nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒02‒20
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Political Resource Curse By Fernanda Brollo; Tommaso Nannicini; Roberto Perotti; Guido Tabellini
  2. Strategic Behaviour of Chinese Political Elites By Chien Chiao
  3. Are There Political Fiscal Cycles in NMS? By Stanova N.
  4. Political Limits to Globalization By Daron Acemoglu; Pierre Yared
  5. Envy, Altruism, and the International Distribution of Trade Protection By Xiaobo Lü; Kenneth F. Scheve; Matthew J. Slaughter
  6. Speed limit laws in America: Economics, politics and geography By Daniel Albalate; Germà Bel
  7. Evolution of Risk and Political Regimes By Maria Petrova; Robert Bates
  8. Institutions, Factor Prices and Taxation: Virtues of Strong States? By Daron Acemoglu
  9. Politics and trade: lessons from past globalisations By Kevin O'Rourke

  1. By: Fernanda Brollo; Tommaso Nannicini; Roberto Perotti; Guido Tabellini
    Abstract: The paper studies the effect of additional government revenues on political corruption and on the quality of politicians, both with theory and data. The theory is based on a version of the career concerns model of political agency with endogenous entry of political candidates. The evidence refers to municipalities in Brazil, where federal transfers to municipal governments change exogenously according to given population thresholds. We exploit a regression discontinuity design to test the implications of the theory and identify the causal effect of larger federal transfers on political corruption and the observed features of political candidates at the municipal level. In accordance with the predictions of the theory, we find that larger transfers increase political corruption and reduce the quality of candidates for mayor.
    JEL: D72 D73 H40 H77
    Date: 2010–01
  2. By: Chien Chiao
    Abstract: A conceptual framework is constructed to study the strategic behaviour of Chinese political elites. Various rules of political elite's behaviour are examined and suggests directions for empirical studies of the subject.
    Keywords: chinese political elites,
    Date: 2010
  3. By: Stanova N.
    Abstract: It is a generally documented fact that political cycles are a phenomenon of new democracies. In this paper we deepen the evidence for the new EU member countries that are a prominent example of recently established democratic systems. We show that, in line with the opportunistic theory, primary balances tended to deteriorate in the years of elections, if taking NMS ’en bloc’. This was mainly driven by the cycle in government expenditures. However, careful cross-country and cross-time analysis challenges the general view. It turns out that the political cycle cannot be attributed to all new European democracies, in particular, not to those that made long-run attempts to integrate into EMU. Moreover, we document that with the time passing, opportunism has evaporated from the overall sample of the NMS. This comes from the fact that the political cycle has diminished in countries that were prone to opportunistic manipulation in the initial period.
    Date: 2009–12
  4. By: Daron Acemoglu; Pierre Yared
    Abstract: Despite the major advances in information technology that have shaped the recent wave of globalization, openness to trade is still a political choice, and trade policy can change with shifts in domestic political equilibria. This paper suggests that a particular threat and a limiting factor to globalization and its future developments may be militarist sentiments that appear to be on the rise among many nations around the globe today. We proxy militarism by spending on the military and the size of the military, and document that over the past 20 years, countries experiencing greater increases in militarism according to these measures have had lower growth in trade. Focusing on bilateral trade flows, we also show that controlling flexibly for country trends, a pair of countries jointly experiencing greater increases in militarism has lower growth in bilateral trade.
    JEL: F01 F10 F52
    Date: 2010–01
  5. By: Xiaobo Lü; Kenneth F. Scheve; Matthew J. Slaughter
    Abstract: One important puzzle in international political economy is why lower-earning and less-skilled intensive industries tend to receive relatively high levels of trade protection. This pattern of protection holds even in low-income countries in which less-skilled labor is likely to be the relatively abundant factor of production and therefore would be expected in many standard political-economy frameworks to receive relatively low, not high, levels of protection. We propose and model one possible explanation: that individual aversion to inequality—both envy and altruism—lead to systematic differences in support for trade protection across industries, with sectors employing lower-earning workers more intensively being relatively preferred recipients for trade protection. We conduct original survey experiments in China and the United States and provide strong evidence that individual policy opinions about sector-specific trade protection depend on the earnings of workers in the sector. We also present structural estimates of the influence of envy and altruism on sector-specific trade policy preferences. Our estimates indicate that both envy and altruism influence support for trade protection in the United States and that altruism influences policy opinions in China.
    JEL: D63 D64 F13 F59
    Date: 2010–01
  6. By: Daniel Albalate (Faculty of Economics, University of Barcelona); Germà Bel (Faculty of Economics, University of Barcelona)
    Abstract: The regulation of speed limits in the US had been centralized at the federal level since 1974, until decisions were devolved to the states in 1995. However, the centralization debate has reemerged in recent years. Here, we conduct the first econometric analysis of the determinants of speed limit laws. By using economic, geographic and political variables, our results suggest that geography -which affects private mobility needs and preferences- is the main factor influencing speed limit laws. We also highlight the role played by political ideology, with Republican constituencies being associated with higher speed limits. Furthermore, we identify the presence of regional and time dependence effects. By contrast, poor road safety outcomes do not impede the enactment of high speed limits. Overall, we present the first evidence of the role played by geographical, ideological and regional characteristics, which provide us with a better understanding of the formulation of speed limit policies.
    Keywords: Speed Limit Laws; Transport Policy; Social Preferences; Policy Analysis.
    Date: 2010–01
  7. By: Maria Petrova (New Economic School); Robert Bates (Harvard University)
    Abstract: The article contributes to the growing literature on intermediate regiimes by presenting a model that incorporates key features of such regimes and generates several of the "stylized facts" that characterize their behavior: their political volatility, cross nationality and over time, and the veriability of their economic performance something that renders their economies among the fastest growing and declining in global samples. Using an instrumental veriables approach, we test the model employing cross-national data.
    Date: 2010–02
  8. By: Daron Acemoglu
    Abstract: Many of the most pernicious economic institutions and policies create entry barriers or manipulate factor prices to transfer resources from entrepreneurs and workers to groups that hold political power. These inefficiencies partly result from the fact that direct and efficient fiscal instruments that can be used for taxation and redistribution of resources are absent. One might then conclude that increasing state capacity and expanding the set of available fiscal instruments should improve the allocation of resources by preventing the use of these inefficient, indirect methods of redistribution. This reasoning ignores the effect of greater state capacity and the change in the set of available fiscal instruments on the political equilibrium, however. Because the availability of more efficient means of taxation increases the potential benefits of controlling state power, it also intensifies costly political conflict aimed at capturing the control of the state. This indirect effect counteracts the benefits from more efficient taxation and may dominate the direct benefits. The paper establishes the possibility that the allocation of resources may deteriorate substantially in response to an autonomous increase in state capacity and the set of fiscal instruments. It also argues that in the British case, which is a key historical example that points to the central role of increased state capacity in economic development, this change was not autonomous; instead, it was an equilibrium response to changes in political institutions that placed better checks on the exercise of power by the executive. This reasoning suggests that the study of the effect of fiscal capacity and the evaluation of policies aimed at increasing state capacity in less-developed economies should be done in the context of dynamic models of political economy, in which fiscal capacity and political constraints are jointly determined.
    JEL: D74 O12 P14 P16
    Date: 2010–01
  9. By: Kevin O'Rourke
    Abstract: After tracing the link between politics and trade over a millennium, KevinO'Rourke identifies permanent features of international economic relations. His timing is perfect. The crisis has switched the balance of power. Government is back in the driving seat and corporations look fragile. No one can predict how the cards will fall, but politics is making a come-back and will inevitably play a bigger role in shaping our future.
    Date: 2009–01

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