nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒09‒18
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Government Spending and Re-election By Stephan Litschig; Kevin Morrison
  2. Pillars and electoral behavior in Belgium: The neighborhood effect revisited By Quentin David; Gilles Van Hamme
  3. European Union Foreign Policy And the Challenges of Globalisation By Christopher F. Patten
  4. Elections related cycles in publicly supplied goods in Albania By Kächelein, Holger; Lami, Endrit; Imami, Drini
  5. Oil and the Duration of Dictatorships By Jesus Crespo Cuaresma; Harald Oberhofer; Paul Raschky
  6. Bias in the Relative Assessment of Happiness,Political Stance, Height and Weight By Proto, Eugenio; Sgroi, Daniel
  7. Critical connections : Islamic politics and political economy in Indonesia and Malaysia By Khoo, Boo Teik; Vedi, R. Hadiz
  8. Social movements and the crisis of neoliberalism in Malaysia and Thailand By Khoo, Boo Teik
  9. No insulation : politics and technocracy's troubled trajectory By Khoo, Boo Teik
  10. Political institutions and policy outcomes : effects of presidential vetoes on budget making By Kawanaka, Takeshi
  11. Dealing with Politics for Money and Power in Infrastructure By Daniel Benitez; Antonio Estache; Tina Soreide
  12. Size Matters (in Output-Sharing Groups): Voting to End the Tragedy of the Commons By Cherry, Josh; Salant, Stephen; Uler, Neslihan
  13. Prospects after the voting reform of the Lisbon Treaty By László Á. Kóczy

  1. By: Stephan Litschig; Kevin Morrison
    Abstract: Does additional government spending improve the electoral chances of incumbent political parties? This paper provides the first quasi-experimental evidence on this question. Our research design exploits discontinuities in federal funding to local governments in Brazil around several population cutoffs over the period 1982-1985. We find that extra fiscal transfers resulted in a 20% increase in local government spending per capita, and an increase of about 10 percentage points in the re-election probability of local incumbent parties. We also find positive effects of the government spending on education outcomes and earnings, which we interpret as indirect evidence of public service improvements. Together, our results provide evidence that electoral rewards encourage incumbents to spend part of additional revenues on public services valued by voters, a finding in line with agency models of electoral accountability.
    Keywords: Government spending, voting, regression discontinuity.
    JEL: H40 H72 D72
    Date: 2010–06
  2. By: Quentin David (CREA, University of Luxembourg); Gilles Van Hamme (IGEAT, Université Libre de Bruxelles)
    Abstract: This paper explores the processes behind the neighborhood effect in electoral geography. Studies on neighborhood effect have largely ignored the local institutions and cultural milieu within which people are socialized. By taking into account the spatially differentiated social supervision of individuals, we are able to highlight the impact of local institutions on electoral behavior and restore the temporal dimension that has shaped the political specificities of places. In the case of Belgium, we show that social supervision (which took the very accomplished form of pillars) affects voting behavior through two different channels: a direct effect, coming from the family transmission of pillar values, and a contextual effect captured by a measure of the local embeddedness of the pillar.
    Keywords: electoral geography, neighborhood effect, social supervision, pillar, Belgium
    Date: 2010
  3. By: Christopher F. Patten
    Abstract: The European Union is a profoundly political project and one which has attempted to achieve important political goals through economic means. Initially through the establishment of a coal and steel community, then a common market to achieve that simple political goal. [Lecture No. 6]
    Keywords: European, Union, political, economic, goals, community, market
    Date: 2010
  4. By: Kächelein, Holger; Lami, Endrit; Imami, Drini
    Abstract: The phenomena of manipulation of the economy by the incumbent for electoral purpose are called Political Business Cycles (PBC), introduced by Nordhaus (1975). Using policy control economic instruments, as fiscal and monetary instruments, government may manipulate the economy to gain electoral advantage by producing growth and decreasing unemployment before elections. In addition to increased public expenditures, also the production/supply of certain publicly provided goods may score improvements. In Albania, production and supply of electricity (for the time span of our analyzes) was controlled by KESH (Korporata Energjitike Shqiptare - Albanian Energy Corporation) which is a quasi- monopoly in the supply of electricity in Albania, and it is publicly run. Throughout the transition, supply of electricity, due to various technical and economic reasons, has not been stable, and characterized by systematic interruption for households and businesses users, affecting their well-being and performance (electricity is a main source of energy for households, including heating and cooking). Therefore, it seems so that there is an incentive and rationale for the incumbent to use also the provision of electricity to impress the voters before elections, beside of the classical instruments of expenditures. In this paper we analyze consumption, production and import of electricity in Albania. Our hypothesis is that before elections, electricity consumption may increase above usual levels, followed by a contraction after elections. In our analysis we use modern standard econometric approach, used widely for research related to PBC. By ARMA modelling it is possible to prove if elections can explain changes in electricity production, in addition to the past history of the variable and the random error term. --
    Keywords: Political Business Cycle,Electricity,Albania
    JEL: P26 E32 D72 H72
    Date: 2010
  5. By: Jesus Crespo Cuaresma; Harald Oberhofer; Paul Raschky
    Abstract: This paper studies empirically the relationship between oil endowment and the duration of autocratic leaders. A simple theoretical setting shows how the relationship between oil endowment and the duration of the dictatorial regime is mediated by the price of oil. Using a dataset on 106 dictators, our empirical analysis supports the predictions of the theoretical model and indicates that dictators in countries which are relatively better endowed in terms of oil stay longer in office. This result is robust to changes in the definition of dictatorial regimes, as well as to controlling for other economic and political variables.
    Keywords: Natural resources, dictatorship, political economy, duration
    JEL: Q34 D72 H11
    Date: 2010–05
  6. By: Proto, Eugenio (Department of Economics, University of Warwick); Sgroi, Daniel (Department of Economics, University of Warwick)
    Abstract: Cognitive biases have been a recognised feature of research into human behaviour since at least Kahneman and Tversky’s ground-breaking work of the 1970s. We find that such biases extend into the realm of perceptions about relative happiness and we compare and contrast this phenomenon across three other characteristics : height, weight and political stance. Our findings indicate a powerful and consistent bias in the way individuals perceive their place in the population distribution. In particular, those at extremes perceive a population distribution that is incorrectly and heavily biased towards themselves,irrespective of whether the c haracteristic is objective and easily ob served or not. 
    Date: 2010
  7. By: Khoo, Boo Teik; Vedi, R. Hadiz
    Abstract: This article explores Islamic politics in two Muslim-majority countries in Southeast Asia, Indonesia and Malaysia, by linking their trajectories, from late colonial emergence to recent upsurge, to broad concerns of political economy, including changing social bases, capitalist transformation, state policies, and economic crises. The Indonesian and Malaysian trajectories of Islamic politics are tracked in a comparative exercise that goes beyond the case studies to suggest that much of contemporary Islamic politics cannot be explained by reference to Islam alone, but to how Islamic identities and agendas are forged in contexts of modern and profane social contestation.
    Keywords: Southeast Asia, Indonesia, Malaysia, Internal politics, Islam, Islamization, State, Economic transformation, Economic crises, Populism
    Date: 2010–06
  8. By: Khoo, Boo Teik
    Abstract: Of the Southeast Asian countries most badly affected by the 1997 financial crisis, Malaysia and Thailand remain the most unsettled by its political fallout. Their present political situations are not akin to 'politics as usual'. Instead, they capture the unpredicted outcomes of post-crisis struggles to reorganize structures of economic and political power. Comparing the situations in Malaysia and Thailand, this paper focuses on their differing state and civil society engagements with neoliberalism. It is suggested that the post-crisis contestations, sometimes tied to pre-crisis conflicts in political economy, left something of a stalemate: neither neoliberalism nor the social movements satisfactorily fulfilled their agendas in either country.
    Keywords: Southeast Asia, Malaysia, Thailand, Social movements, Economic policy, Financial crises, Neoliberalism, East Asian financial crisis
    Date: 2010–06
  9. By: Khoo, Boo Teik
    Abstract: Technocracy often holds out the promise of rational, disinterested decision-making. Yet states look to technocracy not just for expert inputs and calculated outcomes but to embed the exercise of power in many agendas, policies and programs. Thus, technocracy operates as an appendage of politically constructed structures and configurations of power, and highly placed technocrats cannot be 'mere' backroom experts who supply disinterested rational-technical solutions in economic planning, resource allocation and social distribution, which are inherently political. This paper traces the trajectories of technocracy in conditions of rapid social transformation, severe economic restructuring, or political crises - when the technocratic was unavoidably political.
    Keywords: Developing countries, Internal politics, Economic policy, Public officers, Ruling classes, Technocracy, Technocrats, Economic crises, Structural adjustment, Politics in Chile, Indonesia, The Philippines, Neoliberalism, Populism
    Date: 2010–05
  10. By: Kawanaka, Takeshi
    Abstract: The article examines how the power distribution between the executive and the legislature under the Presidential system affects policy outcomes. We focus in particular on the presidential veto, both package and partial. Using a simple game theory model, we show that the presidential partial veto generally yields a result in favor of the President, but that such effects vary depending on the reversion points of the package veto and the Congress's possible use of sanctions against the President. The effects of the Presidential partial veto diminish if the reversion point meets certain conditions, or if the Congress has no power to impose sufficient sanctions on the President when the President revises the outcome ex-post. To clarify and explain the model, we present the case of budget making in the Philippines between 1994 and 2008. In the Philippines, the presidential partial veto has been bringing expenditure programs closer to the President's ideal point within what may be called the Congress's indifference curve. The Congress, however, has not always passed budget bills and from time to time has carried over the previous year's budget, in years when the budget deficit increased. This is the situation that the policy makers cannot retrieve from the reversion point.
    Keywords: Philippines, Internal politics, Budget and accounts, Institutions, Democracy, Policy, Budget
    Date: 2010–06
  11. By: Daniel Benitez; Antonio Estache; Tina Soreide
    Abstract: Policy recommendations for infrastructure provision usually build on a well-established understanding of best practice for sector governance. Too rarely are they adapted to the country-specific political environment even if this is an area where policy choices are likely to be subject to private agendas in politics. The fact that such private agendas are often ignored goes a long way toward explaining why infrastructure policies fail and why best practice can be counterproductive. While non-benevolence and rent-seeking are well described in the literature and anecdotes abound, there is only limited consideration of how the different incentive problems in politics impede policy improvements in infrastructure. This paper addresses why politics in infrastructure cannot be ignored, drawing on theoretical results and a systematic review of experiences. It reviews how different private agendas in politics will have different impact for sector-governance decisions – and hence service delivery. The concept of best practice in policy recommendations should be reconsidered in a wide perspective and allow for tailored solutions based on an understanding of the given incentive problems. Policy recommendations should take into account how coordination trade-offs may complicate efforts to reduce the possible impact of private agendas on infrastructure policy decisions. While more transparency linked to service delivery indicators is a “safe” recommendation, it is also clear that the demand for good governance will not be sufficient to secure political accountability in a sector with huge vested interests combined with complicated funding schemes and complex contracts.
    Date: 2010–09
  12. By: Cherry, Josh; Salant, Stephen; Uler, Neslihan
    Abstract: Individuals extracting common-pool resources in the field sometimes form output-sharing groups to avoid costs of crowding. In theory, if the right number of groups forms, Nash equilibrium aggregate effort should fall to the socially optimal level. Whether individuals manage to form the efficient number of groups and to invest within the chosen groups as theory predicts, however, has not been previously determined. We investigate these questions experimentally. We find that subjects do vote in most cases to divide themselves into the optimal number of output-sharing groups, and in addition do decrease the inefficiency significantly (by 50% to 71%). We did observe systematic departures from the theory when the group sizes are not predicted to induce socially optimal investment. Without exception these are in the direction of the socially optimal investment, confirming the tendency noted elsewhere in public goods experiments for subjects to be more “other-regarding” than purely selfish.
    Keywords: catch-sharing, common-pool resources, efficient private provision, free-riding, laboratory experiment, partnership solution
    Date: 2010–09–08
  13. By: László Á. Kóczy (Óbuda University)
    Abstract: The European Union used to make decisions by unanimity or near unanimity. After a series of extensions, with 27 member states the present decision making mechanisms have become very slow and assigned power to the members in an arbitrary way. The new decision rules accepted as part of the Lisbon Treaty did not only make decision making far easier, but streamlined the process by removing the most controversial element: the voting weights. The new system relies entirely on population data. We look at the immediate impact of the reform as well as the long term effects of the different demographic trends in the 27 member states. We find that the Lisbon rules benefit the largest member states, while medium sized countries, especially Central Eastern European countries suffer the biggest losses.
    Keywords: European Union, Council of Ministers, qualied majority voting, Banzhaf index, Shapley-Shubik index, a priori voting power, demographics.
    Date: 2010

This nep-pol issue is ©2010 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.