economic and socio-political factors in a country and its environmental performance.
    Keywords: environmental quality; human development; economic growth; democracy; corruption; environmental Kuznets curve (EKC)
    JEL: D73 O15 Q56 Q01 D72 O4 P28
    Date: 2010–01–12
  5. By: Erik Gartzke; Dominic Rohner
    Abstract: Nations have historically sought power and prosperity through control of physical space. In recent decades, however, territorial empire has largely ceased. Most states that can take and hold territory no longer appear eager to do so, while the weak are unable to expand. Have powerful countries become 'kinder and gentler', or has something fundamental changed about the logic of empire? We offer a theory of imperialism and decolonization that explains both historic cycles of expansion and decline and the demise of the urge to colonize. Technological shocks enable expansion, while military technology gradually disseminates, diluting imperial advantage. At the same time, economic development has led to a secular decline in the payoffs for appropriating land, minerals, and reluctant labor. Once conquest no longer pays for great powers, the systemic imperative to vertically integrate production also becomes archaic.
    Keywords: Imperialism, decolonization, development, democracy, mercantilism
    JEL: D74 N40
    Date: 2010–01
  6. By: Christian Bjørnskov (Aarhus School of Business, Aarhus University); Niklas Potrafke (University of Konstanz)
    Abstract: This paper examines how political ideology influenced economic freedom in the Canadian provinces. We analyze the dataset of economic freedom indicators compiled by the Fraser Institute in 10 Canadian provinces over the 1981-2005 period and introduce two different indices of political ideology: government and parliament ideology. The results suggest that government ideology influenced labor market reforms: market-oriented governments promoted liberalization of the labor market. Parliamentary ideology did not influence economic liberalization at all. This finding (1) identifies differences between leftist and rightwing governments concerning the role of government in the economy and (2) indicates that ideological polarization concerns governments but less parliamentary fractions in the Canadian provinces.
    Keywords: economic freedom, taxation, regulations, ideology, panel data
    JEL: O51 P16 R11 R50
    Date: 2009–12
  7. By: Keefer, Philip; Neumayer, Eric; Plumper, Thomas
    Abstract: Governments can significantly reduce earthquake mortality by implementing and enforcing quake-proof construction regulation. The authors examine why many governments do not. Contrary to intuition, controlling for the strength and location of actual earthquakes, mortality is lower in countries with higher earthquake propensity, where the payoffs to mortality prevention are higher. Importantly, however, the government response to earthquake propensity depends on country income and the political incentives of governments to provide public goods to citizens. The opportunity costs of earthquake mortality prevention are higher in poorer countries; rich countries invest more in mortality prevention than poor countries in response to a higher earthquake propensity. Similarly, governments that have fewer incentives to provide public goods, such as younger democracies, autocracies with less institutionalized ruling parties and countries with corrupt regimes, respond less to an elevated quake propensity. They therefore have higher mortality at any level of quake propensity compared to older democracies, autocracies with highly institutionalized parties and non-corrupt regimes, respectively. The authors find robust evidence for these predictions in our analysis of earthquake mortality over the period 1960 to 2005.
    Keywords: Population Policies,Natural Disasters,Hazard Risk Management,Labor Policies,Disaster Management
    Date: 2010–01–01
  8. By: Crespo Cuaresma, Jesus (Department of Economics, University of Innsbruck); Oberhofer, Harald (University of Salzburg); Raschky, Paul (Department of Economics, Monash University)
    Abstract: This paper studies empirically the relationship between oil endowment and the duration of autocratic leaders. A simple theoretical setting shows how the relationship between oil endowment and the duration of the dictatorial regime is mediated by the price of oil. Using a dataset on 106 dictators, our empirical analysis supports the predictions of the theoretical model and indicates that dictators in countries which are relatively better endowed in terms of oil stay longer in office. This result is robust to changes in the definition of dictatorial regimes, as well as to controlling for other economic and political variables.
    Keywords: Natural resources; dictatorship; political economy; duration
    JEL: D72 H11 Q34
    Date: 2010–01–14
  9. By: Matthias Doepke; Fabrizio Zilibotti
    Abstract: In recent years, a number of governments and consumer groups in rich countries have tried to discourage the use of child labor in poor countries through measures such as product boycotts and the imposition of international labor standards. The purported objective of such measures is to reduce the incidence of child labor in developing countries and thereby improve children’s welfare. In this paper, we examine the effects of such policies from a political-economy perspective. We show that these types of international action on child labor tend to lower domestic political support within developing countries for banning child labor. Hence, international labor standards and product boycotts may delay the ultimate eradication of child labor.
    Keywords: Child labor, political economy, labor standards, trade sanctions
    JEL: J20 J88 O10
    Date: 2010–01

This nep-pol issue is ©2010 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.