nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒12‒11
fourteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Compulsory Voting and Public Finance By Roland Hodler
  2. The political cost of reforms By Alessandra Bonfiglioli; Gino Gancia
  3. Tacit Lobbying Agreements: An Experimental Study By Großer, Jens; Reuben, Ernesto; Tymula, Agnieszka
  4. Growth of Electoral Fraud in Non-Democracies: The Role of Uncertainty By Dmitriy Vorobyev
  5. Measuring and Comparing Party Ideology in Nonindustrialized Societies: Taking Party Manifesto Research to Africa By Sebastian Elischer
  6. A Political Economy of the Immigrant Assimilation: Internal Dynamics By Gil S. Epstein; Ira N. Gang
  7. What drives US Immigration Policy? Evidence from Congressional Roll Call Votes By Giovanni Facchini; Max Steinhardt
  8. Demographic Change, Intergenerational Altruism, and Fiscal Policy - A Political Economy Approach - By Oguro, Kazumasa; Shimasawa, Manabu; Aoki, Reiko; Oshio, Takashi
  9. Political Institutions and War Initiation: The Democratic Peace Hypothesis Revisited By Michelle R. Garfinkel
  10. Lessons to Be Learned: Political Party Research and Political Party Assistance By Gero Erdmann
  11. Effective Regulatory Institutions: The Regulator’s Role in the Policy Process, Including Issues of Regulatory Independence By Tom Winsor
  12. Words speak louder than actions: The impact of politics on economic performance By Osterloh, Steffen
  13. Social movements, political battles, and new market emergence in pay television By Gurses, Kerem; Ozcan, Pinar
  14. Bureaucracy intermediaries, corruption and red tape By Fredriksson, Anders

  1. By: Roland Hodler (Study Center Gerzensee)
    Abstract: Conventional wisdom suggests that compulsory voting lowers the influence of specialinterest groups and leads to policies that are better for less privileged citizens, who often abstain when voting is voluntary. To scrutinize this conventional wisdom, I study public goods provision and rents to specialinterest groups in a probabilistic voting model with campaign contributions in which citizens can decide how much political information to acquire, and whether to vote or abstain. I find that compulsory voting, modeled as an increase in abstention costs, raises the share of poorly informed and impressionable voters, thereby making special-interest groups more influential and increasing their rents. Total government spending and taxes increase as well, while the effect on public goods provision is ambiguous. Compulsory voting may thus lead to policy changes that harm even less privileged citizens.
    Date: 2010–11
  2. By: Alessandra Bonfiglioli; Gino Gancia
    Abstract: This paper formalizes in a fully-rational model the popular idea that politicians perceive an electoral cost in adopting costly reforms with future benefits and reconciles it with the evidence that reformist governments are not punished by voters. To do so, it proposes a model of elections where political ability is ex-ante unknown and investment in reforms is unobservable. On the one hand, elections improve accountability and allow to keep well-performing incumbents. On the other, politicians make too little reforms in an attempt to signal high ability and increase their reappointment probability. Although in a rational expectation equilibrium voters cannot be fooled and hence reelection does not depend on reforms, the strategy of underinvesting in reforms is nonetheless sustained by out-of-equilibrium beliefs. Contrary to the conventional wisdom, uncertainty makes reforms more politically viable and may, under some conditions, increase social welfare. The model is then used to study how political rewards can be set so as to maximize social welfare and the desirability of imposing a one-term limit to governments. The predictions of this theory are consistent with a number of empirical regularities on the determinants of reforms and reelection. They are also consistent with a new stylized fact documented in this paper: economic uncertainty is associated to more reforms in a panel of 20 OECD countries.
    Keywords: Elections, Reforms, Asymmetric Information, Uncertainty.
    JEL: E6 H3
    Date: 2010–01
  3. By: Großer, Jens (Florida State University); Reuben, Ernesto (Columbia University); Tymula, Agnieszka (New York University)
    Abstract: We experimentally study the common wisdom that money buys political influence. In the game, one lobbyist has the opportunity to influence redistributive tax policies in her favor by transferring money to two competing candidates. The success of the lobbying investment depends on whether or not the candidates are willing to respond and able to collude on low-tax policies that do not harm their relative chances in the elections. In the experiment, we find that lobbying is never successful when the lobbyist and candidates interact just once. By contrast, it yields substantially lower redistribution in about 40% of societies with finitely-repeated encounters. However, lobbying investments are not always profitable, and profit-sharing between the lobbyist and candidates depends on prominent equity norms. Our experimental results shed new light on the complex process of buying political influence in everyday politics and help explain why only relatively few corporate firms do actually lobby.
    Keywords: lobbying, redistribution, elections, bargaining, collusion
    JEL: D72 H10 K42
    Date: 2010–11
  4. By: Dmitriy Vorobyev
    Abstract: Electoral fraud has become an integral part of electoral competition both in established democracies and less-than-democratic regimes. In this paper I study electoral fraud in the non-democratic setting. First, I present evidence of fraud sustainability and growth over the lifetime of non-democratic regimes in post-Soviet and Sub-Saharan countries. Second, I provide a theoretical model that explains the observed tendency of growing fraud. Specifically, in a probabilistic voting model of electoral competition with falsifications, a corrupt incumbent faces two types of uncertainty: uncertainty about voters’ attitude towards fraud and uncertainty about his true support, captured by a purely random component in the voters’ utility over candidates. The model predicts that when uncertainty is sufficiently large, higher uncertainty about voters’ fraud intolerance provides weaker incentives to commit fraud. Over time the incumbent becomes more certain about voters’ reaction to fraud because of learning through Bayesian updating and, thus, as the deterrent role of fraud intolerance uncertainty declines, the incentives to commit fraud become stronger, providing a growing fraud profile.
    Keywords: election; voting; fraud; learning
    JEL: D72 D73 D83
    Date: 2010–10
  5. By: Sebastian Elischer
    Abstract: Despite a growing interest in African political parties, no comparative analyses of political ideology in Africa have been undertaken to date. This study addresses this shortcoming by applying the Manifesto Research Group’s (MRG) coding scheme to a complete set of African party manifestos in three African countries. The study’s main aim is to determine whether a research tool that has been seminal in the study of Western politics can be used to study political parties in nonindustrialized societies. In a first step the study examines the extent to which African manifestos advance programmatic ideas. Although most parties fail to do so, results indicate drastic differences between parties. The study subsequently investigates how African parties position themselves on a right–left spectrum. Most parties show a bias towards the political Left. Finally, the study examines the stance of individual parties on specific policy issues such as democracy and human rights, education, corruption, youth and women, and intercommunal relations. The study argues that although the MRG scheme has been designed against the historical background of European politics, it can be applied to advance the study of African parties.
    Keywords: social cleavages, political parties, Ghana, Kenya, Namibia
    Date: 2010–06
  6. By: Gil S. Epstein (Bar Ilan University, IZA and CReAM); Ira N. Gang (Rutgers University, IZA and CReAM)
    Abstract: Within immigrant society different groups wish to help the migrants in different ways – immigrant societies are multi-layered and multi-dimensional. We examine the situation where there exists a foundation that has resources and that wishes to help the migrants. To do so they need migrant groups to invest effort in helping their country-folk. Migrant groups compete against one another by helping their country-folk and to win grants from the foundation. We develop a model that considers how such a competition affects the resources in-vested by the groups’ supporters and how beneficial it is to immigrants. We consider two alternative rewards systems for supporters – absolute and relative ranking – in achieving their goals.
    Date: 2010–07–31
  7. By: Giovanni Facchini (Erasmus University Rotterdam, University of Milan, Centro Studi Luca d’Agliano, CEPR and CES-Ifo); Max Steinhardt (Hamburg Institute of International Economics (HWWI), Centro Studi Luca d’Agliano and ECARES)
    Abstract: Immigration is today one of the most hotly debated policy issues in the United States. Despite marked divergence of opinion even within political parties, several important reforms have been in-troduced in the post 1965 era. The purpose of this paper is to carry out a systematic analysis of the drivers of the voting behavior of US representatives on immigration policy in the period 1970-2006, and in particular to assess the role of economic factors at the district level. Our findings suggest that representatives from more skilled labor abundant districts are more likely to support an open immi-gration policy towards the unskilled, whereas the opposite is true for representatives from more un-skilled labor abundant districts. This evidence is robust to the introduction of an array of additional economic and non-economic characteristics of the districts, and suggests that a simple factor analy-sis model can go a long way in explaining the voting behavior on immigration policy.
    Keywords: Immigration policy, Voting, Political Economy
    JEL: F22 J61
    Date: 2010–07–31
  8. By: Oguro, Kazumasa; Shimasawa, Manabu; Aoki, Reiko; Oshio, Takashi
    Abstract: Our study employs an OLG model under which political strengths of different generations (the working and retirees with and without children) determine the distribution of the fiscal burden between the generations, including the future generation. We investigate the relationship between the extent of intergenerational altruism, the political regime, and the intergenerational distribution of the fiscal burden. We show that if the working generation were to care more about the utility of the retirees (their parents), cooperation between the working and retirees with children would be possible, changing the political outcome. As a result, the tax burden of the working generation would decrease and its members would be better off. Lowering the voting age and having parents vote on behalf of their children would also result in the same shift, but for higher levels of intergenerational altruism and the working generation’s political
    Keywords: Public debt, public deficit, OLG models, intergenerational altruism, Demeny voting method
    JEL: D64 E60 H63
    Date: 2010–11
  9. By: Michelle R. Garfinkel (Department of Economics, University of California-Irvine)
    Abstract: This chapter analyzes the influence of democratic institutions---specifically, the effects of (i) electoral uncertainty when individuals within a nation have different preferences over public peaceful investment and (ii) greater checks and balances that lead to a more effective mobilization of resources for both public peaceful investment and arming---on a nation's incentive to arm and willingness to initiate war. The analysis is based on a model where nations contest some given resource and where they cannot commit to their future allocations to arming; yet, the victor in a conflict today gains an advantage in future conflict and thus realizes a savings in future arming. These assumptions imply that, despite the short-term incentives to settle peacefully, one or both nations might choose to initiate war. In such a setting, electoral uncertainty tends to make a democracy more peaceful relative to an autocracy, whereas greater checks and balances tend to make a democracy less peaceful. Thus, while two democracies might be more peaceful than two autocracies when paired against each other in a contest over a given resource, this is not necessarily the case. Even under conditions where democracies are most likely to be peaceful with one another, democracies are at least as likely to be in war with autocracies as autocracies are likely to be in war each other.
    Keywords: International conflict; Domestic conflict; Peaceful settlement; Political institutions
    JEL: D30 D70 D72 D74 D78 F51
    Date: 2010–12
  10. By: Gero Erdmann
    Abstract: Generally speaking, the effects of international political party assistance are viewed nega-tively, or at least controversially. This study attributes some of the shortcomings of political party aid to the poor relationship between assistance providers and political science party research. They simply operate in different worlds. Party assistance lacks clear-cut concepts and strategies in practice, which makes it difficult to adequately evaluate it. At issue is its “standard method,” with its “transformative” intention to change the party organization of the assistance receivers. At the same time, the scholarship on political parties can provide only limited help to assistance providers due to its own conceptual and methodological re-strictions, such as the Western European bias underlying its major concepts, the predomi-nance of a functionalist approach, and the scant empirical research on political parties out-side of Europe and the US. Taking a cue from recent political party research, we could begin to question the overarching role of political parties in the transition and consolidation proc-ess of new democracies. Other research findings emphasize the coexistence of different types of party organizations, and the possibility of different organizational developments, which might all be consistent with consolidating democracy. All this suggests the necessity of aban-doning the controversial aim of the “transformative impact” of political party aid.
    Keywords: democratization, democracy promotion, political party assistance, political party research
    Date: 2010–10
  11. By: Tom Winsor
    Abstract: This paper discusses three connected aspects of regulation: (1) what makes a regulatory authority effective; (2) what is the legitimate role of a regulatory authority in the making and implementation of policy, and how that role may be regarded by others, and (3) the issue of independence of regulation from undue political intervention. It argues that regulators are usually established to carry out complex technical tasks which government is unable or unwilling to do, partly because government wishes to distance itself from responsibility for some decisions, but, having invested regulatory authorities with sometimes considerable powers which are more detailed and intrusive than any possessed by government over state-owned entities or industries, political or bureaucratic impatience or intolerance of that power sometimes takes over, and undue governmental pressure or interventions follow. These interventions come about either because of regulatory failures, or because politicians wish themselves to exercise regulatory powers which they regret having transferred to regulatory authorities. Regulatory independence from political intervention and regulatory freedom from political considerations is internationally recognised as an important facet of effective economic regulation, but despite that, it can come under such severe pressure that the system will fracture, causing severe loss of confidence in the regulatory system and in the reputation of the host government for fairness and respect for the integrity of the systems of checks and balances which has been established for the protection of investment. It argues that regulatory independence is as much about regulatory behaviour and legal status.
    Date: 2010–11
  12. By: Osterloh, Steffen
    Abstract: In this paper, a new approach to disclose the impact of politics on economic growth is presented: we use data derived from content analysis of party manifestos as measures of party preferences. In a panel of 23 OECD countries, we detect a positive impact of party support for various market-liberal policies on economic performance. In particular, we show that parties which were more concerned with market interventions and - to a lesser extent - welfare state policies impacted on growth negatively; those which proposed incentives for business as well as technology and infrastructure had a positive impact. Moreover, the robustness of the results is demonstrated in a model averaging framework. --
    Keywords: economic growth,political economy,ideology,panel data,model averaging
    JEL: O40 H11 P16
    Date: 2010
  13. By: Gurses, Kerem (La Salle); Ozcan, Pinar (IESE Business School)
    Abstract: This paper documents the development of pay TV in the United States. We show that when the first version of pay TV, over-the-air pay TV, came to the market, a social movement started by movie theatres and TV broadcasters to "protect free TV" blocked the emerging market. Later on, however, another technology with a similar business model, pay cable TV, became successful. A closer look into the factors leading to this success shows that regulatory voids, the ambiguity of the public interest frame, and the influence over public opinion can create windows of opportunity for a technology to emerge despite strong opposition from incumbent firms. We argue that in highly regulated industries, technology dominance can arise from windows of opportunity emerging amidst political battles.
    Keywords: technology; market emergence; social movement; regulation; organizational frames;
    Date: 2010–10–03
  14. By: Fredriksson, Anders (Stockholm Institute of Transition Economics)
    Abstract: Intermediaries helping individuals and firms with the government bureaucracy are common in developing countries. Although such bureaucracy intermediaries are, anecdotally, linked with corruption and welfare losses, few formal analyses exist. <p> In our model, a government license can benefit individuals. We study individuals' net gain when acquiring the license through the regular bureaucratic procedure, through bribing or through intermediaries. For a given procedure, individuals using intermediaries are better off than if intermediaries and corruption had not existed. Intermediaries "grease the wheels". We then study incentives of corrupt bureaucrats to create red tape. When free to choose levels of red tape, bureaucrats implement more red tape and individuals are unambiguously worse off in a setting with intermediaries than with "direct" corruption only. <p> Intermediaries can thus improve access to the bureaucracy, but also strengthen incentives to create red tape - a potential explanation why license procedures tend to be long in developing countries.
    Keywords: Bureaucracy; Corruption; Intermediaries; Red tape
    JEL: D73 O12
    Date: 2010–07–14

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