nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒09‒05
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Motivations and Electoral Competition: Equilibrium Analysis and Experimental Evidence By Michalis Drouvelis; Alejandro Saporiti; Nicolaas J. Vriend
  2. A Passion for Democracy By Elena Panova
  3. “The People Want the Fall of the Regime”:Schooling, Political Protest, and the Economy By Filipe R. Campante; Davin Chor
  4. Electoral Competition as a Determinant of Fiscal Decentralization By Mario Jametti; Marcelin Joanis
  5. Romes without Empires: Urban Concentration,Political Competition, and Economic Growth By Cem Karayalcin; Mehmet Ali Ulubasoglu
  6. Has political instability contributed to price clustering on Fiji's stock market? By Paresh Kumar Narayan; Russell Smyth
  7. Political influence on non-cooperative international climate policy By Wolfgang Habla; Ralph Winkler
  8. Measuring Institutions: Indicators of Political and Economic Institutions in Namibia: 1884 - 2008 By B.P. Zaaruka; J.W. Fedderke
  9. What Price the Court of St. James? Political Influences on Ambassadorial Postings of the United States of America By J.W.Fedderke; D.Jett

  1. By: Michalis Drouvelis (University of Birmingham); Alejandro Saporiti (University of Manchester); Nicolaas J. Vriend (Queen Mary, University of London)
    Abstract: We study both theoretically and experimentally the complete set of Nash equilibria of a classical one-dimensional, majority rule election game with two candidates, who might be interested in power as well as in ideology, but not necessarily in the same way. Apart from obtaining the well known median voter result and the two-sided policy differentiation outcome, the paper uncovers the existence of two new equilibrium configurations, called 'one-sided' and 'probabilistic' policy differentiation, respectively. Our analysis shows how these equilibrium configurations depend on the relative interests in power (resp., ideology) and the uncertainty about voters' preferences. The theoretical predictions are supported by the data collected from a series of laboratory experiments, as we observe convergence to the Nash equilibrium values at the aggregate as well as the individual levels in all treatments, and the comparative statics effects across treatments are as predicted by the theory.
    Keywords: Electoral competition, Power, Ideology, Uncertainty, Nash equilibrium, Experimental evidence
    JEL: C72 C90 D72
    Date: 2011–08
  2. By: Elena Panova
    Abstract: Theories of voter turnout assume that an active voter receives a warm glow from doing a good deed to like-minded compatriots. What tells him that he is doing them a good deed by voting for this or that candidate or policy? Their own votes are naturally available feedback. We propose a dynamic model of voting with asymmetric information in which being among the majority provides a voter with a positive feedback on his voting decision, increasing his self confidence, hence, his warm glow from voting in the future. The voters who cannot tell which policy is superior, try to pool with a majority (so as to get involved in the democratic process). They vote much according to the available public information, however, without herding. We find these effects in the unique equilibrium of our voting game. <P>Les théories de vote supposent qu'un électeur reçoit de la satisfaction ou du « warm glow » quand il vote. Le « warm glow » est créé par la confiance d'une bonne action envers ses compatriotes. Qu'est-ce qui fait croire à un électeur qu'il fait une bonne action envers ses compatriotes en votant pour telle ou telle plateforme politique? Leurs propres votes sont un signal naturellement disponible. Nous proposons un modèle dynamique de vote avec des informations asymétriques dans lequel la majorité fournit un signal positif sur le choix de vote. Ce signal augmente la confiance de l’électeur en ses choix de vote, et par conséquent, son « warm glow » de votes prochains. Les électeurs qui ne peuvent pas distinguer quelle plateforme politique est supérieure essaient d'imiter le vote de majorité afin de bâtir la confiance en ses choix de vote et s'impliquer dans le processus démocratique. Ils votent surtout selon les informations publiques disponibles, cependant, sans « herding ». Nous trouvons ces effets dans l'équilibre unique de notre jeu de vote.
    Keywords: expressive voting, habitual voting, complementarities in voting, self-signaling, public information and the vote, status quo bias., vote expressif, vote habituel, complémentarités au vote, self-signaling, information publique et vote, tendance au statu qo.
    JEL: D71 D72 D82 D83 P16
    Date: 2011–05–01
  3. By: Filipe R. Campante (Harvard Kennedy School, Harvard University); Davin Chor (School of Economics, Singapore Management University)
    Abstract: We examine several hypotheses regarding the determinants and implications of political protest, motivated by the wave of popular uprisings in Arab countries starting in late 2010. While the popular narrative has emphasized the role of a youthful demography and political repression, we draw attention back to one of the most fundamental correlates of political activity identified in the literature, namely education. Using a combination of individual-level micro data and cross-country macro data, we highlight how rising levels of education coupled with economic under-performance jointly provide a strong explanation for participation in protest modes of political activity as well as incumbent turnover. Political protests are thus more likely when an increasingly educated populace does not have commensurate economic gains. We also find that the implied political instability is associated with heightened pressures towards democratization.
    JEL: D72 D78 I20 I21 O15
    Date: 2011–03
  4. By: Mario Jametti (Institute for Microeconomics and Public Economics (MecoP), University of Lugano; CESifo); Marcelin Joanis (University of Sherbrooke, GREDI, CIRANO)
    Abstract: Fiscal decentralization is high on the agenda in policy fora. This paper empirically investigates the underlying causes of fiscal decentralization, based on the predictions of a simple political economy model. We argue that the likeliness that a central government engages in devolution of powers depends in important ways on the political forces that it faces, the theory’s main insight being that the central government’s electoral strength should, all else being equal, decrease that government’s share of spending. Consistent with the model’s predictions, empirical results from a panel of democracies support the relevance of political factors as determinants of fiscal decentralization. The relationship between central government electoral strength and both expenditure and revenue centralization emerges as negative and non-linear.
    Keywords: Fiscal decentralization; Fiscal federalism; Vertical interactions; Partial De-centralization; Elections
    JEL: H77 D72 H11
    Date: 2011–08–26
  5. By: Cem Karayalcin (Department of Economics, Florida International University); Mehmet Ali Ulubasoglu (Faculty of Business and Law, Deakin University, Victoria 3125, Australia)
    Abstract: Many developing economies are characterized by the dominance of a super metropolis. Taking historical Rome as the archetype of a city that centralizes political power to extract resources from the rest of the country, we develop two models of rent-seeking and expropriation which illustrate di?erent mechanisms that relate political competition to economic outcomes. The "voice" model shows that rent-seeking by different interest groups (localized in di?erent specialized cities/regions) will lead to low investment and growth when the number of such groups is small. The "exit" model allows political competition among those with political power (to tax or expropriate from citizens) over a footloose tax base. It shows that when this power is centralized in relatively few urban nodes, tax rates would be higher and growth rates lower. Our empirical work exploits the connection between urban wealth (with the political power it affords) and national soccer championships. By using a cross-country data set for 103 countries for the period 1960-99, we ?nd strong and robust evidence that countries with higher concentrations in urban wealth¨Cas proxied by the number of di?erent cities with championships in national soccer leagues¨Ctend to have lower long-run growth rates.
    Date: 2011–08
  6. By: Paresh Kumar Narayan; Russell Smyth
    Abstract: The goal of this paper is to examine evidence of stock price clustering on the South Pacific Stock Exchange, located in Fiji, and explore its determinants. We find that stock prices cluster at the decimal of 0 and 5, with almost half of prices settling on these two decimals. Upon investigating the determinants of price clustering on the South Pacific Stock Exchange we find that price level and volume of trade have a statistically significant positive effect on price clustering. We also propose and test a „panic trading‟ hypothesis which states political instability induces price clustering. We find evidence that political instability in Fiji induces price clustering behavior.
    Keywords: Political instability, price clustering, Fiji
    Date: 2011–08–29
  7. By: Wolfgang Habla; Ralph Winkler
    Abstract: We analyze non-cooperative international climate policy in a setting of political competition by national interest groups. In the first stage, countries decide whether to set up an international emission permits market, which only forms if it is supported by all countries. In the second stage, countries non-cooperatively decide on the number of tradable or non-tradable emission allowances, depending on the type of regime. In both stages, special interest groups try to sway the government in their favor. We find that (i) both the choice of regime and the level of aggregate emissions only depend on the aggregate levels of organized stakes in all countries and not on their distribution among individual interest groups, and (ii) an increase in lobbying influence by a particular lobby group may backfire by inducing a change towards the less preferred regime.
    Keywords: non-cooperative climate policy; political economy; emissions trading; organization
    JEL: D72 H23 H41 Q58
    Date: 2011–08
  8. By: B.P. Zaaruka; J.W. Fedderke
    Abstract: This paper presents a database on institutional measures for Namibia for the period 1884 to 2008. Using the techniques of principal components and factor analysis in aggregating these indicators, the study does two things. First, it illustrates a methodology for constructing de jure and de facto institutional measures by means of using pieces of legislation and quantitative data, respectively. Secondly, these indicators are used to assess the nature of political and economic institutional transformation from the colonial legacy to the modern outcome using Namibia as a natural experiment. The new indicators while covering a long time period (1884-2008), correlate fairly well with some of the widely used institutional indices produced by the Freedom House and the Heritage foundation.
    Keywords: Namibia Institutional Indicators Political Freedom Property Rights Judicial Independence Political Instability
    JEL: K00 N4 O1
    Date: 2011
  9. By: J.W.Fedderke; D.Jett
    Abstract: This paper explores the appointment of career diplomats and political appointments to ambassadorial positions, across a range of characteristics that serve to indicate the attractiveness of the posting. The results of the paper suggest that political appointees are more likely to become ambassadors in high income OECD countries, that are strong tourist destinations, are located in Western Europe, and that carry lower hardship allowances, than are career diplomats. We also show that the greater the personal or bundled campaign contributions to a presidential campaign, the more lucrative the posting the contributor can expect in terms of per capita GDP, tourist volumes, hardship allowances, and the more likely the posting will be in Western Europe, and the less likely it will be in Central and South Asia or Sub-Saharan Africa. Finally, we identify a range of prices for personal and bundled campaign contributors for a set of lucrative posts. Depending on circumstance, we establish that the price range for the Court of St. James lies between $650,000 and $2.3 million.
    Date: 2011

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.