nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒01‒16
eight papers chosen by
Eugene Beaulieu
University of Calgary

  1. Identification and Estimation of Preference Distributions When Voters Are Ideological By Antonio Merlo; Aureo de Paula
  2. Do Natural Resource Revenues Hinder Financial Development? The role of political Institutions By Sambit Bhattacharyya; Roland Hodler
  3. Foreign Aid and Enlightened Leaders By Roland Hodler; Paul A. Raschky
  4. Party Activists, Campaign Funding and the Quality of Government By John Maloney; Andrew Pickering
  5. Politicians' Luck of the Draw: Evidence from the Spanish Christmas Lottery By Manuel Bagues; Berta Esteve-Volart
  6. Revisiting the evidence on trade policy protections By Bruce A. Blonigen
  7. Corruption and the military in politics: theory and evidence from around the world By Muhammad Tariq Majeed; Ronald MacDonald
  8. It’s the weather, stupid! Individual participation in collective May Day demonstrations By Kurrild-Klitgaard, Peter

  1. By: Antonio Merlo (Department of Economics, University of Pennsylvania); Aureo de Paula (Department of Economics, University of Pennsylvania)
    Abstract: This paper studies the nonparametric identification and estimation of voters' preferences when voters are ideological. We build on the methods introduced by Degan and Merlo (2009) representing elections as Voronoi tessellations of the ideological space. We exploit the properties of this geometric structure to establish that voter preference distributions and other parameters of interest can be identified from aggregate electoral data. We also show that these objects can be consistently estimated using the methodology proposed by Ai and Chen (2003) and we illustrate our analysis by performing an actual estimation using data from the 1999 European Parliament elections.
    Keywords: Voting, Voronoi tessellation,identification, nonparametric
    JEL: D72 C14
    Date: 2010–12–31
  2. By: Sambit Bhattacharyya; Roland Hodler
    Abstract: We theoretically and empirically examine the relationship between natural resource revenues and financial development. In the theoretical part, we present a politico-economic model in which contract enforcement is low and decreasing in resource revenues when political institutions are poor, but high otherwise. As poor contract enforcement leads to low financial development, the model predicts that resource revenues hinder financial development in countries with poor political institutions, but not in countries with comparatively better political institutions. We test our theoretic predictions systematically using panel data covering the period 1970 to 2005 and 133 countries. Our estimates confirm our theoretical predictions. Our main results hold when we control country fixed effects, time varying common shocks, income and various additional covariates. They are also robust to alternative estimation techniques, various alternative measures of financial development and political institutions, as well as across different samples and data frequencies. We present further evidence using panel data covering the period 1870 to 1940 and 31 countries..
    Keywords: Natural resources; political institutions; financial development
    JEL: D7 O1
    Date: 2010
  3. By: Roland Hodler (Study Center Gerzensee); Paul A. Raschky (Department of Economics, Monash University)
    Abstract: To study whether foreign aid fuels personal, regional and ethnic favoritism, we use satellite data on nighttime light for any region in any aid-recipient country, and we determine for each year and each country the region in which the current political leader was born. Having a panel with 22,850 regions in 91 aid recipient countries with yearly observations from 1992 to 2005, we compare the effect of foreign aid on nighttime light across regions. We find that in countries with poor political institutions, this effect is significantly higher in the region in which the current political leader was born than in other regions. This finding suggests that a disproportionate share of foreign aid ends up in the leader's birth region, and we argue that it supports the view that foreign aid fuels favoritism, broadly defined. We find no such difference in aid-recipient countries with sound political institutions.
    Date: 2010–12
  4. By: John Maloney; Andrew Pickering
    Abstract: We study the formation of government policy in democracies when turnout depends on party activists and campaign spending ‐ parties’ ‘political capital’. The functional importance of political capital determines equilibrium rent-seeking in government. Often the more potent political capital is the greater the extent of rent-seeking. Limiting the level of political capital is distinct from reducing its potency, and whereas we find a strong case for reducing potency we find that placing limits on campaign spending are rarely optimal, and in particular that weak limits are never optimal. A limit on total campaign spending can increase government quality under certain conditions and if so then strong limits are always better than weak limits. However, finite limits on either national or local campaign spending alone, as often seen in practice, are never optimal.
    Keywords: Party activists, campaign funding, rent-seeking, political finance
    JEL: D72
    Date: 2010–12
  5. By: Manuel Bagues; Berta Esteve-Volart
    Abstract: It is well known that incumbent politicians tend to receive more votes when economic conditions are good. In this paper we explore the source of this correlation, exploiting the exceptional evidence provided by the Spanish Christmas Lottery. This is a unique lottery: 75% of Spaniards play, sharing tickets, and every year at Christmas 0.3% of the Spanish GDP is at stake. Because winning tickets are mostly sold by one lottery outlet, winners tend to be geographically clustered. These features allow us to study the impact of exogenous good economic conditions on voting behavior. We find that incumbents receive significantly more votes in winning provinces. Given that individuals are well aware of the random nature of the shock, it is unlikely that this effect is due to voters wrongly attributing economic conditions to the government. Moreover, information from surveys from the same period shows that Christmas Lottery prizes increase the propensity to vote for the incumbent, but they do not affect respondents' assessment of the government. The evidence is consistent with a temporary increase in happiness making voters more lenient toward the incumbent, or with a stronger preference for the status quo.
    Date: 2011–01
  6. By: Bruce A. Blonigen (University of Oregon Economics Department)
    Abstract: Past literature has found evidence that labor market attributes affect individuals’ trade policy preferences in a manner consistent with theories of international trade. This paper shows that, with the exception of education, these relationships between labor market attributes and trade policy preferences are not robust in US survey data. This suggests that either our proxies of labor market attributes are poor or our theories for what drives trade policy preferences need to be revisited.
    Keywords: trade protection, skill, political economy
    JEL: F13 D73
    Date: 2010–11–15
  7. By: Muhammad Tariq Majeed; Ronald MacDonald
    Abstract: Recent theoretical developments and case study evidence suggests a relationship between the military in politics and corruption. This study contributes to this literature by analyzing theoretically and empirically the role of the military in politics and corruption for the first time. By drawing on a cross sectional and panel data set covering a large number of countries, over the period 1984-2007, and using a variety of econometric methods substantial empirical support is found for a positive relationship between the military in politics and corruption. In sum, our results reveal that a one standard deviation increase in the military in politics leads to a 0.22 unit increase in corruption index. This relationship is shown to be robust to a variety of specification changes, different econometric techniques, different sample sizes, alternative corruption indices and the exclusion of outliers. This study suggests that the explanatory power of the military in politics is at least as important as the conventionally accepted causes of corruption, such as economic development.
    Keywords: corruption; military in politics; cross sectional; panel data
    JEL: C23 D72 K42 H1
    Date: 2010–12
  8. By: Kurrild-Klitgaard, Peter
    Abstract: We investigate the possible explanations of variations in aggregate levels of participation in large-scale political demonstrations. A simple public choice inspired model is applied to data derived from the annual May Day demonstrations of the Danish labour movement and socialist parties taking place in Copenhagen in the period 1980-2009. The most important explanatory variables are variations in the weather conditions. Political and socio-economic conditions exhibit few or no robust effects.
    Keywords: Collective action; demonstrations; free-riding; public choice; rationality
    JEL: P36 H41 H23 P16 D70 A13 H11 J51 D74 D72 D61
    Date: 2010

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