nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒08‒15
eight papers chosen by
Eugene Beaulieu
University of Calgary

  1. Employment, Wages and Voter Turnout By Kerwin Kofi Charles; Melvin Stephens Jr.
  2. "The Political Business Cycle: New Evidence from the Nixon Tapes" By Burton A. Abrams; James L. Butkiewicz
  3. The (sub-)optimality of the majority rule By Schmitz, Patrick W.; Tröger, Thomas
  4. There Goes the Neighborhood? People’s Attitudes and the Effects of Immigration to Australia By Sinning, Mathias; Vorell, Matthias
  5. Social Democracy and the âDevelopmental Stateâ as Development Alternatives for South Africa By Van Eck, Lisa
  6. The Political Economy of Project Preparation: An Empirical Analysis of World Bank Projects By Kilby, Christopher
  7. Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2009 By Ponticelli, Jacopo; Voth, Hans-Joachim
  8. Constituencies and Legislation: The Fight over the McFadden Act of 1927 By Raghuram G. Rajan; Rodney Ramcharan

  1. By: Kerwin Kofi Charles; Melvin Stephens Jr.
    Abstract: This paper argues that, since activities that provide political information are complementary with leisure, increased labor market activity should lower turnout, but should do so least in prominent elections where information is ubiquitous. Using official county-level voting data and a variety of OLS and TSLS models, we find that increases in wages and employment: reduce voter turnout in gubernatorial elections by a significant amount; have no effect on Presidential turnout; and raise the share of persons voting in a Presidential election who do not vote on a House of Representative election on the same ballot. We argue that this pattern (which contradicts some previous findings in the literature) can be fully accounted for by an information argument, and is either inconsistent with or not fully explicable by arguments based on citizens’ psychological motivations to vote in good or bad times; changes in logistical voting costs; or transitory migration. Using individual-level panel data methods and multiple years’ data from the American National Election Study (ANES) we confirm that increases in employment lead to less use of the media and reduced political knowledge, and present associational individual evidence that corroborates our main argument.
    JEL: D72 D80 J22
    Date: 2011–08
  2. By: Burton A. Abrams (Department of Economics,University of Delaware); James L. Butkiewicz (Department of Economics,University of Delaware)
    Abstract: Drawing from the personal tape recordings made during the presidency of Richard Nixon, we uncover and report in this paper new evidence that Nixon manipulated Arthur Burns and the Federal Reserve Bank into creating a political business cycle that helped secure Nixon’s reelection victory in 1972. Nixon understood the risks that his desired monetary policy imposed, but chose to trade longer-term economic costs to the economy for his own short-term political benefit.
    Keywords: Monetary Policy; Political Business Cycle
    JEL: E5 E3 E58
    Date: 2011
  3. By: Schmitz, Patrick W.; Tröger, Thomas
    Abstract: We consider collective choice from two alternatives. Ex ante, each agent is uncertain about which alternative she prefers, and may be uncertain about the intensity of her preferences. An environment is given by a probability distribution over utility vectors that is symmetric across agents and neutral across alternatives. In many environments, the majority voting rule maximizes agents' ex-ante expected utilities among all anonymous and dominant-strategy implementable choice rules. But in some environments where the agents' utilities are stochastically correlated, other dominant-strategy choice rules are better for all agents. If utilities are stochastically independent across agents, majority voting is ex-ante optimal among all anonymous and incentive-compatible rules. We also compare rules from an interim viewpoint.
    Keywords: majority rule
    JEL: D72
    Date: 2011–06
  4. By: Sinning, Mathias (Australian National University); Vorell, Matthias (RWI)
    Abstract: This paper compares the effects of immigration flows on economic outcomes and crime levels to the public opinion about these effects using individual and regional data for Australia. We employ an instrumental variables strategy to account for non-random location choices of immigrants and find that immigration has no adverse effects on regional unemployment rates, median incomes, or crime levels. This result is in line with the economic effects that people typically expect but does not confirm the public opinion about the contribution of immigration to higher crime levels, suggesting that Australians overestimate the effect of immigration on crime.
    Keywords: effects of immigration, attitudes towards immigrants, international migration
    JEL: F22 J61
    Date: 2011–07
  5. By: Van Eck, Lisa
    Abstract: This paper investigates social democracy and the âdevelopmental stateâ model as development alternatives for South Africa. This research is significant as it enhances the developmental debate in South Africa that is indispensable in light of South Africaâs poor socio-economic performance. A comparative-historical study is conducted, as well as an analysis of the socio-political situation in South Africa to determine each modelâs compatibility with South Africa. State autonomy is assumed essential. Liberal democracy and the authoritarian âdevelopmental stateâ model are rejected on theoretical and compatibility grounds. Social democracy is therefore investigated. It is concluded that this model is theoretically stronger, yet ideologically squeezed, and its execution is hindered by major stumbling blocks that are identified. Ultimately, it is shown that the economics is fairly simple, but the âprimacy of politicsâ is essential.
    Keywords: Social democracy, developmental state, South Africa, Political Economy, Public Economics,
    Date: 2010–11
  6. By: Kilby, Christopher (Department of Economics and Statistics, Villanova School of Business, Villanova University)
    Abstract: In the last few years, numerous econometric studies have unearthed evidence of donor influence over the geographic distribution of funds from international financial institutions (IFIs). Scholars are now beginning to use quantitative methods to delve into the details of donor influence to understand better how IFIs function and to guide institutional reform. The evidence suggests that donors influence both the amount of funds committed (the number and size of loans) and the disbursement of committed funds. This paper advances the literature by applying stochastic frontier analysis to a novel data source to examine factors that affect how quickly World Bank projects proceed from identification to approval, i.e., how long it takes to prepare a project. Accelerated preparation is one explanation for how the World Bank might increase the number of loans to a recipient member country within a fixed time frame, for example in response to that country siding with powerful donor countries on important UN votes or while that country occupies an elected seat on the UN Security Council or the World Bank Executive Board.
    Keywords: Donor Influence; Project Preparation; Stochastic Frontier Analysis; United States; UN voting; World Bank
    JEL: F35 F53 O19
    Date: 2011–07
  7. By: Ponticelli, Jacopo; Voth, Hans-Joachim
    Abstract: Does fiscal consolidation lead to social unrest? From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble cross-country evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the key factor. We also analyse interactions with various economic and political variables. While autocracies and democracies show a broadly similar responses to budget cuts, countries with more constraints on the executive are less likely to see unrest as a result of austerity measures. Growing media penetration does not lead to a stronger effect of cut-backs on the level of unrest.
    Keywords: demonstrations; Europe; government deficits; instability; public expediture; riots; unrest
    JEL: H40 H50 H60 N14
    Date: 2011–08
  8. By: Raghuram G. Rajan; Rodney Ramcharan
    Abstract: The McFadden Act of 1927 was one of the most hotly contested pieces of legislation in U.S. banking history, and its influence was still felt over half a century later. The act was intended to force states to accord the same branching rights to national banks as they accorded to state banks. By uniting the interests of large state and national banks, it also had the potential to expand the number of states that allowed branching. Congressional votes for the act therefore could reflect the strength of various interests in the district for expanded banking competition. We find congressmen in districts in which landholdings were concentrated (suggesting a landed elite), and where the cost of bank credit was high and its availability limited (suggesting limited banking competition and high potential rents), were significantly more likely to oppose the act. The evidence suggests that while the law and the overall regulatory structure can shape the financial system far into the future, they themselves are likely to be shaped by well-organized elites, even in countries with benign political institutions.
    JEL: G21 K2 N22
    Date: 2011–08

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