nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒10‒23
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Invalid Ballots and Electoral Competition By Gani Aldashev; Giovanni Mastrobuoni
  2. Political and Public Acceptability of Congestion Pricing: Ideology and Self Interest By Harsman, Bjorn; Quigley, John M.
  3. Are We Taxing Ourselves? How Deliberation and Experience Shape Voting on Taxes By Rupert Sausgruber; Jean-Robert Tyran
  4. Religion, Income Inequality, and the Size of the Government By Elgin, Ceyhun; Goksel, Turkmen; Gurdal, Mehmet Y; Orman, Cuneyt
  5. The Political Economy of Intergenerational Risk Sharing By Hollanders, D.A.
  6. Inequality and Political Clientelism: Evidence from South India By Thomas Markussen
  7. Elections and the structure of taxation in developing countries By Hélène EHRHART
  8. Diverse Societal Beliefs and Redistributive Policies, but Equal Welfare: The Trade-off Effect of Information By Tommaso Gabrieli
  9. Separation of Powers or Ideology? What Determines the Tax Level? Theory and Evidence from the US States. By Leandro M. de Magalhães; Lucas Ferrero
  10. Politics, public expenditure and the evolution of poverty in Africa 1920-2009 By Sue Bowden; Paul Mosley
  11. Prospects after the Voting Reform of the Lisbon Treaty By Laszlo A. Koczy

  1. By: Gani Aldashev; Giovanni Mastrobuoni
    Abstract: We study how the closeness of electoral race affect the number of invalid ballots under the traditional paper-ballot voting technology. Using a large dataset from the Italian parliamentary elections in 1994-2001, we find a strong positive correlation between the closeness of electoral race and the fraction of invalid ballots. This correlation is not driven by voters' behavior, the biased actions of election officers, or the strategic pressure by parties. The theory that garners most support is that of unbiased election officers that increase their effort in response to higher (expected) closeness of electoral race, so as to reduce the likelihood of incorrectly adjudicating the victory. We also find large North-South differences in the patterns of invalid ballots: (i) electoral districts and municipalities in Southern Italian regions have a substantially higher level of invalid ballots, and (ii) the correlation between the closeness of electoral race and the fraction of invalid ballots is absent in the South. Social capital and organized crime explain these differences: once these two features are accounted for, the districts and municipalities in the South behave similarly to those in the North.
    Keywords: invalid ballots; electoral competition; social capital; voting technology; Italian parliamentary elections
    JEL: D72 D73 D81 Z10
    Date: 2010
  2. By: Harsman, Bjorn; Quigley, John M.
    Abstract: Studies of the “stated preferences†of households generally report public and political opposition by urban commuters to congestion pricing. It is thought that this opposition inhibits or precludes tolls and pricing systems that would enhance efficiency in the use of scarce roadways. This paper analyzes the only case in which road pricing was decided by a citizen referendum on the basis of experience with a specific pricing system. The city of Stockholm introduced a toll system for seven months in 2006, after which citizens voted on its permanent adoption. We match precinct voting records to citizen commute times and costs by traffic zone, and we analyze patterns of voting in response to economic and political incentives. We document political and ideological incentives for citizen choice, but we also find that the pattern of time savings and incremental costs exerts a powerful influence on voting behavior. In this instance, at least, citizen voters behave as if they value commute time highly. When they have experienced first-hand the out-of-pocket costs and time-savings of a specific pricing scheme, they are prepared to adopt freely policies which reduce congestion on urban motorways.
    Date: 2010–08–01
  3. By: Rupert Sausgruber; Jean-Robert Tyran
    Abstract: We let consumers vote on tax regimes in experimental markets. We test if taxes on sellers are more popular than taxes on consumers, i.e. on voters themselves, even if taxes on sellers are inefficiently high. Taxes on sellers are more popular if voters underestimate the extent of tax shifting in the market. We show that inexperienced voters are prone to such a tax-shifting bias, that experience is an effective de-biasing mechanism, but that pre-vote deliberation about tax regimes makes initially held opinions more extreme rather than correct. Our results suggest that voting on taxes is prone to bias and that easy-to-interpret facts are needed to de-bias voters.
    JEL: C92 H22 D72
    Date: 2010–10
  4. By: Elgin, Ceyhun; Goksel, Turkmen; Gurdal, Mehmet Y; Orman, Cuneyt
    Abstract: Recent empirical research has demonstrated that countries with higher levels of religiosity are characterized by greater income inequality. We argue that this is due to the lower level of government services demanded in more religious countries. Religion requires that individuals make financial sacrifices and this leads the religious to prefer making their contributions voluntarily rather than through mandatory means. To the extent that citizen preferences are reflected in policy outcomes, religiosity results in lower taxes, which in turn implies lower levels of spending on both public goods and redistribution. Since measures of income typically do not fully take into account the part of income coming from donations received, this increases measured income inequality. We formalize these ideas in a general equilibrium political economy model and also show that the implications of our model are supported by cross-country data.
    Keywords: religion; voluntary donations; taxation; redistribution; income inequality
    JEL: D63 Z12 H20
    Date: 2010–09–17
  5. By: Hollanders, D.A. (Tilburg University, Center for Economic Research)
    Abstract: This paper analyses the political constraints of intergenerational risk sharing. The …rst result is that the political process generally does not lead to ex ante optimal insurance. The second result is that in a second best political setting PAYG still contributes to intergenerational risk sharing. The third result is that aging in- creases the discrepancy between …rst-best and second-best transfers. The source of the ine¢ ciency is that politicians redistribute to larger and easier swayed cohorts. Ex post redistribution to lower incomes still leads to an outcome that from an ex ante point of view is preferable to a situation without intergenerational transfers.
    Keywords: risk sharing;aging;political economy
    JEL: D72 E61 H21 H55
    Date: 2010
  6. By: Thomas Markussen (Department of Economics, University of Copenhagen)
    Abstract: Political parties can be vehicles for economic and social development in poor countries. They can also serve as rent seeking instruments. Uncovering how parties function is therefore key to establishing the preconditions for good governance. The paper discusses when and why clientelism on the basis of party affiliation may arise. Operationally, party-based clientelism is defined as a bias of public policy in favour of members of the governing political party. In a sample of local governments in India, party-based clientelism is shown to exist in two out of four states and to be strongly affected by economic inequality.
    Keywords: decentralization; patronage; clientelism; inequality; poverty; India
    JEL: D31 D72 H7 O1
    Date: 2010–10
  7. By: Hélène EHRHART (Centre d'Etudes et de Recherches sur le Développement International)
    Abstract: This paper goes beyond traditional political budget cycles studies by considering the impact of the election calendar on the composition of tax revenue (direct taxes versus indirect taxes) rather than on the global level. We develop a theoretical model, based on Drazen and Eslava (2010) to predict how the taxation structure will be modif ied during election years. Using a panel of 56 developing countries over 1980-2006, our study reveals clear patterns of electorally timed interventions. We found robust evidence that indirect taxes decreases are the preferred vehicle for incumbents in de veloping countries to increase their popularity just before elections. On average, they are falling of 2.6 percent in an election year while the direct taxes remain unchanged. These manipulations constitute reversals in the developing countries' tax reforms aim- ing at broaden tax bases and increase tax mobilization and point at the importance of both good fiscal institutions and fiscal discipline.
    Keywords: Political budget cycles, Tax structure, developing countries
    JEL: O10 E62 D72
    Date: 2010
  8. By: Tommaso Gabrieli (Department of Economics, City University, London)
    Abstract: Large empirical evidence shows that the difference in the political support for redistribution appears to reflect a difference in the social perceptions regarding the determinants of individual wealth and the underlying sources of income inequality. This paper presents a model of beliefs and redistribution which explains this evidence through multiple politico-economic equilibria. Differently from the recent literature which obtains multiple equilibria by modeling agents characterized by psychological biases, my model is based on standard assumptions. Multiple equilibria originate from multiple optimal levels of information for the society. Multiple optimal levels of information exist because increasing the informativeness of an economy produces a trade-off between a decrease in adverse selection and an increase in moral hazard. The framework allows to analyze various comparative statics in order to answer to policy questions.
    Keywords: Politico-Economic Equilibria, Redistribution, Incomplete Information
    JEL: D31 D72 D80 E62 H30 O40
    Date: 2010–09
  9. By: Leandro M. de Magalhães; Lucas Ferrero
    Abstract: We find the surprising result that the tax level is negatively correlated with the size of the Democratic majority in the interval in which the Democrats hold between 50 and 66% of the seats in the state Legislatures. This negative relationship suggests the failure of a simple ideological model that had found some support in the literature, that the main determinant of the tax level is the extent of partisan control over the Legislature. We compare this model with an alternative: a separation-of-powers model in which ideology plays no role in determining the tax level. The driving force of our model is the overlap between the supporters of the Governor and the supporters of the legislative majority. The tax level at first rises and then decreases as the size of the ruling majority increases above 50% of the seats, whether the legislative majority is of the same party as the Governor or from the opposition. This non-monotonic relationship is observed in the data and explained by our model.
    Keywords: Separation of powers, divided government, line-item veto, tax level, semiparametric.
    JEL: H00 H11 H20 H30 H71
    Date: 2010–10
  10. By: Sue Bowden; Paul Mosley
    Abstract: We investigate the historical roots of poverty, with particular reference to the experience of Africa during the 20th century. We find that institutional inheritance is an important influence on current underdevelopment; but in addition, we argue that the influence of policies on institutions is highly significant, and that in Africa at least, a high representation of European settlers in land ownership and policy-making was a source of weakness, and not of strength. We argue this thesis, using mortality rates as a proxy for poverty levels, with reference to two settler colonies – Zimbabwe and Kenya – and two peasant export colonies – Uganda and Ghana. Our findings suggest that in Africa, settler-type political systems tended to produce highly unequal income distributions and, as a consequence, patterns of public expenditure and investment in human and infrastructural capital which were strongly biased against smallholder agriculture and thence against poverty reduction. Peasant-export type political systems, on the other hand, produced more equal income distributions, whose policy structures and, consequently, production functions were less biased against the poor. As a consequence, liberalisation during the 1980s and 1990s produced asymmetric results, with poverty falling sharply in the ‘peasant export’ systems, and rising in settler economies. These contrasts in the evolution of poverty in the late 20th and early 21st centuries, we argue, can only be understood by reference to differences between the settler and peasant export economies, whose roots lie in political decisions taken 100 years previously.
    Date: 2010
  11. By: Laszlo A. Koczy (Institute of Economics - Hungarian Academy of Sciences)
    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 dfferent 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, qualified majority voting, Banzhaf index, Shapley-Shubik index, a priori voting power, demographics
    JEL: C71 D72
    Date: 2010–09

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