nep-pol New Economics Papers
on Positive Political Economics
Issue of 2012‒04‒10
fifteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Effect of Party Discipline on the Electoral Accountability of Politicians By Nicolas-Guillaume Martineau
  2. Political Accountability, Electoral Control, and Media Bias By Takanori Adachi; Yoichi Hizen
  3. Non-economic voting and incumbent strength in Turkey By Hazama, Yasushi
  4. One Mandarin Benefits the Whole Clan: Hometown Infrastructure and Nepotism in an Autocracy By Kieu-Trang Nguyen; Quoc-Anh Do; Anh Tran
  5. The People Want the Fall of the Regime": Schooling, Political Protest, and the Economy By Filipe R. Campante; Davin Chor
  6. Globalization and political trust By Fischer, Justina AV
  7. Can lobbying encourage abatement? Designing a new policy instrument By Lange, Ian; Polborn, Sarah
  8. Political instability and economic growth: Evidence from two decades of transition in CEE By Gurgul, Henryk; Lach , Łukasz
  9. Collusion and the Political Differentiation of Newspapers By Filistrucchi, L.; Antonielli, M.
  10. Participatory accountability and collective action : evidence from field experiments in Albanian schools By Barr, Abigail; Packard, Truman; Serra, Danila
  11. Resource Rents, Political Institutions and Economic Growth By Ibrahim Ahmed Elbadawi; Raimundo Soto
  12. Campaign Contributions over CEOs’ Careers By Adam R. Fremeth; Brian Kelleher Richter; Brandon Schaufele
  13. Fiscal Composition and Aid Effectiveness: A Political-Economy Model By Mosley, Paul
  14. (When) Does Tit-for-Tat Diplomay in Trade Policy Pay Off? By Dluhosch, Barbara; Horgos, Daniel
  15. The choice of domestic policies in a globalized economy: Extended Version By Fischer, Justina A.V.

  1. By: Nicolas-Guillaume Martineau (Département d’économique and GRÉDI, Université de Sherbrooke)
    Abstract: This essay examines the influence of a politician’s party on her accountability to the electorate. It also considers what the conjectured waning of political parties may imply for the effectiveness of elections in disciplining politicians, and for voter welfare. The paper models the election mechanism as a principal-agent relationship between the representative voter (principal) and the politician in office (agent). The party is heterogeneous, composed of factions whose preferences over policy differ. It may coerce the politician by threatening to remove her from the party’s helm following certain policy choices. The main result is that putschist threats, despite being a distortion when the electoral mechanism is functioning well, can be welfare-enhancing in the presence of another distortion on the electoral mechanism. This serves to contribute to a theory of the political second-best.
    Keywords: political agency; factions; accountability; political parties; ideology; voter welfare
    JEL: D72 D6 H10
    Date: 2012–03
  2. By: Takanori Adachi (School of Economics, Nagoya University); Yoichi Hizen (Graduate School of Economics and Business Administration, Hokkaido Univeristy)
    Abstract: Are anti-establishment mass media really useful in preventing politicians from behaving dishonestly? This paper proposes a voting model for analyzing how differences in the direction of media bias affect politicians' behavior. In particular, the probability of corruption by an incumbent is higher (than that in the case of no media bias) if and only if the mass media have some degree of "anti-incumbent" bias (i.e., information favorable to the incumbent is converted into unfavorable news about him or her with a positive probability), provided that the incumbent is less likely to be opportunistic than a challenger. This result holds irrespective of the degree of "pro-incumbent" bias (i.e., information unfavorable to the incumbent is converted into impressive news about him or her with a positive probability). We also show that media bias never increases voter welfare. Our results thus suggest that society should make an effort to eliminate media bias per se rather than promote antagonistic media.
    Keywords: Political Accountability, Retrospective Voting, Media Bias, Voter Welfare
    JEL: D72 H11
    Date: 2012–03
  3. By: Hazama, Yasushi
    Abstract: Evidence suggests that incumbent parties find it harder to be re-elected in emerging than in advanced democracies because of more serious economic problems in the former. Yet the pro-Islamic Justice and Development Party (AKP) has ruled Turkey since 2002. Does economic performance sufficiently account for the electoral strength of the AKP government? Reliance on economic performance alone to gain public support makes a government vulnerable to economic fluctuations. This study includes time-series regressions for the period 1950-2011 in Turkey and demonstrates that even among Turkey's long-lasting governments, the AKP has particular electoral strength that cannot be adequately explained by economic performance.
    Keywords: Internal politics, Elections, Political parties, Economic conditions, Turkey, Economic voting
    JEL: D72
    Date: 2012–03
  4. By: Kieu-Trang Nguyen (Indiana University Bloomington); Quoc-Anh Do (Singapore Management University); Anh Tran (Indiana University Bloomington)
    Abstract: This paper studies nepotism by government officials in an authoritarian regime. We collect a unique dataset of political promotions of officials in Vietnam and estimate their impact on public infrastructure in their hometowns. We find strong positive effects on several outcomes, some with lags, including roads to villages, marketplaces, clean water access, preschools, irrigation, and local radio broadcasters, as well as the hometown’s propensity to benefit from the State’s “poor commune support program”. Nepotism is not limited to only top-level officials, pervasive even among those without direct authority over hometown budgets, stronger when the hometown chairperson’s and promoted official’s ages are closer, and where provincial leadership has more discretionary power in shaping policies, suggesting that nepotism works through informal channels based on specific political power and environment. Contrary to pork barrel politics in democratic parliaments, members of the Vietnamese legislative body have little influence on infrastructure investments for their hometowns. Given the top-down nature of political promotions, officials arguably do not help their tiny communes in exchange for political support. Consistent with that, officials favor only their home commune and ignore their home district, which could offer larger political support. These findings suggest that nepotism is motivated by officials’ social preferences directed towards their related circles, and signals an additional form of corruption that may prevail in developing countries with low transparency.
    Keywords: nepotism, infrastructure construction, official’s hometown, political connection, political promotion, social preference, directed altruism.
    JEL: O12 H54 H72 D72 D64
    Date: 2012–01
  5. 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. We draw attention to one of the most fundamental correlates of political activity identied in the literature, namely education, and its interaction with economic circumstances. 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 display a strong link with 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 nd that the implied political instability is associated with heightened pressures towards democratization.
    Keywords: Education; Human capital; Political protest; Demonstrations; Economic under-performance; Democratization.
    JEL: D72 D78 I20 I21 O15
    Date: 2012–01
  6. By: Fischer, Justina AV
    Abstract: This paper postulates that a country’s integration into the world economy may lower citizens’ political trust. I argue that economic globalization constrains government’s choice set of feasible policies, impeding responsiveness to the median voter. Matching individual-level survey data from 1981 to 2007, repeated cross-sections of altogether 260’000 persons from 80 countries, with a measure of a country’s degree of economic globalization for the same time period, I find that there is a trust-lowering impact of globalization; its magnitude, however, depends on whether or not the individual is informed about politics and the economy. Trust-lowering effects of globalization are larger for those who have no interest in politics, are unwilling to indicate their political leaning, or who have low educational levels. Two-stage least squares regressions and a set of country and time fixed effects support a causal interpretation. Obviously, viewing the domestic government as accountable for its policies plays a decisive role for the relation between economic globalization and political trust. Robustness against country’s degree of economic development, past globalization and different time periods is tested.
    Keywords: Political trust; globalization; international trade; openness; FDI; World Values Survey
    JEL: F15 H41 Z13
    Date: 2012–03–30
  7. By: Lange, Ian; Polborn, Sarah
    Abstract: Taking a political economy perspective this paper proposes an alternative carbon abatement policy instrument with significant cant advantages over existing policy instruments. The key feature of the proposed carbon securities is that they entitle their owners to a fi xed proportion of ex ante unknown total emis-sions. The total level of carbon emissions is set by the political process after the carbon securities have been sold. A key benefit of the proposed carbon security is that it creates a group of stakeholders, whose interest is for a smaller level of emissions and which competes with industries that consume signifi cant amounts of carbon-based energy. The advantages over existing policy tools include an equilibrium carbon price closer to the level preferred by voters and a more predictable environmental policy in the presence of either climate or political uncertainty. (JEL: D72, Q54, Q58)
    Keywords: climate policy; Lobbying
    Date: 2012–03
  8. By: Gurgul, Henryk; Lach , Łukasz
    Abstract: This paper examines the nexus between political instability and economic growth in 10 CEE countries in transition in the period 1990-2009. Our results support the contention that political instability defined as a propensity for government change had a negative impact on growth. On the other hand, there was no causality in the opposite direction. A sensitivity analysis based on the application of a few hundred different variants of the initial econometric model confirmed the abovementioned findings only in the case where major government changes were applied to the definition of political instability.
    Keywords: economic growth; political instability; CEE economies
    JEL: O40
    Date: 2012–03–01
  9. By: Filistrucchi, L.; Antonielli, M. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: We analyse a newspaper market where two editors first choose the political position of their newspaper, then set cover prices and advertising tariffs. We build on the work of Gabszewicz, Laussel and Sonnac (2001, 2002), whose model of competition among newspaper publishers we take as the stage game of an infinitely repeated game, and investigate the incentives to collude and the properties of the collusive agreements in terms of welfare and pluralism. We analyse and compare two forms of collusion: in the first, publishers cooperatively select both prices and political position; in the second, publishers cooperatively select prices only. We show that collusion on prices reinforces the tendency towards a Pensée Unique discussed in Gabszewicz, Laussel and Sonnac (2001), while collusion on both prices and the political line would tend to mitigate it. Our findings question the rationale for Joint Operating Agreements among US newspapers, which allow publishers to cooperate in setting cover prices and advertising tariffs but not the editorial line. We also show that, whatever the form of collusion, incentives to collude first increase, then decrease as advertising revenues per reader increase.
    Keywords: collusion;newspapers;two-sided markets;indirect network effects;pluralism;spatial competition.
    JEL: L41 L82 D43 K21
    Date: 2012
  10. By: Barr, Abigail; Packard, Truman; Serra, Danila
    Abstract: There is general agreement that the existence of participatory institutions is a necessary condition for accountability, especially where top-down institutions are malfunctioning or missing. In education, the evidence on the effectiveness of participatory accountability is mixed. This paper argues that participation is a social dilemma and therefore depends, at least partly, on individuals'propensity to cooperate with others for the common good. This being the case, the mixed evidence could be owing to society-level heterogeneities in individuals'willingness and ability to overcome collective action problems. The authors investigate whether individuals'propensity to cooperate plays a role in parents'decisions to participate in both a school accountability system -- a"short route"to accountability -- and parliamentary elections -- a"long route"to accountability -- by combining survey data on 1,800 individuals'participation decisions with measures of their willingness to contribute to a public good in the context of a very simple, clearly defined laboratory experiment. They conduct a study in a new democracy, Albania, involving parents of children enrolled in primary schools. The findings confirm that, both across individuals within communities and across communities, the decision to hold teachers and school directors accountable directly through participation at the school level, and indirectly through political participation correlates with cooperativeness in a simple public goods game.
    Keywords: Parliamentary Government,Education For All,Tertiary Education,Primary Education,Governance Indicators
    Date: 2012–04–01
  11. By: Ibrahim Ahmed Elbadawi; Raimundo Soto
    Abstract: This paper contributes to the empirical literature on oil and other point-source resource curse. We find that the curse does exist but conditional on bad political governance. Unlike previous studies we estimate a flexible econometric growth model that accounts for long-term country heterogeneity and cross-dependency and retains the virtues of the recent literature, including short-run flexibility, cointegration and error-correction mechanisms. We unpack political institutions into those reflecting the degree of inclusiveness (Polity) and credibility of intertemporal commitments (Political Check and Balances) and find that resource-rich countries with low levels on both scores are likely to experience the curse, while those with high enough levels may turn resource rents into a driver of growth. Countries with high scores on only one dimension may avoid the curse but are not likely to effectively use resource rents to promote growth. This suggests that for the oil-rich Arab world to achieve sustained growth, the Arab spring should not only bring democracy, as badly needed as it is, but should also lay the foundations for strong systems of political checks and balances.
    Keywords: Oil and natural resource curse, economic growth, democracy, political checks and balances
    JEL: O13 P16 O43
    Date: 2012
  12. By: Adam R. Fremeth (Richard Ivey School of Business, University of Western Ontario, London, ON); Brian Kelleher Richter (Richard Ivey School of Business, University of Western Ontario); Brandon Schaufele (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: Individuals dominate money in politics, accounting for over 90% of campaign contributions, but studies of individuals’ giving are scarce. We show that individuals increase their personal contributions dramatically when they assume leadership roles at organizations such as labor unions, non-profits, and firms. Using a newly constructed dataset that focuses on personal contributions, we exploit variation in the leadership status of all 2,198 individuals who were S&P 500 CEOs at any point between 1991 and 2008 to identify a $4,000 jump in personal political giving when individuals become CEOs. Despite giving more money to more candidates, more political action committees (PACs), and more parties, active CEOs’ partisan orientations remain largely unchanged. Falsification tests of an underlying identification assumption demonstrate that these patterns hold whether an individual is promoted to CEO internally or appointed externally. While some fraction of CEOs’ contributions can be attributed to long-standing preferences, willingness, and ability to contribute, the striking change in behavior we identify cannot be explained by these factors alone.
    Keywords: Campaign Contributions, CEOs, Leaders, Personnel Economics, PACs
    JEL: D72 H89 K00 M59
    Date: 2012
  13. By: Mosley, Paul
    Abstract: In accounting for the rather gloomy trend of the aid effectiveness literature over the last few years, one explanatory strand has been fiscal, suggesting in particular that aid flows in weak states have tended to erode the taxbase and the structure of institutions. We pursue this idea, tracing the link from politics to domestic tax effort and then using the influence of this on expenditure to explain the leverage of aid. Thus, we argue that in the long run, tax effort determines the effectiveness of aid, and this relationship operates simultaneously in some countries with the negative link in the opposite direction, from aid to domestic tax effort, as observed by Bräutigam and Knack (2004) and others. We find that tax effort and the ability of the state to diversify its taxation structure are important determinants of long-term growth and aid effectiveness, and in our model, we find that overall aid effectiveness is, in a 3SLS model, weakly positive and significant, echoing the findings of Arndt, Jones and Tarp (2009) and Minoiu and Reddy (2010); however, these findings are not robust when retested using the GMMapproach favoured by the literature. A more robust finding, and a key message for policy, is that a broadening of the tax structure in low-income countries is crucial in order to enable those countries to escape from the .weak state . low tax trap., and to make aid more effective.
    Keywords: aid effectiveness, tax policy
    Date: 2012
  14. By: Dluhosch, Barbara (Helmut Schmidt University, Hamburg); Horgos, Daniel (Helmut Schmidt University, Hamburg)
    Abstract: In international relations, short-run incentives for non-cooperation often dominate. Yet, (external) institutions for enforcing cooperation are hampered by national sovereignty, supposedly strengthening the role of selfenforcing mechanisms. This paper examines their scope with a focus on contingent protection aka tit-for-tat in trade policy. By highlighting various strategies in a (linear) partial-equilibrium framework, we show that retaliation of noncooperative behavior by limiting market access works as a disciplining device independently of supply and demand parameters. Our theoretical results are backed by empirical evidence that countries more frequently involved in WTO-mediated disputes entailing tit-for-tat strategies pursue on average more liberal trade regimes.
    Keywords: Int. Political Economy; Trade Policy Conflicts; Tit-for-Tat; WTO Dispute Settlement
    Date: 2012–03–26
  15. By: Fischer, Justina A.V.
    Abstract: This paper describes the socio-economic adjustment effects exerted by globalization (taking as starting points competitive pressure, sectoral shifts, and financial market contagion) and discusses their relevance for domestic policy-making. I argue that these economic pressures and the resulting transformations in the domestic economy constrain government’s policy choice set to an extent that actual policies are quite freed from any political ideological context. However, important government tasks in a globalized economy remain: remedying information asymmetries between buyers and sellers, regulating markets to combat externalities, as well as providing essential goods.
    Keywords: globalization; trade; domestic policy; deregulation; competition; financial markets; government intervention
    JEL: F16 F15 F42 F18 D62 H41 G15 F01 D82
    Date: 2012–04–03

This nep-pol issue is ©2012 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.