nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒09‒03
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. When Winning is the Only Thing:  Pure Strategy Nash Equilibria in a Three-Candidate Spatial Voting Model By Richard Chisik; Robert J. Lemke
  2. Power Indices in Large Voting Bodies By Leech, Dennis
  3. Participatory Decision Making: A Field Experiment on Manipulating the Votes By Paolo Spada; Raymond Vreeland
  4. Sheltering Corporate Assets from Political Extraction By Lorenzo Caprio; Mara Faccio; John J. McConnell
  5. Elites and Institutional Persistence By Robinson, James A.
  6. Why Are the Elite in China Motivated to Promote Growth By Zang, Xiaowei
  7. Political Instrumentalisation of Islam, Persistent Autocracies, and Obscurantist Deadlock By Jean-Philippe Platteau
  8. Decentralization, Democracy and Allocation of Poverty Alleviation Programs in Rural India By Takahiro Sato; Katsushi S. Imai
  9. Political Costs and Fiscal Benefits: The Political Economy of Residential Property Value Assessment By Michael D. Makowsky; Shane Sanders
  10. The necessary and sufficient condition for the transitivity of the Majority Rule in the linear domain By Xefteris, Dimitrios

  1. By: Richard Chisik (Department of Economics, Ryerson University, Toronto, Canada); Robert J. Lemke (Department of Economics, Lake Forest College, Lake Forest, Illiniois)
    Abstract: It is well-known that there are no pure strategy Nash equilibria (PSNE) in the standard three-candidate spatial voting model when candidates maximize their share of the vote. When all that matters to the candidates is winning the election, however, we show that PSNE do exist. We provide a complete characterization of such equilibria and then extend our results to elections with an arbitrary number of candidates. Finally, when two candidates face the potential entrant of a third, we show that PSNE no longer exist, however, they do exist when the number of existing candidates is at least three.
    Keywords: Voting, spatial equilibrium, location models, entry.
    JEL: C7 D0 H8 R1
    Date: 2010–08
  2. By: Leech, Dennis (Department of Economics, University of Warwick)
    Abstract: There is no consensus on the properties of voting power indices when there are a large number of voters in a weighted voting body. On the one hand, in some real-world cases that have been studied the power indices have been found to be nearly proportional to the weights (eg the EUCM, US Electoral College). This is true for both the PenroseBanzhaf and the Shapley-Shubik indices. It has been suggested that this is a manifestation of a conjecture by Penrose (known subsequently as the Penrose limit theorem, that has been shown to hold under certain conditions). On the other hand, we have the older literature from cooperative game theory, due to Shapley and his collaborators, showing that, where there are a nite number of voters whose weights remain constant in relative terms, and where the quota remains constant in relative terms, while the total number of voters increases without limit - so called oceanic games - the powers of the voters with nite weight tend to limiting values that are, in general, not proportional to the weights. These results, too, are supported by empirical studies of large voting bodies (eg. the IMF/WB boards, corporate shareholder control). This paper proposes a restatement of the Penrose Limit theorem and shows that, for both the power indices, convergence occurs in general, in the limit as the Laakso-Taagepera index of political fragmentation increases. This new version reconciles the di erent theoretical and empirical results that have been found for large voting bodies
    Date: 2010
  3. By: Paolo Spada; Raymond Vreeland
    Abstract: Many believe that deliberative democracy, where individuals discuss alternatives before voting on them, should result in collectively superior outcomes because voters become better informed and decisions are justified using reason. These deliberations typically involve a moderator, however, whose role has been under-examined. We conduct a field experiment to test the effects moderators may have. Participants in a class of 107 students voted on options over their writing and exam requirements. Before voting, they participated in group discussions of about five people each with one moderator. Some (randomly assigned) moderators remained neutral throughout, while others made limited interventions, supporting a specific option. We find a substantial moderator effect. Our experiment is structured like deliberations used world-wide to make community decisions and thus should have some external validity. The results indicate that if organized interest groups had influence over moderators, they might be able to hijack a deliberative decision-making process.
    Keywords: Participatory Decision Making, Field Experiment, Voting.
    JEL: G10 G30 G34 G38 K20 K22
    Date: 2010–08–19
  4. By: Lorenzo Caprio; Mara Faccio; John J. McConnell
    Abstract: We hypothesize that firms structure their asset holdings so as to shelter assets from extraction by politicians and bureaucrats. In countries where the threat of political extraction is higher, we hypothesize that firms hold a lower fraction of their assets in liquid form. Consistent with this conjecture, using data for over 30,000 firms across 109 countries, we find that corporate holdings of liquid assets are negatively correlated with measures of political corruption. Further, annual investment in property, plant, equipment, and inventory plus dividends is positively correlated with measures of political corruption suggesting that owners channel their cash into harder to extract assets. To the extent that the threat of political extraction moves firms away from their otherwise optimal levels of liquid assets, our findings suggest that the threat of political extraction may reduce economic development not only through the direct costs of political payoffs, but also because the potential for asset extraction moves firms away from their otherwise optimal asset holdings.
    Date: 2010–06
  5. By: Robinson, James A.
    Abstract: Particular sets of institutions, once they become established in a society, have a strong tendency to persist. In this paper I argue that understanding how elites form and reproduce is key to understanding the persistence of institutions over time. I illustrate this idea with a simple political economy theory of institutions and through examples from Liberia, the US, South Africa and Germany I show how elites influence institutions. To change institutions requires having an understanding of how reforms influence the preferences, capabilities and strategies of elites.
    Keywords: elites, political economy, persistence of institutions
    Date: 2010
  6. By: Zang, Xiaowei
    Abstract: Rapid economic development in China in the post-1978 era has been considered ‘intriguing’ and ‘puzzling’ since it occurred under the dominance of the Chinese Communist Party – the fusion of politics and economics is supposed to be a powerful impediment to market growth. Scholars have proposed different accounts to explain this paradox, with particular emphasis on the role of the political elite in economic progress. This paper contributes to this literature by studying why the political elite are motivated to promote economic development in China. It argues that like politicians in other types of political regimes, autocratic leaders are interested in high growth rates. It also studies the historical development of China’s developmental elites to understand their motivations for economic growth in the reform era. To better understand whether or not elites in developing countries promote economic growth, scholars should focus on factors such as historical experience, political stability, leadership turnover, or elite perceptions about the impact of growth on their hold on power rather than the differences between autocracy and democracy.
    Keywords: China, democracy, autocracy, development, growth, elites
    Date: 2010
  7. By: Jean-Philippe Platteau
    Abstract: The empirical literature has established a strong link between the fact of being a Muslim-dominated country and indicators of political performance and democracy. This suggests the possible existence of a relation between religion, Islam in this instance, and societal characteristics. Bernard Lewis and others have actually argued the case for such a relation, pointing to aspects of the Islamic religion and culture that make the advent of democracy especially difficult. These arguments fall into the general idea of the “Clash of civilisations” put forward by Samuel Huntington. In this paper, we discuss this sort of argument and show that there is a systematic misconception about the true nature of the relationship between Islam and politics: far from being merged into the religious realm, politics tends to dominate religion. Because of the particular characteristics of Is-lam, namely, the lack of a centralised religious authority structure and the great variability of interpretations of the Islamic law, there is a risk of an “obscurantist deadlock” in the form of a vicious process whereby both the ruler and his political opponents try to outbid each other by using the religious idiom. This risk looms particularly large in crisis situations accentuated by international factors.
    Keywords: Islam, Instrumentalization of religion, autocracies
    Date: 2010–04–22
  8. By: Takahiro Sato (Research Institute for Economics and Business Administration, Kobe University); Katsushi S. Imai (Economics, School of Social Sciences, University of Manchester, UK and Research Institute for Economics and Business Administration, Kobe University)
    Abstract: This paper investigates the effect of the devolution of power to the village level government on the household-level allocation of poverty alleviation programs drawing upon National Sample Survey data and the Election Commission’s election data. First, greater inequality in land-holdings and less competition between the two major political parties generally lead to less provision of the poverty alleviation programs. Second, the disadvantaged groups were not necessarily likely to be the primary beneficiaries of the poverty alleviation programs. Third, our results based on the natural experiment approach suggest that decentralisation did not lead to wider household access to poverty alleviation programmes during the 1990s. Our results imply the possibility that the power and resources were captured by the local elite after decentralisation, that is, decentralization did not necessarily contribute to the improvement of the welfare of the socially disadvantaged groups.
    Keywords: Decentralization, Democracy, Poverty Alleviation Programs, Poverty, IRDP (Integrated Rural Development Programme), RPW (Rural Public Works), India
    JEL: C20 I38 O22 P46
    Date: 2010–08
  9. By: Michael D. Makowsky (Department of Economics, Towson University); Shane Sanders (Department of Economics, Nicholls State University)
    Abstract: In many American states and municipalities, property taxes are the primary means of raising government revenues. Unlike sales or income taxes, however, property taxes have a significant element of subjectivity - the assessed value of the property being taxed. Given this subjectivity, there exists the possibility of political and fiscal incentives entering into property value assessment. We examine the determinants of assessed property value growth in a panel of 351 Massachusetts municipalities from 1995 to 2009. We hypothesize that the year to year growth of assessed value is in part determined by the municipality’s fiscal condition, the availability of alternative revenue sources, and whether the municipality’s property assessor is directly elected or appointed by an elected official. We find evidence that elected assessors respond to both the fiscal benefits and political costs of increasing their assessment of property values. Appraisals grow faster in towns with appointed assessors and respond to temporary raises in the cap on tax revenues with increases in appraisal growth.
    Keywords: Property Taxes, Local Public Finance, Property Appraisal.
    JEL: H71 D70
    Date: 2010–08
  10. By: Xefteris, Dimitrios
    Abstract: This paper identifies the necessary and sufficient condition for the transitivity of the majority rule when individuals are never indifferent between two distinct alternatives (linear domain). By introducing the concept of the relevant population for each set of alternatives, a unique condition can be stated, and substitute the variety of conditions that already exist in the literature.
    Keywords: majority rule; transitivity
    JEL: D70 D71
    Date: 2010–05–01

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