nep-pol New Economics Papers
on Positive Political Economics
Issue of 2012‒03‒08
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Business taxes and the electoral cycle By Dirk Foremny; Nadine Riedel
  2. Right-Wing Political Extremism in the Great Depression By Alan de Bromhead; Barry Eichengreen; Kevin H. O'Rourke
  3. The Influence of Special Interests and Party Activists on Electoral Competition By Nicolas-Guillaume Martineau
  4. Non-anonymous ballot aggregation: an axiomatic generalization of Approval Voting. By Jorge Alcalde-Unzu; Marc Vorsat
  5. Unraveling Short- and Farsightedness in Politics By Hans Gersbach; Oriana Ponta
  6. Multidimensional Political Competition with Non-Common Beliefs By Kazuya Kikuchi
  7. Fighting corruption when existing corruption-control levels count : what do wealth effects tell us? By Simplice A , Asongu
  8. Robust mechanism design and dominant strategy voting rules By Borgers, Tilman; Smith, Doug
  9. Taxation and political stability By Mutascu, Mihai; Tiwari, Aviral; Estrada, Fernando
  10. Corruption as a response to regulation By Noel D., Johnson; William, Ruger; Jason, Sorens; Steven, Yamarik
  11. Do Reported Attitudes towards Immigrants Predict Ethnic Discrimination? By Carlsson, Magnus; Eriksson, Stefan
  12. Loyalty for Sale? Military Spending and Coups d'Etat By Leon, G.

  1. By: Dirk Foremny (University of Bonn); Nadine Riedel (University of Hohenheim & Oxford University CBT & CESifo Munich)
    Abstract: The purpose of this paper is to assess whether politicians manipulate the timing of tax rate changes in a strategic way to maximize reelection prospects. To do so, we exploit the German local business tax as a testing ground which is set autonomously by German municipalities. As election dates vary across local councils, the data allows us to disentangle effects related to the timing of elections from common trends. Using a rich panel data-set for German municipalities, we assess the impact of elections on local business tax choices. The findings support the notion of a political cycle in tax setting behavior as the growth rate of the local business tax is significantly reduced in the election year and the year prior to the election, while it jumps up in the year after the election. This pattern turns out to be robust against a number of sensitivity checks.
    Keywords: Local business tax choice, political economy, election cycle
    JEL: H25 H71 D72
    Date: 2011
  2. By: Alan de Bromhead; Barry Eichengreen; Kevin H. O'Rourke
    Abstract: We examine the impact of the Great Depression on the share of votes for right-wing anti-system parties in elections in the 1920s and 1930s. We confirm the existence of a link between political extremism and economic hard times as captured by growth or contraction of the economy. What mattered was not simply growth at the time of the election but cumulative growth performance. But the effect of the Depression on support for right-wing anti-system parties was not equally powerful under all economic, political and social circumstances. It was greatest in countries with relatively short histories of democracy, with existing extremist parties, and with electoral systems that created low hurdles to parliamentary representation. Above all, it was greatest where depressed economic conditions were allowed to persist.
    JEL: N0 N14
    Date: 2012–02
  3. By: Nicolas-Guillaume Martineau (Département d’économique and GRÉDI, Université de Sherbrooke)
    Abstract: This paper studies the effects on electoral competition of political parties relying on monetary donations and volunteer labour for their electioneering activities. It also examines whether a recorded decline in party activism increases special-interest influence on party policy platforms. Parties are shown to choose differentiated platforms in equilibrium when activists are present, despite factors drawing them together. Special-interest influence on platforms increases when a decline in activism stems from a fall in their motivation, following parties relying less upon them. This reduces procedural welfare, and potentially reduces voter welfare on policy outcomes, thus calling for more strict electoral laws.
    Keywords: activism; special-interest politics; political participation; collective action; electoral competition; electoral financing laws; welfare
    JEL: D71 D72
    Date: 2012–02
  4. By: Jorge Alcalde-Unzu (Departamento de Economía-UPNA); Marc Vorsat (Fundación de Estudios de Economía Aplicada (FEDEA))
    Abstract: We study axiomatically situations in which the society agrees to treat voters with different characteristics distinctly. In this setting, we propose a set of six intuitive axioms and show that they jointly characterize a new class of voting procedures, called Personalized Approval Voting. According to this family, each voter has a strictly positive and finite weight (the weight is necessarily the same for all voters with the same characteristics) and the alternative with the highest number of weighted votes is elected. Hence, the implemented voting procedure reduces to Approval Voting in case all voters are identical or the procedure assigns the same weight to all types.
    Keywords: approval voting, characterization, anonymity.
    JEL: D71
    Date: 2011
  5. By: Hans Gersbach (ETH Zurich, Switzerland); Oriana Ponta (ETH Zurich, Switzerland)
    Abstract: The absence of the deselection threat in incumbents’ last term in office can be negative or positive for society. Some politicians may reduce their efforts, while others may pursue beneficial long-term policies that may be unpopular in the short term. We propose a novel pension system that solves the effort problem while preserving willingness to implement long-term policies. The idea is to give politicians the option to choose between a flexible pension scheme and a fixed pension scheme. In a flexible pension scheme, the pension increases with short term performance as measured by the vote share of the officeholder’s party in the next election. This system increases social welfare by letting officeholders self-select into those activities that most benefit society. We analyze the properties and consequences of such a system and assess its robustness. Finally, we extend the pension system with choice to non-last-term situations and derive a general welfare result.
    Keywords: elections, political contracts, vote-share thresholds, incumbents, selection, effort
    JEL: D7
    Date: 2012–02
  6. By: Kazuya Kikuchi
    Abstract: This paper extends a probabilistic voting model with a multidimensional policy space, allowing candidates to have different prior probability distributions of the distribution of voters' ideal policies. In this model, we show that a platform pair is a Nash equilibrium if and only if both candidates choose a common generalized median of expected ideal policies. Thus, the existence of a Nash equilibrium requires not only that each candidate's belief have an expected generalized median, which is already a knife-edge condition, but also that the two medians coincide. We also study limits of ε-equilibria of Radner (1980) as ε → 0, which we call "limit equilibria." Limit equilibria are policy pairs that approximate choices by the candidates who almost perfectly optimize. We show that a policy pair is a limit equilibrium if and only if both candidates choose the same policy around which they form "opposite expectations" in a certain sense. For a limit equilibrium to exist (equivalently, for ε-equilibria to exist for all ε > 0), it is sufficient, though not necessary, that either candidate has an expected generalized median.
    Date: 2012–02
  7. By: Simplice A , Asongu
    Abstract: Why are some nations more effective at battling corruption than others? Are there different determinants in the fight against corruption across developing nations? How do wealth effects play-out when existing corruption-control levels matter in the corruption battle? To investigate these concerns we examine the determinants of corruption-control throughout the conditional distribution of the fight against corruption. The following broad findings are established. (1) Population growth is a(an) tool(impediment) in(to) the fight against corruption in Low(Middle) income countries. (2) Democracy increases (decreases) corruption-control in Middle(Low) income countries. As a policy implication, blanket corruption-control strategies are unlikely to succeed equally across countries with different income-levels and political wills in the fight against corruption. Thus to be effective, corruption policies should be contingent on the prevailing levels of corruption-control and income-bracket.
    Keywords: Corruption; Democracy; Government quality; Quantile regression; Africa
    JEL: H10 C10 O55 O10 K10
    Date: 2012–02–24
  8. By: Borgers, Tilman; Smith, Doug
    Abstract: We develop an analysis of voting rules that is robust in the sense that we do not make any assumption regarding voters’ knowledge about each other. In dominant strategy voting rules, voters’ behavior can be predicted uniquely without making any such assumption. However, on full domains, the only dominant strategy voting rules are random dictatorships. We show that the designer of a voting rule can achieve Pareto improvements over random dictatorship by choosing rules in which voters’ behavior can depend on their beliefs. The Pareto improvement is achieved for all possible beliefs. The mechanism that we use to demonstrate this result is simple and intuitive, and the Pareto improvement result extends to all equilibria of the mechanism that satisfy a mild refinement. We also show that the result only holds for voters’ interim expected utilities, not for their ex post expected utilities.
    Keywords: robust mechanism design; dominant strategies; voting; Gibbard-Satterthwaite theorem
    JEL: D7 C7
    Date: 2011–11–03
  9. By: Mutascu, Mihai; Tiwari, Aviral; Estrada, Fernando
    Abstract: The present study is, in particular, an attempt to test the relationship between tax level and political stability by using some economic control variables and to see the relationship among government effectiveness, corruption, and GDP. For the purpose, we used the GMM (1991) and GMM system (1998), using a country-level panel data from 112 countries for the period 1997 to 2010. The main results show that political stability is not the key for the tax policy, under the control of political regime durability the taxes as percent in GDP having consistent sinusoidal tendency, by cubic type.
    Keywords: Taxation; Political Stability; Connection; Effects; GMM and GMM system
    JEL: B1 B4 H5 H2 H23 C1 D70 C14 C23 B16 D72 H3 B41 C2
    Date: 2011–07
  10. By: Noel D., Johnson; William, Ruger; Jason, Sorens; Steven, Yamarik
    Abstract: Previous research has found a negative effect of corruption on growth in the United States. However, some theory suggests corruption might have a positive impact in places with dysfunctional political institutions. This paper investigates whether the corruption-growth link is conditional on the extent of government involvement across U.S. states. Even though no state approaches the level of government intervention found in many developing countries, we still find evidence that corruption’s harmful effects on growth are smaller when regulation is greater.
    Keywords: Corruption; U.S. States; Growth; Regulation
    JEL: O1 D7 H7 K4
    Date: 2012–02
  11. By: Carlsson, Magnus (School of Business and Economics, Linnaeus University); Eriksson, Stefan (Department of Economics)
    Abstract: Reported attitudes towards immigrants are sometimes used as a proxy for ethnic discrimination. However, there is little empirical evidence of a link between attitudes and discrimination. In this paper, we use survey data on people’s attitudes towards immigrants combined with data on ethnic discrimination from a field experiment in the Swedish housing market to re-examine this issue. We find clear evidence of a link between reported attitudes towards immigrants and the extent of ethnic discrimination at the municipality level. Thus, in contrast to most prior studies, our results suggest that reported attitudes may be a useful proxy for ethnic discrimination.
    Keywords: Attitudes; Ethnic discrimination; Field experiments; Housing market
    JEL: C93 J15 R39
    Date: 2012–02–21
  12. By: Leon, G.
    Abstract: Coups d'etat continue to be common around the world, often leading to changes in leaders and institutions. We examine the relationship between military spending and coups and find that (i) successful coups increase military spending by more than failed attempts, and (ii) coups are more likely when military spending as a share of GDP is relatively low. Our identification strategy exploits the conditional independence between a coup's outcome and the change in military spending that follows it. We interpret this as evidence that the military may stage coups in order to increase its
    Keywords: coups, income, conflict, military spending, political economy
    JEL: H56 N40 D72 O17
    Date: 2012–02–27

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