nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒03‒19
fifteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. The effect of ideology on policy outcomes in proportional representation systems By Francesco de Sinopoli; Leo Ferraris; Giovanna Iannantuoni
  2. Reverse Electoral Business Cycles and Housing Markets By Canes-Wrone, Brandice; Park, Jee-Kwang
  3. Individual support for economic and political changes: Evidence from transition countries, 1991-2004 By R. Rovelli; A. Zaiceva
  4. The Political Value of Land: Democratization and Land Prices in Chile By Baland, Jean-Marie; Robinson, James A
  5. Satisfaction and adaptation in voting behavior: an empirical exploration By Martorana, Marco Ferdinando; Mazza, Isidoro
  6. Electoral Business Cycles in OECD Countries By Canes-Wrone, Brandice; Park, Jee-Kwang
  7. The Power of Political Voice: Women's Political Representation and Crime in India By Lakshmi Iyer; Anandi Mani; Prachi Mishra; Petia Topalova
  8. Budget support and policy/political dialogue. Donor practices in handling (political) crises By Molenaers, Nadia; Cepinskas, Linas; Jacobs, Bert
  9. Federal Directives, Local Discretion and the Majority Rule By Antoine Loeper
  10. Political Participation and Entrepreneurial Initial Public Offerings in China By Feng, Xunan; Johansson, Anders C.; Zhang, Tianyu
  11. The War of Information By Gul, Faruk; Pesendorfer, Wolfgang
  12. What determines the World Heritage List? An econometric analysis By Bruno S. Frey; Paolo Pamini; Lasse Steiner
  13. The role of elected and appointed village leaders in the allocation of public resources: Evidence from a low-income region in China By Mu, Ren; Zhang, Xiaobo
  14. The Ideological Mapping of American Legislatures By Shor, Boris; McCarty, Nolan
  15. Conflict, Ideology and Foreign Aid By Jean-Louis Arcand; Adama Bah; Julien Labonne

  1. By: Francesco de Sinopoli; Leo Ferraris; Giovanna Iannantuoni
    Abstract: In this paper we propose a model in which there are ideological and strate- gic voters who vote under poportional rule. We prove that the behavior of ideological voters matters for the determination of the outcome. We show that a subset of strategic voters partially counteracts the votes of the ideological voters.
    Keywords: Proportional Election, Strategic Voting, Ideological Voting
    JEL: C72 D72
    Date: 2011–03
  2. By: Canes-Wrone, Brandice (Princeton University); Park, Jee-Kwang (Princeton University)
    Abstract: We argue that the political uncertainty generated by elections encourages private actors to delay investments that entail high costs of reversal, creating a pre-election decline in economic activity entitled a "reverse electoral business cycle." This incentive for delay becomes greater as policy differences between parties/candidates increase. Using new survey and observational data from the United States, we test these arguments. The individual-level analysis assesses whether respondents' perceptions of presidential candidates' policy differences increased the likelihood of postponing certain actions and purchases. For one of these items, housing, we collected observational data to examine whether electoral cycles indeed induce a pre-election decline in economic activity. The findings support the predictions and cannot be explained by existing theories of political business cycles.
    Date: 2010–09
  3. By: R. Rovelli; A. Zaiceva
    Abstract: Using a unique dataset for 14 transition economies, we propose a new measure for individual evaluations of transitional reforms, which we use to study, for the first time, the evolution of support for economic and political reforms from 1991 to 2004. We show that support for economic changes has been increasing over time after an initial drop, while support for political reforms has generally been higher. Support attitudes are lower among the old, less skilled, unemployed, poor, and those living in the CIS countries, especially during the 1990s. We also find evidence that transition-related hardship, opinions on the speed of reforms, political preferences and preferences towards redistribution, ideology and social capital matter. Finally, we show that individual preferences for state ownership and the quality of political institutions contribute mostly to explaining the lower levels of support in the CIS countries.
    JEL: O57 A13 P26 P36
    Date: 2011–03
  4. By: Baland, Jean-Marie; Robinson, James A
    Abstract: Though models of political economy suggest that changes in political institutions, such as democratization, should have large effects on policies and economic outcomes, the empirical literature finds ambiguous results. It is important, however, to ‘unbundle’ democratic reforms into more specific changes, for instance the introduction of secrecy of balloting, and be more specific about the mechanisms linking these to economic outcomes. To this end we develop a simple model of the economic consequences of the absence of a secret ballot. While providing workers with employment, landlords can also impose some degree of political control. When voting is not secret, landlords can dictate who their workers should vote for. As votes are used by the landlords to accumulate political rents, vote control increases the demand for labor and for land. The introduction of secret ballot should lead to a fall in the price of land in those areas where patron-client relationships and vote control were the strongest. We test the predictions of the model by examining in detail the evolution of land prices in Chile around May 31st. 1958, for which we collected original data. A characteristic of rural Chile at this time was the inquilinaje system, by which a worker, the inquilino, entered into a long term, often hereditary, employment relationship with a landlord, and lived on his landlord’s estate. We show that the introduction of the secret ballot in 1958 had implications for land prices which are perfectly consistent with the predictions of our model. Political rents represented 25% of the value of the land in Chile prior to 1958.
    Keywords: elections; land prices; political institutions
    JEL: D72 O54 Q15
    Date: 2011–03
  5. By: Martorana, Marco Ferdinando; Mazza, Isidoro
    Abstract: Dynamic models of learning and adaptation have provided realistic predictions in terms of voting behavior. This study aims at contributing to their scant empirical verification. We develop a learning algorithm based on bounded rationality estimating the pattern of learning process through a two-stage econometric model. The analysis links voting behavior to past choices and economic satisfaction derived from previous period election and state of the economy. This represents a novelty in the literature on voting that assumes given voter preferences. Results show that persistence is positively affected by the combination of income changes and past behavior and by union membership.
    Keywords: voting; bounded rationality; learning; political accountability
    JEL: C23 D72 C25
    Date: 2010–12–31
  6. By: Canes-Wrone, Brandice (Princeton University); Park, Jee-Kwang (Princeton University)
    Abstract: Studies of OECD countries have generally failed to detect real economic expansions in the pre-election period, casting doubt on the existence of opportunistic political business cycles. We develop a theory that predicts a substantial portion of the economy experiences a real decline in the pre-election period. Specifically, the political uncertainty created by elections induces private actors to postpone investments with high costs of reversal. The resulting declines, referred to as reverse electoral business cycles, are larger the more competitive the electoral race and the greater the polarization between major parties. We test these predictions using quarterly data on private fixed investment in ten OECD countries between 1975 and 2006. The results suggest that reverse electoral business cycles exist, and as expected, depend on electoral competitiveness and partisan polarization. Moreover, simply by removing private fixed investment from gross domestic product (GDP), we uncover robust evidence of opportunistic cycles.
    Date: 2010–09
  7. By: Lakshmi Iyer (Harvard Business School, Business, Government and the International Economy Unit); Anandi Mani (University of Warwick); Prachi Mishra (Research Department, IMF); Petia Topalova (Research Department, IMF)
    Abstract: Using state-level variation in the timing of political reforms, we find that an increase in female representation in local government induces a large and significant rise in documented crimes against women in India. Our evidence suggests that this increase is good news, as it is driven primarily by greater reporting rather than greater incidence of such crimes. In contrast, we find no increase in crimes against men or gender-neutral crimes. We also examine the effectiveness of alternative forms of political representation: Large scale membership of women in local councils affects crime against them more than their presence in higher-level leadership positions.
    Keywords: crime, women's empowerment, minority representation, voice
    JEL: J12 J15 J16 P16
    Date: 2011–03
  8. By: Molenaers, Nadia; Cepinskas, Linas; Jacobs, Bert
    Abstract: Budget support entered the aid scene at the turn of the millennium and it is considered as the aid modality par excellence to foster ownership and more effective aid through institutional reform. In 2008-2009 a number of political events in aid receiving African countries however pointed at the difficult relation between budget support and (political) governance. The paper analyzes donor policies and practices surrounding policy/political dialogue and budget support and offers a number of policy recommendations on where and how to deal with “political” issues. Based on a desk study carried in March-May 2010 at the request of the Belgian Directorate-General for Development Cooperation, the paper presents a substantial analysis of Mozambique and Zambia where two recent political crises were successfully resolved by five donor countries. The authors argue that using budget support to drive both democratic and economic change is hazardous. Acknowledging the synergy between policy and political dialogue, the paper posits that technocratic and democratic issues should be separated because there are obvious trade-offs between them. Democratic governance issues should be dealt with in a separate high level forum, and in a pro-active rather than reactive way. In addition, donors need to ensure their interventions do not undermine recipient countries efforts to democratize. In effect, they should lower their ambitions: 1) with regard to what they can do: change cannot be bought, it can only be supported; 2) with regard to what recipient governments can do: even when there is commitment, change is most often gradual, not in big leaps. If anything, politics and political savvy should be brought in more, because every reform (however technocratic) is profoundly political.
    Date: 2010–12
  9. By: Antoine Loeper
    Abstract: We consider a federation in which citizens determine by federal majority rule a discretionary policy space which partially restricts the sovereignty of member states. Citizens first vote on the size of the discretionary space (the degree of local discretion), and then on its location on the policy space (the federal directive). Finally, each state votes on its respective policy within the discretionary space. This federal mechanism allows voters to express directly their trade-o¤ between flexibility and policy harmonization. We show that at the voting equilibrium, the federal directive is negatively sensitive to the preferences of nonmedian voters. Moreover, the degree of local discretion is too limited and insufficiently sensitive to the magnitude of externalities. Hence, the model shows that inadequate and excessively rigid federal interventions can emerge from a neutral and democratic decision process without agency costs or informational imperfections.
    Keywords: Federalism, Local Discretion, Directive, Partial Decentralization, Majority rule. JEL Classification Numbers: H77, D72
    Date: 2010–12
  10. By: Feng, Xunan (Shanghai Jiaotong University); Johansson, Anders C. (China Economic Research Center); Zhang, Tianyu (The Chinese University of Hong Kong)
    Abstract: This paper examines the value of political participation by private entrepreneurs in China. Using a unique sample of all initial public offerings by entrepreneurial firms during 1994-2007 and political participation by the controlling entrepreneurs, we test the hypothesis that firms with entrepreneurs who participate in politics are able to exploit rent-seeking opportunities that normal firms do not have access to. We document that the long-run stock performance after the IPO of firms controlled by entrepreneurs who participate in politics is superior to that of common entrepreneurial firms. Our results also show that political participation has a significant positive effect on change in operating performance and a negative effect on first-day returns. Moreover, we find that economic development and local institutions are important for this value effect. The difference in performance is even larger in regions characterized by more abundant rent-seeking opportunities, indicating that the value effect of political participation likely originates from rent seeking. This finding is consistent with the hypothesis that political participation facilitates entrepreneurs’ rent seeking.
    Keywords: Political participation; Entrepreneurial firms; Corporate governance; Initial public offerings; China
    JEL: G30 G32 G34 P48
    Date: 2011–03–01
  11. By: Gul, Faruk (Princeton University); Pesendorfer, Wolfgang (Princeton University)
    Abstract: We analyze political campaigns between two parties with opposing interests. Parties pay a cost to provide information to a voter who chooses the policy. The information flow is continuous and stops when parties quit. The parties' actions are strategic substitutes: a party with a lower cost provides more but its opponent provides less information. For voters, the parties' actions are complements and raising the low-cost party's cost may be beneficial. Asymmetric information adds a signaling component in the form of a belief-threshold beyond which unfavorable information is offset by the informed party's decision to continue campaigning.
    Date: 2010–09
  12. By: Bruno S. Frey; Paolo Pamini; Lasse Steiner
    Abstract: The official intention of the UNESCO World Heritage List is to protect the global heritage. However, the existing List is highly imbalanced according to countries and continents. Historical reasons, such as historical GDP, population, and number of years of high civilization, have a significant impact on being included on the List. In addition, economic and political factors unrelated to the value of heritage, such as rent seeking by bureaucrats and politicians, the size of the tourist sector, the importance of media, the degree of federalism, and membership in the UN Security Council, influence the composition of the List.
    Keywords: Global public goods, world heritage, international organizations, international political economy, culture
    JEL: Z11 F5 H87
    Date: 2011–01
  13. By: Mu, Ren; Zhang, Xiaobo
    Keywords: appointed leader, election, Public goods,
    Date: 2011
  14. By: Shor, Boris (University of Chicago); McCarty, Nolan (Princeton University)
    Abstract: The development and elaboration of the spatial theory of voting has contributed greatly to the study of legislative decision making and elections. Statistical models that estimate the spatial locations of individual legislators have been a key contributor to this success (Poole and Rosenthal 1997; Clinton, Jackman and Rivers 2004). In addition to applications to the U.S. Congress, spatial models have been estimated for the Supreme Court, U.S. presidents, a large number of non-U.S. legislatures, and supra- national organizations. But, unfortunately, a potentially fruitful laboratory for testing spatial theories of policymaking and elections, the American states, has remained relatively unexploited. Two problems have limited the empirical application of spatial theory to the states. The first is that state legislative roll call data has not yet been systematically collected for all states over time. Second, because ideal point models are based on latent scales, comparisons of ideal points across states or chambers within a state are difficult. This paper reports substantial progress on both fronts. First, we have obtained the roll call voting data for all state legislatures from the mid-1990s onward. Second, we exploit a recurring survey of state legislative candidates to enable comparisons across time, chambers, and states as well as with the U.S. Congress. The resulting mapping of America's state legislatures has tremendous potential to address numerous questions not only about state politics and policymaking, but legislative politics in general.
    Date: 2010–07
  15. By: Jean-Louis Arcand (The Graduate Institute, Geneva); Adama Bah (CERDI Université d'Auvergne); Julien Labonne (University of Oxford)
    Abstract: In this paper, we present a rent-seeking model of conflict, which highlights the role of ideology in determining whether the government or the rebels take the initiative. We use the model to interpret the impact of a large-scale Community-Driven Development project on civil conflict in the Philippines. The country is characterized by the presence of two rebel groups, the New People's Army (NPA) and the Moro Islamic Liberation Front (MILF), with two distinct ideologies. We use a unique geo-referenced panel dataset on the occurrence of conflicts in 2003 and 2006 gathered from local newspapers that we match with nationally representative household survey and budget data on all municipalities in the country. Consistent with our model's predictions, using a variety of estimation strategies, we find robust evidence that the project leads to a decline in MILF-related events and to an increase in NPA-related events.
    Date: 2010–12

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