nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒03‒20
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Fiscal Centralization and the Political Process By Fernando Albornoz; Antonio Cabrales
  2. The Redistributive Effects of Political Reservation for Minorities: Evidence from India By Aimee Chin; Nishith Prakash
  3. Reexamining the link between gender and corruption: The role of social institutions By Boris Branisa; Maria Ziegler
  4. The impact of immigration on election outcomes in Danish municipalities By Gerdes, Christer; Wadensjö, Eskil
  5. Off-the-peak preferences over government size By Francisco Martínez Mora; M. Socorro Puy
  6. The disadvantage of winning an election By Enriqueta Aragonès; Santiago Sánchez-Pagés
  7. The Great Leap Forward: The Political Economy of Education in Brazil, 1889-1930 By André Carlos Martínez Fritscher; Aldo Musacchio; Martina Viarengo
  8. Political, social and religious dimensions in the fight against HIV/AIDS : Negotiating worldviews, facing practical challenges By Bartelink, B.; Pape, U.
  9. On Strategy-proofness and Symmetric Single-peakedness By Jordi Massó; Inés Moreno de Barreda
  10. Corporate Lobbying and Financial Performance By Chen, Hui; Parsley, David; Yang, Ya-wen
  11. Sowing and sewing growth: The political economy of rice and garments in Cambodia By Ear, Sophal
  12. The Political Economy of the MDGs: Retrospect and Prospect for the World's Biggest Promise By David Hulme; James Scott

  1. By: Fernando Albornoz; Antonio Cabrales
    Abstract: We study the dynamic support for fiscal decentralization in a political agency model from the perspective of a region. We show that corruption opportunities are lower under centralization at each period of time. However, centralization makes more difficult for citizens to detect corrupt incumbents. Thus, corruption is easier under centralization for low levels of political competition. We show that the relative advantage of centralization depends negatively on the quality of the local political class, but it is greater if the center and the region are subject to similar government productivity shocks. When we endogenize the quality of local politicians, we establish a positive link between the development of the private sector and the support for decentralization. Since political support to centralization evolves over time, driven either by economic/political development or by exogenous changes in preferences over public good consumption, it is possible that voters are (rationally) discontent about it. Also, preferences of voters and the politicians about centralization can diverge when political competition is weak.
    Date: 2010–01
  2. By: Aimee Chin (University of Houston & NBER); Nishith Prakash (Dartmouth College, Institute for the Study of Labor (IZA) & Centre for Research and Analysis of Migration (CReAM))
    Abstract: We examine the impact of political reservation for disadvantaged minority groups on poverty. To address the concern that political reservation is endogenous in the relationship between poverty and reservation, we take advantage of the state-time variation in reservation in state legislative assemblies in India that arises from national policies that cause reservations to be revised and the time lags with which the revised reservations are implemented due to the timing of state elections. Using data on sixteen major Indian states for the period 1960-1992, we find that increasing the share of seats reserved for Scheduled Tribes significantly reduces poverty while increasing the share of seats reserved for Scheduled Castes has no impact on poverty. Political reservation for Scheduled Tribes has a greater effect on rural poverty than urban poverty, and appears to benefit people near the poverty line as well as those far below it.
    Keywords: Affirmative Action, Poverty, Minorities, India.
    JEL: I38 J15 J78
    Date: 2010–03
  3. By: Boris Branisa (University of Göttingen); Maria Ziegler (University of Göttingen)
    Abstract: In this paper we reexamine the link between gender inequality and corruption. We review the literature on the relationship between representation of women in economic and political life, democracy and corruption, and bring in a new previously omitted variable that captures the level of discrimination against women in a society: social institutions related to gender inequality. Using a sample of developing countries we regress corruption on the representation of women, democracy and other control variables. Then we add the subindex civil liberties from the OECD Gender, Institutions and DevelopmentDatabase as the measure of social institutions related to gender inequality. The results show that corruption is higher in countries where social institutions deprive women of their freedom to participate in social life, even accounting for democracy and representation of women in political and economic life as well as for other variables. Our findings suggest that, in a context where social values disadvantage women, it might not be enough to push democratic reforms and to increase the participation of women to reduce corruption.
    Keywords: Social institutions; Gender inequality; Corruption
    JEL: D63 D73 J16
    Date: 2010–03–03
  4. By: Gerdes, Christer (Stockholm University Linnaeus Center for Integration Studies - SULCIS); Wadensjö, Eskil (Stockholm University Linnaeus Center for Integration Studies - SULCIS)
    Abstract: In this paper we study the effects on support for different political parties following an increase in the immigrant share in Danish municipalities during a period marked by a substantial influx of refugees. The two anti-immigration parties in the political landscape of Denmark are among those that win votes as a result of this influx, but so also does a pro-immigration party on the left. Controlling for a number of social-economic aspects, our results thus point to some discontent with immigration; however, they do not support predictions of a general decline for political parties that are in favour of a generous welfare state, as proposed by some scholars.
    Keywords: immigration; immigrants; elections; racism; xenophobia
    JEL: D72 J15 J61
    Date: 2010–03–10
  5. By: Francisco Martínez Mora; M. Socorro Puy
    Abstract: We show that preferences-bias towards overprovision or underprovision can explain the asymmetric location of electoral candidates with respect to the median voter. We analyze the determinants of preferences off-the-peak and find that: (i) The sign of the third derivative of the policy-induced utility function indicates whether preferences are bias towards overprovision (positive) or underprovision (negative). (ii) The analog of Kimball's coefficient of prudence can be used to measure the asymmetry of preferences. (iii) Consumers’risk aversion and government corruption (in the form of decreasing e¤ectiveness producing public good) induce voters’ preferences to be more intense towards underprovision.
    Date: 2010–02
  6. By: Enriqueta Aragonès; Santiago Sánchez-Pagés
    Abstract: This paper analyzes the problem that an incumbent faces during the legislature when deciding how to react to popular initiatives or policy proposals coming from different sources. We argue that this potential source of electoral disadvantage that the incumbent obtains after being elected can jeopardize the reelection possibilities of the incumbent. We analyze the decision of the incumbent when facing reelection and we characterize the conditions under which the advantages that the incumbent obtains can overcome the disadvantages. Finally, we use the results of this analysis to discuss some implica- tions of the use of mechanisms of direct democracy like referenda and popular assemblies on electoral competition.
    Keywords: Incumbency advantage, Referenda, Popular initiatives, Elections.
    JEL: D7 H1
    Date: 2010–03–08
  7. By: André Carlos Martínez Fritscher (Banco de México); Aldo Musacchio (Harvard Business School, Business, Government and the International Economy Unit); Martina Viarengo (CEP, London School of Economics)
    Abstract: Brazil at the turn of the twentieth century offers an interesting puzzle. Among the large economies in the Americas it had the lowest level of literacy in 1890, but by 1940 the country had surpassed most of its peers in terms of literacy and had done a significant improvement of its education system. All of this happened in spite of the fact that the Constitution of 1891 included a literacy requirement to vote and gave states the responsibility to spend on education. That is to say, Brazilian states had a significant improvement in education levels and a significant increase in expenditures on education per capita despite having institutions that limited political participation for the masses (Lindert, 2004; Engerman, Mariscal and Sokoloff, 2009) and having one of the worst colonial institutional legacies of the Americas (Acemoglu, Johnson, and Robison, 2001; Easterly and Levine, 2003; and Engerman and Sokoloff, 1997, 2002). This paper explains how state governments got the funds to pay for education and examines the incentives that politicians had to spend on education between 1889 to 1930. Our findings are threefold. First, we show that the Constitution of 1891, which decentralized education and allowed states to collect export taxes to finance expenditures, rendered states with higher windfall tax revenues from the export of commodities to spend more on education per capita. Second, we prove that colonial institutions constrained the financing of education, but that nonetheless the net effect of the increase in commodity exports always led to a net increase in education expenditures. Finally, we argue that political competition after 1891 led politicians to spend on education, Since only literate adults could vote, we show that increases in expenditures (and increases in revenues from export taxes) led to increases in the number of voters at the state level.
    Date: 2010–03
  8. By: Bartelink, B.; Pape, U. (Groningen University)
    Date: 2010
  9. By: Jordi Massó; Inés Moreno de Barreda
    Abstract: We characterize the class of strategy-proof social choice functions on the domain of symmetric single-peaked preferences. This class is strictly larger than the set of generalized median voter schemes (the class of strategy-proof and tops-only social choice functions on the domain of single-peaked preferences characterized by Moulin (1980)) since, under the domain of symmetric single-peaked preferences, generalized median voter schemes can be disturbed by discontinuity points and remain strategy-proof on the smaller domain. Our result identifies the specific nature of these discontinuities which allow to design non-onto social choice functions to deal with feasibility constraints.
    Keywords: Strategy-proofness, Single-peaked Preferences, Median Voter, Feasibility Constraints.
    JEL: D7
    Date: 2010–03–05
  10. By: Chen, Hui; Parsley, David; Yang, Ya-wen
    Abstract: Corporate lobbying activities are designed to influence legislators and thus to further company goals by encouraging favorable policies and/or outcomes. Using data made available by the Lobbying Disclosure Act of 1995, this study examines corporate lobbying activities from a financial perspective. We find that on average, lobbying is positively related to accounting and market measures of financial performance. These results are robust across a number of empirical specifications and continue to hold when we account for potential sample selection. We also report market performance evidence using a portfolio approach. We find that portfolios of firms with the highest lobbying intensities significantly outperform their benchmarks in the three years following portfolio formation.
    Keywords: Corporate Lobbying; accounting performance; market returns; portfolio
    JEL: G30 G10
    Date: 2010–01
  11. By: Ear, Sophal
    Abstract: What explains Cambodia’s double digit growth in 2006, 2005, and 2004 of 11%, 13%, and 10%, respectively, despite relatively poor governance (162 out of 179 countries in the 2007 Corruption Perception Index, 151 out of 163 in 2006, 130 out of 158 in 2005 the year in which it was first ranked)? Why do some sectors thrive while others fail under such conditions? This paper undertakes a review of the relevant literature and analyzes the results of detailed semi-structured interviews with at least 50 firms/businessmen, government, and non-government officials to understand the dynamics of governance and growth focused around two types of sectors in Cambodia: 1) Successful sectors such as garments in which the chapter seeks to elucidate how firms have coped, and the “cover” mechanism that has allowed them to thrive in relative terms (e.g., is it connections to the prevailing government insiders?) has been to date; and 2) Less than successful sectors such as rice for which the chapter identifies emerging patterns of engagement among the Cambodian state, foreign investors and indigenous business. Not unlike what happened with garments exports to the US, an arbitrage opportunity is unfolding in rice. The European Union’s “Everything But Arms” initiative takes full effect in September 2009 permitting Cambodia, as a least developed country, to export rice to the EU tariff-free. Likewise in garments, the creation of the Garment Manufacturers Association of Cambodia (GMAC) in 1999 enabled manufacturers to interact with a single voice with the State, and to negotiate standard “payments”. At the same time, membership in GMAC is required for any garments manufacturer to export legally. Similar patterns have already emerged in the rice sector, where Green Trade, a state-owned enterprise, and the Cambodian National Rice Millers Association, were the only two entities licensed to export shipments of more than 100 tons of rice in 2008.
    Keywords: Cambodia; growth; governance; trade policy
    JEL: O24 O53 O19 O12
    Date: 2009–04–01
  12. By: David Hulme; James Scott
    Abstract: In September 2010 world leaders will meet in New York to discuss progress in meeting the UN Millennium Development Goals (MDGs), which include the promise of halving ‘extreme poverty’ between 1990 and 2015. The paper begins with a brief history of how the MDGs came into being (See Table 1 for a list and other details), noting that they were primarily a product of the rich world, before looking at the progress made in achieving them and the degree to which the rich countries have lived up to the promises they made as part of Goal 8. The final section draws lessons from the MDG process to feed into the debate concerning what will take their place in 2015 when they come to an end.
    Date: 2010

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