nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒07‒13
twenty-one papers chosen by
Eugene Beaulieu
University of Calgary

  1. Moderating Government By Francesco De Sinopoli; Leo Ferraris; Giovanna Iannantuoni
  2. Extreme voting under proportional representation: the multidimensional case. By De Sinopoli, Francesco; Iannantuoni, Giovanna
  3. Inequality, Development, and the Stability of Democracy – Lipset and Three Critical Junctures in German History By Jung, Florian; Sunde, Uwe
  4. Inequality Aversion and Voting on Redistribution By Wolfgang Hoechtl; Rupert Sausgruber; Jean-Robert Tyran
  5. Konkordanz, Divided Government, und die Möglichkeit von Reformen By Kirchgässner, Gebhard
  6. Voting over Selective Immigration Policies with Immigration Aversion By Rebeca Jiménez-Rodríguez; Giuseppe Russo
  7. Did Growth and Reforms Increase Citizens’ Support for the Transition? By R. Golinelli; R. Rovelli
  8. On the superiority of approval vs plurality: a counterexample By Francesco De Sinopoli; Giovanna Iannantuoni
  9. Does female reservation affect long-term political outcomes ? Evidence from rural India By Deininger, Klaus; Jin, Songqing; Nagarajan, Hari K.; Fang, Xia
  10. Two-ballot versus plurality rule: an empirical investigation on the number of candidates By Carlos Eduardo S. Gonçalves; Ricardo A. Madeira; Mauro Rodrigues
  11. Rising food prices, food price volatility, and political unrest By Bellemare, Marc F.
  12. When does more aid imply less democracy? An empirical examination By Irene Vlachaki; Sarantis Kalyvitis
  13. Variable-population voting rules By Pivato, Marcus
  14. Public sector corruption and the probability of technological disasters By Yamamura, Eiji
  15. Intergenerational transfer institutions public education and public pensions. By Boldrin, Michele; Montes Alonso, Ana
  16. Can Lipset’s theory travel through time and space? the destination Nicaragua, 1972-1998. A time series test of the social requisites of democracy. By Michalak, Katja
  17. In the mood for redistribution. An empirical analysis of individual preferences for redistribution in Italy By Gaeta, Giuseppe Lucio
  18. Industrial policy, collective action, and the direction of technological change By Temel, Tugrul
  19. Length of Compulsory Education and Voter Turnout - Evidence from a Staged Reform By Panu Pelkonen
  20. Mind the gaps: a political economy of the multiple dimensions of China’s rural–urban divide By Xiaobing Wang; Jenifer Piesse; Nick Weaver
  21. Lobbying the European Commission: Open or secret? By Raj Chari; Daniel Hillebrand O'Donovan

  1. By: Francesco De Sinopoli (Department of Economics (University of Verona)); Leo Ferraris (Department of Economics (University of Verona)); Giovanna Iannantuoni (University of Milano-Bicocca)
    Abstract: We consider a model where policy motivated citizens vote in two simultaneous elections, one for the President who is elected by majority rule, in a single national district, and one for the Congressmen, each of whom is elected by majority rule in a local district. The policy to be implemented depends not only on who is elected President but also on the composition of the Congress. We characterize the equilibria of the model using a conditional sincerity concept that takes into account the possibility that some voters may be simultaneously decisive in both elections. Such a concept emerges naturally in a model with trembles. A crucial feature of the solution is the moderation of Government.
    Keywords: voting, proportional rule, majority, parliament.
    JEL: C72 D72
    Date: 2011–06
  2. By: De Sinopoli, Francesco; Iannantuoni, Giovanna
    Abstract: We study the strategic behavior of voters in a model of proportional representation, in which the policy space is multidimensional. Our main finding is that in large electorate, under some assumptions on voters' preferences, voters essentially vote, in any equilibrium, only for the extreme parties.
  3. By: Jung, Florian; Sunde, Uwe
    Abstract: This paper studies the endogenous emergence of political regimes, in particular democracy, oligarchy and mass dictatorship, in societies in which productive resources are distributed unequally and institutions do not ensure political commitments. The political regime is shown to depend on resource inequality as well as on economic development, reflected in the production structure. The main results imply that for any level of development there exists a distribution of resources such that democracy is the political outcome. This distribution is even independent of the particular development level if the income share generated by the poor is sufficiently large. On the other hand, there are distributions of resources for which democracy is infeasible in equilibrium irrespective of the level of development. The model also delivers results on the stability of democracy. Variations in inequality across several dimensions due to unbalanced technological change, immigration or changes in the demographic structure affect the scope for democracy or may even lead to its breakdown. The results are consistent with the different political regimes that emerged in Germany after its unification in 1871.
    Keywords: Income inequality, development, democracy, coalition formation, factor endowments, demographic structure.
    JEL: P16 O10 H10
    Date: 2011–07
  4. By: Wolfgang Hoechtl; Rupert Sausgruber; Jean-Robert Tyran
    Abstract: Mounting evidence shows that there is heterogeneity in aversion to inequality, i.e. that some people have a concern for a fair distribution. Does such a concern matter for majority voting on redistribution? Fairness preferences are relevant for redistribution outcomes only if fair voters are pivotal. Pivotality, in turn, depends on the structure of income classes. We experimentally study voting on redistribution between two income classes and show that the effects of inequality aversion are asymmetric. Inequality aversion is more likely to matter if the “rich” are in majority. With a “poor” majority, we find that redistribution outcomes look as if all voters were exclusively motivated by their pocketbook.
    Keywords: redistribution, self interest, inequality aversion, median voter, experiment
    JEL: A13 C9 D72
    Date: 2011–06
  5. By: Kirchgässner, Gebhard
    Abstract: In Switzerland, political concordance or direct popular rights and the resulting consociational democracy are often held responsible for delay or even cancellation of necessary political reforms. Switzerland is, however, not the only country with such a system, and direct democracy is just one out of several mechanisms fostering political concordance. Moreover, as the examples of the United States and Germany show, a concordant political system might show up even if the government does not reflect this. Thus, we first describe different manifestations of political concordance. Then, we ask for institutional preconditions for successful political reforms before the situations in Switzerland and Germany are discussed more detailed. The experience of both countries shows that political concordance is not per se destructive for political reforms, it can even be conductive. This very much depends on the concrete institutional design of political concordance.
    Keywords: Political Concordance, Consociational Democracy, Divided Government, Economic and Political Reforms, Westminster-System, Germany, Switzerland
    JEL: H11
    Date: 2011–07
  6. By: Rebeca Jiménez-Rodríguez (University of Salamanca); Giuseppe Russo (University of Salerno and CSEF)
    Abstract: Selective immigration policies set lower barriers to entry for skilled workers. However, simple economic intuition suggests that skilled majorities should welcome unskilled immigrants and protect skilled natives. This paper studies the voting over a selective policy in a two-country, three-factor model with skilled and unskilled labor, endogenous migration decisions, costly border enforcement and aversion to immigration. Results show that heterogeneity in capital distribution forces skilled voters to form a coalition with unskilled voters, who become pivotal. The voting outcome is therefore biased towards the preferences of the latter, and consists in a selective protectionism. Finally, immigration aversion helps to explain why skilled majorities do not bring down entry barriers against unskilled workers.
    Keywords: selective immigration policies, multidimensional voting, cultural preferences, Condorcet winner
    JEL: D72 F22 J18
    Date: 2011–07–05
  7. By: R. Golinelli; R. Rovelli
    Abstract: How did post-communist transformations affect people’s perceptions of their economic and political systems? We model a pseudo-panel with 89 country-year clusters, based on 13 countries observed between 1991 and 2004, to identify the macro and institutional drivers of the public opinion. Our main findings are: (i) When the economy is growing, on average people appreciate more extensive reforms; they dislike unbalanced reforms. (ii) Worsening of income distribution and higher inflation interact with an increasing share of the private sector in aggravating nostalgia for the past regime. (iii) Cross-country differences in the attitudes towards the present and future (both in the economic and political dimensions) are largely explained by differences in the institutional indicators for the rule of law and corruption. (iv) Cross-country differences in the extent of nostalgia towards the past are mainly related to differences in the deterioration of standards of living.
    JEL: O11 O57 P2 P36 P27
    Date: 2011–07
  8. By: Francesco De Sinopoli; Giovanna Iannantuoni
    Abstract: We present a simple voting environment where the Condorcet winner exists. Under plurality rule, the derived game has a stable set where such a candidate is elected with probability one. However, no stable set of the approval game elects the Condorcet winner with positive probability.
    Keywords: Approval voting, Plurality voting, Sophisticated voting,Mertens Stability.
    JEL: C72 D72
    Date: 2011–06
  9. By: Deininger, Klaus; Jin, Songqing; Nagarajan, Hari K.; Fang, Xia
    Abstract: Although many studies have explored the impacts of political quotas for females, often with ambiguous results, the underlying mechanisms and long-term effects have received little attention. This paper uses nation-wide data from India spanning a 15-year period to explore how reservations affect leader qualifications, service delivery, political participation, local accountability, and individuals’ willingness to contribute to public goods. Although leader quality declines and impacts on service quality are often negative, gender quotas are shown to increase the level and quality of women's political participation, the ability to hold leaders to account, and the willingness to contribute to public goods. Key effects persist beyond the reserved period and impacts on females often materialize only with a lag.
    Keywords: Housing&Human Habitats,Population Policies,Gender and Law,Gender and Health,Parliamentary Government
    Date: 2011–06–01
  10. By: Carlos Eduardo S. Gonçalves (Universidade de São Paulo); Ricardo A. Madeira (Universidade de São Paulo); Mauro Rodrigues (Universidade de São Paulo)
    Abstract: Duverger claimed more than 50 years ago that the number of candidates in elections should be a function of electoral rules. Both his “law” and “hypothesis” suggest the number of candidates vying for seats in elections to be tightly linked to characteristics of the electoral process such as its degree of proportionality and the presence of runoffs. Here we test the validity of Duverger’s claim using data from municipal elections in Brazil. Our study differs from others in the field in two important dimensions. First, by using municipal data we avoid the usual problems that plague statistical analysis using cross-country data. Secondly, we have a truly exogenous source of variation due to a change in electoral legislation introduced by the constitutional reform of 1988: simple plurality remained the rule only in municipalities with less than 200,000 voters, and a second-ballot became mandatory for the others above that threshold. This allows for a neat identification strategy using panel data. Our main finding is that elections with runoffs lure greater numbers of candidates in municipalities with sufficiently high levels of heterogeneity.
    Keywords: Duverger's law, runoff, heterogeneity
    JEL: D70 D72
    Date: 2011
  11. By: Bellemare, Marc F.
    Abstract: Do food prices cause political unrest? Throughout history, riots appear to have frequently broken out as a consequence of high food prices. This paper studies the impact of food prices on political unrest using monthly data on food prices at the international level. Because food prices and political unrest are jointly determined, the incidence of natural disasters in a given month is used in an attempt to identify the causal relationship between food prices and political unrest. Empirical results indicate that between January 1990 and January 2011, food price increases have led to increased political unrest, whereas food price volatility has been associated with decreases in political unrest. These findings are consistent with those of the applied microeconomics literature on the welfare impacts of food prices.
    Keywords: Food Prices; Price Volatility; Political Unrest; Food Riots
    JEL: O11 Q11 D74 Q34 O13
    Date: 2011–06–28
  12. By: Irene Vlachaki (European Commission, Brussels, Belgium); Sarantis Kalyvitis (DIEES, AUEB)
    Abstract: Foreign aid flows have increased considerably during the last decades, targeting, apart from development objectives, goals related to democracy. In this paper we investigate whether aid has affected the political regime of recipient countries. To this end, we use annual data on Net Official Development Assistance covering 64 aid-recipients. Because of data limitations, we cover the period 1967-2002. We find that aid flows decreased the likelihood of observing a democratic regime in a recipient country. This effect is sensitive to economic and social conditions. The negative relation between aid and democracy is moderated when aid flows are preceded by economic liberalization. Aid from the U.S. has a non-significant effect on the political regime of recipients.
    Keywords: democratization; foreign aid; binary model; endogeneity
    JEL: D70 F35 C25
    Date: 2011–07–29
  13. By: Pivato, Marcus
    Abstract: Let X be a set of social alternatives, and let V be a set of `votes' or `signals'. (We do not assume any structure on X or V). A `variable population voting rule' F takes any number of anonymous votes drawn from V as input, and produces a nonempty subset of X as output. The rule F satisfies `reinforcement' if, whenever two disjoint sets of voters independently select some subset Y of X, the union of these two sets will also select Y. We show that F satisfies reinforcement if and only if F is a `balance rule'. If F satisfies a form of neutrality, then F is satisfies reinforcement if and only if F is a scoring rule (with scores taking values in an abstract linearly ordered abelian group R); this generalizes a result of Myerson (1995). We also discuss the sense in which the balance or scoring representation of F is unique. Finally, we provide a characterization of two scoring rules: `formally utilitarian' voting and `range voting'. a
    Keywords: reinforcement; scoring rule; balance rule; linearly ordered abelian group; formal utilitarian; range voting
    JEL: D71
    Date: 2011–06–28
  14. By: Yamamura, Eiji
    Abstract: A growing number of works have explored the influence of institution on the outcomes of disasters and accidents from the viewpoint of political economy. This paper focuses on the probability of the occurrence of disasters rather than disaster outcomes. Using panel data from 98 countries, this paper examines how public sector corruption is associated with the probability of technological disasters. It was found that public sector corruption raises the probability of technological disasters. This result is robust when endogeneity bias is controlled.
    Keywords: Corruption; Institution; Disasters; Risk
    JEL: D73 D81 Q54
    Date: 2011–06–29
  15. By: Boldrin, Michele; Montes Alonso, Ana
    Abstract: In a world in which credit markets to finance investments in human capital are rare, the competitive equilibrium allocation generally cannot achieve either static or dynamic efficiency. When generations overlap, this inefficiency can be overcome by properly designed institutions. We study the working of two such institutions: Public Education and Public Pensions. We argue that, when established jointly, they implement an intergenerational dynamic game of taxes and transfers through which public education for the young and public pensions for the elderly support each other. Through the public financing of education, the young borrow from the middle age to invest in human capital. When employed, they pay back their debt by means of a social security tax on labor income. The proceedings of the latter are used to finance pension payments to the now elderly lenders. We also show that such intergenerational agreement can be supported as a sub game perfect equilibrium of, relatively straightforward, majority voting games. While the intertemporal allocation so obtained does not necessarily reach full dynamic efficiency it does so under certain restrictions and it always improves upon the laissez-faire allocation. We test the main predictions of our model by using micro and macro data from Spain. The results are surprisingly good.
    Keywords: Intergenerational contract; Efficiency; Human capital; Political equilibria;
  16. By: Michalak, Katja
    Abstract: The epigraph is emblematic of an orthodox theoretical view that ‘only in a wealthy society could a situation exist in which the mass of the population could intelligently participate in politics’ and that this relationship is universal and applicable cross time and space. Comparing ancient Greece to modern societies, arguments are made that wealthy societies prerequisite mass participating in politics as well as an avoidance of irresponsible demagogues. The development of self-restraint through wealth emerges as a universal constant through time and space. However, how universalistic is Social Requisites of Democracy cross time and space? Can we imagine or theorize the genesis of the democratic self-restraint in alternative sources? The following research design is an attempt to apply the well-known theory of Lipset’s Social Requisites of Democracy to the Central American context, and more specifically, to the Nicaraguan case. In recent years, scholars (such as e.g. Linz and Stepan, Przeworksi, Karl and Schmitter) have attempted to apply existing theories to previously unexamined areas of the world (most relevant to this paper is the application of South European and Latin American transitions and consolidations to the new democracies of Eastern Europe). But what is their goal? In order to gain a new insight of how applicable an existing theory is cross-nationally, Or to show that we cannot apply theories to multiple regions? The latter might indicate that there is specificity and uniqueness to a region or a theory.
    Keywords: political economy; political development; democratization; economic transition
    JEL: P36 F50 O10 O54 O15
    Date: 2011–06–29
  17. By: Gaeta, Giuseppe Lucio
    Abstract: Over the past few years a large body of literature has studied the determinants of individual preferences for income equality and redistributive policies. In this paper, using data from the World Values Survey (WVS), we specifically focus on the preferences expressed by Italians and analyse their determinants. We verify a number of factors, usually found to impact individual attitudes towards equality and redistribution, and demonstrate that self-interest evaluations, together with the personal system of beliefs, do influence this kind of personal attitudes. The results also seem to suggest that living in a specific regional context may play a significant role in conditioning personal attitudes.
    Keywords: inequality; redistribution; individual preferences
    JEL: D31 H31 H23
    Date: 2011–06–30
  18. By: Temel, Tugrul
    Abstract: This paper studies patterns of technological change under two scenarios. In Scenario I, a distorted government is open to the influence of producers' collective action, while in Scenario II a benevolent government operates to maximize national income. The paper draws attention to the role that institutional arrangements and asymmetries in sectoral technology absorption play in shaping the path of technological change. Simulation results are threefold. First, biased institutions under Scenario I might help drag the economy towards the right trajectory, with current generations experiencing welfare loss. Secondly, the benevolent government under Scenario II supports the path of capital-augmenting technological change, which is also supported by the distorted government only when institutions deliberately favor the investment goods producing sector. Thirdly, sectoral asymmetries in technology assimilation do not help industries overcome disadvantageous situations in the political market, and hence do not inuence the direction of technological developments.
    Keywords: Technological change; industrial policy and lobbying; political-economic equilibrium.
    JEL: O38 O33 P26
    Date: 2011–06–29
  19. By: Panu Pelkonen
    Abstract: In this study, a long-term impact of additional schooling at the lower end of the educational distribution is measured on voter turnout. Schooling is instrumented with a staged Norwegian school reform, which increased minimum attainment by two years - from seven to nine. The impact is measured at two levels: individual, and municipality level. Both levels of analysis suggest that the additional education has no effect on the turnout rates. At the individual level, the impact of education is also tested on various measures of civic outcomes. Of these, only the likelihood of signing a petition is positively affected by education.
    Keywords: Education, Externalities, Voting, School reform
    JEL: H23 I21
    Date: 2009–09
  20. By: Xiaobing Wang; Jenifer Piesse; Nick Weaver
    Abstract: China’s impressive growth has been accompanied by increasing inequality and a widening rural– urban divide. This paper identifies and examines nine major dimensions of this divide: income, consumption, education, healthcare, employment, child care, pensions, access to public services and environment. The paper attributes the main causes of the rural–urban divide to China’s development strategy and the associated regressive tax and subsidies policies. This paper is among the first to evaluate and decompose the rural–urban divide into multiple dimensions or gaps, and highlights the severe constraints on the Chinese peasantry. It discuses the policy and welfare implications of the rural–urban divide. It argues that the large size of the rural–urban divide was mainly due to inequality in opportunities and the lack of social provision of public goods in rural areas. The removal of discriminatory policies, including the provision of such public goods, will lead to greater equality of opportunity and a reduced gap. Increased equality and efficiency can be achieved simultaneously.
    Date: 2011
  21. By: Raj Chari (Political Science, Trinity College Dublin and IMDEA Social Sciences); Daniel Hillebrand O'Donovan (Department Trinity College Dublin)
    Abstract: Little transparency in the EU black‐box of policy making means that there is limited citizen knowledge of which interest groups are operating in Brussels, what they seek to influence, how much resources they put into lobbying and the impact this has had on EU’s already large democratic deficit. As such, mass publics have held few tools to better understand, and get involved in changing, EU politics. In order to combat this problem, observers have considered the need to pursue 'sunshine' laws, a significant one being the regulation of lobbying. With this in mind, this paper asks: what has the Commission done with regard to regulating lobbyists and how does this compare from an international perspective; what insights can be gained about how the Commission register has evolved and the actors involved in policy making; and what lessons can be learned from this experience and is it really an antidote for the lack of genuine popular involvement in EU policy making? To answer these questions, there are three main sections. The first examines what is meant by the term 'lobbying regulation' and, from a comparative international perspective, it analyzes the Commission's attempts to increase transparency through its establishment of its 'voluntary' register in June 2008. The second considers the evolution of the register since its establishment, offering a novel, yet simple, analysis of the register's statistics between June 2008 and October 2010, focusing on registrations by consultancies, law firms, in‐house corporate lobbies, NGOs and others. It also considers registration dynamics in one of the most significant and globalized sectors in the economy, namely the automobile sector. The third section closes with lessons to be learned from a comparative perspective and ponders the structural changes that may be considered by the Commission in order to establish genuine popular involvement in EU policy making.
    Keywords: European Commission; lobbying regulation; register of lobbyists; transparency; automobile sector
    Date: 2011–06–30

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