nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒04‒11
fourteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Do Leaders Affect Government Spending Priorities? By Adi Brender; Allan Drazen
  2. Partially Binding Platforms: Political Promises as a Partial Commitment Device By Yasushi Asako
  3. The Politics of Monetary Policy By Alberto F. Alesina; Andrea Stella
  4. The Effect of Daughters on Partisanship By Dalton Conley; Emily Rauscher
  5. On the political economy of tax limits By Stephen Calabrese; Dennis Epple
  6. Political Institutions, Policymaking, and Economic Policy in Latin America By Martin Ardanaz; Carlos Scartascini; Mariano Tommasi
  7. Interest Groups, Information Manipulation in the Media, and Public Policy: The Case of the Landless Peasants Movement in Brazil By Lee J. Alston; Gary D. Libecap; Bernardo Mueller
  8. Veto Players and Policy Trade-Offs- An Intertemporal Approach to Study the Effects of Political Institutions on Policy By Carlos Scartascini; Mariano Tommasi; Ernesto Stein
  9. Political Institutions and the Dynamics of Public Investment By Marco Battaglini; Salvatore Nunnari; Thomas R. Palfrey
  10. Work Values, Endogenous Sentiments and Redistribution By Matteo Cervellati; Joan Esteban; Laurence Kranich
  11. National borders matter... where one draws the lines too. By Lavallée, E.; Vicard, V.
  12. Social fragmentation and public goods : polarization, inequality and patronage in Uttar Pradesh and Bihar. By Catherine Bros
  13. Is the Welfare State Sustainable? Experimental Evidence on Citizens’ Preferences for Redistribution By Ilja Neustadt; Peter Zweifel
  14. An Empirical Study of Corruption in Ports By Sequeira, SANDRA; Djankov, SIMEON

  1. By: Adi Brender; Allan Drazen
    Abstract: Since a key function of competitive elections is to allow voters to express their policy preferences, one might take it for granted that when leadership changes, policy change follows. Using a dataset we created on the composition of central government expenditures in a panel of 71 democracies over 1972-2003, we test whether changes in leadership induce significant changes in one measure of policy - spending composition - as well as looking at the effect of other political and economic variables. We find that the replacement of a leader tends to have no significant effect on expenditure composition in the short-run. This remains true after controlling for a host of political and economic variables. However, over the medium-term leadership changes are associated with larger changes in expenditure composition, mostly in developed countries. We also find that in established democracies, election years are associated with larger changes in expenditure composition while new democracies, which were found by Brender and Drazen (2005) to raise their overall level of expenditures in election years, tend not to have such changes.
    Keywords: Budget; Political Leaders; Elections; Fiscal Policy; Expenditure Composition
    JEL: D72 O10 D78
    Date: 2010
  2. By: Yasushi Asako (Institute for Monetary and Economic Studies, Bank of Japan (E-mail:
    Abstract: This paper examines the effects of campaign platforms in political competition when campaign platforms are partially binding: a candidate who implements a policy different from his/her platform must pay a cost of betrayal that increases with the size of the discrepancy. With partially binding platforms, the median-voter theorem does not hold, and candidates always implement different policies in equilibrium. If and only if the cost of betrayal goes to infinity for any degree of betrayal, the median-voter theorem holds. Partially binding platforms also can predict who wins. A candidate who is more moderate, less policy-motivated and whose cost of betrayal is higher than the opposition with the same degree of betrayal wins. The degree of honesty can be derived endogenously, and candidates who have the above characteristics are more honest.
    Keywords: Electoral Competition, Median-voter Theorem, Valence, Campaign Platforms
    JEL: C72 D72
    Date: 2010–02
  3. By: Alberto F. Alesina; Andrea Stella
    Abstract: In this paper we critically review the literature on the political economy of monetary policy, with an eye on the questions raised by the recent financial crisis. We begin with a discussion of rules versus discretion. We then examine the issue of Central Banks independence both in normal times and in times of crisis. Then we review the literature of electoral manipulation of policies. Finally we address international institutional issues concerning the feasibility, optimality and political sustainability of currency unions in which more than one country share the same currency. A brief review of the Euro experience concludes the paper.
    JEL: E52
    Date: 2010–04
  4. By: Dalton Conley; Emily Rauscher
    Abstract: Washington (2008) finds that, controlling for total number of children, each additional daughter makes a member of Congress more likely to vote liberally and attributes this finding to socialization. However, daughters’ influence could manifest differently for elite politicians and the general citizenry, thanks to the selection gradient particular to the political process. This study asks whether the proportion of female biological offspring affects political party identification. Using nationally-representative data from the General Social Survey, we find that female offspring induce more conservative political identification. We hypothesize that this results from the change in reproductive fitness strategy that daughters may evince.
    JEL: D19 H0
    Date: 2010–04
  5. By: Stephen Calabrese (Carnegie Mellon University); Dennis Epple (Carnegie Mellon University)
    Abstract: We study the political economy of state limitations on the taxing powers of local governments, investigating the effects of such restriction on housing markets, community composition, and types of taxes and expenditures undertaken by local governments. We characterize equilibrium when voters choose values of multiple policy (tax and expenditure) instruments, finding that tax limitations have very substantial effects on housing prices and the composition of communities. Political support for tax limits comes from suburban voters and from a subset of central-city voters. Support for tax limits come even from residents of communities that are not constrained by the limits.
    Keywords: Tax limits, redistribution, public goods, property tax, income tax, head tax
    JEL: D72 D78 H30 H42 H72 H73
    Date: 2010
  6. By: Martin Ardanaz; Carlos Scartascini; Mariano Tommasi
    Abstract: This paper surveys selected themes in the political economy of policymaking in Latin America, with an emphasis on recent research focusing on actual decision and implementation processes, and on the political institutions and state and social actors involved in those processes. In particular, the paper addresses how political rules work for or against intertemporal cooperation among political actors. The document shows that the extent to which polities obtain the key policy features that seem to determine development depends on the workings of political institutions, which define how the policymaking game is played, on the characteristics of the arenas of interaction, which define where the policymaking game is played, and on certain characteristics of key socioeconomic groups, which define who interacts with professionalpoliticians in pursuing different policy preferences.
    Keywords: Political institutions, Public policies, Economic policy, Government capabilities, Development, Latin America
    JEL: D72 D78 H10 H50 O10
    Date: 2010–03
  7. By: Lee J. Alston; Gary D. Libecap; Bernardo Mueller
    Abstract: We extend the literature on interest group behavior and policy outcomes by examining how groups with limited resources (votes and campaign contributions) effectively influence government by manipulating media information to voters. Voters in turn lobby politicians to implement the group’s preferred policies. In this manner interest groups can secure favorable government actions beyond their size and wealth. This is an important contribution because of the increased role of the media in the information age and because this linkage better explains observed government policies. We develop a multi-principal, multi-task model of interest group behavior and generate the characteristics of interest groups that would be most successful using publicity to secure their policy objectives. We apply the model to the Landless Peasants’ Movement in Brazil. We detail how the Landless Peasants’ Movement molds information; show the general voter response; and examine the reaction of politicians in changing the timing and nature of policy.
    JEL: D23 D72 D78 O13 Q15
    Date: 2010–04
  8. By: Carlos Scartascini; Mariano Tommasi; Ernesto Stein
    Abstract: The capacity to sustain policies over time and the capacity to adjust policies in the face of changing circumstances are two desirable properties of policymaking systems. The veto player approach has suggested that polities with more veto players will have the capacity to sustain policies at the expense of the ability to change policy when necessary. This paper disputes that assertion from an intertemporal perspective, drawing from transaction cost economics and repeated game theory and showing that some countries might have both more credibility and more adaptability than others. More generally, the paper argues that, when studying the effects of political institutions on policy outcomes, a perspective of intertemporal politics might lead to predictions different from those emanating from more a-temporal approaches.
    Keywords: Political institutions, Public policies, Veto players, Policy adaptability, Policy stability, Intertemporal, Credibility, Repeated games
    JEL: D72 D78 H10 H50
    Date: 2010–03
  9. By: Marco Battaglini; Salvatore Nunnari; Thomas R. Palfrey
    Abstract: We present a theoretical model of the provision of a durable public good over an infinite horizon. In each period, there is a societal endowment of which each of n districts owns a share. This endowment can either be invested in the public good or consumed. We characterize the planner's optimal solution and time path of investment and consumption. We then consider alternative political mechanisms for deciding on the time path, and analyze the Markov perfect equilibrium of these mechanisms. One class of these mechanisms involves a legislature where representatives of each district bargain with each other to decide how to divide the current period's societal endowment between investment in the public good and transfers to each district. The second class of mechanisms involves the districts making independent decisions for how to divide their own share of the endowment between consumption and investment. We conduct an experiment to assess the performance of these mechanisms, and compare the observed allocations to the Markov perfect equilibrium.
    Keywords: Dynamic political economy; voting; public goods; bargaining; experiments
    JEL: D71 D72 C78 C92 H41 H54
    Date: 2010
  10. By: Matteo Cervellati; Joan Esteban; Laurence Kranich
    Abstract: We examine the interactions between individual behavior, sentiments and the social contract in a model of rational voting over redistribution. Agents have moral "work values". Individuals' self-esteem and social consideration of others are endogenously determined comparing behaviors to moral standards. Attitudes toward redistribution depend on self-interest and social preferences. We characterize the politico-economic equilibria in which sentiments, labor supply and redistribution are determined simultaneously. The equilibria feature different degrees of "social cohesion" and redistribution depending on pre-tax income inequality. In clustered equilibria the poor are held partly responsible for their low income since they work less than the moral standard and hence redistribution is low. The paper proposes a novel explanation for the emergence of different sentiments and social contracts across countries. The predictions appear broadly in line with well-documented differences between the United States and Europe.
    Keywords: Social Contract, Endogenous Sentiments, Voting over Taxes, Moral Work Values, Redistribution, Income Inequality, Politico-Economic Equilibria.
    JEL: D64 D72 Z13 H3 J2
    Date: 2010–03–25
  11. By: Lavallée, E.; Vicard, V.
    Abstract: The fact that crossing a political border dramatically reduces trade flows has been widely documented in the literature. The increasing number of borders has surprisingly attracted much less attention. The number of independent countries has indeed risen from 72 in 1948 to 192 today. This paper estimates the effect of political disintegration since World War II on the measured growth in world trade. We first show that trade statistics should be considered carefully when assessing globalization over time, since the definition of trade partners varies over time. We document a sizeable resulting accounting artefact, which accounts for 17% of the growth in world trade since 1948. Second, we estimate that political disintegration alone since World War II has raised measured international trade flows by 9% but decreased actual trade flows (including inter-regional trade) by 4%...
    Keywords: Trade, Borders, Political disintegration, Trade statistics.
    JEL: F1 N70
    Date: 2010
  12. By: Catherine Bros (Centre d'Economie de la Sorbonne and CSH - Delhi)
    Abstract: A vast recent literature has stressed social fragmentation's negative impact on the provision of public goods. It has been established theoretically that social fragmentation engenders discord and thereby undermines public goods provision. Empirical research has produced mixed results about this relationship. On the one hand it rarely holds for all the goods and on another hand it appears attenuated at the micro-level. Three points ought to be considered. First, the negative role attributed to social fragmentation rests upon the actuality of a relationship between social antagonisms and ethnic diversity. Yet, such an actuality is to be proved. Second, should such a relationship exist, polarization indices would be more appropriate than the traditional fractionalization index used so far in the literature. Third, theoretical works have set aside the possibility of ethnic patronage in accessing public goods. Nevertheless, it is a central issue as patronage is common in developing countries. In this event, a positive relationship could be found between social fragmentation and the presence of public goods. This article aims at showing that such a positive relationship does exist, at least in parts of India, as a consequence of caste patronage. It also shown that polarization is irrelevant as social antagonisms do not seem to be an obstacle to the provision of public goods.
    Keywords: Political economy, patronage, public goods, collective action, inequality, Olson, Caste, India.
    JEL: H4 O1 O2
    Date: 2010–03
  13. By: Ilja Neustadt (Socioeconomic Institute, University of Zurich); Peter Zweifel (Socioeconomic Institute, University of Zurich)
    Abstract: The sustainability of the welfare state ultimately depends on citizens’ preferences for income redistribution. They are elicited through a Discrete Choice Experiment performed in 2008 in Switzerland. Attributes are redistribution as GDP share, its uses (the unemployed, old-age pensioners, people with ill health etc.), and nationality of beneficiary. Estimated marginal willingness to pay (WTP) is positive among those who deem benefits too low, and negative otherwise. However, even those who state that government should reduce income inequality exhibit a negative WTP on average. The major finding is that estimated average WTP is maximum at 21% of GDP, clearly below the current value of 25%. Thus, the present Swiss welfare state does not appear sustainable.
    Keywords: Income redistribution, preferences, willingness to pay, welfare state, sustainability, discrete choice experiments,
    JEL: C35 C93 D63 H29
    Date: 2010–03
  14. By: Sequeira, SANDRA; Djankov, SIMEON
    Abstract: We generate an original dataset on bribe payments at two competing ports in Southern Africa that allows us to take an unusually close look at the relationship between bureaucratic organization, bribe-setting behavior and the costs corruption imposes on users of public services. We find that the way bureaucracies are organized can generate different opportunities for bureaucrats to engage in "collusive" or "coercive" types of corruption. We then observe how firms adjust their shipping and sourcing strategies in response to different types of corruption. "Collusive" corruption is cost-reducing for firms, increasing usage of the corrupt port, while "coercive" corruption is cost-increasing, reducing demand for port services. Our findings therefore suggest that firms respond to the opportunities and challenges created by different types of corruption, organizing production in a way that increases or decreases demand for the public service.
    Keywords: Corruption; Transport; Trade Costs; Firm Behavior
    JEL: D23 D21 D02 L91 D01
    Date: 2010

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