nep-pol New Economics Papers
on Positive Political Economics
Issue of 2012‒05‒02
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Choosing a Champion: Party Membership and Policy Platform By Anderson, Simon P; Meagher, Kieron J
  2. Do Parties Matter? Estimating the Effect of Political Power in Multi-party Systems By Ronny Freier; Christian Odendahl
  3. Ballot Order effects: An analysis of Irish General Elections By John Regan
  4. Female representation but male rule? Party competition and the political glass ceiling By Folke, Olle; Rickne, Johanna
  5. Petro populism By Egil Matsen; Gisle J. Natvik; Ragnar Torvik
  6. Optimal Districting with Endogenous Party Platforms By E Bracco
  7. The evolution of renewable energy policy in Oecd countries:aggregate indicators and determinants By Francesco Nicolli; Francesco Vona
  8. Paternalistic goods to improve income distribution: a political economy approach By Rosella Levaggi; Francesco Menoncin
  9. The political economy of the middle class in the Dominican Republic : individualization of public goods, lack of institutional trust and weak collective action By Sanchez, Miguel Eduardo; Senderowitsch, Roby
  10. The political economy of agricultural policy reform in India: Fertilizers and electricity for irrigation By Birner, Regina; Gupta, Surupa; Sharma, Neeru
  11. Voting by monetary policy committees: evidence from the CEE inflation-targeting countries By Alexander Jung; Gergely Kiss
  12. Does Economic Freedom Foster Tolerance? By Berggren, Niclas; Nilsson, Therese

  1. By: Anderson, Simon P; Meagher, Kieron J
    Abstract: We introduce endogenous political parties into the Hotelling-Downs voting framework to model the selection of candidates. First, activists choose which party to join, if at all. Second, party members select a champion for the general election. Third, the electorate median voter determines the (stochastic) general election outcome. Although party members trade off win probabilities candidate location preferences, in equilibrium they vote sincerely, so champions are at party medians. Minimum differentiation is only attained when valence uncertainty vanishes. Otherwise, the electorate median voter is in neither party. Despite asymmetric party and policy positions in equilibrium, electoral successes remain roughly equal.
    Keywords: activism; endogenous activism; political parties; spatial voting; valence
    JEL: D71 D72
    Date: 2012–04
  2. By: Ronny Freier; Christian Odendahl
    Abstract: This paper estimates the effect of political power on tax policies in municipal councils under a proportional election system. The main challenge in estimating the causal effect of parties on policy is to isolate the effect of power from underlying voter preferences and the selection effect of parties. We use an instrumental variable approach where close elections provide the exogenous variation in our variable of interest: voting power. Using data from German municipalities in the state of Bavaria, our estimation results suggest that power does matter. Somewhat surprisingly, the center-left party SPD is found to lower all three locally controlled taxes, whereas The Greens increase both property taxes considerably. These results remain robust across a range of specifications. What is more, the effect of the SPD is confirmed by a simple regression discontinuity estimation of mayors in these local governments.
    Keywords: local taxation, local election, municipality data instrumental variable approach
    JEL: H10 H11 H77
    Date: 2012
  3. By: John Regan (University College Dublin)
    Abstract: This paper presents evidence of ballot order effects in Irish General Elections, where candidates are listed in alphabetical order. Data relating to elections from 1977 to 2011 suggest the effect is significant in a statistical sense and in magnitude. The nature of the Irish electoral system sees voters cast preferences for candidates, and as a result a greater level of information regarding voters becomes available. Various fixed effects are added to control for constituencies, candidates and political parties.
    Keywords: Ballot order effects, Proportional Representation, Fixed Effects, Irish Elections, Maltese Elections
    Date: 2012–04–24
  4. By: Folke, Olle (Columbia University); Rickne, Johanna (Uppsala Center for Labor Studies)
    Abstract: The share of women in legislative assemblies has grown substantially, but there is still under-representation and it is more severe for more influential appointments. This pattern is mirrored in Swedish municipalities, for which we analyze panel data on the career developments of all 35.000 elected politicians over six election cycles to examine why women fail to rise in the political hierarchy. We show that women have a higher turnover rate which keeps them from accumulating the seniority required to (ever) catch up with their male colleagues. In our analysis, we can rule out that less political experience, lower age, or different responses to changes in family structure are the major contributors to women’s disadvantage. Instead, we find that competition between political parties substantially improves women’s relative performance. We interpret this as evidence for a negative bias against women in the recruitment process being a major contributor to women’s high turnover rate.
    Keywords: Careers in politics; Political competition; Supply of politicians
    JEL: D72 J45
    Date: 2012–04–24
  5. By: Egil Matsen (Norwegian University of Science and Technology, Department of Economics); Gisle J. Natvik (Norges Bank (Central Bank of Norway)); Ragnar Torvik (Norwegian University of Science and Technology, Department of Economics)
    Abstract: We aim to explain petro populism —the excessive use of oil revenues to buy political support. To reap the full gains of natural resource income politicians need to remain in office over time. Hence, even a purely rent-seeking incumbent who only cares about his own welfare, will want to provide voters with goods and services if it promotes his probability of remaining in office. While this incentive benfits citizens under the rule of rent-seekers, it also has the adverse effect of motivating benevolent policymakers to short-term overprovision of goods and services. In equilibrium politicians of all types indulge in excessive resource extraction, while voters reward policies they realize cannot be sustained over time. Our model explains how resource wealth may generate political competition that reduces the tenability of equilibrium policies.
    Keywords: Resource curse, Political economy.
    JEL: D72 O13 Q33
    Date: 2012–04–19
  6. 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
  7. By: Francesco Nicolli (University of Ferrara); Francesco Vona (Observatoire Francais des Conjonctures Economiques, Skema Business School)
    Abstract: This paper proposes different methods to aggregate heterogeneous policies for renewable energy. We compare time-varying indicators built using principal component analysis with average-based indicators. The main goal of the paper is to account for the evolution of both types of policy indicators with a set of common variables. Our empirical results are consistent with predictions of politicaleconomy models of environmental policies as lobbying, income and, to a less extent, inequality have expected effects on policy. The brown lobbying power, proxied by entry barriers in the energy sector, has negative influence on the policy indicators even when taking into account endogeneity in its effect. The results are also robust to dynamic panel specifications and to the exclusion of groups of countries. Interestingly, too, corruption has only an indirect effect on policy mediated by entry barriers, while the negative effect of inequality is much stronger for the richer countries. Keywords :Renewable Energy Policy, Political Economy, Product Market Regulation, Lobbying,Policy Indicators Classification-JEL :Q42, Q48,D72,Q38
    Date: 2012–04
  8. By: Rosella Levaggi (Economics Department, University of Brescia, Italy); Francesco Menoncin (Economics Department, University of Brescia, Italy)
    Abstract: In this article we show that when the provision of paternalistic goods is entwined with income distribution, the political decision process may prevent welfare maximisation. We model the decision process from a political economy perspective by assuming that the quantity of a paternalistic good to be produced, its regional distribution, and the equalisation grant are the result of a utilitarian bargaining process between a (relatively) rich Region and a poor one. Two cases are considered: a unitary and a federal State. The solution for a unitary State shows that First Best can be achieved only if the two Regions have the same bargaining power. In this case the level of income distribution is negatively correlated with the power of the rich Region. For a federal State we show that the result of the bargaining process always implies underprovision of the paternalistic good. Our model may explain the observed cross-national differences in the redistributive power of public policies.
    Keywords: Paternalistic Goods, Income Distribution
    JEL: I18 H77
    Date: 2012–04
  9. By: Sanchez, Miguel Eduardo; Senderowitsch, Roby
    Abstract: This paper tries to uncover some of the hidden factors behind poor public service delivery in the Dominican Republic. By looking at three sector cases, education, health and electricity, it is possible to observe that in this setting of low quality of public services the"middle class"is opting out from the system and adopting private solutions to collective problems. The combination of this opting out behavior with low levels of institutional trust, especially among"middle class"members, fragmented interests and clientelism, among other factors, results in weak collective action and lack of effective demand for improvements in service provision. Some of the tentative policy options to break this sub-optimal equilibrium are i) to build capacity in civil society organizations and help them forming a pro-reform coalition, ii) reduce the gap between the middle class and the poorer by trying to improve the provision of public goods and enlarging the welfare state, and (iii) increase transparency mechanisms and introduce e-government formulas in order to optimize the allocation of public resources.
    Keywords: Health Monitoring&Evaluation,Public Sector Expenditure Policy,Population Policies,Public Sector Economics,Political Economy
    Date: 2012–04–01
  10. By: Birner, Regina; Gupta, Surupa; Sharma, Neeru
    Abstract: Agricultural policy reform is one of the major challenges facing India today. Such reform is required in order to reduce poverty through faster agricultural growth and to promote more sustainable use of natural resources while ensuring food security. Subsidy policies that promote the use of fertilizer and of electricity for groundwater irrigation are in particular need of reform. While subsidies for these two inputs played a crucial role in achieving India's Green Revolution, they have been criticized during the past decade for benefiting large-scale farmers more than smallholders, placing a fiscal burden on the state, and having negative environmental effects. By analyzing the evolution of these input subsidy policies and examining the political processes involved in efforts to reform them, this study throws new light on the factors that have so far prevented a move toward more pro-poor and environmentally sustainable agricultural input policies in India. The authors show that electoral politics, institutional factors, and policy paradigms or belief systems all play an important role in blocking reform. They identify several policy reform options, as well as political strategies that can overcome past obstacles to reform. Community-based policy solutions, new coalitions for policy reform, fresh approaches to the policy debate, innovative and consensus-oriented forms of deliberation, and effective use of research-based knowledge can all make positive contributions to Indian policy reform. The analyses and proposals presented in this study will be a valuable resource for policymakers and stakeholders concerned with the politics of agricultural development.
    Date: 2011
  11. By: Alexander Jung (European Central Bank); Gergely Kiss (Fitch Ratings)
    Abstract: The aim of this paper is to study preference heterogeneity in monetary policy committees of inflation-targeting (IT) countries in Central and Eastern Europe (CEE) during the period 2005–2010. It employs (individual) voting records of the Monetary Council of the Magyar Nemzeti Bank (the central bank of Hungary) and of the Monetary Policy Council of the National Bank of Poland. Preference heterogeneity in committees is not directly observable. Therefore, we pursue an indirect measurement and conduct an econometric analysis based on (pooled) Taylor-type reaction functions estimated using real-time information on economic and financial indicators and voting records. Recent evidence for the monetary policy committees (MPCs) of advanced economies (see Besley et al., 2008; Jung, 2011) suggests that preference heterogeneity among its members is systematic. Unlike for monetary policy committees of advanced countries, the present paper finds preference heterogeneity to be random for both the members of the Monetary Policy Council of the National Bank of Poland (NBP), and the members of the Monetary Council of the Magyar Nemzeti Bank (MNB). But, similar to the committees of advanced economies, the diversity of views on the inflation forecast is measurable in both committees. A separate cluster analysis shows that different preferences of MPC members may be attributable to their status (chairman, internal member, external member) and that members may also differ in their desired response to changes in the economic outlook.
    Keywords: central banking, monetary policy committee, inflation targeting, collective decision-making, voting, preferences, pooled regressions
    JEL: C23 D72 D83 E58
    Date: 2012
  12. By: Berggren, Niclas (Research Institute of Industrial Economics (IFN)); Nilsson, Therese (Research Institute of Industrial Economics (IFN))
    Abstract: Tolerance has the potential to affect both economic growth and wellbeing. It is therefore important to discern its determinants. We add to the literature by investigating whether the degree to which economic institutions and policies are market-oriented is related to different measures of tolerance. Regression analysis of up to 65 countries reveals that economic freedom is positively related to tolerance towards homosexuals, especially in the longer run, while tolerance towards people of a different race and a willingness to teach kids tolerance are not strongly affected by how free markets are. Stable monetary policy and outcomes is the area of economic freedom most consistently associated with greater tolerance, but the quality of the legal system seems to matter as well. We furthermore find indications of a causal relationship and of social trust playing a role as a mechanism in the relationship between economic freedom and tolerance and as an important catalyst: the more trust in society, the more positive the effect of economic freedom on tolerance.
    Keywords: Markets; Economic freedom; Tolerance; Government; Institutions; Regulation
    JEL: P10 P48 Z13
    Date: 2012–04–20

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