nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒07‒27
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. Politics and the geographic allocation of public funds in a semi-democracy: The case of Ghana, 1996-2004. By André, Pierre; Mesplé-Somps, Sandrine
  2. Can political reservations affect political equilibria in the long-term? Evidence from local elections in rural India By Nagarajan, Hari K.; Deininger, Klaus; Jin, Songqing
  3. Reexamining the link between gender and corruption: The role of social institutions By Branisa, Boris; Ziegler, Maria
  4. And the loser is... Plurality Voting By Jean-François Laslier
  5. Do Natural Resource Revenues Hinder Financial Development? The Role of Political Institutions By Bhattacharyya, Sambit; Hodler, Roland
  6. Democratic Accountability and the Relative Obstacles to Foreign Investment By McCann, Fergal; Dorsch, Michael; McGuirk, Eoin
  7. Taxation and political stability By Mutascu, Mihai; Tiwari, Aviral; Estrada, Fernando
  8. Political Connections and Investment in Rural Vietnam By Finn Tarp; Thomas Markussen
  9. Economic Globalisation, Democracy and Income in Sub-Saharan Africa: A Panel Cointegration Analysis By Sakyi, Daniel
  10. Framing and Misperceptions in a Public Good Experiment By Toke Fosgaard; Lars Gårn Hansen; Erik Wengström

  1. By: André, Pierre; Mesplé-Somps, Sandrine
    Abstract: The body of literature on purely democratic countries can sometimes fail to explain the behavior of government in semi-democratic African countries. Empirical and theoretical political economic papers and that public funds target ruling party supporters and swing districts. Our results, however, suggest that the opposite was true of Ghana. We observe that pro-government districts received less public investment when the NDC was in power. We posit that this nding is partially driven by the government's will to curry favor with opposition politicians. Indeed, in addition to pursuing its electoral objectives, the government of an emerging democracy may fear political instability and keep the lid on potential unrest by bargaining with opposition leaders. Our analysis also shows that, when controlling for votes and other covariates (including wealth, urbanization and density), public goods allocation is not driven by ethnic group targeting either. --
    Keywords: Public goods,Elections,Politics,Ghana
    JEL: D72 O55 R53
    Date: 2011
  2. By: Nagarajan, Hari K.; Deininger, Klaus; Jin, Songqing
    Abstract: While many studies explored impacts of political quotas for females, often with ambiguous results, underlying mechanisms and long-term effects have received relatively little attention. Nation-wide data from India spanning a 15-year period allow us 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 ambiguous, gender quotas are shown to increase political processes and participation, the willingness to contribute to public goods, and perceived ability to hold leaders to account. Key effects persist beyond the reserved period and impacts on females often materialize only with a lag. --
    Keywords: Public goods,reservations,India,discrimination,political economy
    JEL: O10 H11 H70
    Date: 2011
  3. By: Branisa, Boris; Ziegler, Maria
    Abstract: In this paper we reexamine the link between gender inequality and corruption. We review the literature on the relationship between representation of women in economic and political life, democracy and corruption, and bring in a new previously omitted variable that captures the level of discrimination against women in a society: social institutions related to gender inequality. Using a sample of developing countries we regress corruption on the representation of women, democracy and other control variables. Then we add the subindex civil liberties from the OECD Development Centre's GID Data-Base as the measure of social institutions related to gender inequality. The results show that corruption is higher in countries where social institutions deprive women of their freedom to participate in social life, even accounting for democracy and representation of women in political and economic life as well as for other variables. Our findings suggest that, in a context where social values disadvantage women, neither political reforms towards democracy nor increasing the representation of women in political and economic positions might be enough to reduce corruption. --
    Keywords: Social institutions,Gender inequality,Corruption,OECD Development Centre's GID Data-Base
    JEL: D63 D73 J16
    Date: 2011
  4. By: Jean-François Laslier (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: This paper reports on a vote for choosing the best voting rules that was organized among the participants of the Voting Procedures workshop in July, 2010. Among 18 voting rules, Approval Voting won the contest, and Plurality Voting received no support at all.
    Date: 2011–07–20
  5. By: Bhattacharyya, Sambit; Hodler, Roland
    Abstract: We theoretically and empirically examine the relationship between natural resource revenues and financial development. In the theoretical part, we present a politico-economic model in which contract enforcement is low and decreasing in resource revenues when political institutions are poor, but high otherwise. As poor contract enforcement leads to low financial development, the model predicts that resource revenues hinder financial development in countries with poor political institutions, but not in countries with comparatively better political institutions. We test our theoretical predictions systematically using panel data covering the period 1970 to 2005 and 133 countries. Our estimates confirm our theoretical predictions. Our main results hold when we control country fixed effects, time varying common shocks, income and various additional covariates. They are also robust to alternative estimation techniques, various alternative measures of financial development and political institutions, as well as across different samples and data frequencies. We present further evidence using panel data covering the period 1870 to 1940 and 31 countries. --
    Keywords: Natural resources,political institutions,financial development
    JEL: D7 O1
    Date: 2011
  6. By: McCann, Fergal; Dorsch, Michael; McGuirk, Eoin
    Abstract: This paper considers the relationship between democratic accountability in de- veloping countries and the policies they use to attract foreign direct investment (FDI). We isolate two policy areas that governments of developing countries use to attract FDI: the tax burden on firms and the regulatory standards within which they operate. Countries that maintain high business taxes can only attract FDI by offering a less regulated business environment, which may have associated po- litical costs. The extent to which democratic accountability constrains leaders in their tax/regulatory policy choices is our main line of analysis. The novelty of the paper is that it endogenously determines policy choices within a political economy framework that recognizes the trade-offs between attracting FDI and maintaining political control. Examination of firm-level survey data from foreign firms operating in eastern Europe and central Asian economies confirms our model's main conclusion: regulation is seen to be a relatively larger obstacle to doing business in countries with greater democratic accountability. --
    Date: 2011
  7. By: Mutascu, Mihai; Tiwari, Aviral; Estrada, Fernando
    Abstract: The present study is, in particular, an attempt to test the relationship between tax level and political stability by using some economic control variables and to see the relationship among government effectiveness, corruption, and GDP. For the purpose, we used the Vector Autoregression (VAR) approach in the panel framework, using a country-level panel data from 59 countries for the period 2002 to 2008. The salient features of this model are: (a) simplicity is based on a limited number of variables(five) are categorical or continuous and not dependent on complex interactions or nonlinear effects. (b) accuracy: a low level of errors, the model achieves a high percentage of accuracy in distinguishing countries with inclination to political instability, compared to countries with political stability, (c) generality: the model allows to distinguish types of political instability, both resulting from acts of violence and failure of democracies to show, and (d) novelty: the model incorporates a tool that helps evaluate and exclude many variables used by the conventional literature. This approach is mainly based on the recognition of state structures and the relations between elites and parties.
    Keywords: Taxation, Political Stability, Connection, Effects, Panel VAR analysis
    JEL: D70 H20 C23
    Date: 2011–07–16
  8. By: Finn Tarp; Thomas Markussen
    Abstract: This paper uses household panel data from rural Vietnam to explore the effects of having a relative in a position of political or bureaucratic power on farmers. agricultural investment decisions. Our main result is that households significantly increase their investment in land improvement as a result of relatives moving into public office. Connections to office holders appear to be important for investment because they strengthen de facto land property rights and improve access to off-farm employment and to informal loans. The findings underline the importance of informal networks for economic behaviour in environments with developing institutions and markets. They also suggest the presence of an untapped potential for economic development: if households without connections could obtain equally strong property rights and accessto credit and insurance as the well-connected households, investment levels would risesubstantially.
    Keywords: political connections, informal networks, land property rights, investment,credit, Vietnam
    Date: 2011
  9. By: Sakyi, Daniel
    Abstract: Sub-Saharan Africa has been characterised by low-income levels for decades. This paper analyses the impact of economic globalisation and democracy on income in sub-Saharan Africa using panel cointegration techniques. The paper considers a composite indicator for economic globalisation and several alternative indicators of democracy and highlights the essence of the simultaneous adoption of economic globalisation and democracy for sub- Saharan African countries. The empirical results based on a sample of 31 countries over the 1980-2005 period, clearly indicate that, whilst the total long run impact of economic globalisation on income has been beneficial, the total long run impact of democracy has been the bane of income in sub-Saharan Africa. The paper concludes that policy reforms should aim to improve democratic institutions in sub-Saharan Africa for its potential benefits to be realised. --
    Keywords: Economic Globalisation,Democracy,Income,Sub-Saharan Africa
    JEL: P0 E0 O1 O55
    Date: 2011
  10. By: Toke Fosgaard (Institute of Food and Resource Economics, University of Copenhagen); Lars Gårn Hansen (Institute of Food and Resource Economics, University of Copenhagen); Erik Wengström (Department of Economics, University of Lund; Department of Economics, University of Copenhagen)
    Abstract: Earlier studies have found that a substantial part of the contributions in public good games can be explained by subjects misperceiving the game's incentives. Using a large-scale public good experiment, we show that subtle changes in how the game is framed substantially affect such misperceptions and that this explains major parts of framing effect on subjects' behavior. When controlling for the different levels of misperception between frames, the framing effect on subjects' cooperation preferences disappears. This suggests that merely changing how tax-, fine- or subsidy systems are framed, without reducing complexity, could reduce welfare loss from misperception of incentives.
    Keywords: Public goods, Cooperation, Misperception, Game form recognition, Framing effects, Internet experiment
    JEL: C90 H41
    Date: 2011–07

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.