nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒05‒30
fifteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Do Politicians’ Preferences Matter for Voters’ Voting Decisions? By Dahlberg, Matz; Mörk, Eva; Sorribas Navarro, Pilar
  2. Political competition in hard times By Zudenkova, Galina
  3. The Comparative Political Economy of Economic Geography By Wiberg, Magnus
  4. The Dual Policy in the Dual Economy - The Political Economy of Urban Bias in Dictatorial Regimes By Shifa, Abdulaziz
  5. Corruption scandals, press reporting, and accountability. Evidence from Spanish mayors By Elena Costas-Pérez; Albert Solé-Ollé; Pilar Sorribas-Navarro
  6. Electing Displacement: Political Cleansing in Apartadó, Colombia By Abbey Steele
  7. Incentive compatible reforms : the political economy of public investments in Mongolia By Hasnain, Zahid
  8. Axiomatic districting By Puppe, Clemens; Tasnádi, Attila
  9. Does the Broad Public Want to Consolidate Public Debt? – The Role of Fairness and of Policy Credibility By Helmut Stix
  10. Time for behavioral political economy? An analysis of articles in behavioral economics By Berggren, Niclas
  11. Democracy and Reforms: Evidence from a New Dataset By Paola Giuliano; Prachi Mishra; Antonio Spilimbergo
  12. Why has Britain fewer marginal seats than it used to? By Robert Hodgson; John Maloney
  13. On the Origins of Gender Roles: Women and the Plough By Alesina, Alberto; Giuliano, Paola; Nunn, Nathan
  14. Corruption and environmental policy: An alternative perspective By Athanasios Lapatinas; Anastasia Litina; Eftichios S. Sartzetakis
  15. Can Regional Transfers Buy Public Support? Evidence from EU Structural Policy By Steffen Osterloh

  1. By: Dahlberg, Matz (Uppsala Center for Fiscal Studies); Mörk, Eva (Uppsala Center for Fiscal Studies); Sorribas Navarro, Pilar (Universitat de Barcelona and Institut d’Economia de Barcelona)
    Abstract: Using unique survey data that allows us to observe both voters’ and politicians’ preferences for local public spending as well as voting decisions, this paper tests if voters typically support parties in which the politicians’ preferences are closest to their own. Doing so would be rational for the voters to do if politicians’ preferences matter for policy outcomes, as is the case in e.g. the citizen-candidate model. It is found that this is indeed the case. This finding is in line with theoretical models such as the citizen-candidate model arguing that politicians cannot credibly commit to election platforms that differ from their true policy preferences.
    Keywords: Elections; voting; preferences for public services
    JEL: H71 P16
    Date: 2011–05–16
  2. By: Zudenkova, Galina
    Abstract: This paper analyzes a spatial model of political competition between two policy-motivated parties in hard times of crisis. Hard times are modeled in terms of policy-making costs carried by a newly elected party. The results predict policy divergence in equilibrium. If the ideological preferences of parties are quite diverse and extreme, there is a unique equilibrium in which the parties announce symmetric platforms and each party wins with probability one half. If one party is extreme while the other is more moderate, there is a unique equilibrium in which the parties announce asymmetric platforms. If the preferred policies of the parties are not very distinct, there are two equilibria with asymmetric platforms. An important property of equilibrium with asymmetric platforms is that a winning party necessarily announces its most preferred policy as a platform.
    Keywords: Spatial model; Political competition; Two-party system; Policy-motivated parties; Hard times; Crisis.
    JEL: D72
    Date: 2011–05–01
  3. By: Wiberg, Magnus (Ministry of Finance)
    Abstract: This paper examines how different electoral rules affect the lo- cation decisions of firms through the effect on regional policy. The equilibrium location of industry in the economically smaller (larger) region is higher under majoritarian (proportional) elections. The stan- dard prediction in the economic geography literature, that the larger region becomes the core when trade barriers are reduced, no longer holds. The establishment of manufacturing production in the smaller region is increasing in the level of regional integration. As trade is in- creasingly liberalized, the economy features a reversed core-periphery equilibrium. This result holds under both electoral rules. However, firms locate to the smaller region at a relatively higher rate in the case of majoritarian voting, hence, the reversed equilibrium occurs for a relatively lower level of regional integration with majoritarian elections. Empirical evidence shows that the model is consistent with qualitative features of the data, and the results are robust to an instru- mental variable strategy that accounts for the potential endogeneity of the electoral rule.
    Keywords: Economic Geography; Regional Policy; Electoral Rules
    JEL: D72 F12 R12
    Date: 2011–05–08
  4. By: Shifa, Abdulaziz (Dept. of Economics, Stockholm University)
    Abstract: One of the most common policy obstacles in the global effort against poverty is what is termed as “urban bias” where rural residents, who constitute majority of the poor in the world, face systematic bias against their economic interests by their own governments. This paper develops a simple political economy model of urban bias in dictatorial regimes. Equilibrium outcomes relating policy outcomes with economic structure, political power, and other behavioral and structural variables are analyzed. The model shows that anti-agricultural biases can emerge in primarily agrarian societies even if there is no bias in political power between urban and rural citizens. Evidence from recent World Bank country level panel data on biases against/for agriculture provides support for the model’s prediction.
    Keywords: Urban bias; rural poverty; dictatorship
    JEL: D72 O17 O20 P48 R00
    Date: 2011–05–15
  5. By: Elena Costas-Pérez (Universitat de Barcelona & IEB); Albert Solé-Ollé (Universitat de Barcelona & IEB); Pilar Sorribas-Navarro (Universitat de Barcelona & IEB)
    Abstract: We analyse the effects of local corruption on electoral outcomes with Spanish data. Based upon press reports published between 1996 and 2009, we are able to construct a novel database on corruption scandals and news related to bribe-taking in exchange for amendments to land use plans. Our data show that local corruption scandals first emerged during the 1999-2003 term, but that they peaked just before the 2007 elections. We estimate an equation for the incumbent’s vote share at this electoral contest and find the average vote loss after a corruption scandal to be around 4%, and the effect to be greater for cases receiving wide newspaper coverage (up to 9%). The effects found for the 2003 elections are much lower. When we consider cases in which the incumbent has been charged with corruption and press coverage has been extensive the vote loss can rise to 12%. However, press reports have a negative impact on the vote even when no judicial charges have been brought.
    Keywords: voting, accountability, corruption
    JEL: P16 D72
    Date: 2011
  6. By: Abbey Steele (Woodrow Wilson School, Princeton University)
    Abstract: This article highlights a nefarious effect of elections during civil wars by demonstrating that they can facilitate the displacement of civilians. This occurs through two main mechanisms: they reveal information about civilians' loyalties directly to armed groups; and they threaten the status quo of local elites' power, motivating them to ally with outside armed groups in order to regain it. Armed groups strategically displace civilians identified as "disloyal" in order to gain control over a territory. I test implications of the argument with original, micro-level quantitative and qualitative data from northwest Colombia. Using voter censuses and disaggregated electoral returns in the 1990s, I show that residents in urban neighbourhoods that supported the insurgent-backed political party, the Patriotic Union (UP), were more likely to leave the city of Apartadó than neighbors in other districts. However, residents of the nearby rural communities that supported the UP were the least likely to leave. I trace the patterns of violence across the communities using local archival materials and interviews to assess how well the argument accounts for the variation observed, and to explore the unexpected outcome in the rural area. While I find that counterinsurgents attempted strategic displacement in both the city and the mountains, they only succeeded in the urban areas because residents of the rural hamlets were uniquely able to overcome the collective action problem that strategic displacement generates. The findings demonstrate that political identities are relevant for patterns of violence, and that political cleansing resembles ethnic cleansing.
    Date: 2011–01
  7. By: Hasnain, Zahid
    Abstract: Why do politicians distort public investments? And given that public investments are poor because presumably that is what is politically rational, what types of reforms are likely to be both efficiency improving and compatible with the interests of politicians? This paper explores these two questions in the context of Mongolia. It argues that Mongolian members of parliament have an incentive to over-spend on smaller projects that bring benefits to specific geographical localities and to under-spend on large infrastructure that would bring economic benefits to Mongolia on the whole. The incentive for the former is that members of parliament internalize the political benefits from the provision of particular, targeted benefits to specific communities. The disincentive for the latter is that large infrastructure carries a political risk because the political faction in control of that particular ministry would have access to huge rents and become politically too powerful. The identity of these"winners"is uncertain ex ante, given the relatively egalitarian and ethnically homogenous nature of Mongolia's society and polity. Anticipating this risk, members of parliament are reluctant to fund these projects. Since these large infrastructure projects are crucial for national growth, neglecting them hurts all members of parliament. Members of parliament will therefore support reforms that collectively tie their hands by safeguarding large, strategic investment projects from political interference thereby ensuring that no political faction becomes too powerful. This protection of mega-projects would need to be part of a bargain that also allows geographical targeting of some percentage of the capital budget.
    Keywords: Debt Markets,Public Sector Expenditure Policy,Political Economy,Access to Finance,Parliamentary Government
    Date: 2011–05–01
  8. By: Puppe, Clemens; Tasnádi, Attila
    Abstract: In a framework with two parties, deterministic voter preferences and a type of geographical constraints, we propose a set of simple axioms and show that they jointly characterize the districting rule that maximizes the number of districts one party can win, given the distribution of individual votes (the 'optimal gerrymandering rule'). As a corollary, we obtain that no districting rule can satisfy our axioms and treat parties symmetrically. --
    Keywords: districting,gerrymandering
    JEL: D72
    Date: 2011
  9. By: Helmut Stix (Economic Analysis Division, Oesterreichische Nationalbank)
    Abstract: The paper tests selected long-standing hypotheses about why voters support or oppose fiscal consolidation. Deviating from most of the empirical literature which mainly focuses on cross-sectional and time series evidence, this paper employs data from a public opinion survey that has been conducted in spring 2010 in Austria. The results show (i) that voters are fiscally prudent, that (ii) they behave rationally in the sense that self-interest matters, that (iii) they care for the next generation (this effect is surprisingly small), that (iv) the distributional fairness among the current generation is as at least as important as the intergenerational aspect and that (v) the low credibility of medium-term fiscal policy plans can be a serious impediment to voters’ support for consolidation. These results bear direct implications on the design of fiscal consolidation plans. JEL classification: H63, H31, D12
    Keywords: Public debt, fiscal adjustment, political economy, fairness, credibility
    Date: 2011–05–10
  10. By: Berggren, Niclas (The Ratio Institute)
    Abstract: This study analyzes leading research in behavioral economics to see whether it contains advocacy of paternalism and whether it addresses the potential cognitive limitations and biases of the policymakers who are going to implement paternalist policies. The findings reveal that 20.7% of the studied articles in behavioral economics propose paternalist policy action and that 95.5% of these do not contain any analysis of the cognitive ability of policymakers. This suggests that behavioral political economy, in which the analytical tools of behavioral economics are applied to political decision-makers as well, would offer a useful extension of the research program.
    Keywords: Behavioral economics; Anomalies; Rationality; Homo economicus; Public choice
    JEL: D78
    Date: 2011–05–19
  11. By: Paola Giuliano (UCLA, NBER, CEPR and IZA); Prachi Mishra (IMF); Antonio Spilimbergo (IMF, CEPR, and WDI)
    Abstract: Empirical evidence on the relationship between democracy and economic reforms is limited to few reforms, countries, and years. This paper studies the impact of democracy on the adoption of economic reforms using a new dataset on reforms in the financial, capital and banking sectors, product markets, agriculture, and trade for 150 countries over the period 1960-2004. Democracy has a positive and significant impact on the adoption of economic reforms but there is no evidence that economic reforms foster democracy. Our results are robust to the inclusion of a large variety of controls and estimation strategies.
    Date: 2011–05
  12. By: Robert Hodgson (Department of Economics, University of Exeter); John Maloney (Department of Economics, University of Exeter)
    Abstract: The decline in the number of marginal constituencies in Britain is often attributed to the increasing geographical polarisation of the electorate, with the North having become even more pro-Labour and the South even more pro-Conservative. We show that this has been more than neutralised by the weakening links between social class and voting behaviour, and explain the fall in the number of marginals by the party, not just personal, incumbency effects which tend to pile up in all but the most marginal seats.
    Date: 2011
  13. By: Alesina, Alberto (Harvard University); Giuliano, Paola (University of California, Los Angeles); Nunn, Nathan (Harvard University)
    Abstract: This paper seeks to better understand the historical origins of current differences in norms and beliefs about the appropriate role of women in society. We test the hypothesis that traditional agricultural practices influenced the historical gender division of labor and the evolution and persistence of gender norms. We find that, consistent with existing hypotheses, the descendants of societies that traditionally practiced plough agriculture, today have lower rates of female participation in the workplace, in politics, and in entrepreneurial activities, as well as a greater prevalence of attitudes favoring gender inequality. We identify the causal impact of traditional plough use by exploiting variation in the historical geo-climatic suitability of the environment for growing crops that differentially benefited from the adoption of the plough. Our IV estimates, based on this variation, support the findings from OLS. To isolate the importance of cultural transmission as a mechanism, we examine female labor force participation of second-generation immigrants living within the US.
    Keywords: culture, beliefs, values, gender roles
    JEL: J16 N30
    Date: 2011–05
  14. By: Athanasios Lapatinas (Department of Economics, University of Ioannina); Anastasia Litina (Department of Economics, University of Ioannina); Eftichios S. Sartzetakis (Department of Economics, University of Macedonia)
    Abstract: We construct an overlapping generations model comprising of two distinct groups of agents, citizens and politicians. Each agent lives through two periods; childhood and adulthood. She makes choices only as an adult, based on her utility that depends on her own con- sumption and the human capital and environmental quality endowed to her o¤spring. Citizens decide upon the proportion of their income that declare to the tax authorities, balancing between their own con- sumption and their o¤springs?s well being. Politicians on the other hand can peculate a part of the tax revenue allocated to education and environmental protection with the rates of peculation for each ac- tivity exogenously given. Politicians decide upon the allocation of the tax revenue between the two activities balancing a similar trade-o¤ to that of citizens. In this context, two self-ful?lling stable equilib- ria can emerge, one with high tax evasion and high allocation to the more rent-seeking activity and one with low tax evasion and low al- location to the more rent-seeking activity. This outcome accords well with existing empirical evidence and outlines that environmental poli- cies may fail in corrupt countries if they are meant to increase rent seeking instead of protecting the environment.
    Date: 2011–06
  15. By: Steffen Osterloh (Centre for European Economic Research)
    Abstract: On the occasion of the 65th birthday of Governor Klaus Liebscher and in recognition of his commitment to Austria’s participation in European monetary union and to the cause of European integration, the Oesterreichische Nationalbank (OeNB) established a “Klaus Liebscher Award”. It has been be offered annually since 2005 for up to two excellent scientific papers on European monetary union and European integration issues. The authors must be less than 35 years old and be citizens from EU member or EU candidate countries. Each “Klaus Liebscher Award” is worth EUR 10,000. The winning papers of the seventh Award 2011 were written by Steffen Osterloh and by Friederike Niepmann and Tim Schmidt-Eisenlohr (shared award). Steffen Osterloh’s paper is presented in this Working Paper while Friederike Niepmann’s and Tim Schmidt-Eisenlohr’s contribution is contained in Working Paper 170. In this paper Steffen Osterloh starts from the observation that regional transfers are often assumed to have an impact on the public opinion towards the benefactor, but that empirical evidence is still scarce. In his paper the author tests this hypothesis for the structural funds of the European Union (EU) by combining detailed data on regional transfers with public opinion surveys. A positive impact of transfers on public support for the EU can be confirmed. Moreover, the author scrutinizes the role of awareness of being a recipient of funds in this process. In particular, he finds that the impact of the amount of transfers on the individual’s awareness is heterogenous and particularly depends on education. Finally, the author shows that the type of information source which arouses the citizen’s awareness of the transfers affects the impact on his opinion. JEL classification: D72, F59, H73
    Keywords: regional policy, vote purchasing, public opinion, European Union
    Date: 2011–05–23

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