nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒07‒21
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Strategic voting and nomination By Green-Armytage, James
  2. A survival analysis of the circulation of the political elites governing Italy from 1861 to 1994. By Silvia Fedeli; Francesco Forte
  3. Did Growth and Reforms Increase Citizens' Support for the Transition? By Golinelli, Roberto; Rovelli, Riccardo
  4. Advertising Effects in Presidential Elections By Gordon, Brett R.; Hartmann, Wesley R.
  6. Political Mergers as Coalition Formation By Eric Weese
  7. Lame Ducks and Divided Government: How Voters Control the Unaccountable By Schelker, Mark
  8. Who Supports the ECB? Evidence from Eurobarometer Survey Data By Etienne Farvaque; Muhammad Azmat Hayat; Alexander Mihailov
  9. Strategic Interaction in Local Fiscal Policy: Evidence from Portuguese Municipalities By Hélia Silva; Linda Gonçalves Veiga; Miguel Portela
  10. Capture, Politics and Antitrust Effectiveness By Rocco Ciciretti; Simone Meraglia; Gustavo Piga
  11. Lobbying for Education in a Two-sector Model. By Debora Di Gioacchino; Paola Profeta

  1. By: Green-Armytage, James
    Abstract: Using computer simulations based on three separate data generating processes, I estimate the fraction of elections in which sincere voting will be a core equilibrium given each of eight single-winner voting rules. Additionally, I determine how often each voting rule is vulnerable to simple voting strategies such as 'burying' and 'compromising', and how often each voting rule gives an incentive for non-winning candidates to enter or leave races. I find that Hare is least vulnerable to strategic voting in general, whereas Borda, Coombs, approval, and range are most vulnerable. I find that plurality is most vulnerable to compromising and strategic exit (which can both reinforce two-party systems), and that Borda is most vulnerable to strategic entry. I support my key results with analytical proofs.
    Keywords: strategic voting; tactical voting; strategic nomination; Condorcet; alternative vote; Borda count; approval voting
    JEL: D7
    Date: 2011–04–14
  2. By: Silvia Fedeli; Francesco Forte
    Abstract: We study the determinants of governments and legislatures’ survival in Italy from the unification to the end of the I Republic (1861-1994) - excluding the fascist period and the subsequent transitory institutional period, "Constituente" (1946-1948). We test whether institutional features such as electoral systems, form of State and extent of suffrage had any effect on the survival of legislatures and governments. We control for voting power of the parliamentary groups, number of parties represented in the parliament and size of the representative bodies. Unlike the political economy wisdom, we show that, over the whole period, governments and legislatures’ survivals are inversely related to the plurality electoral system. The restricted suffrage and a high voting power of the leading parties reduce the risk of anticipated end of governments. The survival of the legislatures is related to the form of state (republic) and to the voting power of the leading party.
    Keywords: Elites; Survival analysis; Electoral systems; Voting power, Political institutions.
    Date: 2011–04
  3. By: Golinelli, Roberto (University of Bologna); Rovelli, Riccardo (University of Bologna)
    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.
    Keywords: economic performance, economic reforms, post-communist transition, political economy, support for reforms, public opinion
    JEL: O11 O57 P2 P36 P52
    Date: 2011–07
  4. By: Gordon, Brett R. (Columbia University); Hartmann, Wesley R. (Stanford University)
    Abstract: We estimate advertising effects in the context of presidential elections. This setting overcomes many data challenges in previous advertising studies, while arguably providing one of the most interesting empirical settings to study advertising's effects. The four-year presidential election cycle facilitates measurement in two ways. First, the gap between elections depreciates past advertising stocks such that large advertising investments are concentrated within relatively short periods. Second, the lack of political advertising between elections allows lagged advertising prices to serve as instruments that are safely independent of candidates' current advertising choices. To further aid estimation, the winner-take-all nature of the electoral college generates broad variation in advertising levels across states. We analyze the data using an aggregate discrete choice approach with extensive fixed effects at the party-market level to control for unobservable cross-sectional factors that might be correlated with advertising, outcomes, and instruments. The results indicate significant positive effects of advertising exposures for the 2000 and 2004 general elections. Advertising elasticities are smaller than are typical for branded goods, yet significant enough to shift election outcomes. For example, if advertising were set to zero and all other factors held constant, three states' electoral votes would have changed parties in 2000, leading to a different president.
    Date: 2011–06
  5. By: Jean-Paul Faguet
    Abstract: The most important theoretical argument concerning decentralization is that it can improve governance by making government more accountable and responsive to the governed. Improving governance is also central to the motivations of real-world reformers, who bear risks and costs in the interest of devolution. But the literature has mostly focused instead on policy-relevant outcomes, such as education and health services, public investment, and fiscal deficits. This paper examines how decentralization affects governance, in particular how it might increase political competition, improve public accountability, reduce political instability, and impose incentive-compatible limits on government power, but also threaten fiscal sustainability.
    Keywords: decentralization, governance, local government, political competition,accountability, instability
    Date: 2011–06
  6. By: Eric Weese (Department of Economics, Yale University)
    Abstract: Political coalition formation games can describe the formation and dissolution of nations, as well as the creation of coalition governments, the establishment of political parties, and other similar phenomena. These games have been studied from a theoretical perspective, but the resulting models have not been used extensively in empirical work. This paper presents a method of estimating political coalition formation models with many-player coalitions, and then illustrates this method by estimating structural coefficients that describe the behaviour of municipalities during a recent set of municipal mergers in Japan. The method enables counterfactual analysis, which in the Japanese case shows that the national government could increase welfare via a counter-intuitive policy involving transfers to richer municipalities conditional on their participation in a merger.
    Keywords: computational techniques, coalitions, municipalities
    JEL: C63 D71 H77
    Date: 2011–03
  7. By: Schelker, Mark
    Abstract: The ability of voters to use the available electoral instruments is crucial for the functioning of democracies. The paper shows that voters consider the institutional environment when making electoral decisions. Voters recognize that executives who face binding term limits (i.e., “lame ducks”) have incentives to deviate from the preferences of voters because these politicians are not subject to reelection restrictions. This weakened accountability can be counterbalanced by an alternative mechanism known as divided government. By dividing government control between the executive and legislative branches, voters can force a lame duck to compromise on policies with an opposing legislature. Using a panel data analysis of the US states from 1975 to 2000, it is shown that the probability of divided government is 10-15 percent higher when governors are lame ducks. This effect remains robust and significant even after controlling for many relevant covariates. This result provides evidence of the considerable capacity of voters to process information and use alternative electoral instruments to control an otherwise unaccountable executive.
    Keywords: Divided government, lame duck, term limit, accountability
    JEL: D72
    Date: 2011–07
  8. By: Etienne Farvaque (Department of Economics, University of Lille 1); Muhammad Azmat Hayat (Department of Economics, University of Lille 1); Alexander Mihailov (Department of Economics, University of Reading)
    Abstract: This paper addresses empirically the still debated issue of the legitimacy of the European Central Bank (ECB) with regard to European polities, presenting evidence on public opinion support for the ECB as elicited from responses in the recent waves of the Eurobarometer survey. We employ a rich set of potential determinants, combining macroeconomic and socio-demographic data in logistic regressions, to explain trust in the ECB. We find that people with higher level of income and education and centre to right-wing political orientation tend to support the ECB, as well as people with optimistic expectations on the economic situation. Moreover, our results indicate that socio-demographic determinants of trust in the ECB dominate macroeconomic ones, in particular inflation performance, by a considerable margin of magnitude and in a quite robust way. The policy relevance of such results is important for ECB’s communication strategy with the EU public, especially in the years ahead of likely reforms of the European Monetary Union (EMU).
    Keywords: European Central Bank, communication, legitimacy, determinants of trust, Eurobarometer survey, logistic regression
    JEL: C23 E58 F33 H11 Z13
    Date: 2011–07–08
  9. By: Hélia Silva (European University Institute); Linda Gonçalves Veiga (Universidade do Minho - NIPE); Miguel Portela (Universidade do Minho - NIPE, Tinbergen Institute and IZA Bonn)
    Abstract: This paper aims at testing the degree of interaction between Portuguese municipalities’ expenditure levels by estimating a dynamic panel model, based on jurisdictional reaction functions. The analysis is performed for all 278 Portuguese mainland municipalities from 1986 to 2006, using alternative ways to measure neighbourhood. Results indicate that local governments’ spending decisions are significantly influenced by the actions of neighbouring municipalities. For total expenditures, there is evidence that a 10% increase in nearby municipalities’ expenditures boosts expenditures in a given municipality by around 3.8%.
    Keywords: spending interactions, local government, spatial econometrics, dynamic panel data
    JEL: C23 H7 R1
    Date: 2011
  10. By: Rocco Ciciretti (Faculty of Economics, University of Rome "Tor Vergata"); Simone Meraglia (Toulouse School of Economics); Gustavo Piga (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: We study a three-tier hierarchy Political Principal - Competition Authority - Firms in which the Principal chooses the Authority's (i) exante budget, (ii) state-contingent transfer, and (iii) preferences in presence of moral hazard. Collusion between the Authority and firms may arise so as to avoid fines. For high efficiency levels of side-contracting, collusion proofness induces high-powered incentives for the Authority. The Principal trades-off the benefits from allowing the Authority to exert its desidered level of effort with the cost of leaving it an increasing expected rent. This results in the budget being non-monotone in the side-contracting efficiency level. When firms bribe the Principal for a reduced budget, both the budget and the state-contingent transfer are non-increasing in the side-contracting efficiency level. Instances in which the Authority is optimally allocated a zero budget are characterized. Finally we show that the Principal prefers a consumers' surplus maximizing Competition Authority.
    Keywords: Three-tier Hierarchy, Moral Hazard, Collusion-Proofness, Endogenous Budget, Law Enforcement
    JEL: D72 D73 D86 K21
    Date: 2011–07–14
  11. By: Debora Di Gioacchino; Paola Profeta
    Abstract: Modern economies devote a relevant share of their resources to education. However, even among industrialised countries, there are differences in the traits of the education system and in its outcome in terms of human capital composition. The question we pose in this paper is why the composition of human capital is so diversied. The answer we propose is that the education system responds to the economy’s structure of production. Skills are required by firms according to their needs and are supplied through the education system. We analyse the political economy of education in a two-period model in which heterogeneous firms, specialised in two different sectors, try to induce the government to finance the type of education which is complementary to their production. In the first period, the policy-maker decides the skill composition of new-workers which will determine the supply of skills in the second period. Firms may lobby to obtain their preferred skill composition. We show that in the political equilibrium in which firms in both sectors get organised, the policy-maker chooses the same skill composition that would be chosen by the social planner. Moving to endogenous lobbying, we are able to show that, if there are no costs of lobbying, then both sectors will lobby in equilibrium. However, in the more realistic case in which if lobbying is costly it may be that only one sector will find it profitable to offer monetary contribution; which sector gets organised depends on sectors’ share in total output, relative productivity and prices of the two sectors.
    Keywords: Endogenous lobbying, human capital composition, structure of production.
    JEL: I2 D72
    Date: 2010–12

This nep-pol issue is ©2011 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.