nep-pol New Economics Papers
on Positive Political Economics
Issue of 2012‒01‒18
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Left, Right, Left: Income and Political Dynamics in Transition Economies By Michael Carter; John Morrow
  2. Populism, Partisanship, and the Funding of Political Campaigns By Tilman Klumpp
  3. Rational Democracy:A Political System for Universal Interest By Mo, Pak Hung
  4. Growth and Election Outcomes in a Developing Country. By Gupta, Poonam; Panagariya, Arvind
  5. Political Contestation in the Shadow of Hierarchy By Niclas Meyer
  6. Subjective Wealth, Policy Change, and Political Opinions: Evidence from the Cotton Reform in Burkina Faso By Kaminski, Jonathan
  7. “Honey, I shrunk the kids’ benefits!” — Revisiting intergenerational conflict in OECD countries. By Tim Krieger; Jens Ruhose
  8. Labor Supply of Politicians By Raymond Fisman; Nikolaj A. Harmon; Emir Kamenica; Inger Munk
  9. Monnet for Nothing? France's Mixed Europeanization By Olivier Rozenberg

  1. By: Michael Carter; John Morrow
    Abstract: The political left turn in Latin America, which lagged its transition to liberalized market economies by a decade or more, challenges conventional economic explanations of voting behavior. While the implications of upward mobility for the political preferences of forward-looking voters have been studied, neither the upward mobility model nor conventional myopic median voter models are well equipped to explain Latin America's political transformation. This paper generalizes the forward-looking voter model to consider a broad range of dynamic processes. When voters have full information on the nature of income dynamics in a transition economy, we show that strong support for redistributive policies will materialize rapidly if income dynamics offer few prospects of upward mobility for key sections of the electorate. In contrast, when voters have imperfect information, our model predicts a slow and politically polarizing shift toward redistributive voter preferences under these same non-concave income dynamics. Simulation using fitted income dynamics for two Latin American economies suggests that the imperfect information model better accounts for the observed shift back to the left in Latin America, and that this generalized, forward-looking voter approach may offer additional insights about political dynamics in other transition economies.
    Keywords: income dynamics, redistributive politics, polarization, Bayesian learning, Latin America
    JEL: D31 D72 D83 P16
    Date: 2012–01
  2. By: Tilman Klumpp
    Abstract: We dene populism as a politician's eort to appeal to a large group of voters with limited information regarding a policy-relevant state of nature. In our model, the populist motive makes it impossible for political candidates to communicate their information to voters credibly. We show that the presence of special interest groups (SIGs) with partisan preferences can mitigate this eect and thereby improve policy. This does not happen because SIGs are better informed than policy makers. Instead, campaign contributions by SIGs allow politicians to insulate themselves from the need to adopt populist platforms. We show that a regime in which SIGs are allowed to contribute to political campaigns welfare-dominates (ex ante) regimes in which no such contributions are allowed, or where campaigns are publicly nanced, or where they are funded by the candidates' private wealth.
    Date: 2011–04
  3. By: Mo, Pak Hung
    Abstract: In this paper, we formulate a political system that can satisfy certain desirable characteristics that include democratic participation, serving for universal interest, public sector efficiency, and sustainable by incentive compatibility and virtuous cycles. The system comprises a set of rules and organizations that provide motivations and supports to the participants for enhancing universal interest. It is a political structure that serves the people, rules by rationality, strives for efficiency and is sustainable. They will drive the society toward harmony and rapid growth in the quality of life for all.
    Keywords: Political System Design; Economic Development
    JEL: H11 D72 P48 P16
    Date: 2012–01
  4. By: Gupta, Poonam (National Institute of Public Finance and Policy); Panagariya, Arvind (Columbia University)
    Abstract: With the exception Brander and Drazen (2008), who use a comprehensive cross-country database consisting of both developed and developing countries, the hypothesis that rapid growth helps incumbents win elections has been tested exclusively for the developed countries (e.g., Ray Fair 1978). But since sustained rapid growth offers the prospect of pulling vast numbers of the voters out of poverty within a generation, such an effect is far more likely to be present in the developing rather than developed countries. In this paper, we offer the first test of the hypothesis on a large developing and poor country, India, which has seen its economy grow 8 to 9 percent recently. We first generalize the Fair model to allow for multiple candidates instead for just two and then test it using crossstate data. We find quantitatively large and statistically robust effect of growth on the prospects of the candidates of the state incumbent parties to win elections. Specifically, we use the data on 422 candidates in the 2009 parliamentary elections and show that the candidates of incumbent parties in high-growth states have much better prospects of victory than those in low-growth states.
    Date: 2011–10
  5. By: Niclas Meyer
    Abstract: In the public policy literature, there is a widespread belief that industry self-regulation would only take place—and lead to satisfactory results—if industry was faced with a credible threat of hierarchical government intervention. At the example of intermodal transport standardization, however, this paper demonstrates that this does not have to be the case. It may even have a counterproductive effect by exposing self-regulatory processes to political contestation.
    Keywords: Shadow of hierarchy, self-regulation, private governance, technical standardization
    Date: 2012–01
  6. By: Kaminski, Jonathan
    Abstract: This paper provides new evidence on the pattern of individual subjective welfare after a natural experiment in policy-led rural development, and aims to identify the causal relationships between subjective welfare and political opinions on the effects of the policy change. I adopt a structural approach by introducing a reference-based utility function that contains a signal of individual participation in the policy change, which is conveyed by political opinions. Using data collected in cotton areas of Burkina Faso, several simultaneous estimations are performed to analyze seemingly covariant political opinions on the recent cotton reform and changes in subjective wealth, while addressing measurement issues related to subjective indicators as well as heterogeneity in latent psychological factors. In addition to absolute and relative indicators of wealth, the large increase in subjective wealth is found to be driven by enthusiastic opinions about the reformâs effects on welfare and poverty alleviation, as well as by technical and institutional changes. The endogenous impact of political opinions on subjective wealth underlies the partial appropriation of the reformâs welfare effects by farmers.
    Keywords: Subjective Wealth, Burkina Faso, Policy Change, Rural Development, Political Opinions., Environmental Economics and Policy, Political Economy, Resource /Energy Economics and Policy, I32, 013, Q16, Q18,
    Date: 2011–11
  7. By: Tim Krieger (University of Paderborn); Jens Ruhose (Ifo Institut)
    Abstract: Intergenerational conflicts may arise when interests of different age groups do not align. We examine cross-country data to find evidence for this conflict in OECD countries. We derive our results from a FGLS estimation model, which is complemented by a System-GMM estimation. Data covers a panel of 22 OECD countries over the time period 1985-2005. We find little support for intergenerational conflict in general; however, those who are close to (statutory) retirement age dislike public expenditure for families and education because, once they retire, they have to adapt to lower retirement income levels compared to previous work income. This effect lasts for a transitory period only.
    Keywords: Intergenerational Conflict, Family Benefits, Population Ageing, Education Expenditure, Voting, Retirement Income Shock.
    JEL: D72 H50 J13 J14 I22
    Date: 2011–12
  8. By: Raymond Fisman; Nikolaj A. Harmon; Emir Kamenica; Inger Munk
    Abstract: We examine the labor supply of politicians using data on Members of the European Parliament (MEPs). We exploit the introduction of a law that equalized MEPs' salaries, which had previously differed by as much as a factor of ten. Doubling an MEP's salary increases the probability of running for reelection by 23 percentage points and increases the logarithm of the number of parties that field a candidate by 29 percent of a standard deviation. A salary increase has no discernible impact on absenteeism or shirking from legislative sessions; in contrast, non-pecuniary motives, proxied by home-country corruption, substantially impact the intensive margin of labor supply. Finally, an increase in salary lowers the quality of elected MEPs, measured by the selectivity of their undergraduate institutions.
    JEL: D72 D73
    Date: 2012–01
  9. By: Olivier Rozenberg
    Abstract: This contribution tries both to assess the impact of the European Union on France and to discuss the rich literature on that topic originating both from EU studies, opinion studies, public policy analysis and institutional analysis. France’s relationship with the EU appears paradoxical given the contrast between the traditional pro-EU involvement of French elites and regular expressions of reticence, such as the opposition to the Draft Constitutional Treaty by referendum in 2005. This paper offers an account of this paradoxical relationship by highlighting the heterogeneity of adaptation to the EU. While public policy and legislation are becoming increasingly Europeanised, the EU has a limited impact on political life and the domestic institutional system. As a result of this mixed situation, the national narratives for supporting French membership to the EU suffer from progressive erosion and Euroscepticism subtly gaining ground.
    Keywords: Europeanization; France; public opinion; institutions; political science
    Date: 2011–12–31

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