nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒02‒12
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Institutions, Voter Turnout and Policy Outcomes By Eileen Fumagalli; Gaia Narciso
  2. Voting over piece-wise linear tax methods By MORENO-TERNERO, Juan D.
  3. The Participation Gap: Evidence from Compulsory Voting Laws By Hangartner, Dominik; Schmid, Lukas
  4. Democracy, Property Rights, Income Equality, and Corruption By Bin Dong; Benno Torgler
  5. The Hotelling-Downs Model with Runoff Voting By Sandro Brusco; Marcin Dziubinski; Jaideep Roy
  6. The political economy of derived pension rights By LEROUX, Marie - Louise; PESTIEAU, Pierre
  7. Red, Blue, and the Flu: Media Self-Selection and Partisan Gaps in Swine Flu Vaccinations By Baum, Matthew A.
  8. Uncertainty and Central Banl Transparency: A Non-Bayesian Approach By Daniel Laskar
  9. On the strategic use of representative democracy in international agreements By Grégoire Rota-Graziosi
  10. Are firms' lobbying strategies universal? By Madina Rival
  11. Endogenous Environmental Policy when Pollution is Transboundary By Joachim Fünfgelt; Günther G. Schulze
  12. Local Governments Tax Autonomy, Lobbying, and Welfare By Sandro Brusco; Luca Colombo; Umberto Galmarini
  13. An Evolutionary Game Approach to the Issues of Migration, Nationalism, Assimilation and Enclaves By Andre Barreira da Silva Rocha

  1. By: Eileen Fumagalli (IEFE - Bocconi University); Gaia Narciso (Department of Economics, Trinity College Dublin)
    Abstract: The impact of political institutions on policy outcomes has gained much attention in the literature over the last years. The aim of this paper is to test whether the impact of constitutions on economic outcomes is direct. By introducing citizens' political participation, rather than politicians' incentives, as the driving force connecting institutions to policy outcomes, we empirically show that voter turnout is the channel through which forms of government affect economic policies. We provide evidence of the existence of two relationships. First, presidential regimes appear to be related to lower voter participation in national elections. Second, higher voter participation induces an increase in government expenditure, total revenues, welfare state spending, and budget deficit. We conclude that forms of government affect policy outcomes only through voter turnout.
    Keywords: Electoral rule, form of government, voter participation, policy outcomes
    JEL: D72 E60 H00
    Date: 2011–02
  2. By: MORENO-TERNERO, Juan D. (Universidad de Malaga, Spain; Universidad Pablo de Olavide, Seville, Spain; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)
    Abstract: We analyze the problem of choosing the most appropriate method for apportioning taxes in a democracy. We consider a simple theoretical model of taxation and restrict our attention to piece-wise linear tax methods, which are almost ubiquitous in advanced democracies world- wide. We show that if we allow agents to vote for any method within a rich domain of piece-wise linear methods, then a majority voting equilibrium exists. Furthermore, if most voters have income below mean income then each method within the domain can be supported in equilibrium.
    Keywords: voting, taxes, majority, single-crossing, Talmud
    JEL: D72 H24
    Date: 2010–12–01
  3. By: Hangartner, Dominik; Schmid, Lukas
    Abstract: Why do some people go to the polling station, sometimes up to several times a year, while others always prefer to stay at home? This question has launched a wide theoretical debate in both economics and political science, but convincing empirical support for the different models proposed is still rare. The basic rational voting model of Downs (1957) predicts zero participation because each individual vote is extremely unlikely to be pivotal. One prominent modification of this model is the inclusion of a civic duty term into the voter's utility function (Riker and Ordeshook, 1968) which has been the basis of structural ethical voting models such as Coate and Conlin (2004) and Feddersen and Sandroni (2006). Another branch of structural models looks at informational asymmetries among citizens (Feddersen and Pesendorfer, 1996, 1999). This paper tests the implications of these two branches of structural models by exploiting a unique variability in compulsory voting laws in Swiss federal states. By analyzing a newly compiled comparative data set covering the 1900-1950 period, we find large positive effects of the introduction of compulsory voting laws on turnout. Along with the arguably exogenous treatment allocation, several specification and placebo tests lend support to a causal interpretation of this result. The findings of this study lend support to the ethical voting models since citizens do react to compulsory voting laws only if it is enforced with a fee. At the same time, the informational aspect of non-voting is questioned as „new" voters do not delegate their votes.
    Keywords: Compulsory Voting; Voter Turnout; Structural Voting Models
    JEL: D72
    Date: 2010–09–15
  4. By: Bin Dong (The School of Economics and Finance, Queensland University of Technology); Benno Torgler (The School of Economics and Finance, Queensland University of Technology, CREMA – Centre for Research in Economics, Management and the Arts and CESifo)
    Abstract: This paper presents theoretical and empirical evidence on the nexus between corruption and democracy. We establish a political economy model where the effect of democracy on corruption is conditional on income distribution and property rights protection. Our empirical analysis with cross-national panel data provides evidence that is consistent with the theoretical prediction. Moreover, the effect of democratization on corruption depends on the protection of property rights and income equality which shows that corruption is a nonlinear function of these variables. The results indicate that democracy will work better as a control of corruption if the property rights system works and there is a low level of income inequality. On the other hand if property rights are not secured and there is strong income inequality, democracy may even lead to an increase of corruption. In addition, property rights protection and the mitigation of income inequality contribute in a strong manner to the reduction of corruption.
    Keywords: Corruption, Democracy, Income inequality, Property rights
    JEL: D73 H11 P16
    Date: 2011–01
  5. By: Sandro Brusco (Department of Economics, Stony Brook University); Marcin Dziubinski (Institute of Informatics, Faculty of Mathematics, Informatics and Mechanics, Warsaw University, Banacha 2, 02-097 Warsaw, Poland.); Jaideep Roy (Department of Economics, University of Birmingham, Edgbaston, Birmingham B15 2TT, UK.)
    Abstract: We consider the Hotelling-Downs model with n >= 2 oce seeking candidates and runo voting. We show that Nash equilibria in pure strategies always exist and that there are typically multiple equilibria, both convergent (all candidates are located at the median) and divergent (candidates locate at distinct positions), though only divergent equilibria are robust to free entry. Moreover, two-policy equilibria exist under any distribution of voters' ideal policies, while equilibria with more than two policies exist generically but under restrictive conditions that we characterize. In this sense, our analysis suggests that two-policy equilibria are the most prominent outcomes.
    Keywords: Downs, Free Entry, Runoff System, Equilibrium
    JEL: J61 J70 J31 I20 D01 D70
    Date: 2010–09
  6. By: LEROUX, Marie - Louise (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); PESTIEAU, Pierre (University of Liege, CREPP; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium; PSE and CEPR)
    Abstract: Derived pension rights exist in most Social Security systems but with variable generosity. They are mainly targeted towards non-working wives and widows and are viewed as a means to alleviate poverty among older women living alone. The purpose of this paper is to explain how they can emerge from a political economy process when the Social Security is a combination of Bismarckian and Beveridgian pillars. It also shows that derived rights tend to encourage stay-at- home wives thus revealing an unpleasant trade-o§ between female labor participation and poverty alleviation.
    Keywords: social security, derived pension rights, majority voting, individualisation of pension rights
    JEL: D72 D78 H55
    Date: 2010–07–01
  7. By: Baum, Matthew A. (Harvard Kennedy School)
    Abstract: This study assesses the relationship between political partisanship and attitudes and behavior with respect to the Swine Flu crisis of 2009 in general, and the U.S. mass vaccination program in particular. I argue that even seemingly non-partisan political issues like public health are increasingly characterized by partisan polarization in public attitudes, and that such polarization is in part attributable, at least in part, to the breakdown of the information commons that characterized the American mass media from roughly the 1950s until the early 1990s. In its place has arisen an increasingly fragmented and niche-oriented media marketplace in which individuals are better able to limit their information exposure to attitudes and opinions that reinforce, rather than challenge, their preexisting beliefs. I test my argument against a variety of data sources, including opinion surveys and state level Swine Flu vaccination rate data.
    Date: 2011–01
  8. By: Daniel Laskar (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We underline that some results obtained in the literature on central bank transparency may be quite different when we take a non-Bayesian approach to uncertainty, where "ambiguity" is taken into account. We consider some specific argument of the literature (obtained under a Bayesian approach), which implies that political uncertainty can be beneficial and central bank transparency harmful. We show that when ambiguity is large enough, these results do not hold anymore: political uncertainty is always harmful and central bank transparency always beneficial. Furthermore, as soon as we depart from the Bayesian case, Knightian uncertainty is always harmful. JEL Classification: E58; E52 Keywords: central bank transparency; political uncertainty; Knightian uncertainty; ambiguity; non-Bayesian approach
    Keywords: central bank transparency; political uncertainty; Knightian uncertainty; ambiguity; non-Bayesian approach
    Date: 2010–09–27
  9. By: Grégoire Rota-Graziosi (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: We consider as endogenous the choice of the delegation' rule in a political integration process between two countries. We study three potential types of delegation: strong, weak or no delegation, this last case corresponding to a referendum. We show that populations decide to bind themselves by delegating the national policy decision to a "powerfull conservative representative", in order to improve their bargaining position. These non-cooperative behaviors of countries when they decide on their delegation rule induce negative political externalities between countries, which cancel the gains achieved by the internalization of economic externalities in the case of political integration. We then propose two extensions. First, we assume a pre-play game where the countries choose whether or not to initiate political integration. Secondly, we examine the consequences of ratification by referendum. We conclude that a Pareto improvement of the political integration process would be to specify within the international treaty itself the means for its ratification; more precisely, to incorporate a formal ratification procedure, corresponding to an ex post referendum.
    Keywords: Delegation;International Agreements;Nash Bargaining Solution;Political Integration;Ratification;Referendum
    Date: 2011–02–03
  10. By: Madina Rival (GREG - CRC - Groupe de recherche en économie et en gestion – Centre de recherche en comptabilité - Conservatoire National des Arts et Métiers (CNAM))
    Abstract: Lobbying public decision-makers is an increasingly widespread managerial practice, but has so far attracted little research attention in Europe. This article studies how it is put into practice as a strategy by French and UK firms. An empirical study examines 679 lobbying campaigns (also known as “political action”), that are grouped into categories and described using statistical data analysis techniques. The results highlight a pattern in the corporate lobbying phenomenon: five types of lobbying strategy (that can be described and illustrated) exist for French firms, and four for UK firms. The central theme of discussion is to what extent firms'political strategies are universal or country specific. Tentative explanations can be put forward: implementation of lobbying strategies appears to depend on the type of issues addressed (which could be universal), but also on the country's political environment (which could be country specific). The study shows the interdependent influence of human resources, economic structures and the political environment (laws and the role of the state) on firms' lobbying strategies.
    Keywords: lobbying, corporate political strategy, societal effects, data analysis, France and the UK
    Date: 2010–11
  11. By: Joachim Fünfgelt (Sustainability Economics Group, Leuphana University of Lüneburg, Germany); Günther G. Schulze (Dept. of International Economic Policy, University of Freiburg, Germany)
    Abstract: We analyze the formation of environmental policy to regulate transboundary pollution if governments are self-interested. In a common agency framework, we portray the environmental policy calculus of two political supportmaximizing governments that are in a situation of strategic interaction with respect to their environmental policies, but too small to affect world market prices. We show how governments systematically deviate from socially optimal environmental policies. Taxes may be too high if environmental interests and pollution-intensity of production are very strong; under different constellations they may be too low. Governments may actually subsidize the production of a polluting good. Politically motivated environmental policy thus may be more harmful to the environment as compared to the benevolent dictators’ solution. In other cases it may enhance environmental quality and welfare beyond what a benevolent government would achieve.
    Keywords: Political economy, environmental policy, transboundary pollution, common agency, strategic interaction
    JEL: Q F
    Date: 2011–02
  12. By: Sandro Brusco (Department of Economics, Stony Brook University); Luca Colombo (Università Cattolica, Milan, Italy); Umberto Galmarini (Università dell’Insubria, Como, Italy)
    Abstract: What degree of tax autonomy should be granted to a regional government on a local tax base? Although the regional policy maker aims at maximizing social welfare, her tax policy may be distorted by the lobbying activity of local taxpayers. In this political environment we characterize the conditions under which social welfare can be increased by restricting the set of tax instruments available to the local policy maker, i.e. the degree of local tax autonomy. We show that full tax autonomy is likely to be dominated by minimal tax autonomy when there are many groups of similar size, while the converse occurs when tax bases are asymmetrically distributed.
    Keywords: Tax autonomy, lobbying, local public good provision
    JEL: D70 H71 H77
    Date: 2010–07
  13. By: Andre Barreira da Silva Rocha
    Abstract: I use evolutionary game theory to address the relation between nationalism and immigration, studying how two different populations in a country, one composed of national citizens and the other of immigrants, evolve over time. Both populations depart from some polymorphic initial state. A national citizen may behave either nationalistically or may welcome immigrants. Immigrants may have an interest in learning the host country language or not. I also account for the presence of enclaves, which make the immigrants’ own population effects important. The results show that six types of evolutionary equilibria are possible, although they never co-exist in the state space. A low cost of learning the host country language leads to complete assimilation of immigrants over time. Enclaves make assimilation a less competitive strategy. A high cost of learning may lead to peaceful multiculturalism or to political instability depending on the ability of policy makers to prevent nationalistic attitudes.
    Date: 2010–11–12

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