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on Positive Political Economics |
| By: | Federico Boffa (Università di Macerata & IEB); Amedeo Piolatto (Universitat de Barcelona & IEB); Giacomo A. M. Ponzetto (CREI, Universitat Pompeu Fabra & Barcelona GSE) |
| Abstract: | This paper studies fiscal federalism when voter information varies across regions. We develop a model of political agency with heterogeneously informed voters. Rent-seeking politicians provide public goods to win the votes of the informed. As a result, rent extraction is lower in regions with higher information. In equilibrium, electoral discipline has decreasing returns. Thus, political centralization efficiently reduces aggregate rent extraction. The model predicts that a region’s benefits from centralization are decreasing in its residents’ information. We test this prediction using panel data on pollutant emissions across U.S. states. The 1970 Clean Air Act centralized environmental policy at the federal level. In line with our theory, we find that centralization induced a differential decrease in pollution for uninformed relative to informed states. |
| Keywords: | Political centralization, government accountability, imperfect information, elections, environmental policy, air pollution |
| JEL: | D72 D82 H73 H77 Q58 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2012/5/doc2012-14&r=pol |
| By: | Stephan Litschig; Kevin Morrison |
| Abstract: | Does additional government spending improve the electoral chances of incumbent political parties? This paper provides the first quasi-experimental evidence on this question. Our research design exploits discontinuities in federal funding to local governments in Brazil around several population cutoffs over the period 1982-1985. We find that extra fiscal transfers resulted in a 20% increase in local government spending per capita, and an increase of about 10 percentage points in the re-election probability of local incumbent parties. We also find positive effects of the government spending on education outcomes and earnings, which we interpret as indirect evidence of public service improvements. Together, our results provide evidence that electoral rewards encourage incumbents to spend part of additional revenues on public services valued by voters, a finding in line with agency models of electoral accountability. |
| Keywords: | Government spending, voting, regression discontinuity |
| JEL: | H40 H72 D72 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:515&r=pol |
| By: | Anders Akerman; Anna Larsson; Alireza Naghavi |
| Abstract: | Data on the growth performances of countries with similar comparative (dis)advantage and political institutions reveal a striking variation across world regions. While some former autocracies such as the East Asian growth miracles have done remarkably well, others such as the Latin American economies have grown at much lower rates. In this paper, we propose a political economy explanation of these diverging paths of development by addressing the preferences of the country's political elite. We build a theoretical framework where factors of production owned by the political elites differ across countries. In each country, the incumbent autocrat will cater to the preferences of the elites when setting trade policy and the property rights regime. We show how stronger property rights may lead to capital accumulation and labor reallocation to the manufacturing sector. This, in turn, can lead to a shift in the comparative advantage, a decision to open up to trade and an inflow of more productive foreign capital. Consistent with a set of stylised facts on East Asia and Latin America, we argue that strong property rights are crucial for success upon globalization. |
| Keywords: | Autocracy, Growth, Political Elites, Landowners, Capitalists, Growth Miracles, Trade, Comparative Advantage, Capital Mobility, Property Rights |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:deg:conpap:c016_041&r=pol |
| By: | Carlos Scartascini; Mariano Tommasi |
| Abstract: | This paper argues that institutionalization is an equilibrium phenomenon and is associated with better policies and better results in terms of economic development. In support of this argument is presented a theoretical model that extends the space of feasible actions for political actors, including the possibility of investing in both institutionalized and non-institutionalized arenas. Thus, to visualize the process of institutionalization can be endogenous to the functioning of political institutions. In addition to this conceptual model, quantitative results are presented which show that low levels of institutionalization tend to weaken the results arising from the literature of more traditional political economy. That is, low institutionalization in the context of traditional political institutions, particularly those jure measures may not be relevant in explaining policy outcomes. Still, this work opens up more questions than it answers and leaves lines of research proposals that can help provide answers to them. |
| JEL: | D72 D73 D78 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:idb:wpaper:4763&r=pol |
| By: | Giacomo Ponzetto |
| Abstract: | Protectionism enjoys surprising popular support, in spite of deadweight losses. At the same time, trade barriers appear to decline with public information about protection. This paper develops an electoral model with heterogeneously informed voters which explains both facts and predicts the pattern of trade policy across industries. In the model, each agent endogenously acquires more information about his sector of employment. As a result, voters support protectionism, because they learn more about the trade barriers that help them as producers than those that hurt them as consumers. In equilibrium, asymmetric information induces a universal protectionist bias. The structure of protection is Pareto inefficient, in contrast to existing models. The model predicts a Dracula effect: trade policy for a sector is less protectionist when there is more public information about it. Using a measure of newspaper coverage across industries, I …find that cross-sector evidence from the United States bears out my theoretical predictions. |
| Keywords: | Protectionism, Voters, Imperfect information, Media coverage, Dracula effect, Pareto inefficiency |
| JEL: | F13 D72 D83 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:596&r=pol |
| By: | Harald Badinger (Department of Economics, Vienna University of Economics and Business); Elisabeth Nindl (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | This paper presents new empirical evidence on the determinants of corruption, focussing on the role of globalization and inequality. The estimates for a panel of 102 countries over the period 1995-2005 point to three main results: i) Detection technologies, reflected in a high level of development, human capital, and political rights reduce corruption, whereas natural resource rents increase corruption. ii) Globalization (in terms of both trade and financial openness) has a negative effect on corruption, which is more pronounced in developing countries. iii) Inequality increases corruption, and once the role of inequality is accounted for, the impact of globalization on corruption is halved. In line with recent theory, this suggests that globalization – besides reducing corruption through enhanced competition – affects corruption also by reducing inequality. |
| Keywords: | Globalization, inequality, corruption |
| JEL: | F1 F3 F4 O1 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp139&r=pol |