nep-pol New Economics Papers
on Positive Political Economics
Issue of 2011‒12‒19
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. Democratization and Civic Capital in Italy By Luigi Guiso; Paolo Pinotti
  2. Enfranchisement and Representation: Italy 1909-1913 By Valentino Larcinese
  3. Election inversions, coalitions and proportional representation: Examples from Danish elections By Kurrild-Klitgaard, Peter
  4. Optimal Districting with Endogenous Party Platforms By E Bracco
  5. Can Market Failure Cause Political Failure? By Madhav S, Aney; Maitreesh Ghatak; Massimo Morelli
  6. Why Don’t We Tax the Rich? Inequality, Legislative Malapportionment, and Personal Income Taxation around the World By Martin Ardanaz; Carlos Scartascini
  7. The Electoral Consequences of Large Fiscal Adjustments By Alberto F. Alesina; Dorian Carloni; Giampaolo Lecce
  8. Political Business Cycles and Monetary Policy Revisited – An Application of a Two-Dimensional Asymmetric Taylor Reaction Function By Jens Klose
  9. Violence, Political Instability, and International Trade: Evidence from Kenyaâs Cut Flower Sector By Muhammad, Andrew; DâSouza, Anna; Amponsah, William
  10. Competitive trilateral lobbying for and against subsidizing green energy By Rüdiger Pethig

  1. By: Luigi Guiso (European University Institute,Florence, EIEF, & CEPR); Paolo Pinotti (Università Commerciale "Luigi Bocconi", Milan & DONDENA)
    Abstract: We document a sharp reversal in electoral participation between the North and the South of Italy after the 1912 enfranchisement which extended voting rights from a limited élite to (almost) all adult males. When voting was restricted to the élite, electoral turnout was higher in the South but falls significantly below that in the North after the enfranchisement. Furthermore the new gap is never bridged over the following century and participation remains lower in the South despite the enrichment of democratic institutions and further extension of voting rights to the female population during the post war democratic republic. This pattern in the data is consistent with a simple model where individuals’ voting in political elections is affected by private benefits and by civic duty, only elites can grab private benefits from participation in politics and civic culture differs across communities. We also find that extension of voting rights to non-elites results in a significant transfer of power to their political organizations only among populations with a high sense of civic duties. Together with the very persistent gap in participation between North and South our findings suggest that democratization – a process of concession of democratic rights – can benefit non-elites only when the latter have already a high sense of civic capital and is unlikely to be a viable avenue for inducing norms of civic behavior.
    Keywords: democracy, culture, civic capital, institutions formation, voting
    JEL: A1 E0 N4 Z1
    Date: 2011–10
  2. By: Valentino Larcinese
    Abstract: This paper presents evidence on the consequences of the 1912 introduction of "quasiuniversal" male suffrage in Italy. The reform increased the electorate from slightly less than three million to 8,650,000 and left the electoral rules and the district boundaries unchanged. This allows us to exploit the heterogeneity in enfranchisement rates across electoral districts to identify the causal effects of franchise extension on a number of political outcomes. The reform caused an increase in the vote share of social reformers (Socialists, Republicans and Radicals), together referred to as the Estrema. One standard deviation in the share of newly enfranchised voters over the total number of registered 1913 voters caused an increase of around 2% in votes for Estrema candidates but had no impact on their parliamentary net seat gains. Enfranchisement had also no impact on the parliamentary representation of aristocracy and traditional elites. Other outcomes (the chances of having candidates from the Estrema and the Herfindel-Hirshman index of electoral competition) were also unaffected, with the exception of turnout, which decreased. These findings show that de jure political equalization did not cause major changes to political representation, although the voting choices of the formerly and newly enfranchised citizens differed on average. This apparent puzzle is the consequence of the heterogeneity of the effect across a number of both social and political dimensions. The paper documents elite's effort to minimize the political impact of the reform.
    Keywords: democratization, voting, electoral competition, inequality, swingdistricts, political violence, Vatican, socialism.
    JEL: D3 D7 I25 N33 N34
    Date: 2011–12
  3. By: Kurrild-Klitgaard, Peter
    Abstract: When collective choices are made in more than one round and with dif¬ferent groups of decision-makers, so-called election inversions may take place, where each group have different majority outcomes. We identify two ver¬sions of such compound majority paradoxes specifically, but not ex¬clu¬si¬ve¬ly, relevant for systems of proportional representation with governing coalitions: The “Threshold Paradox” and the “Federal Paradox”. The empirical relevance of the two paradoxes is illustrated with examples from three Danish elections (1971, 1990, 2011), where a majority of the voters voted for one bloc of parties but where a majority of the seats fell to another.
    Keywords: Social choice; voting paradoxes; electoral systems; election inversions
    JEL: D71 D72
    Date: 2011–12
  4. By: E Bracco
    Abstract: This paper proposes a theory of socially optimal districting in a legislative-election model with endogenous party platforms. We generalize the model of Coate and Knight (2007), allowing parties to strategically condition their platforms on the districting. The socially optimal districting re ects the ideological leaning of the population, so that parties internalize voters' preferences in their policy platforms. The optimal seat-vote curve is unbiased when voters are risk-neutral, and -contrary to previous findings-biased against the largest partisan group when voters are risk-averse. The model is then calibrated by an econometric analysis of the elections of U.S. State legislators during the 1990s.
    Date: 2011
  5. By: Madhav S, Aney; Maitreesh Ghatak; Massimo Morelli
    Abstract: We study how inefficiencies of market failure may be further amplified by political choices made by interest groups created in the inefficient market. We take an occupational choice framework, where agents are endowed heterogeneously with wealth and talent. In our model, market failure due to unobservability of talent endogenously creates a class structure that affects voting on institutional reform. In contrast to the world without market failure where the electorate unanimously vote in favour of surplus maximising institutional reform, we find that the preferences of these classes are often aligned in ways that creates a tension between surplus maximising and politically feasible institutional reforms.
    Keywords: occupational choice, adverse selection, property rights, assetliquidation, political failure, market failure.
    JEL: O12 O16 O17 I
    Date: 2011–07
  6. By: Martin Ardanaz; Carlos Scartascini
    Abstract: Personal income taxation remains relatively low in many developing countries despite recent democratic advancement and rapid economic growth; this is hard to reconcile with standard political economy models of taxation. This paper argues that the details of political institutions help to explain these low levels of personal income taxation. In particular, legislative malapportionment enables rich elites to have disproportionate political influence. Because over-represented districts tend to be dominated by parties aligned with the elite, these groups can block legislative attempts to introduce progressive taxes. Using a sample of more than 50 countries (including 17 across Latin America) between 1990 and 2007, this paper finds that i) countries with historically more unequal distributions of wealth and income systematically present higher levels of legislative malapportionment, and ii) higher levels of malapportionment are associated with lower shares of personal income taxes in GDP.
    JEL: D70 D78 H24
    Date: 2011–11
  7. By: Alberto F. Alesina; Dorian Carloni; Giampaolo Lecce
    Abstract: The conventional wisdom regarding the political consequences of large reductions of budget deficits is that they are very costly for the governments which implement them: they are punished by voters at the following elections. In the present paper, instead, we find no evidence that governments which quickly reduce budget deficits are systematically voted out of office in a sample of 19 OECD countries from 1975 to 2008. We also take into consideration issues of reverse causality, namely the possibility that only "strong and popular" governments can implement fiscal adjustments and thus they are not voted out of office "despite" having reduced the deficits. In the end we conclude that many governments can reduce deficits avoiding an electoral defeat.
    JEL: H2 H3 H5
    Date: 2011–12
  8. By: Jens Klose
    Abstract: This paper uses two-dimensional asymmetric Taylor reaction functions for 16 OECD-countries to account for different reactions to the inflation rate and output by central banks before or after an election of the fiscal authorities in the respective country. Important for such an investigation is not only the period before or after an election takes place but also whether the inflation rate and output are below or above their target or potential value because this information shows whether the central bank systematically deviates from the Taylor rule. Using a Panel-GMM we observe that in the OECD-countries there are political business cycles in monetary policy with respect to the inflation and output response. However, the supporting time horizon differs between both exogenous indicators and state of variables.
    Keywords: Political business cycle; monetary policy; Taylor rule; asymmetries; Panel- GMM
    JEL: E32 E43 E52 E58
    Date: 2011–10
  9. By: Muhammad, Andrew; DâSouza, Anna; Amponsah, William
    Abstract: Abstract: We assess whether and how violence and political instability affect trade between developed and developing countries considering the special case of EU imports of Kenyan roses after the 2007/08 post-election violence and political instability in Kenya. Using the Rotterdam model to estimate EU demand for roses from Kenya and other global competitors, we find evidence of a structural change in the import growth rate for Kenya, approximately equivalent to an 18.6% tariff. These results highlight the importance of non-tariff barriers to trade and contribute to the growing literature on the role of insecurity and instability in hindering international trade.
    Keywords: Kenya, Africa, EU, election violence, cut flowers, roses, imports, international trade, Demand and Price Analysis, International Development, International Relations/Trade, Political Economy, F14, F23, F59, O13, Q17,
    Date: 2011–10
  10. By: Rüdiger Pethig
    Abstract: A small open economy operates a carbon emission trading scheme and subsidizes green energy. Taking cap-and-trade as given, we seek to explain the subsidy as the outcome of a trilateral tug of war between the ‘green’ energy industry, the ‘black’ energy industry and consumers. With parametric functions we fully solve the competitive economic equilibrium and the lobbying Nash equilibrium. We show how the resultant subsidy depends on the political influence of all three lobbying groups and we trace its determinants. Whether consumers have ‘green preferences’ turns out to be crucial for the results.
    Keywords: green preferences, fossil fuel, green energy, green energy subsidy,cap-and-trade, overlapping regulation, competitive lobbying
    JEL: Q42 Q43 Q52 Q54 D72 D78 H23
    Date: 2011

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