nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒06‒18
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. The performance of four possible rules for selecting the Prime Minister after the Dutch Parliamentary elections of June 2010 By Colignatus, Thomas
  2. Work Values, Endogenous Sentiments and Redistribution By Laurence Kranich; Matteo Cervellati; Joan Esteban
  3. A Quantile-based Test of Protection for Sale Model By Susumu Imai; Hajime Katayama; Kala Krishna
  4. Education and the Political Economy of Environmental Protection. By Natacha Raffin
  5. A Quantile-based Test of Protection for Sale Model By Imai, Susumu; Katayama, Hajime; Krishna, Kala
  6. The Timing of Elections in Federations : A Disciplining Device against Soft Budget Constraints ?. By Karolina Kaiser; Emmanuelle Taugourdeau
  7. An Economic Model of Party Formation and Competition By Daniel Radley; James Rockey
  8. Twitter Adoption in Congress: Who Tweets First? By Chi, Feng; Yang, Nathan
  9. The Political Economy of Globalization – Revisiting Stephen Hymer 50 Years On By Dunning , John; Pitelis, Christos
  10. Referenda under Oath By Nicolas Jacquemet; Alexander James; Stephane Luchini; Jason Shogren
  11. Social identity, group composition and public good provision: an experimental study By Chakravarty, Surajeet; Fonseca, Miguel A.
  12. Decentralization of the Size and Scope of Local Governments and Corruption By Rajeev K. Goel; Michael A. Nelson
  13. The endogenous nature of the measurement of social preferences By Smith, John

  1. By: Colignatus, Thomas
    Abstract: Economic policy depends not only on national elections but also on coalition bargaining strategies. In coalition government, minority parties bargain on policy and form a majority coalition, and select a Prime Minister from their mids. In Holland the latter is done conventionally with Plurality, so that the largest party provides the chair of the cabinet. Alternative methods are Condorcet, Borda or Borda Fixed Point. Since the role of the Prime Minister is to be above all parties and represent the nation and to be there for all citizens, it would enhance democracy and likely be optimal if the potential Prime Minister is selected from all parties and at the start of the bargaining process. The performance of the four selection rules is evaluated using the results of the 2010 Dutch Parliamentary elections. The impossibility theorem by Kenneth Arrow (Nobel memorial prize in economics 1972) finds a crucially different interpretation.
    Keywords: Political economy; public choice; political science; optimal representation; electoral systems; elections; coalition; impossibility theorem
    JEL: D71 C88 A2
    Date: 2010–06–11
  2. By: Laurence Kranich; Matteo Cervellati; Joan Esteban
    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.
    Date: 2010
  3. By: Susumu Imai; Hajime Katayama; Kala Krishna
    Abstract: This paper proposes a new test of the Protection for Sale (PFS) model by Grossman and Helpman (1994). Unlike existing methods in the literature, our approach does not require any data on political organization. We use quantile and quantile IV regressions to do so using the data from Gawande and Bandyopadhyay (2000). Surprisingly, the results do not provide any evidence favoring the PFS model. We also explain why previous work may have inadvertently found support for it.
    Keywords: protection for sale, lobbying, political economy, quantile regression
    JEL: F13 F14
    Date: 2010–06
  4. By: Natacha Raffin (Paris School of Economics - Centre d'Economie de la Sorbonne)
    Abstract: We develop a political economy model that might explain the different environmental performance of countries, through educational choices. Individuals decide whether to invest in additional education according to their expectations regarding future environmental quality. They also vote on a tax that will be exclusively used to finance environmental protection. We show that the model may generate multiple equilibria and agents' expectations may be self-fulfilling when the public policy is endogenous. Then, we analyse the long-term implications of a public policy that would favour education and make it possible to select the higher equilibrium.
    Keywords: Environmental quality, human capital, education, self-fulfilling prophecies, public policy.
    JEL: I28 H20 O16 O40 Q58
    Date: 2010–05
  5. By: Imai, Susumu; Katayama, Hajime; Krishna, Kala
    Abstract: This paper proposes a new test of the Protection for Sale (PFS) model by Grossman and Helpman (1994). Unlike existing methods in the literature, our approach does not require any data on political organization. We use quantile and quantile IV regressions to do so using the data from Gawande and Bandyopadhyay (2000). Surprisingly, the results do not provide any evidence favoring the PFS model. We also explain why previous work may have inadvertently found support for it.
    Keywords: Protection for Sale, Lobbying, Political Economy, Quantile Regression
    JEL: F13 F14
    Date: 2010–05
  6. By: Karolina Kaiser (Université de Munich); Emmanuelle Taugourdeau (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: We introduce political economics into the soft budget constraint problem by asking if the timing of elections has the potential to harden budget constraints. Specifically, we ask under which circumstances the soft budget constraint problem is worse - with synchronized elections, i.e. simultaneous central and regional office terms, or with staggered elections, i.e. terms of office that do not coincide. We find that staggered elections clearly improve fiscal discipline at the local level as well as welfare.
    Keywords: Soft budget constraints, fiscal federalism, elections.
    JEL: D72 H77
    Date: 2010–02
  7. By: Daniel Radley; James Rockey
    Abstract: This paper investigates the behaviour of a Citizen-Candidate Model in a simple framework with many large constituencies, many policy dimensions, and endogenous coalition formation. A model is simulated in which districts elect representatives who themselves interact to form parties. Competition between parties of different sizes and with different platforms is an emergent property of the model which leads to stable equilibria. The paper shows that the widespread usage of the Citizen-Candidate model may be empirically justified. Our results demonstrate how the number of policy dimensions and representatives elected per electoral district influence the number, size, and relative locations of parties and consequently the possible stable equilibria. Comparison with election data shows strong correspondence between the model’s results and observed outcomes, including variation consistent with Duverger’s law.
    Date: 2010–05
  8. By: Chi, Feng; Yang, Nathan
    Abstract: Our general objective is to characterize the recent and well publicized diffusion of Twitter among politicians in the United States 111th House of Representatives. Ultimately, Barrack Obama, Facebook and peers matter when it comes to the propensity and speed of Twitter adoption. A basic analysis of the distribution of first Tweets over time reveals clustering around the President's inauguration; which holds regardless whether the adopter is Democratic or Republican, or an incumbent or newcomer. After we characterize which representatives are most likely to adopt Twitter, we confirm the widespread belief that Facebook and Twitter are indeed complementary technology. Given their perceived desire for accessible government, a surprising result is that Republicans are more likely to adopt Twitter than Democrats. Finally, using the exact dates of each adopter's first Tweet, we demonstrate that the diffusion of Twitter is faster for those representatives with a larger number of peers already using the technology, where peers are defined by two social networks: (1) Politicians representing the same state; and (2) politicians belonging to the same committees; especially so for those in committee networks. This observed behavior can be rationalized by social learning, as the instances in which the peer effects are important correspond to the cases in which social learning is relevant.
    Keywords: Communication; diffusion of technology; political marketing; social interaction; social media; social learning.
    JEL: M3 D83 D85
    Date: 2010–06–09
  9. By: Dunning , John; Pitelis, Christos
    Abstract: We discuss issues pertaining to the political economy of “globalization”, in the context of the seminal contribution by Stephen Hymer. While Hymer’s contribution to the theory of the multinational enterprise (MNE) and foreign direct investment (FDI) is widely recognized, his contribution to the political economy of what he called “multinational corporate capital” has received less attention. In this paper we revisit some of the issues he raised, notably uneven development, global governance and central planning in the context of post-Hymer scholarly thinking and the shifting global landscape. In so doing we also speculate on the challenges and future of globalization.
    Keywords: Stephen Hymer; International Political Economy; Institutions; Globalization;Sustainability
    JEL: F23 F02 F21
    Date: 2009–11–13
  10. By: Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Alexander James (University of Wyoming - Department of Economics and Finance); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Jason Shogren (Departement Economy and Finance, University of Wyoming - University of Wyoming)
    Abstract: Herein we explore whether a solemn oath can eliminate hypothetical bias in a voting referenda, a design commonly promoted in nonmarket valuation exercises for its incentive compatibility properties. First, we reject the null hypothesis that a hypothetical bias does not exist. Second, we cannot reject the hypothesis that people who sign an oath are as likely to vote for the public good (e.g., wind energy R&D) in a hypothetical referenda as in a real one. This result opens interesting avenues for improving the elicitation of preferences in the lab.
    Keywords: Dichotomous Choice Mechanism; Hypothetical bias; Oath; Preference revelation
    Date: 2010–06–08
  11. By: Chakravarty, Surajeet; Fonseca, Miguel A.
    Abstract: Social fragmentation has been identified as a potential cause for the under-provision of public goods in developing nations, as well as in urban communities in developed countries such as the U.S. We study the effect of social fragmentation on public good provision using laboratory experiments. We create two artificial social groups in the lab and we assign subjects belonging to both groups to a public good game. The treatment variable is the relative size of each social group, which is a proxy for social fragmentation. We find that while higher social fragmentation leads to lower public good provision, this effect is short-lived. Furthermore, social homogeneity does not lead to higher levels of contributions.
    Keywords: Social Identity; Public Goods; Social Fragmentation; Experiments.
    JEL: C92 D02 H41
    Date: 2010–06–07
  12. By: Rajeev K. Goel; Michael A. Nelson
    Abstract: This research adds to the literature on the nexus between government and corruption by examining further the influence of government decentralization on corruption. Previous research has focused primarily on fiscal decentralization. We bring additional evidence to bear for the United States by addressing whether the structure of local governments – measured both in terms of the scope of services offered and the size of the population served – has a bearing on corruption within the state. Results show that government decentralization does not necessarily reduce corruption – the type of decentralization matters. Specifically, we find that more general-purpose governments consistently contribute to corruption. In contrast, the effect of special-purpose governments on corruption is mixed. The findings uniquely flush out the tension between fiscal decentralization and fragmental local government structures in terms of impacts on corruption. Beyond this, we find that the influences of various government enforcement agencies on corruption, including police, judiciary and corrections, vary. Other corruption determinants generally support the literature. Policy implications are discussed.
    Keywords: Corruption; Fiscal decentralization; Local government fragmentation; Special-purpose government; General-purpose government
    Date: 2010–05
  13. By: Smith, John
    Abstract: Measures of preferences are primarily useful in that they are helpful in predicting behavior. We perform an experiment which demonstrates that the timing of the measurement of social preferences can affect such a measure. Researchers often measure social preferences by posing a series of dictator game allocation decisions; we use a particular technique, Social Value Orientation (SVO). We vary the order of the SVO measurement and a lager stakes dictator game. In our first study, we find that subjects with prosocial preferences act even more prosocially when the SVO measurement is administered first, whereas those with selfish preferences are unaffected by the order. In our second study we vary the order of the SVO measurement and a nonstandard dictator game. We do not find the effect found in the first study. This suggests that the effect found in the first study is driven by choices involving the size of surplus.
    Keywords: experimental economics; social values; dictator game; social value orientation
    JEL: D64 Z13 C91
    Date: 2010–06–13

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