nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒09‒22
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Living under the ‘right’ government: does political ideology matter to trust in political institutions? An analysis for OECD countries By Fischer, Justina
  2. Vote-Buying and Reciprocity By Finan, Frederico S.; Schechter, Laura
  3. On party-proportional representation under district distortions By Gabrielle Demange
  4. The Democratic Transition By Fabrice Murtin; Romain Wacziarg
  5. The Political Economy of Deforestation in the Tropics By Robin Burgess; Matthew Hansen; Benjamin A. Olken; Peter Potapov; Stefanie Sieber
  6. Cycles in Politics: Wavelet Analysis of Political Time-Series By Luís Francisco Aguiar; Pedro C. Magalhães; Maria Joana Soares
  7. No Country for Old Men: Aging Dictators and Economic Growth By Richard Jong-A-Pin; Jochen O. Mierau
  8. Redistributive Politics and Government Debt in a Borrowing-constrained Economy By Ryo Arawatari; Tetsuo Ono
  9. The Political Economy of Sovereign Defaults By Eugenia Andreasen; Guido Sandleris; Alejandro Van Der Ghote
  10. Sovereign Defaults and The Political Economy Of Market Reaccess By Mauro Alessandro; Guido Sandleris; Alejandro Van Der Ghote
  11. Do institutions and social cohesion enhance the effectiveness of aid? New Evidence from Africa By Mina Baliamoune-Lutz
  12. Globalization and Gender Equality in Developing Countries By Niklas Potrafke; Heinrich Ursprung
  13. The Political Economy of Climate Change Mitigation Policies: How to Build a Constituency to Address Global Warming? By Alain de Serres; John Llewellyn; Preston Llewellyn
  14. Electoral Accountability and Local Government Efficiency: Quasi-Experimental Avidence From the Italian Health Care Sector Reforms By Francesco Porcelli
  15. Polarization and the Middle Class By Fernando Borraz; Nicolás Gonzalez Pampillón; Máximo Rossi
  16. Food sovereignty and agricultural trade policy commitments: How much leeway do West African nations have? By Catherine Laroche Dupraz; Angèle Postolle

  1. By: Fischer, Justina
    Abstract: This paper asks whether trust in political institutions depends on individual’s political leaning and the political ideology of the national government. We employ information on 140'000 individuals in 30 democratic OECD countries from the World Values Survey, 1981 – 2007, and estimate so-called micro-based pseudo-panel two-way fixed effects models. Distinguishing between extreme and moderate versions of leftist and rightist political leaning, our estimates reveal that political trust increases non-linearly in the degree of individual’s conservatism. We also find that political leaning is not instrumental to improving one's own socio-economic situation, thus rather constituting an expressive behavior. If government ideology matches individual’s political preferences, trust in political institutions is increased. In contrast, the ‘apolitical’ appears to distrust the political system as such. We also find evidence for a symmetric, but incomplete convergence of party ideologies to the median voter position. Implications for vote abstention are discussed.
    Keywords: political trust; government ideology; political leaning; World Values Survey
    JEL: H11 D72 Z13
    Date: 2011–09–12
  2. By: Finan, Frederico S. (University of California, Berkeley); Schechter, Laura (University of Wisconsin-Madison)
    Abstract: While vote-buying is common, little is known about how politicians determine who to target. We argue that vote-buying can be sustained by an internalized norm of reciprocity. Receiving money engenders feelings of obligation. Combining survey data on vote-buying with an experiment-based measure of reciprocity, we show that politicians target reciprocal individuals. Overall, our findings highlight the importance of social preferences in determining political behavior.
    Keywords: vote-buying, reciprocity, redistributive politics, voting, social preferences
    JEL: H0
    Date: 2011–09
  3. By: Gabrielle Demange (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: The paper presents the problem of choosing the representatives in an assembly when the whole electoral region is subdivided into electoral districts. Because of the two dimensions, geographical (districts) and political (parties), the problem is called bi-apportionment. Often the allocation of seats to districts is pre-determined and furthermore distorted ---meaning that the ratios of the number of assigned seats to population size vary significantly across districts. The paper surveys proposed bi-apportionment methods with a focus on the conflict that may arise between party-proportional representation under district distortions.
    Keywords: Party-proportional representation ; (bi-)apportionment ; (bi-)divisor methods ; fair shares
    Date: 2011–09
  4. By: Fabrice Murtin; Romain Wacziarg
    Abstract: Over the last two centuries, many countries experienced regime transitions toward democracy. We document this democratic transition over a long time horizon. We use historical time series of income, education and democracy levels from 1870 to 2000 to explore the economic factors associated with rising levels of democracy. We find that primary schooling, and to a weaker extent per capita income levels, are strong determinants of the quality of political institutions. We find little evidence of causality running the other way, from democracy to income or education.
    JEL: N10 O43 O57
    Date: 2011–09
  5. By: Robin Burgess; Matthew Hansen; Benjamin A. Olken; Peter Potapov; Stefanie Sieber
    Abstract: Tropical deforestation accounts for almost one-fifth of greenhouse gas emissions worldwide and threatens the world's most diverse ecosystems. The prevalence of illegal forest extraction in the tropics suggests that understanding the incentives of local bureaucrats and politicians who enforce forest policy may be critical to understanding tropical deforestation. We find support for this thesis using a novel satellite-based dataset that tracks annual changes in forest cover across eight years of institutional change in post-Soeharto Indonesia. Increases in the numbers of political jurisdictions are associated with increased deforestation and with lower prices in local wood markets, consistent with a model of Cournot competition between jurisdictions. Illegal logging increases dramatically in the years leading up to local elections, suggesting the presence of "political logging cycles". And, illegal logging and rents from unevenly distributed oil and gas revenues are short run substitutes, but this effect dissapears over time as political turnover occurs. The results illustrate how incentives faced by local government officials affect deforestation, and provide an example of how standard economic theories can explain illegal behavior.
    JEL: D73 L73
    Date: 2011–09
  6. By: Luís Francisco Aguiar (Universidade do Minho - NIPE); Pedro C. Magalhães (University of Lisbon, Social Sciences Institute); Maria Joana Soares (Universidade do Minho)
    Abstract: Spectral analysis and ARMA models have been the most common weapons of choice for the detection of cycles in political time-series. Controversies about cycles, however, tend to revolve about an issue that both techniques are badly equipped to address: the possibility of irregular cycles without fixed periodicity throughout the entire time-series. This has led to two main consequences. On the one hand, proponents of cyclical theories have often dismissed established statistical techniques. On the other hand, proponents of established techniques have dismissed the possibility of cycles without fixed periodicity. Wavelets allow the detection of transient and coexisting cycles and structural breaks in periodicity. In this paper, we present the tools of wavelet analysis and apply them to the study to two lingering puzzles in the political science literature: the existence to cycles in election returns in the United States and in the severity of major power wars.
    Date: 2011
  7. By: Richard Jong-A-Pin; Jochen O. Mierau
    Abstract: This paper develops a model of the relationship between the age of a dictator and economic growth. In the model a dictator must spread the resources of the economy over his reign but faces mortality and political risk. The model shows that if the time horizon of the dictator decreases, either due to an increase of mortality risk or political risk, the economic growth rate decreases. The model predictions are supported by empirical evidence based on a threeway fixed effects model including country, year and dictator fixed effects for a sample of dictators from 116 countries. These results are robust to sample selection, the tenure of dictators, the definition of dictatorship, and a broad set of economic growth determinants.
    Keywords: Aging, ,; economic growth; government performance; political instability; political leaders
    JEL: H11 O11 O43
    Date: 2011–09
  8. By: Ryo Arawatari (Faculty of Economics, Shinshu University); Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: We develop a two-period, three-class of income model where low-income agents are borrowing constrained because of capital market imperfections, and where redistributive expenditure is financed by tax and government debt. When the degree of capital market imperfection is high, there is an ends-against-the-middle equilibrium where the constrained low-income and the unconstrained high-income agents favor low levels of government debt and redistributive expenditure; these agents form a coalition against the middle. In this equilibrium, the levels of government debt and expenditure are below the efficient levels, and the spread of income distribution results in a lower debt-to-GDP ratio.
    Keywords: Government debt; Borrowing constraints; Voting; Structure-induced equilibrium; Income inequality.
    JEL: D72 H52 H60
    Date: 2011–01
  9. By: Eugenia Andreasen; Guido Sandleris; Alejandro Van Der Ghote
    Abstract: In times of crises, sovereign debt repayment typically depends on the implementation of fiscal programs. In order to implement these programs, governments usually need to garner some political support. The literature of sovereign defaults has not paid attention to the presence of political constraints, assuming instead, that governments have always unlimited access to the resources of the economy to repay their debts. In this paper, we analyze how the presence of political constraints affects sovereign governments´ borrowing and default decisions. We do so in a standard DSGE model with endogeneous default risk where we introduce two novel features: heterogeneous agents in the domestic private sector and a requirement that the government obtains some of their support to implement a fiscal program needed to repay the debt. In this framework, we show that there can be different types of sovereign default events. Default can arise because the government is unwilling to repay, in the best tradition of the sovereign debt literature, but also due to insufficient political support even if a benevolent government would prefer to repay.We calibrate the model to the Argentine economy and show that, once political constraints are taken into account, the matching with the data of standard sovereign debt models is weaker than previously understood.
    Date: 2011
  10. By: Mauro Alessandro; Guido Sandleris; Alejandro Van Der Ghote
    Abstract: Following a sovereign default, governments are usually unable to borrow from international credit markets for some time. The period of "exclusion" has varied from more than twenty years following some default events to less than a year in others. Using a unique dataset on sovereign bond issuances and syndicated bank loans between 1980 and 2000, this paper studies empirically the determinants of the duration of exclusion following a sovereign default and presents a DSGE model of endogeneous sovereign borrowing that rationalizes our key empirical findings. In particular, we find that countries either reaccess the markets in the first years after a default or have to wait a much longer time to do it. We also find that political stability significantly increases the chances of reaccessing the market in any given period after the default. Our political economy model of market reaccess can match hese two features of the data.
    Date: 2011
  11. By: Mina Baliamoune-Lutz
    Abstract: Using the Arellano-Bond dynamic panel GMM estimator, this paper explores the effects of aid, institutions, and social cohesion on per-capita income growth in 34 African countries, focusing in particular on the interplay of aid and institutions and the interplay of aid and social cohesion. The empirical results indicate that social cohesion enhances the growth effects of aid but there is a threshold effect, suggesting that aid becomes effective in enhancing growth in countries with higher social cohesion. Surprisingly, the results show that beyond a certain level of improvements in institutional quality, institutions (political rights and civil liberties) reduce the effectiveness of aid. We discuss the implications of these results.
    Keywords: Growth; aid effectiveness; institutions; social cohesion; Africa
    JEL: F35 F43 O17
    Date: 2011–09
  12. By: Niklas Potrafke (Department of Economics, University of Konstanz, Germany); Heinrich Ursprung (Department of Economics, University of Konstanz, Germany)
    Abstract: This study empirically assesses the influence of globalization on the institutional root causes of gender equality as measured by the new OECD Social Institutions and Gender Index (SIGI). We capture the multifaceted concept of globalization with the KOF index and its three sub-indices which measure the economic, social and political dimensions of globalization. Observing the progress of globalization for a sample of almost one hundred countries at ten year intervals starting in 1970, we find that economic and social globalization exerted a decidedly positive influence on the social institutions which underlie gender equality.
    Keywords: globalization, gender equality, social institutions
    JEL: O11 O57
    Date: 2011–09–12
  13. By: Alain de Serres; John Llewellyn; Preston Llewellyn
    Abstract: Developments over the past few years have shown that reforms to address climate change are no less difficult to implement than reforms in other areas, even if the objective of limiting global warming is broadly accepted. In the case of global public goods such as the climate, the political challenge is further complicated by the need to convince voters that domestic action to reduce greenhouse gas emissions is worth taking, notwithstanding the cost and uncertainties regarding other countries’ commitments. This paper seeks to draw a number of political-economy lessons from reform experience in other economic areas, and considers how these lessons can be applied to the particular case of climate change mitigation policy. It examines the main ingredients for building a constituency for greenhouse gas (GHG) emissions reduction policies at home, stressing the need to establish the credibility of the overall objective and intermediate targets. It also reviews the challenges faced in securing successful implementation of the least-cost set of policies, focusing on how to address the concerns raised by the uneven distribution of costs and benefits of pricing instruments without undermining their effectiveness.<P>L'économie politique de l'atténuation du changement climatique : comment assurer un soutien populaire en faveur d'actions pour enrayer le réchauffement planétaire<BR>Les discussions des dernières années ont montré que la mise en place de mesures pour atténuer le changement climatique peut s’avérer aussi difficile que la conduite de réformes économiques dans d’autres secteurs, même si l’objectif de limiter le réchauffement de la planète est largement accepté. Dans le cas d’un bien public comme le climat, le défi politique est accentué par la nécessité de convaincre les électeurs du bien fondé de l’action au plan national, malgré les coûts et les incertitudes concernant l’engagement des autres pays. Cette étude vise à tirer certains enseignements de l’expérience en matière de politique économique acquise lors de la mise en place de réformes majeures dans d’autres champs d’action, et à voir dans quelle mesure ces enseignements peuvent s’appliquer au cas particulier de la lutte au changement climatique. Les principaux ingrédients pour assurer un large soutien à des mesures efficaces de réduction des émissions de gaz à effet de serres sont passés en revue, de même que les défis que posent leur mise en place, ce qui nécessite de prendre en compte les inquiétudes concernant la distribution inégale des coûts et des bénéfices des instruments de prix en tout évitant de saper leur efficacité.
    Keywords: competitiveness, political economy, carbon tax, cost-effectiveness, climate change mitigation, compétitivité, économie politique, taxes carbone, efficacité par rapport aux coûts, atténuation du changement climatique
    JEL: Q52 Q54
    Date: 2011–09–05
  14. By: Francesco Porcelli (University of Bari)
    Abstract: This paper evaluates the effect of two policy changes on the efficiency of Italian regional governments in the provision of health care services: first a change in the electoral system; second a process of fiscal decentralisation. The electoral system was changed in 1995 and replaced a pure proportional system by a majoritarian system, fostering the transition of regional governments towards a presidential regime. The process of fiscal decentralisation took effect in 1998, when intergovernmental grants earmarked for the health care sector were replaced by regional taxes. The Italian context offers a unique source of data to test the predictions of recent theoretical models that support a positive relationship between government efficiency and the electoral accountability enhanced by institutions such as electoral rules and fiscal decentralisation. The paper provides two main contributions: 1) a comprehensive analysis of the two main reforms that involved Italian regional governments and the health care sector during the 1990s; 2) the evaluation of the impact of the electoral reform in a quasi-experimental setting. The final results provide empirical evidence in line with the findings of the theoretical models.
    Keywords: electoral accountability, DEA, decentralisation, efficiency, health
    JEL: D71 D91 I32
    Date: 2011–09
  15. By: Fernando Borraz (Banco Central del Uruguay y Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Nicolás Gonzalez Pampillón (Universidad de Montevideo); Máximo Rossi (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: There is an increasing literature that discusses how to measure the middle class. Some approaches are based on an arbitrary deÖnition such as income quartiles or the poverty line. Recently, Foster and Wolfson developed a methodology which lacks of arbitrariness that enables us to compare the middle class of two di§erent income distributions. We apply this new tool jointly with a complementary method ñrelative distribution approach- to household income data in 1994-2004 and 2004-2010, to analyze the evolution of the middle class and polarization in Uruguay. During the Örst period, which is characterized by an increasing income inequality, we Önd that the middle class declined and income polarization increased. In the second one, where the Uruguayan economy experienced a recovery from the downturn su§ered in 2002, we Önd that the middle class rose and polarization decreased. However, this last result is attenuated when we do not consider the household income imputation because of the new health system implemented in 2008.
    Keywords: income polarization, middle class, inequality, social policies, bipolarization
    JEL: D3 D6 I3
    Date: 2011–08
  16. By: Catherine Laroche Dupraz; Angèle Postolle
    Abstract: The 2008 food crisis has challenged the political legitimacy and economic efficiency of the liberalization of international agricultural trade. An alternative vision defended by the food sovereignty movement is that long-term food security cannot rely on dependency on food imports, but must be built on the development of domestic production with enough barrier protection to shelter it from world price fluctuations and unfair trading. The purpose of this paper is to look into whether the West African nations can achieve food sovereignty given their various trade commitments and other external constraints. The particularity of our approach is to combine a historical economic analysis with a political approach to food sovereignty and trade commitments. Our results suggest that external brakes on the development of food sovereignty policies are marginal, as the countries still have unused room for manoeuvre to protect their smallholder agriculture under the terms of draft World Trade Organization agreements and Economic Partnership Agreements and under the international financial institutions’ recommendations. Rather, the international environment seems to be instrumented by West African states that do not manage to secure a national political consensus to drive structural reforms deemed vital and further the food security of the urban populations over the marginalized rural populations. Recently, the regional integration process has made headway with a common agricultural support and protection policy project that could herald an internal political balance more conducive to food-producing agriculture.
    Keywords: food sovereignty, West Africa, protection, agricultural policy, WTO negotiations
    JEL: O10 O13 F13 F50
    Date: 2011

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