nep-pol New Economics Papers
on Positive Political Economics
Issue of 2012‒07‒23
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Tax Contracts and Elections By Gersbach, Hans; Schneider, Maik
  2. A Political Winner’s Curse: Why Preventive Policies Pass Parliament so Narrowly By Philipp an de Meulen; Christian Bredemeier
  3. The Politics of Federalism in Argentina: Implications for Governance and Accountability By Martin Ardanaz; Marcelo Leiras; Mariano Tommasi
  4. Inequality in democracy: Insights from an empirical analysis of political dynasties in the 15th Philippine Congress By Beja Jr, Edsel; Mendoza, Ronald U.; Venida, Victor S.; Yap, David B.
  5. The Neuroeconomics of Voting: Neural Evidence of Different Sources of Utility in Voting By Ivo Bischoff; Carolin Neuhaus; Peter Trautner; Bernd Weber
  6. Media Markets, Special Interests, and Voters By Leopoldo Fergusson
  7. De Jure and de Facto Determinants of Power:Evidence from Mississippi By Graziella Bertocchi; Arcangelo Dimico
  8. The Political Economy of Deforestation in the Tropics By Burgess, Robin; Hansen, Matthew; Olken, Benjamin; Potapov, Peter; Sieber, Stefanie
  9. Political Support in Hard Times: Do People Care about National Welfare? By Friedrichsen, Jana; Zahn, Philipp
  10. The local electoral impacts of conditional cash transfers: Evidence from a field experiment. By Julien Labonne
  11. Political ideology, quality at entry and the success of economic reform programs By Smets, Lodewijk; Knack, Stephen; Molenaers, Nadia
  12. Do Coalitions Really Cause Larger Government Expenditures? – Mixed Evidence from a Regression Discontinuity Design By Sebastian Garmann

  1. By: Gersbach, Hans; Schneider, Maik
    Abstract: In this paper we examine the impact of tax contracts, a novel instrument, on elections, policies, and welfare. We consider a political game in which three parties compete to form the government and voters may behave strategically. Parties have policy preferences about the level of public-good provision and benefit from perks when in office. A government raises taxes for both purposes. We show that tax contracts yield moderate policies and lead to lower perks by avoiding the formation of grand coalitions in order to win government. Moreover, in polarized societies they unambiguously improve the welfare of the median voter.
    Keywords: elections; government formation; political contracts; tax promise
    JEL: D72 D82 H55
    Date: 2012–07
  2. By: Philipp an de Meulen; Christian Bredemeier
    Abstract: Preventive policy measures such as bailouts often pass parliament very narrowly. We present a model of asymmetric information between politicians and voters which rationalizes this narrow parliamentary outcome. A successful preventive policy impedes the verification of its own necessity. When policy intervention is necessary but voters disagree ex-ante, individual politicians have an incentive to loose the vote in parliament in order to be rewarded by voters ex-post. Comfortable vote margins induce incentives to move to the loosing fraction to avoid this winner’s curse. In equilibrium, parliamentary elections over preventive policies are thus likely to end at very narrow margins.
    Keywords: Political economy; asymmetric information
    JEL: D72 D82
    Date: 2012–05
  3. By: Martin Ardanaz; Marcelo Leiras; Mariano Tommasi
    Abstract: This paper contributes to an agenda that views the effects of policies and institutional reforms as dependent on the structure of political incentives for national and subnational political actors. The paper studies political incentive structures at the subnational level and the mechanisms whereby they affect national-level politics and policymaking at the national level in Argentina, a highly decentralized middle-income democracy, Argentina. The Argentine political system makes subnational political power structures very influential in national politics. Moreover, most Argentine provinces are local bastions of power dominated by entrenched elites, characterized by scarce political competition, weak division of powers, and clientelistic political linkages. Political dominance in the provinces and political importance at the national level reinforce each other, dragging the Argentine political and policymaking system towards the practices and features of its most politically backward regions.
    JEL: D72 D73 D78 H11 H70 H77
    Date: 2012–06
  4. By: Beja Jr, Edsel; Mendoza, Ronald U.; Venida, Victor S.; Yap, David B.
    Abstract: This paper presents metrics to estimate the size of political dynasties in the 15th Congress of the Republic of the Philippines and analyze the relationship between political dynasty and socio-economic outcomes. Results show that political dynasties comprise 70 percent of jurisdiction-based legislators in the current Congress. They possess higher net worth and win elections by larger margins of victory compared to not political dynasties. Jurisdictions of political dynasties are characterized by lower standards of living, lower human development, and higher levels of deprivation and inequality.
    Keywords: Democracy; political dynasty; Philippines; Philippine Congress
    JEL: D70 D63 P00 O53 D72 H00
    Date: 2012–07–15
  5. By: Ivo Bischoff (University of Kassel); Carolin Neuhaus (University of Bonn); Peter Trautner (University of Bonn); Bernd Weber (University of Bonn)
    Abstract: Which motives drive the decision of a voter to approve or reject a policy proposal? The Public Choice literature distinguishes between instrumental and expressive voting motives. We investigate the importance of these motives by analysing the patterns of neural activity in different voting situations. We conduct an fMRI-experiment which investigates neural activation at the moment of voting and use the altruism scale proposed by Tankersley et al. (2007) to differentiate between altruists and non-altruists. Non-altruists show neural activation patterns that are consistent with expressive voting motives. Among non-altruists, we also find activation patterns that point at egoistic instrumental motives. Both results are in line with the corresponding Public Choice literature. On the other hand, we find no evidence for expressive voting motives among altruists. Their neural activation pattern is generally much less conclusive with respect to the underlying motives.
    Keywords: Voting behavior, expressive voting, instrumental voting, political decision making, charitable donation, neuroscience, neuroeconomics, neuropolitical, fMRI
    JEL: D72 D87
    Date: 2012
  6. By: Leopoldo Fergusson
    Abstract: This paper examines the role of mass media in countering special interest group influence. I use the concentration of campaign contributions from Political Action Committees to proxy special interests’ capture US Senate candidates from 1980 to 2002, and compare the reaction of voters to increases in concentration in two different types of media markets – in-state media markets and out-of-state media markets. Unlike in-state media markets, out-of-state markets focus on neighboring states’ politics and elections. Thus, if citizens punish political capture, increases in concentration of special interest contributions to a particular candidate should reduce his vote share in in-state counties relative to the out-of-state counties, where the candidate receives less coverage. I find that a one standard deviation increase in concentration of special interest contributions to incumbents reduces their vote share by about 0.5 to 1.5 percentage points in in-state counties relative to the out-of-state counties. Results are similar in specifications that rely solely on variation in concentration across time within the same county, and when the sample is limited to in-state counties that are contiguous to out-of-state counties and have similar demographic structures. A placebo test where in-state counties bordering out-of-state ones are compared to other in-state counties shows no effect, confirming the identification hypothesis that the results are not driven by geographic characteristics or distance from the media center of the state.
    Date: 2012–06–13
  7. By: Graziella Bertocchi; Arcangelo Dimico
    Abstract: We evaluate the empirical relevance of de facto vs. de jure determinants of political power in the U.S. South between the end of the nineteenth and the beginning of the twentieth century. We apply a variety of estimation techniques to a previously unexploited dataset on voter registration by race covering the counties of Mississippi in 1896, shortly after the introduction of the 1890 voting restrictions encoded in the state constitution. Our results indicate that de jure voting restrictions reduce black registration but that black disfranchisement starts well before 1890 and is more intense where a black majority represents a threat to the de facto power of white elites. Moreover, the effect of race becomes stronger after 1890 suggesting that the de jure barriers may have served the purpose of institutionalizing a de facto condition of disfranchisement.
    Keywords: race, voting, institutions, education, inequality
    JEL: J15 N41 O43 P16
    Date: 2012–07
  8. By: Burgess, Robin; Hansen, Matthew; Olken, Benjamin; Potapov, Peter; Sieber, Stefanie
    Abstract: Tropical deforestation accounts for almost one-fifth of greenhouse gas emissions worldwide and threatens the world's most diverse ecosystems. The prevalence of illegal forest extraction in the tropics suggests that understanding the incentives of local bureaucrats and politicians who enforce forest policy may be critical to combating tropical deforestation. We find support for this thesis using a novel satellite-based dataset that tracks annual changes in forest cover across eight years of institutional change in post-Soeharto Indonesia. Increases in the numbers of political jurisdictions are associated with increased deforestation and with lower prices in local wood markets, consistent with a model of Cournot competition between jurisdictions. We also show that illegal logging and rents from unevenly distributed oil and gas revenues are short run substitutes, but this effect disappears over time as political turnover occurs. The results illustrate how incentives faced by local government o¢ cials affect deforestation, and provide an example of how standard economic theories can explain illegal behavior.
    Keywords: biodiversity; climate change; corruption; Cournot competition; deforestation; environmental monitoring; illegal logging; political economy; satellite imagery
    JEL: D73 L73
    Date: 2012–06
  9. By: Friedrichsen, Jana; Zahn, Philipp
    Abstract: During the Great Recession mass demonstrations indicated weakened political support in Europe. We show that growing dissatisfaction reflects poor economic conditions; unemployment is particularly important. Using individual level data for 16 Western European countries for 1976-2010, we find that national economic performance even matters beyond personal economic outcomes. Finally, while effects of growth and unemployment rates are the same across demographic subsets, the effect of inflation is heterogeneous. Younger, well-educated, or working individuals put relatively higher weight on price stability than the elderly, less skilled or not working. Our findings reinforce the political importance of employment and growth policies.
    Keywords: Political support , satisfaction with democracy , growth , unemployment , collectivism
    JEL: H11 O43 P16
    Date: 2012
  10. By: Julien Labonne
    Abstract: I develop and test two competing models assessing the impacts of targeted government transfers on a local incumbent’s electoral performance. I take advantage of the randomized roll-out of a large-scale Conditional Cash Transfer program in the Philippines, which offers an ideal setting to test the models. Although the program was usually implemented in all villages in a municipality, a subset of beneficiary municipalities were randomly selected to receive the program in a randomly selected subset of villages. I find that, in a competitive political environment, incumbent vote share is 26 percentage points higher in municipalities in which the program was implemented in all villages than in municipalities in which the program was implemented in half of the villages. The program had no impact in municipalities with low levels of political competition. Further, within municipalities, there is evidence consistent with the argument that incumbents compensated households in control villages by redistributing their own budget there. Results suggest that anti-poverty programs might have nefarious long-term consequences by preventing replacements of local incumbents.
    Keywords: Elections, Conditional cash transfers, Decentralization
    JEL: D72
    Date: 2012
  11. By: Smets, Lodewijk; Knack, Stephen; Molenaers, Nadia
    Abstract: This study investigates how government ideology matters for the success of World Bank economic policy loans, which typically support market-liberalizing reforms. A simple model predicts that World Bank staff will invest more effort in designing an economic policy loan when faced with a left-wing government. Empirically, estimates from a Heckman selection model show that the quality at entry of an economic policy loan is significantly higher for governments with a left-wing party orientation. This result is robust to changes in the sample, alternative measures of ideology, different estimation techniques and the inclusion of additional control variables. Next, robust findings from estimating a recursive triangular system of equations indicate that leftist governments comply more fully with loan agreements. Results also suggest that World Bank resources are more productive -- in terms of reform success -- in the design of policy operations than in their supervision. Anecdotal evidence from several country cases is consistent with the finding that left-wing governments receive higher quality loans.
    Keywords: Economic Adjustment and Lending,Banks&Banking Reform,Public Sector Corruption&Anticorruption Measures,Economic Theory&Research,Debt Markets
    Date: 2012–07–01
  12. By: Sebastian Garmann
    Abstract: This paper measures the causal effect of coalition vs. single-party governments on fiscal policies using a data set of 396 municipalities in the German state of North Rhine-Westphalia in the time period 1985-2004. Using a regression discontinuity design to take the endogeneity of the type of government into account, we exploit a discontinuity that comes through the change from a coalition to a single-party government at 50% of the seat share of the strongest party. Our results point to a significant effect of the type of government on personnel expenditures, while we do not find significant results for material spending and investment expenditures. These results differ substantially from simple OLS estimates.
    Keywords: Legislative organization; regression discontinuity design; local fi scal policy;coalition governments; government spending; panel data
    JEL: C21 D72 D78 H11
    Date: 2012–05

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