nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒06‒25
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. Towards a Political Economy of Macroeconomic Thinking By Saint-Paul, Gilles
  2. Euclidean Revealed Preferences: Testing the Spatial Voting Model By Marc Henry; Ismael Mourifié
  3. Inequality in Developing Economies: The Role of Institutional Development By Adalgiso Amendola; Joshy Easaw; Antonio Savoia
  4. Income, Democracy, and the Cunning of Reason By Daniel Treisman
  5. Income and Democracy: Lipset's Law Inverted By Ghada Fayad; Robert H. Bates; Anke Hoeffler
  6. Evaluating election platforms: a task for fiscal councils? Scope and rules of the game in view of 25 years of Dutch practice By Bos, Frits; Teulings, Coen
  7. Democratic Dividends: Stockholding, Wealth and Politics in New York, 1791-1826 By Eric Hilt; Jacqueline Valentine
  8. Ethnic party fragmentation versus unity: A niche-based explanation research note By Gábor P.
  9. Signs of reality - reality of signs. Explorations of a pending revolution in political economy. By Hanappi, Hardy
  10. Afraid of God or Afraid of Man: How religion shapes attitudes toward free riding and fraud By H'madoun M.

  1. By: Saint-Paul, Gilles (TSE)
    Date: 2011–05–23
  2. By: Marc Henry; Ismael Mourifié
    Abstract: In the spatial model of voting, voters choose the candidate closest to them in the ideological space. Recent work by (Degan and Merlo 2009) shows that it is falsifiable on the basis of individual voting data in multiple elections. We show how to tackle the fact that the model only partially identifies the distribution of voting profiles and we give a formal revealed preference test of the spatial voting model in 3 national elections in the US, and strongly reject the spatial model in all cases. We also construct confidence regions for partially identified voter characteristics in an augmented model with unobserved valence dimension, and identify the amount of voter heterogeneity necessary to reconcile the data with spatial preferences. <P>
    Keywords: revealed preference, partial identification, elliptic preferences, voting behaviour,
    Date: 2011–06–01
  3. By: Adalgiso Amendola (Università di Salerno); Joshy Easaw (University of Swansea); Antonio Savoia (Department of Economics, University of Exeter)
    Abstract: This paper studies the distributive impact of institutional change in developing countries. In such economies, property rights systems may preserve the interests of an influential minority, who can control key-markets, access to assets and investment opportunities, especially if they enjoy disproportionate political power. We test this hypothesis using cross-section and panel data methods on a sample of low- and middle-income economies from Africa, Asia and Latin America. Results suggest that: (a) increasing property rights protection increases income inequality; (b) this effect is larger in low-democracy environments; (c) few countries have developed political institutions capable of counterbalancing this effect.
    Keywords: Inequality, developing economies, institutions, property rights, democracy.
    JEL: O15 O17 D70
    Date: 2011
  4. By: Daniel Treisman
    Abstract: A long-standing debate pits those who think economic development leads to democratization against those who argue that both result from distant historical causes. Using the most comprehensive estimates of national income available, I show that development is associated with more democratic government—but in the medium run (10 to 20 years). The reason is that, for the most part, higher income only prompts a breakthrough to more democratic politics after the incumbent leader falls from power. And in the short run, faster economic growth increases the leader’s odds of survival. This logic—for which I provide evidence at the levels of individual countries and the world—helps explain why democracy advances in waves followed by periods of stasis and why dictators, concerned only to entrench themselves in power, end up preparing their countries to leap to a higher level of democracy when they are eventually overthrown.
    JEL: D78 I39 N10 O10
    Date: 2011–06
  5. By: Ghada Fayad; Robert H. Bates; Anke Hoeffler
    Abstract: In this article, we revisit Lipset’s law (Lipset 1959), which posits a positive and significant relationship between income and democracy. Using dynamic panel data estimation techniques that account for short-run cross-country heterogeneity in the relationship between income and democracy and that correct for potential cross-section error dependence, we overturn the literature's recent set of findings of the absence of any significant relationship between income and democracy and in a surprising manner: We find a significant and negative relationship between income and democracy: higher/lower incomes per capita hinder/trigger democratization. We attribute this result to the nature of the tax base. Decomposing overall income per capita into its resource and non-resource components, we find that the coefficient on the latter is positive and significant while that on the former is significant but negative. In the Sub-Saharan Africa (SSA) portion of the sample where the relationship runs from political institutions – i.e. democracy – to economic performance – i.e. income, democracy is found to positively and significantly affect income per capita, which slowly converge to its long-run value as predicted by current democracy levels: SSA countries may thus be currently too democratic to what their income levels suggest.
    Keywords: income, democracy, Sub-Saharan Africa, Dynammic panel data, parameter heterogeneity, Cross-section dependence
    JEL: C23 O11 O17 O55
    Date: 2011
  6. By: Bos, Frits; Teulings, Coen
    Abstract: In some countries - the Netherlands, UK and USA - the expected economic implications of election platforms of political parties are evaluated by independent economic institutions prior to the election. This paper analyzes the merits and limitations of this process, taking 25 years of Dutch experience as a point of reference. In particular in times of financial crisis and unsustainable public finance, evaluation of election platforms can serve as a disciplining device for unrealistic or (time) inconsistent promises by politicians. More in general, it can help political parties to credibly inform voters about the implications of their platforms, to design more efficient policies and to reach consensus on them. It can also create a level playing field for political parties not represented in the government, in particular those with limited resources for economic information and expertise. However, there may be adverse effects, in particular when trade-offs are presented in an unbalanced way or when the rules of the evaluation provide too much room for gaming and free lunches.
    Keywords: Evaluation of election platforms; Fiscal watchdogs
    JEL: E62 D70 H0 E61 A11
    Date: 2011–06
  7. By: Eric Hilt; Jacqueline Valentine
    Abstract: This paper analyzes the early history of corporate shareholding, and its relationship with political change. In the late eighteenth century, corporations were extremely rare and were dominated by elites, but in the early nineteenth century, after American politics became significantly more democratic, corporations proliferated rapidly. Using newly collected data, this paper compares the wealth and status of New York City households who owned corporate stock to the general population there both in 1791, when there were only two corporations in the state, and in 1826, when there were hundreds. The results indicate that although corporate stock was held principally by the city’s elite merchants in both periods, share ownership became more widespread over time among less affluent households. In particular, the corporations created in the 1820s were owned and managed by investors who were less wealthy than the stockholders of corporations created in earlier, less democratic periods in the state’s history.
    JEL: K22 N21 N41
    Date: 2011–06
  8. By: Gábor P.
    Abstract: The paper provides a niche model for the lack and emergence of ethnic party fragmentation under different demographic conditions. The predictions are tested against the findings of Stroschein (2011) on Hungarian ethnic party success at municipal elections in three Romanian counties.
    Date: 2011–05
  9. By: Hanappi, Hardy
    Abstract: This paper explores the interaction between the world of information processes in human society and the non-information dynamics, which the latter set out to understand. This broad topic is approached with a focus on evolutionary political economy: It turns out that progress in this scientific discipline seems to depend crucially on a methodological revolution reframing this above mentioned interplay. The paper consists of three parts. After a brief introduction, which sketches the position of the argument in the current epistemological discourse, part 1 sets out to describe the basic methodological ingredients used by evolutionary political economy to describe the ‘reality’ of socioeconomic dynamics. Part 2 jumps to the world of languages used and proposes a rather radical break with the received apparatus of analytical mathematics used so successfully in sciences studying non-living phenomena. The development of procedural simulation languages should substitute inadequate mathematical formalizations, some examples are provided. Part 3 then returns to ‘reality’ dynamics, but now incorporates the interaction with the information sphere in a small algorithmic model. This model – like the introduction - again makes visible the relationships to earlier research in the field. Instead of a conclusion – several, hopefully innovative ideas are provided in passing, throughout the paper - an epilogue is provided, which tries to indicate the implications of this methodological paper for political practice in face of the current global crisis.
    Keywords: Scientific methods; evolutionary political economy; formal languages; ideology
    JEL: B51 B52 B4
    Date: 2011–05–28
  10. By: H'madoun M.
    Abstract: In the Theory of Moral Sentiments, Adam Smith captured the key elements of a theory – later developed by many others – of why religion matters for behavior: self-interest, belief prevailing over belonging and a religion with an image of god as omnipotent, all-seeing and judging. The goal of this paper is to test this theory empirically by investigating how religion constrains people’s willingness to engage in free riding and fraud, i.e. cheating on taxes, falsely claiming government benefits, free riding on public transport and accepting a bribe. The most recent wave of the World Values Survey (2005-2008) is used to look into whether religion might be a factor shaping people’s attitudes toward free riding, and to what extent belief or participation make a difference. Results show that religion effectively exerts an influence mainly through belief in god. This effect was only found significant in those country groups that share an image of god as an active, punishing and judging being in contrast to an abstract and distant transcendental essence. This corresponds to previous literature where the conjecture is that fear of an all-seeing and punishing god alters the costs and benefits associated with fraudulent or immoral behavior making it less attractive.
    Date: 2011–06

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