nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒04‒17
24 papers chosen by
Eugene Beaulieu
University of Calgary

  1. Correcting for Survey Effects in Pre-election Polls By Heij, C.; Franses, Ph.H.B.F.
  2. Majority Voting and the Welfare Implications of Tax Avoidance By Christian Traxler
  3. Determinants of fiscal decentralization: political economy aspects By Mario Jametti; Marcelin Joanis
  4. Off-the-peak preferences over government size* By Francisco Martínez-Mora; M. Socorro Puy
  5. Elections and Political Risk: New Evidence from Political Prediction Markets in Taiwan By Masami Imai; Cameron A. Shelton
  6. Partisan Liberalizations. A New Puzzle from OECD Network Industries? By Filippo Belloc; Antonio Nicita
  7. The ethnicity distraction ? political credibility and partisan preferences in Africa By Keefer, Philip
  8. A Critical Review of Opinion Polls relating to Iranian Voting Intentions: Problems of Research Methodology as applied to Complex Societies By Suzuki, Hitoshi
  9. Local Economies and General Elections: The Influence of Municipal and Regional Economic Conditions on Voting in Sweden 1985–2002 By Elinder, Mikael
  10. Mobility and local income redistribution By Sigrid Roehrs; David Stadelmann
  11. Inequality, Mobility and Redistributive Politics By Ryo Arawatari; Tetsuo Ono
  12. Unravelling Voters’ Perceptions of the Economy By Orla Doyle
  13. The Political Economy of Productivity. The Case of Chile By Cristobal Aninat; Jose Miguel Benavente; Ignacio Briones; Nicolas Eyzaguirre; Patricio Navia; Jocelyn Olivari
  14. The Political Economy of Fiscal Reform in Brazil: The Rationale for the Suboptimal Equilibrum By Marcus Melo; Carlos Pereira; Saulo Souza
  15. Majorities with a quorum. By Annick Laruelle; Federico Valenciano
  16. Net-immigration of developing countries: The role of economic determinants, disasters, conflicts, and political instability By Ziesemer, Thomas
  17. Democracy, Populism and Hyperinflation(s): Some Evidence from Latin America By Manoel Bittencourt
  18. Quaternary dichotomous voting rules. By Annick Laruelle; Federico Valenciano
  19. Hierarchy of Players in Swap Robust Voting Games and Minimal Winning Coalitions By Bishnu, Monisankar; Roy, Sonali
  20. Is Corruption Really Bad for Inequality? Evidence from Latin America By Carlyn Dobson; Antonio Rodríguez
  21. Cambodia’s patient zero: The political economy of foreign aid and avian influenza By Ear, Sophal
  22. Attitudes towards immigration in Europe By Sarah Bridges; Simona Mateut
  23. Contributing or Free-Riding? Voluntary Participation in a Public Good Economy By Taiji Furusawa; Hideo Konishi
  24. An Axiomatic Approach to the Measurement of Corruption: Theory and Applications By James E. Foster, Andrew W. Horowitz and Fabio Méndez

  1. By: Heij, C.; Franses, Ph.H.B.F. (Erasmus Econometric Institute)
    Abstract: Pre-election polls can suffer from survey effects. For example, surveyed individuals can become more aware of the upcoming election so that they become more inclined to vote. These effects may depend on factors like political orientation and prior intention to vote, and this may cause biases in forecasts of election outcomes. We advocate a simple methodology to estimate the magnitude of these survey effects, which can be taken into account when translating future poll results into predicted election outcomes. The survey effects are estimated by collecting survey data both before and after the election. We illustrate our method by means of a field study with data concerning the 2009 European Parliament elections in the Netherlands. Our study provides empirical evidence of significant positive survey effects with respect to voter participation, especially for individuals with low intention to vote. For our data, the overall survey effect on party shares is small. This effect can be more substantial for less balanced survey samples, for example, if political orientation and voting intention are correlated in the sample. We conclude that pre-election polls that do not correct for survey effects will overestimate voter turnout and will have biased party shares.
    Keywords: pre-election polls;survey effects;intention modification;self-prophecy;data collection;turnout forecast;bias correction
    Date: 2010–03–31
  2. By: Christian Traxler (Max Planck Institute for Research on Collective Goods)
    Abstract: A benchmark result in the political economy of taxation is that majority voting over a linear income tax schedule will result in an ine±ciently high tax rate whenever the median voter has a below average income. The present paper examines the role of tax avoidance for this welfare assessment. We find that the inefficiency in the voting equilibrium is the lower, the higher the average level of tax avoidance in the economy, or equivalently, the lower the median voter's amount of avoidance. The result holds for endogenous avoidance and labor choice and, under certain conditions, for an endogenous enforcement policy.
    Keywords: Tax avoidance, welfare analysis, majority voting, median voter equilibrium
    JEL: H26 D72 D6
    Date: 2009–07
  3. By: Mario Jametti (University of Lugano); Marcelin Joanis (Université de Sherbrooke)
    Abstract: This paper empirically investigates the underlying causes of expenditure decentralization, based on the predictions of a new political economy model of partial fiscal decentralization. Under shared expenditure responsibility, the degree of decentralization is endogenous and depends on the relative political conditions prevailing at each level of government. Our empirical results from a panel of democracies support the relevance of political factors as determinants of fiscal decentralization. The relationship between central government electoral strength and both expenditure and revenue centralization emerges as nontrivial and non-linear. Political forces at the central government level driving centralization up and down appear to coexist.
    Keywords: fiscal decentralization, fiscal federalism, vertical interactions, partial decentralization, elections
    JEL: H77 D72 H11
    Date: 2010
  4. By: Francisco Martínez-Mora; M. Socorro Puy
    Abstract: We study the political consequences of policy preferences which are non-symmetric around the peak. While the usual assumption of symmetric preferences is innocuous in political equilibria with plat-forms convergence, it is not neutral when candidates are differentiated. We show that a larger government size emerges when preferences of the median voter off-the-peak are more intense towards overprovision (what we call wasteful preferences), whereas a smaller government results when her preferences are more intense towards underprovision (scrooge preferences). We then 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 wasteful (positive) or scrooge (negative). (ii) The analog of Kimball's coefficient of prudence can be used to measure degrees of wastefulness and scroogeness. (iii) Consumers' risk aversion and government decreasing effectiveness in producing the public good generate scrooge.
    Keywords: Single-peaked preferences; citizen-candidate; coefficient of prudence; differentiated platforms; risk-aversion
    JEL: D72 H31 H5
    Date: 2010–01
  5. By: Masami Imai (Department of Economics, Wesleyan University); Cameron A. Shelton (Robert Day School of Economics and Finance, Claremont McKenna College)
    Abstract: We examine the effects of party platforms on the economic opportunities of firms using a unique data set from a political prediction market in Taiwan, a country with two dominant parties whose political cleavage derives mainly from a single issue: the “One China Principle”. We find that during the 2008 Presidential campaign, the share price of Taiwanese firms with investments in the mainland responded strongly and positively to a positive electoral outlook for the KMT, the party which advocates lifting caps on cross-strait investment in mainland China. The response is strongest for those firms who have already hit their caps.
    Keywords: Partisan Effects, Taiwan
    JEL: P16 O16 E44
    Date: 2010–01
  6. By: Filippo Belloc; Antonio Nicita
    Abstract: We investigate the political determinants of liberalization in OECD network industries, performing a panel estimation over thirty years, through the largest and most updated sample available. Contrary to traditional ideological cleavages, we find that right-wing governments liberalize less than left-wing ones. This result is confirmed when controlling for the existing regulatory conditions that executives find when elected. Furthermore, governments’ heterogeneity, proportional electoral rules, and European Union membership all show positive and statistically significant effects on liberalization. Our findings suggest that, despite the conventional wisdom, the political-economic rationale behind liberalization paths in network industries is far from being assessed
    Keywords: Liberalization – Network Industries – Government heterogeneity and Partisanship – Electoral systems - Panel data
    JEL: D72 L50 P16 C23
    Date: 2010–03
  7. By: Keefer, Philip
    Abstract: Much of the research on ethnicity, development and conflict implicitly assumes that ethnic groups act collectively in pursuit of their interests. Collective political action is typically facilitated by political parties able to make credible commitments to pursue group interests. Other work, however, emphasizes the lack of political credibility as a source of adverse development outcomes. Evidence presented here uses partisan preferences across 16 Sub-Saharan African countries to distinguish these positions. The evidence is inconsistent with the credibility of party commitments to pursue collective ethnic interests: ethnic clustering of political support is less widespread than expected; members of clustered ethnic groups exhibit high rates of partisan disinterest and are only slightly more likely to express a partisan preference; and partisan preferences are more affected by factors, such as gift-giving, often associated with low political credibility. These findings emphasize the importance of looking beyond ethnicity in analyses of economic development.
    Keywords: Parliamentary Government,Educational Sciences,Social Inclusion&Institutions,Population Policies,Education and Society
    Date: 2010–03–01
  8. By: Suzuki, Hitoshi
    Abstract: After the 10th Iranian Presidential election on June 12, 2009, several public opinion polls taken in Iran attracted the attention of policy-makers and journalists around the world because of the political crisis that followed. In this paper I first review critically the polls conducted by the WPO (, PIPA (Program on International Policy Attitudes) at the University of Maryland. I also review an essay by Steven Kull, which is based on the aforementioned poll results and which in my opinion leads to false conclusions concerning Iran’s political prospects. I also discuss “An Analysis of Multiple Polls of the Iranian Public,†published by WPO-PIPA on February 3 2010. The present paper arrives at the overall conclusion that it is impossible to obtain an accurate image of political opinions in societies as complicated as that of Iran by concentrating on only one technique of research and analysis, especially when the political and social situation in the society concerned is in a state of constant flux.
    Keywords: Iran, Elections, Presidential Election, Opinion Polls, Political Crisis
    Date: 2010–03
  9. By: Elinder, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: This paper presents a detailed analysis of voters’ responses to municipality and regional-level unemployment and economic growth, using panel data on 284 municipalities and 9 regions, covering Swedish general elections from 1982 to 2002. The preferred specification suggests that a reduction in regional unemployment by one percentage point is associated with an increase in the support for the national government by about 1.7 percentage points. The effect of growth, at the regional level, is substantial in size, but statistically insignificant. At the municipality level, unemployment has a smaller effect than at the regional level and growth has no effect on government support.
    Keywords: Elections; Voting; Local Economic Conditions
    JEL: H11 R11 R12 R58
    Date: 2010–01–05
  10. By: Sigrid Roehrs (University of Zurich); David Stadelmann (University of Fribourg)
    Abstract: Mobility may undermine local income redistribution in federal systems,because rich taxpayers can evade high taxes by moving to low tax jurisdictions. By analyzing a model of local income redistribution with endogenous voting, income heterogeneity and an exogenously given degree of mobility we focus explicitly on the link between redistribution and mobility. Our findings suggest a nonlinear relationship between redistribution and mobility: high and low degrees of mobility permit major income redistribution as income sorting is absent, while a medium degree of mobility leads to high differences in tax rates between jurisdictions and thus to income sorting and less redistribution.
    Keywords: Redistribution, political economy, locational equilibrium, taxes, tax havens
    JEL: H23 H71 H73
    Date: 2010
  11. By: Ryo Arawatari (Faculty of Economics, Shinshu University); Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This paper develops a model where income inequality and intergenerational mo- bility are jointly determined via redistributive politics. The model includes two key factors: accessibility of tertiary education for poor-born agents and multiple self- ful?lling expectations of agents. Given these factors, the model provides predictions of cross-country differences in inequality and mobility consistent with empirical ob- servations.
    Keywords: Inequality; Inequality; Intergenerational mobility; Redistribution; Markov per- fect political equilibrium; Overlapping generations
    JEL: D70 H55 I38
    Date: 2009–04
  12. By: Orla Doyle (Geary Institute, University College Dublin)
    Abstract: Individual perceptions of the economy are a key factor influencing voting decisions, yet they often deviate from movements in the real economy. This study investigates the formation of economic perceptions during a period of economic and political instability in the Czech Republic using a series of Economic Expectations and Attitude (EEA) surveys and yearly regional economic indicators. It measures the extent to which retrospective and prospective perceptions are related to objective measures of the economy and subjective heterogeneity at an individual level. The study finds that objective economic indicators are inadequate determinants of economic perceptions and that such perceptions can be distorted by ideological beliefs, socioeconomic characteristics and personal experiences despite turbulent economic shocks, a highly politicized economic reform process and weak party identification.
    Keywords: Economic perceptions, regional economic indicators, transition democracies, ideological beliefs
    Date: 2010–01–29
  13. By: Cristobal Aninat; Jose Miguel Benavente; Ignacio Briones; Nicolas Eyzaguirre; Patricio Navia; Jocelyn Olivari
    Abstract: This paper analyzes the political economy of productivity-related policymaking in Chile following a political transaction cost model (Spiller and Tommasi, 2003; Murillo et al., 2008). The main findings indicate that i) the Chilean policymaking process (PMP) was successful in the 1990s in implementing productivityenhancing policies, but as the country moved to a higher stage of development, the PMP grew less adept at generating the more complex set of policies needed to increase productivity at this stage; and ii) the Chilean PMP is less transparent than previously thought (Aninat et al., 2008), thus allowing political actors to favor private interests without being punished by the electorate. This has become apparent as the more sophisticated reforms needed at this stage of development require a deeper and more consolidated democracy.
    Keywords: Economic policy, Institutional reforms, Productivity, Pensions, Education, Innovation, State modernization, Competitiveness, Chile
    JEL: L52 O25 O40
    Date: 2010–04
  14. By: Marcus Melo; Carlos Pereira; Saulo Souza
    Abstract: This project examines fiscal reforms in Brazil since the 1990s, particularly in taxation, budgeting, and fiscal federalism. While recentralizing fiscal authority and massively expanding the extractive capacity of the state, policymakers chose not to revamp an inefficient tax system that has nonetheless proven capable of generating high levels of revenue. In budgeting, the economic crises of the mid-1990s prompted the government to rein in subnational fiscal imbalances but discouraged policymakers from introducing major changes in the tax system. As the executive derives utility from fiscal stability and inflation control because of electoral incentives and credibility gains in international markets, reform initiatives can generate political benefits for incumbent politicians. The paper finally argues that the Achilles’ heel of the sustainability of the Fiscal Responsibility Law is its enforcement technology: the Tribunais de Contas.
    Keywords: Fiscal responsibility laws, Fiscal federalism, Brazil, Political institutions
    JEL: H3 H77 H83 H71
    Date: 2010–02
  15. By: Annick Laruelle (UPV/EHU); Federico Valenciano (UPV/EHU)
    Abstract: Based on a general model of \"quaternary\" voting rule, sensitive to voters. choices between four di¤erent options (abstaining, voting \"yes\", voting \"no\" and staying home), we systematically study di¤erent types of majority and quorum. The model allows for a precise formulation of majority rules and quorum con- straints. For such rules four types of majority can be de.ned. We also consider four types of quorum. Then we study the possible combinations of a majority system with a type of quorum and provide examples from rules actually used in parliaments.
    Date: 2010–03–11
  16. By: Ziesemer, Thomas (UNU-MERIT, and Maastricht University)
    Abstract: We provide regressions for the net immigration flows of developing countries. We show that (i) savings finance emigration and worker remittances serve to make staying rather than migrating possible; (ii) lagged dependent migration flows have a negative sign in the presence of migration stock variables; (iii) stocks of migrants in six OECD countries and in the developing countries have non-linear effects. Some of the non-linear effects vanish if indicators for disasters, conflicts and political instability are taken into account.
    Keywords: migration, remittances, disasters, conflicts, political instability
    JEL: F22 O15
    Date: 2010
  17. By: Manoel Bittencourt
    Abstract: We test for the populist view of inflation in Latin America between 1970 and 2007. The empirical results - based on the relatively novel panel time-series data and analysis - confirm the theoretical prediction that recently elected governments coming into power after periods of political dictatorship, and which are faced with high economic inequality, end up generating high inflation and macroeconomic instability. All in all, we suggest that the implementation of democracy as such requires not only the right political context' - or an appropriately constrained executive - to work well, but it also must come with certain economic institutions (e.g. central bank independence and a credible and responsible fiscal authority), institutions which would raise the costs of pursuing populist policies in the first place.
    Keywords: Democracy, populism, hyperination, Latin America
    JEL: E31 E65 N16 O23 O54
    Date: 2010
  18. By: Annick Laruelle (UPV/EHU); Federico Valenciano (UPV/EHU)
    Abstract: In this paper we provide a general model of \"quaternary\" dichotomous voting rules (QVRs), namely, voting rules for making collective dichotomous decisions (to accept or reject a proposal), based on vote pro.les in which four options are available to each voter: voting (\"yes\", \"no\".or \"abstaining\") or staying home and not turning out. The model covers most of actual real-world dichotomus rules, where quorums are often required, and some of the extensions considered in the literature. In particular, we address and solve the question of the representability of QVRs by means of weighted rules and extend the notion of \"dimension\"of a rule.
    JEL: C71 D71
    Date: 2010–03–11
  19. By: Bishnu, Monisankar; Roy, Sonali
    Abstract: Ordinarily, the process of decision making by a committee through voting is modelled by a monotonic game the range of whose characteristic function is restricted to {0,1}. The decision rule that governs the collective action of a voting body induces a hierarchy in the set of players in terms of the a-priori influence that the players have over the decision making process. In order to determine this hierarchy in a swap robust game, one has to either evaluate a number-based power index (e.g., the Shapley-Shubik index, the Banzhaf-Coleman index) for each player or conduct a pairwise comparison between players in order to find out whether there exists a coalition in which player i is desirable over another player j as a coalition partner. In this paper we outline a much simpler and more elegant mechanism to determine the ranking of players in terms of their a-priori power using only minimal winning coalitions, rather than the entire set of winning coalitions.
    Keywords: simple game; swap robust game; desirability; weak desirability; lexicographic ordering
    JEL: C71 D71
    Date: 2009–10–01
  20. By: Carlyn Dobson (Nothingam Business School); Antonio Rodríguez (School of Public Health, Department of Health Services Research, University of Aarhus)
    Abstract: This paper presents new evidence on the relationship between corruption and income inequality. Using a panel data methodology, we find that lower corruption is associated with higher income inequality in Latin America. This result is in contrast to other empirical studies but it makes sense in Latin America for a number of reasons. The finding of an inverse relationship between inequality and corruption suggests that institutional reform policies by themselves may be misguided.
    Keywords: Corruption, Inequality, Latin America
    JEL: D73 O15 O43
    Date: 2010–03
  21. By: Ear, Sophal
    Abstract: What happens when a developing country with poor health infrastructure and even poorer animal health surveillance is thought to be a potential source for the next emerging infectious disease? This is the story of Cambodia and Avian Influenza. This paper undertakes a review of the relevant literature and analyzes the results of detailed semi-structured interviews of individuals highly engaged in Avian Influenza work in Cambodia. First, the political economy context is detailed with particular attention to aid dependency, tourism and the role of the livestock sector. The role of politics and the bureaucracy in this context is explored. Three competing policy narratives emerge: first, kill the birds, but don’t compensate as it’s too difficult and costly; second, behaviour modification change is the answer; and third, whatever happened to poverty and livelihoods? Finally, the political economy of the policy process in Cambodia is described, including actors, networks and interests. The paper finds that in the context of avian influenza, donors are too often motivated by concerns other than protecting livelihoods, just as traditional aid activities are often dominated by the need to tie aid to donor countries, avian influenza activities have been overtly focused on detecting and preventing pandemic as a threat to the donor countries themselves. As of 2008, donors have committed $35 million to Cambodia, placing it seventh among the top 10 recipients of avian influenza funding globally, fourth in terms of per case and per death from A/H5N1, and second in terms of per capita and per outbreak funding. However, ultimate responsibility for the success or failure of policies in Cambodia must rest with those in charge. Poor governance and pervasive institutional failure have plagued the response in Cambodia. Effective disease response and effective governance must go hand-in-hand. A rushed, emergency oriented response to avian influenza may have undermined already weak governance capacity in Cambodia, fuelling patronage networks and encouraging rent seeking. Whether such funds have increased the ability of Cambodia—and the world—to prevent a future pandemic remains uncertain.
    Keywords: Highly Pathogenic Avian Influenza; Cambodia; Political Economy
    JEL: P33 P32 P26
    Date: 2009–09
  22. By: Sarah Bridges; Simona Mateut (Department of Economics, The University of Sheffield Author-Person=pma543)
    Abstract: This paper examines opposition towards immigration in Europe. Although we find evidence that both economic and non-economic variables shape attitudes towards the arrival of immigrants, the relative importance of these factors depends crucially on the race/ethnicity of the arriving immigrants. We find that more exposure to immigrants reduces opposition towards the arrival of different race immigrants, while fears over labour market competition are more likely to shape attitudes towards the arrival of same race immigrants. Social welfare considerations are also important in determining attitudes towards further immigration, but mainly towards those of a different race.
    Keywords: Attitudes, Immigration, European Union
    JEL: F1 F22 J61
    Date: 2009–05
  23. By: Taiji Furusawa; Hideo Konishi
    Abstract: We consider a (pure) public goods provision problem with voluntary participation in a quasi-linear economy. We propose a new hybrid solution concept, the free-riding-proof core (FRP-Core), which endogenously determines a contribution group, public good provision level, and its cost-sharing. The FRP-Core is always nonempty in public good economies but does not usually achieve global efficiency. The FRP-Core has support from both cooperative and noncooperative games. In particular, it is equivalent to the set of perfectly coalition-proof Nash equilibrium (Bernheim, Peleg, and Whinston, 1987) of a dynamic game with players' participation decisions followed by a common agency game of public goods provision. We illustrate various properties of the FRPCore with an example. We also show that the equilibrium level of public good shrinks to zero as the economy is replicated.
    Keywords: endogenous coalition formation, externalities, public good, perfectly coalition-proof Nash equilibrium, free-riders, free-riding-proof core, lobbying, common agency game
    Date: 2010–03
  24. By: James E. Foster, Andrew W. Horowitz and Fabio Méndez
    Abstract: In this paper we demonstrate that the axiomatic measurement approach developed in the poverty and inequality literature can be usefully applied to the measurement of corruption. We develop a conceptual framework for organizing corruption data and discuss several objective, aggregate corruption measures consistent with axiomatic requirements. We then provide an empirical application of the methodology and estimate the respective corruption measures for a sample of over 25 countries during the year 2000. Our empirical analysis reveals significant discrepancies between the country rankings generated by these measures and those provided by the Corruption Perception Index (CPI) from Transparency International. To our knowledge, this paper represents a first analysis of corruption measurement using an axiomatic framework.
    Keywords: corruption, illegal behaviour, corruption measurement, legal institutions
    JEL: K42 O17 P37
    Date: 2009–05

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