nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒01‒30
seventeen papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Labor Market of Italian Politicians By Massimiliano Landi; Antonio Merlo; Vincenzo Galasso; Andrea Mattozzi
  2. Reconstituting Political Representation in the EU: The analytical framework and the operationalisation of the RECON models By Emmanuel Sigalas, Monika Mokre, Johannes Pollak, Jozef Bátora; Peter Slominski
  3. Rational Choice and Voter Turnout: Evidence from Union Representation Elections By Henry S. Farber
  4. Tying Your Enemy’s Hands in Close Races: The Politics of Federal Transfers in Brazil By Fernanda Brollo; Tommaso Nannicini
  5. Lifestyles and Preferences for (Public) Goods: Professional Football in Munich By Gabriel Ahlfeldt; Wolfgang Maennig; Michaela Ölschläger
  6. The Coevolution of Economic and Political Development from Monarchy to Democracy By Fali Huang
  7. Do Migrants Improve Governance at Home? Evidence from a Voting Experiment By Catia Batista; Pedro Vicente
  8. Assessing the relationship between democracy and domestic taxes in developing countries By Hélène EHRHART
  9. Voting over piece-wise linear tax methods By Juan D. Moreno-Ternero
  10. Voting over piece-wise linear tax methods By Juan D. Moreno-Ternero
  11. Evolving Preferences and Policy Advice in Democratic Society By Viktor J. Vanberg
  12. Majority Voting in Multidimensional Policy Spaces: Kramer-Shepsle versus Stackelberg By De Donder, Philippe; Le Breton, Michel; Peluso, Eugenio
  13. The Political Economy of Trade Policy in Indonesia By Hadi Soesastro; M. Chatib Basri
  14. Rice and Philippine Politics By Ponciano S. Intal Jr.; Marissa C. Garcia
  15. The political economy of Land Reform: A new perspective applied to Latin America By Miguel Rocha de Sousa
  16. A Fistful of Dollars: Lobbying and the Financial Crisis By Thierry Tressel; Prachi Mishra; Deniz Igan
  17. The Politico-Strategic Dimension of the US Proposal for a Free Trade Agreement with the Philippines By Renato Cruz de Castro

  1. By: Massimiliano Landi; Antonio Merlo; Vincenzo Galasso; Andrea Mattozzi (Singapore Management University)
    Abstract: Like voters (the represented), politicians (the representees) are the heart and soul of representative democracy. But isn’t being a politician just like any other job? After we get past the rhetoric, is politics any different than other occupations? In the political sector, voters, parties and politicians represent the counterparts of consumers, firms and workers/managers in the market sector. In fact, the analogy is much deeper than it may appear at first sight. In the market sector, consumers determine to a large extent the success of a firm and ultimately the management’s fate. However, managers are chosen by the firms, which typically have an objective that is different from those of consumers and managers. Likewise, while in all democratic systems the voters ultimately determine who is elected, it is typically the case that political parties nominate candidates for public office. Furthermore, the objectives of voters and parties with respect to the selection of candidates may differ, and are constrained by the career ambitions of individuals with political aspirations. But then, what really makes a career in the political sector different from a career in any other economic sector? There are at least three distinctive features that characterize the labor market in the political sector. First, politicians are typically “under the spotlight,� receiving the attention of the media and of a variety of citizens’ organizations. This makes politics a “showcase,� where politicians in office can display their political skills, while it might be more difficult for individuals working in the market sector to reveal their market ability. Second, inter-party competition for potential politicians is likely to be of secondary importance, as ideological preferences are more likely to attract individuals toward specific parties at the beginning of their political careers. Third, it is often the case that political parties “take care of their losers� by reserving party’s positions to defeated incumbents. As a result, while individual careers within the political sector are inevitably linked to the opportunities available within parties, the extent to which individual endowments of “political� and “market� skills are correlated, or experience in the political (market) sector is also valuable in the market (political) sector, links the labor markets of the two sectors. This link affects the selection of politicians, the politicians’ careers, and the relationship between parties and voters.
    Keywords: politicians, voters, parties, political sector,
    JEL: J21 J00 J49
    Date: 2010–01
  2. By: Emmanuel Sigalas, Monika Mokre, Johannes Pollak, Jozef Bátora; Peter Slominski
    Abstract: In this paper we elaborate on the analytical framework linking the three RECON democracy models to political representation and claims-making during the European elections campaign. Relying on the models of delegated, federal and regional-cosmopolitan democracy as ideal-types we develop a theoretical and operational framework that guides our empirical research on the prospects of parliamentary mode of representation at the EU level. We argue that parliamentary representation will continue to play a role in the future, but the role of political parties at European level and the claims brought forward to mobilise the electorate will be different in each democracy model. In the case of a delegated EU democracy the national political parties will dominate the European party federations and the EP election campaigns will be predominantly national in their scope. Equally, in a federal EU democracy the influence of the European level parties over their national member will be prominent and political claims will have a distinctively European outlook. In a non-statist, regional-cosmopolitan EU democracy parties and MEP candidates should address also matters of extra-European and of global concern, while the relationship between national and European level parties should be one of consensual agreement rather than of institutionalised hierarchy. The paper ends with the formulation of a series of testable hypotheses that will allow us to assess empirically the prospects for each EU democracy model.
    Keywords: democracy; European elections; European Parliament; political parties; political representation
    Date: 2009–12–15
  3. By: Henry S. Farber (Princeton University)
    Abstract: It is common observation that many individuals vote despite the fact that in elections with even a moderate number of voters, the probability their vote will be pivotal is quite small. The theoretical solutions of positing that individuals receive utility from the act of voting itself "explains" why individuals vote, but it leaves open the question of whether or not there is a significant margin of individuals who consider the effect of their vote on the outcome in deciding whether or not to vote. I develop a rational choice model of voting in union representation elections (government supervised secret ballot elections, generally held at the workplace, on the question of whether the workers would like to be represented by a union.) These elections provide a particularly good laboratory to study voter behavior because many of the elections have sufficiently few eligible voters that individuals can have a substantial probability of being pivotal. I implement this model empirically using data on over 75,000 of these elections held from 1972-2009. The results suggest that most individuals (over 80 percent) vote in these elections independent of consideration of the likehood that they will be pivotal. Among the reminder, it appears the 1) the likelihood of voting falls with election size, 2) the likelihood of voting increases with the expected closeness of the election outcome, and 3) the marginal effect of closeness on the likehood of voting increases in magnitude with election size. While the first two findings are consistant with the standard rational choice model, the third is not. The results suggest that, while these individuals consider first-order variation in the probability that they will be pivotal, they do not carry out a complete calculation of the probability of being pivotal.
    Keywords: Union elections, voting behavior, rational choice
    JEL: H39 J08 J29
    Date: 2009–10
  4. By: Fernanda Brollo; Tommaso Nannicini
    Abstract: We apply a regression discontinuity design in close electoral races to identify the impact of (exogenous) partisan alignment on federal transfers to municipal governments in Brazil. According to our results, municipalities where the mayor is affiliated with the coalition of the President receive larger transfers by about 36%–43% in the last two years of the term. This effect is mainly driven by the fact that the federal government penalizes municipalities run by mayors from the opposition coalition who won by a narrow margin, thereby tying their hands for the next (close) electoral race. We also find that politically motivated transfers are larger for second-term mayors—who may have more political connections, weaker reelection incentives, or stronger incentives to run for higher offices—and for small municipalities without a radio station, where the mayor can more easily claim political credit for transfers.
    Date: 2010
  5. By: Gabriel Ahlfeldt (Chair for Economic Policy, University of Hamburg); Wolfgang Maennig (Chair for Economic Policy, University of Hamburg); Michaela Ölschläger (Chair for Economic Policy, University of Hamburg)
    Abstract: This paper investigates the 2001 referendum on the Allianz-Arena, a professional soccer stadium in Munich, Germany, with respect to lifestyle-specific voter preferences. Using political party affiliation and milieu probabilities as proxy variables, we find that lifestyle-specific preferences, values and attitudes more significantly contribute to the explanation of voting outcome compared to traditional strata-orientated indicators of economic wealth. Thus, lifestyle, preferences, tastes and attitudes are not proportionally related to income. Results are robust to stadium proximity effects and spatial dependency.
    Keywords: Lifestyle, Milieu, Referendum, Stadium, Munich
    JEL: D72 H40 P36 R58
    Date: 2009
  6. By: Fali Huang (Singapore Management University)
    Abstract: This paper establishes a simple model of long run economic and political development, which is driven by the inherent technical features of di¤erent production factors and the political con.icts among factor owners on how to divide the outputs. The main production factor in economy evolves from land to physical capital and then to human capital, which enables their respective owners (landlords, capitalists, and workers) to gain political power in the same sequence, shaping the political development path from monarchy to oligarchy and .nally to democracy with full su¤rage. When it is too costly for any group of factor owners to repress others, political compromise is reached and economic progress is not blocked; otherwise, the political con.icts may lead to economic stagnation.
    Keywords: Economic Development, Political Development, Democratization, Class Structure, Land, Physical Capital, Human Capital, Monarchy, Oligarchy, Democracy, Su¤rage Extension
    JEL: O10 O40 P16 N10
    Date: 2010–01
  7. By: Catia Batista (Department of Economics and Institute for International Integration Studies, Trinity College Dublin; IZA); Pedro Vicente (Department of Economics and Institute for International Integration Studies, Trinity College Dublin; CSAE-Oxford; BREAD)
    Abstract: This paper tests the hypothesis that international migration experiences may promote better institutions at home by raising the demand for political accountability. In order to examine this question, we use a simple postcard voting experiment designed to capture the population’s desire for better governance. Using data from a tailored household survey, we examine the determinants of voting behavior in our experiment, and isolate the positive effect of international emigration on the demand for political accountability. We find that this effect can be mainly attributed to the presence of return migrants, particularly to those who emigrated to countries with better governance.
    Keywords: international migration, governance, political accountability, institutions, effects of emigration in origin countries, household survey, Cape Verde, sub-Saharan Africa
    JEL: F22 O12 O15 O43 P16
    Date: 2009–12
  8. By: Hélène EHRHART
    Abstract: To what extent differences across developing countries in their domestic tax mobilization can be explained, in addition to the traditional determinants, by political economy factors and particularly by the political regime? Using a panel of 66 developing countries over the period 1990-2005, this paper provides econometric evidence that democracy matters for achieving higher domestic tax revenues which are much needed to finance public goods. It is especially the level of constraints on the executive which is of importance to counter the government's propensity to cave in for special interests and to be insufficiently welfare minded. We found that high levels of democracy are specifically needed in natural resource rich countries to make natural resource rents contribute to higher domestic tax revenues and no longer be an impediment to a sustained tax system.
    Keywords: Tax Revenues, democracy, developing countries
    Date: 2009
  9. By: Juan D. Moreno-Ternero (Department of Economic Theory, Universidad de Málaga)
    Abstract: We analyze the problem of choosing the most appropriate method for apportioning taxes in a democracy. We consider a simple model of taxation and restrict our attention to piece- wise linear tax methods, which are almost ubiquitous in advanced democracies worldwide. In spite of facing an impossibility result saying that if we allow agents to vote for any piece-wise linear tax method no equilibrium exists, we show that if we limit the domain of admissible methods in a meaningful way, albeit not restrictive, an equilibrium does exist. We also show that, for such a domain, a wide variety of methods can be supported in equilibrium. This last result provides rationale for some activities of special interest groups.
    Keywords: voting, taxes, majority, single crossing, special interest politics
    JEL: D72 H24
  10. By: Juan D. Moreno-Ternero (U. de Málaga, U. Pablo de Olavide y CORE, Universit´e catholique de Louvain)
    Abstract: We analyze the problem of choosing the most appropriate method for apportioning taxes in a democracy. We consider a simple model of taxation and restrict our attention to piece-wise linear tax methods, which are almost ubiquitous in advanced democracies worldwide. In spite of facing an impossibility result saying that if we allow agents to vote for any piece-wise linear tax method no equilibrium exists, we show that if we limit the domain of admissible methods in a meaningful way, albeit not restrictive, an equilibrium does exist. We also show that, for such a domain, a wide variety of methods can be supported in equilibrium. This last result provides rationale for some activities of special interest groups.
    Keywords: voting, taxes, majority, single crossing, special interest politics.
    JEL: D72 H24
    Date: 2010–01
  11. By: Viktor J. Vanberg
    Keywords: Length 24 pages
    Date: 2009–12
  12. By: De Donder, Philippe (Toulouse School of Economics (GREMAQ-CNRS and IDEI)); Le Breton, Michel (Toulouse School of Economics (GREMAQ and IDEI)); Peluso, Eugenio (Universtiy of Verona)
    Abstract: We study majority voting over a bidimensional policy space when the voters’ type space is either uni- or bidimensional. We show that a Condorcet winner fails to generically exist even with a unidimensional type space. We then study two voting procedures widely used in the literature. The Stackelberg (ST) procedure assumes that votes are taken one dimension at a time according to an exogenously specied sequence. The Kramer-Shepsle (KS) procedure also assumes that votes are taken separately on each dimension, but not in a sequential way. A vector of policies is a Kramer-Shepsle equilibrium if each component coincides with the majority choice on this dimension given the other components of the vector. We study the existence and uniqueness of the ST and KS equilibria, and we compare them, looking e.g. at the impact of the ordering of votes for ST and identifying circumstances under which ST and KS equilibria coincide. In the process, we state explicitly the assumptions on the utility function that are needed for these equilibria to be well behaved. We especially stress the importance of single crossing conditions, and we identify two variants of these assumptions: a marginal version that is imposed on all policy dimensions separately, and a joint version whose denition involves both policy dimensions.
    JEL: D72 H41
    Date: 2010–01
  13. By: Hadi Soesastro; M. Chatib Basri (Centre for Strategic and International Studies, Jakarta)
    Abstract: This paper focuses on Indonesia's trade policies after the economic crisis. It examines the trend towards protection and addresses the issues of competitiveness. The concluding part briefly discusses Indonesia's policies on and involvement in free trade agreements (FTAs), which have recently proliferated in the Asia Pacific region.
    Keywords: Indonesia, political economy, trade policy, economic crisis, free trade agreement
    JEL: F13 F15
    Date: 2010–01
  14. By: Ponciano S. Intal Jr.; Marissa C. Garcia (Philippine Institute for Development Studies)
    Abstract: Rice has been a pivotal political commodity since the Commonwealth because of its importance as a staple food and calorie source for majority of the population, especially in the low-income groups, as well as a source of employment and income to a wide range of people that comprise the demand and supply chain. As a result, food security and price stability continue as twin priority objectives of the government regimes in the Philippines. Using a political economy perspective, this paper establishes the strong relationship between rice and politics and explains recent developments in the Philippine rice landscape. Results of the analysis show that the price of rice has been a significant determinant in election results since the 1950s, with the exception of 1998, where despite stable prices, the candidate from the incumbent administration failed to win the presidential elections. In addition, reliance by the Philippine government primarily on price instruments to achieve its rice objectives and to protect farmer and consumer interests has not resulted in any substantial improvements in rice production. In fact, the shift to rice protection since the 1980s has failed to stabilize domestic rice prices and has effectively penalized the poorer households. This has been traced largely to the failure of the National Food Authority to provide timely, accurate, and appropriate intervention in the country’s rice market. If the Philippines is to achieve sustained, stable rice supply at low prices and at the same time promote rice consumer and producer welfare, the adoption of a privatefocused, market-based regulatory regime without a rice trading parastatal (but with rice emergency reserves, not for price stabilization) remains as a long-term objective. In the meantime, a two-pronged transitional approach is suggested- 1) Setting up a Tax Expenditure Fund ceiling for all subsidies to government-controlled and -owned corporations (GOCCs); and 2) More aggressive support of productivity enhancing investments in the rice sector, e.g., irrigation and better varieties and improved farming practices through agricultural research, development, and extension (RD&E).
    Keywords: rice, politics, political economy, rice politics
    JEL: Q18 L66 Q10
    Date: 2010–01
  15. By: Miguel Rocha de Sousa (Department of Economics, University of Évora; NICPRI-UE)
    Abstract: We define in section 1 our notion of land reform, on section 2, the most important social and political movements of land reform in Latin America are presented. On section 3 we use a theoretical model in the context of economic growth with human capital learning-by-doing to evaluate land reforms. Section 4, discusses the results. Section 5 presents some economic efficiency estimates for the ?Cédula? project of 2000 in NE Brazil - a market led land bill project, sponsored by the World Bank (WB) and the Ministry of Agricultural Development (MDA). Finally, section 6 concludes, and section 7 presents the references.
    Keywords: Brazil, ?Cédula?, human capital, Land Reform, Latin America, Learning by doing, ?MST - Movimento dos Sem Terra?.
    JEL: Q15
    Date: 2009
  16. By: Thierry Tressel; Prachi Mishra; Deniz Igan
    Abstract: Using detailed information on lobbying and mortgage lending activities, we find that lenders lobbying more on issues related to mortgage lending (i) had higher loan-to-income ratios, (ii) securitized more intensively, and (iii) had faster growing portfolios. Ex-post, delinquency rates are higher in areas where lobbyist' lending grew faster and they experienced negative abnormal stock returns during key crisis events. The findings are robust to (i) falsification tests using lobbying on issues unrelated to mortgage lending, (ii) a difference-in-difference approach based on state-level laws, and (iii) instrumental variables strategies. These results show that lobbying lenders engage in riskier lending.
    Keywords: Corporate sector , Economic models , Financial crisis , Financial institutions , Financial sector , Global Financial Crisis 2008-2009 , Governance , Housing , Legislation , Loans , Political economy ,
    Date: 2009–12–28
  17. By: Renato Cruz de Castro (Philippine Institute for Development Studies)
    Abstract: This research paper examines the politico-strategic motivations of the Bush Administration’s effort to foster Free Trade Agreements to a number of countries, including the Philippines. It argues that FTAs are being used by the U.S. as means of advancing the trade interest of American business, as well as ensuring its leadership in the global political economy. The article observes that the current attempt of the Bush Administration to push for FTAs is driven by political dynamics. Among these are the competition between the Congress and the White House, the U.S. strategy in the war on terror, pressuring the E.U to another round of trade liberalization negotiations, and ensuring American access to the East Asian regional economy. The article then discusses the specific politico-strategic motives of the Bush Administration in its offer of an FTA to the Philippines. In conclusion, it explores the possible political ramifications of an FTA with the U.S. on Philippine society and how the Philippine government can respond to this offer of a preferential trading arrangement from its major security ally.
    Keywords: Competitive Trade Liberalization, Preferential Trading Arrangement, American economic hegemony, war on terror, Trade Promotion Authority Act, Trade Negotiating Authority of 2001, East Asian FTAs, Philippine Foreign Policy
    JEL: F13 O24 F10
    Date: 2010–01

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