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

  1. Turnout and Power Sharing By Helios Herrera and; Massimo Morelli
  2. Fiscal Federalism and Electoral Accountability By Aidt, T.; Dutta, J.
  3. Influential Opinion Leaders By Jakub Steiner; Colin Stewart
  4. Political Participation, Regional Policy and the Location of Industry By Wiberg, Magnus
  5. Approval Quorums Dominate Participation Quorums By Francois Maniquet; Massimo Morelli
  6. Vote or Shout By Chakravarty, Surajeet; Kaplan, Todd R
  7. Foreign Direct Investment and Civil Rights:  Testing Decreasing Returns to Civil Rights By Ponce, Aldo
  8. The Political Economy of the MDGs: Retrospect and Prospect for the World's Biggest Promise By David Hulme; James Scott
  9. Protesting or Justifying? A Latent Class Model for Contingent Valuation with Attitudinal Data By Cunha-e-Sa, Maria Antonieta; Madureira, Livia; Nunes, Luis Catela; Otrachshenko, Vladimir
  10. The Causes of Corruption: Evidence from China By Bin Dong; Benno Torgler

  1. By: Helios Herrera and; Massimo Morelli
    Abstract: Differences in electoral rules and/or legislative, executive or legal institutions across countries induce different mappings from election outcomes to distributions of power. We explore how these different mappings affect voters’ participation in a democracy. Assuming heterogeneity in the cost of voting, the effect of such institutional di¤erences on turnout depends on the distribution of voters’ preferences for the parties: when the two parties have similar support, turnout is higher in a winner-take-all system than in a power sharing system; the result is reversed when one side has a larger base. Moreover, the winner-take-all system has higher welfare if and only if the support is uneven. We compare the ‘size effect’ and the ‘underdog compensation effect’ under different systems. All systems induce an underdog compensation which is partial. Namely, unlike other costly voting models, the side with the larger support almost surely wins the majority of the votes. The results obtained in the rational voter model, characterized by the voter free-riding problem, continue to hold in other models of turnout such as ethical voter models and voter mobilization models.
    Keywords: Proportional Influence, Winner-Take-All, Underdog Compensation
    JEL: D72
    Date: 2010
  2. By: Aidt, T.; Dutta, J.
    Abstract: We study the e¢ cient allocation of spending and taxation authority in a federation in which federal politicians are exposed to electoral uncertainty. We show that centralization may, but need not, result in a loss of electoral accountability. We identify an important asymmetry between positive and negative externalities and show that centralization may not be e¢ cient in economies with positive externalities even when regions are identical and centralization does not entail a loss of accountability. We also show that decentralization can only Pareto dominate centralization in economies with negative externalities.
    Keywords: Fiscal federalism, local public goods, externalities, performance voting, turnout uncertainty, electoral accountabilit
    JEL: D72 D78 H41
    Date: 2010–04–30
  3. By: Jakub Steiner; Colin Stewart
    Abstract: We present a simple model of elections in which experts with special interests endorse candidates and endorsements are observed by the voters. We show that the equilibrium election outcome is biased towards the experts' interests even though voters know the distribution of expert interests and account for it when evaluating endorsements. Expert influence is fully decentralized in the sense that individual experts have no incentive to exert influence. The effect arises when some agents prefer, ceteris paribus, to support the winning candidate and when experts are much better informed about the state of the world than are voters.
    Keywords: Voting, coordination, experts
    JEL: D72 D82 D83
    Date: 2010–04–16
  4. By: Wiberg, Magnus (Ministry of finance)
    Abstract: This paper analyzes the location of manufacturing activities when regional policy is determined by each region’s relative propensity to vote. Once voting over government transfers to regions is included in an economic geography framework with size asymmetries, the standard prediction that the larger region becomes the core when trade barriers are reduced no longer holds. The establishment of manufacturing production in the economically smaller region is increasing in the level of regional integration. As trade is increasingly liberalized, the economy eventually features a reversed core-periphery equilibrium where all firms reside in the South. It is further shown that the relative political participation rate increases in the factor scarce region as trade is liberalized. Empirical evidence shows that the model is consistent with qualitative features of the data.
    Keywords: Economic Geography; Regional Policy; Voter Turnout
    JEL: D72 F12 R12
    Date: 2010–04–14
  5. By: Francois Maniquet; Massimo Morelli
    Abstract: We study direct democracy with population uncertainty. Voters' participation is often among the desiderata by the election designer. A participation quorum is a threshold on the fraction of participating voters below which the status quo is kept. We show that participation quorums produce incentive for partisans of the status quo to abstain, with the consequence that the status quo may be kept in situations where the planner would prefer the reform, or the reform is passed when the planner prefers the status quo. An approval quorum is a threshold on the number of voters expressing a ballot in favor of the reform below which the status quo is kept. We show that approval quorums do not suffer from the drawbacks of participation quorums. Moreover, an electoral system with approval quorum performs better than one with participation quorum even when the planner wishes to implement the corresponding participation quorum social choice function.
    Keywords: Participation Quorum, Approval Quorum, Preference Aggregation, Information Aggregation, Implementation.
    Date: 2010
  6. By: Chakravarty, Surajeet; Kaplan, Todd R
    Abstract: We examine an environment with n voters each with a private value over two alternatives. We compare the social surplus of two mechanisms for deciding between them: majority voting and shouting. In majority voting, the choice with the most votes wins. With shouting, the voter who shouts the loudest (sends the costliest wasteful signal) chooses the outcome. We find that it is optimal to use voting in the case where n is large and value for each particular alternative of the voters is bounded. For other cases, the superior mechanism is depends upon the order statistics of the distribution of values.
    Keywords: majority voting; voting procedures; social efficiency
    JEL: C70 D72
    Date: 2010–04–14
  7. By: Ponce, Aldo
    Abstract: In this paper, I examine the effectiveness of improvements in political and civil rights for attracting foreign direct investment flows (FDI) into democracies. I contend that advances in the quality of democracy – specifically those concerning civil rights – present positive but decreasing marginal returns in attracting FDI inflows. I empirically prove this proposition by using panel data regressions within the Latin American and Eastern European contexts from periods following their democratization (1991-2003).
    Keywords: foreign direct investment; civil rights; democratization; developing nations; Latin America; Eastern Europe
    JEL: K12 K00 F21 K11 K31 P52
    Date: 2010–03–15
  8. 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
  9. By: Cunha-e-Sa, Maria Antonieta; Madureira, Livia; Nunes, Luis Catela; Otrachshenko, Vladimir
    Abstract: This article develops a latent class model for estimating willingness-to-pay for public goods using simultaneously contingent valuation (CV) and attitudinal data capturing protest attitudes related to the lack of trust in public institutions providing those goods. A measure of the social cost associated with protest responses and the consequent loss in potential contributions for providing the public good is proposed. The presence of potential justification biases is further considered, that is, the possibility that for psychological reasons the response to the CV question affects the answers to the attitudinal questions. The results from our empirical application suggest that psychological factors should not be ignored in CV estimation for policy purposes, allowing for a correct identification of protest responses. JEL codes: C35, C85, Q51
    Date: 2010
  10. By: Bin Dong (QUT); Benno Torgler (QUT)
    Abstract: In this study we explore in detail the causes of corruption in China using two different sets of data at the regional level (provinces and cities). We observe that regions with more anti-corruption efforts, histories of British rule, higher openness, more access to media and relatively higher wages of government employees are markedly less corrupt; while social heterogeneity, regulation, abundance of resource and state-owned enterprises substantially breed regional corruption. Moreover, fiscal decentralization is discovered to depress corruption significantly, while administrative decentralization fosters local corruption. We also find that there is currently a positive relationship between corruption and economic development in China that is mainly driven by the transition to a market economy.
    Keywords: Corruption; China; Government; Decentralization; Deterrence; Social Heterogenity
    JEL: D73 H11 K42
    Date: 2010–03–25

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