nep-pol New Economics Papers
on Positive Political Economics
Issue of 2012‒04‒17
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. A Theory of Strategic Voting in Runoff Elections By LAURENT BOUTON
  2. Optimal Districting with Endogenous Party Platforms By E Bracco
  3. Political Economy of The Budgetary Process in Malaysia By Gulam Hassan, Mohamed Aslam; Tan, Yee Shin
  4. SCHOOLING AND VOTER TURNOUT: Is there an American Exception? By Arnaud Chevalier; Orla Doyle
  5. Education, Rent-seeking and the Curse of Natural Resources. By Wadho, Waqar Ahmed
  6. The politics of automatic stabilization mechanisms in public pension programs By Weaver, Kent
  7. A New Outside Option Value for Networks: The Kappa-Value – Measuring Distribution of Power of Political Agreements By Julia Belau
  8. The Costs of Corruption in the Italian Solid Waste Industry By Graziano Abrate; Fabrizio Erbetta; Giovanni Fraquelli; Davide Vannoni
  9. Bosnia and Herzegovina: Political breakthrough in times of economic stagnation By Josef Pöschl
  10. Delegation and Rewards By Vetter, Stefan

  1. By: LAURENT BOUTON (Department of Economics, Boston University)
    Abstract: This paper analyzes the properties of runoff electoral systems when voters are strategic. A model of three-candidate runoff elections is presented, and two new features are included: the risk of upset victory in the second round is endogenous, and many types of runoff systems are considered. Three main results emerge. First, runoff elections produce equilibria in which only two candidates receive a positive fraction of the votes. Second, a sincere voting equilibrium does not always exist. Finally, runo¤ systems with a threshold below 50% produce an Ortega effect that may lead to the systematic victory of the Condorcet loser.
    Keywords: Runoff Elections, Duverger's Law and Hypothesis, Condorcet Loser, Poisson Games
    JEL: C72 D72
    Date: 2012–01
  2. 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
  3. By: Gulam Hassan, Mohamed Aslam; Tan, Yee Shin
    Abstract: The ruling political party or the ruling government has rights in drafting and implementing economic policies including the budget policy. In the case of Malaysia, as observed, the budget policy is associated with the long or medium term economic development plans that are drafted, current thinking or thought of economic policies and additional measures that would be introduced probably related to major economic events such as the impact of financial or global economic crises. Also the budget includes economic policies according to the ruling party’s manifesto and promises made during the election. Eventhough the budget is the ruling government’s privilege but the government’s financial plan, i.e the allocation and the manner of spending, taxation and borrowing are subject to law, acts, rules and procedures. The ruling government cannot simply utilize economic resources for its political means or interests. This paper argues that there is a solid link between the ruling political party with the preparation of the budget policy. To examine the matter this paper uses the survey method. This paper has found that in the case of Malaysia the Member of Parliaments do influence the outlining of the annual budget.
    Keywords: Political Institutions; Elections; Development Plans; Budget Policy; Malaysia
    JEL: O23 E62 O20 P48 P16
    Date: 2012–04–05
  4. By: Arnaud Chevalier (Royal Holloway, University of London, CEE & IZA); Orla Doyle (UCD Geary Institute & School of Economics, University College Dublin)
    Abstract: One of the most consistent findings in studies of electoral behaviour is that individuals with higher education have a greater propensity to vote. The nature of this relationship is much debated, with US studies generally finding evidence of a causal relationship, while European studies generally reporting no causal effect. To assess whether the US is an exception we rely on an international dataset incorporating 38 countries, the ISSP (International Social Survey Programme) from 1985 to 2010. Both instrumental variable and multi-level modelling approaches, reveals that the US is an outlier regarding the relationship between education and voter turnout. Moreover country-specific institutional and economic factors do not explain the heterogeneity in the relationship of interest. Alternatively, we show that disenfranchisement laws in the U.S. mediates the effect of education on voter turnout, such that the education gradient in voting is greater in U.S. States with the harshest disenfranchisement legislature. As such, the observed relationship between education and voting is partly driven by the effect of education on crime.
    Keywords: Voter turnout, Education, Disenfranchisement laws
    JEL: D72 I20 K42
    Date: 2012–04–10
  5. By: Wadho, Waqar Ahmed
    Abstract: Empirical evidence suggests that natural resources breed corruption and reduce educational attainments, dampening economic growth. The theoretical literature has treated these two channels separately, with natural resources affecting growth either through human capital or corruption. In this paper, we argue that education and corruption are jointly determined and depend on the endowment of natural resources. Natural resources affect the incentives to invest in education and rent seeking that in turn affect growth. Whether natural resources stimulate growth or induce a poverty-trap crucially depends on inequality in access to education and political participation, as well as on the cost of political participation. For lower inequality and higher cost of political participation, a high-growth and a poverty-trap equilibrium co-exist even with abundant natural resources.
    Keywords: Natural resources; Resource curse; Growth; Human capital; Rent-seeking; Corruption
    JEL: O11 O41 O13 J24 D72
    Date: 2011–06–01
  6. By: Weaver, Kent
    Abstract: Demographic and fiscal pressures have increased pressures on governments in most wealthy countries to reduce the generosity of their public pension programs. Mechanisms that automatically adjust public pension levels to take account of factors such as increased life expectancy and slower economic growth are appealing to politicians because it saves them from having to take loss-imposing actions that are likely to incur political blame. This paper analyzes the financial and political potential of automatic stabilizing mechanisms (ASMs), beginning with a discussion of design issues and alternatives. This is followed by a discussion of potential adoption, implementation, and sustainability challenges for automatic stabilizing mechanisms and a review of experiences with stabilization mechanisms in three countries: Canada, Sweden and Germany. The paper argues that ASMs are vulnerable to erosion over time, especially when the losses that the ASM would impose are substantial, and when elections are impending. Preserving the integrity of ASMs is most likely where the parties that initially supported their adoption continue to be able to sustain cartel-like behavior with respect to pension policymaking. Overall, the analysis in this paper suggests that automatic stabilizing mechanisms are no panacea for the problems of countries facing serious long-term pension financing problems. --
    Date: 2011
  7. By: Julia Belau
    Abstract: In an economic or social situation where agents have to group in order to achieve common goals, how can we calculate the coalitional rents of the agents arising from the coalition formation? Once we have formalized the situation via a TU-game and a network describing the economic structure, we can apply different allocation rules to assign the coalitional rents to the agents. We specifically analyze situations where parties with a specific vote distribution in a parliament have to build agreements in order to reach some required quorum. In this situation, we want to measure the (relative) distribution of power. We analyze the allocation rules called Position value (Meessen (1988) and Borm et al. (1992)) and graph-chi-value (Casajus (2009)). Applying the generalized framework (Gómez et al. (2008)), a framework where coalitions are not established yet, we fi nd that the graph-chi-value does not differ for networks referring to the same coalition while the Position value takes into account the specific role of an agent within the network, i.e. the communication path. We define and characterize a new outside option sensitive value, the Kappa-value, which takes into account both outside options and the role of an agent within the network.
    Keywords: Cooperative games; graph-restricted games; networks; position value; outside options; minimal winning coalitions
    JEL: C71 D85 H10
    Date: 2012–04
  8. By: Graziano Abrate (Department of Business Management and Environment, University of Eastern Piedmont); Fabrizio Erbetta (Department of Business Management and Environment, University of Eastern Piedmont); Giovanni Fraquelli (Department of Business Management and Environment, University of Eastern Piedmont); Davide Vannoni (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: The paper investigates the link between corruption and efficiency by using a rich micro-level dataset concerning solid waste collection activities in 529 Italian municipalities observed over the years 2004-2006. In order to test the impact of corruption on cost efficiency we estimate a stochastic latent class frontier approach, which accounts for technological heterogeneity across units. The results of our estimates show that corruption significantly increases inefficiency, a finding which is robust to the inclusion of alternative local corruption indicators and of other control variables such as geographical, demographic and political factors. Finally, we find that the impact of corruption tends to be greater in the southern regions of the country and for those municipalities which are less involved in recycling activities.
    Keywords: corruption, cost inefficiency, latent class stochastic frontier, solid waste
    JEL: C33 D24 D73 Q53
    Date: 2012–04
  9. By: Josef Pöschl (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The economy of Bosnia and Herzegovina will hardly grow substantially or may even shrink slightly in 2012. For the time being, there is nothing that would support expectations of a strong GDP decline. For the period after 2012 we can count with growth resumption, should external conditions allow for that. The main impetus needs to come from outside as a major home-made demand push is unlikely to happen. Prices will remain relatively stable, and no strong medium-term improvement on the labour market can be expected.
    Date: 2012–03
  10. By: Vetter, Stefan
    Abstract: We study experimentally whether anti-corruption policies with a focus on bribery might be insufficient to uncover more subtle ways of gaining an unfair advantage. In particular, we investigate whether an implicit agreement to exchange favors between a decision-maker and a lobbying party serves as a legal substitute for corruption. Due to the obvious lack of field data on these activities, the laboratory provides an excellent opportunity to study this question. We find that even the pure anticipation of future rewards from a lobbying party suffices to bias a decision-maker in favor of this party, even though it creates negative externalities to others. Although future rewards are not contractible, the benefitting party voluntarily compensates decision-makers for partisan choices. In this way, both receive higher payoffs, but aggregate welfare is lower than without a rewards channel. Thus, the outcome mirrors what might have been achieved via conventional bribing, while not being illegal.
    Keywords: delegation; gift exchange; corruption; lobbying; negative externalities
    JEL: C91 D62 D63 D73 K42
    Date: 2012–04

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