nep-pol New Economics Papers
on Positive Political Economics
Issue of 2012‒09‒30
eight papers chosen by
Eugene Beaulieu
University of Calgary

  1. Centralization and Accountability: Theory and Evidence from the Clean Air Act By Federico Boffaa; Amadeo Piollatto; Giacomo Ponzetto
  2. The Voter's Blunt Tool By Bowen, T. Renee; Mo, Cecilia Hyunjung
  3. Rethinking the Political Economy of Decentralization: How Elections and Parties Shape the Provision of Local Public Goods By Raúl A. Ponce-Rodríguez; Charles R. Hankla; Jorge Martinez-Vazquez; Eunice Heredia-Ortiz
  4. Citizenry Accountability in Autocracies: The Political Economy of Good Governance in China By Gilli, Mario; Li, Yuan
  5. Prediction for the 2012 United States Presidential Election using Multiple Regression Model By Sinha, Pankaj; Sharma, Aastha; Singh, Harsh Vardhan
  6. Shaping of the Nation: The Effect of Fourth of July on Political Preferences and Behavior in the United States By Madestam, Andreas; Yanagizawa-Drott, David
  7. Constitutions and Economic Development: Evidence from the American Indian Nations By Akee, Randall K. Q.; Jorgensen, Miriam; Sunde, Uwe
  8. Inequality, extractive institutions, and growth in nondemocratic regimes By Mizuno, Nobuhiro; Naito, Katsuyuki; Okazawa, Ryosuke

  1. By: Federico Boffaa; Amadeo Piollatto; Giacomo Ponzetto
    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 environ- mental 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, interregional heterogeneity, elections, environmental policy, air pollution
    JEL: D72 D82 H73 H77 Q58
    Date: 2012–04
  2. By: Bowen, T. Renee (Stanford University); Mo, Cecilia Hyunjung (Stanford University)
    Abstract: When do voters win? Democracies have appealing properties, but failures of democracies to produce policies that benefit the voter abound. What conditions determine the success of the unorganized voter who only possess a blunt tool-- the vote-- versus an organized special interest group or firm? In this paper we derive with minimal assumptions conditions under which a democracy will produce policies that favor the voter. The model predictions are consistent with Besley, Persson and Sturm (2010), who show that increasing political competition leads to policies that benefit the voter. In addition, we show that increasing office holding benefits, decreasing potential rents to firms and increasing the salience of policy also leads to policies that benefit the voter. We find a positive interaction between the effect of political competition and office holding benefits. We support the model with data from the United States and find empirical evidence that increasing governors' salary decreased taxes paid by individuals through income tax relative to corporate tax, and increasing Governor salary increased minimum wages.
    Date: 2012–08
  3. By: Raúl A. Ponce-Rodríguez (Department of Economics, Universidad Autónoma de Ciudad Juárez); Charles R. Hankla (Department of Political Science, Georgia State University); Jorge Martinez-Vazquez (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University); Eunice Heredia-Ortiz (Development Alternatives Inc., DAI Author)
    Abstract: Decentralization is among the most important global trends of the new century, yet there is still no consensus on how to design political institutions to realize its benefits. In this paper, we investigate the political conditions under which decentralization will improve the delivery of public goods. We begin by incorporating insights from political science and economics into a rigorous and formal extension of the “decentralization theorem”. Our extension assumes inter-jurisdictional spillovers and suggests that the interaction of democratic decentralization (popularly elected sub-national governments) and party centralization (the power of national party leaders over subnational office-seekers) will produce the best outcomes for public service delivery. To test this argument empirically, we make use of a new dataset of sub-national political institutions created for this project. Our analyses, which allow us to examine educational outcomes in more than 125 countries across more than 25 years, provide support for our theoretical expectations.
    Date: 2012–08–11
  4. By: Gilli, Mario (Department of Economics, University of Milan-Bicocca); Li, Yuan (China Economic Research Center)
    Abstract: Do citizens have a role in constraining the policies of autocratic governments? Usually political and economic literature models autocracy as if citizens have no role in constraining a leader's behavior, when in fact autocratic governments are afraid of potential citizen revolts. In this paper we build a three player political agency model to study citizenry accountability in autocracies. We show that the citizens can effectively discipline the leader due to the threat of revolution notwithstanding the size of the selectorate, though this may result in a failed state when the costs of revolution and the size of the selectorate are small. Our model and results provide a useful framework for interpreting the political logic of the China's economic reform after the "Tiananmen incident".
    Keywords: Autocracy; Accountability; Revolt; Chinese Economic Reform
    JEL: D02 D74 H11 P30
    Date: 2012–09–20
  5. By: Sinha, Pankaj; Sharma, Aastha; Singh, Harsh Vardhan
    Abstract: This paper investigates the factors responsible for predicting 2012 U.S. Presidential election. Though contemporary discussions on Presidential election mention that unemployment rate will be a deciding factor in this election, it is found that unemployment rate is not significant for predicting the forthcoming Presidential election. Except GDP growth rate, various other economic factors like interest rate, inflation, public debt, change in oil and gold prices, budget deficit/surplus and exchange rate are also not significant for predicting the U.S. Presidential election outcome. Lewis-Beck and Rice (1982) proposed Gallup rating, obtained in June of the election year, as a significant indicator for forecasting the Presidential election. However, the present study finds that even though there exists a relationship between June Gallup rating and incumbent vote share in the Presidential election, the Gallup rating cannot be used as the sole indicator of the Presidential elections. Various other non-economic factors like scandals linked to the incumbent President and the performance of the two parties in the midterm elections are found to be significant. We study the influence of the above economic and non-economic variables on voting behavior in U.S. Presidential elections and develop a suitable regression model for predicting the 2012 U.S. Presidential election. The emergence of new non-economic factors reflects the changing dynamics of U.S. Presidential election outcomes. The proposed model forecasts that the Democrat candidate Mr. Barack Obama is likely to get a vote percentage between 51.818 % - 54.239 %, with 95% confidence interval.
    Keywords: USA Presidential election; forecasting; regression; Gallup rating; Congress; Scandal;macroeconomic variable; midterm election;
    JEL: C53 C5 E17 D72 C01 C2
    Date: 2012–08–05
  6. By: Madestam, Andreas (Bocconi University); Yanagizawa-Drott, David (Harvard University)
    Abstract: This paper examines whether social interactions and cultural practices affect political views and behavior in society. We investigate the issue by documenting a major social and cultural event at different stages in life: the Fourth of July celebrations in the United States during the 20th century. Using absence of rainfall as a proxy for participation in the event, we find that days without rain on Fourth of July in childhood shift adult views and voting in favor of the Republicans and increase turnout in presidential elections. The effects we estimate are highly persistent throughout life and originate in early age. Rain-free Fourth of Julys experienced as an adult also make it more likely that people identify as Republicans, but the effect depreciates substantially after a few years. Taken together, the evidence suggests that political views and behavior derive from social and cultural experience in early childhood, and that Fourth of July shapes the political landscape in the Unites States.
    Date: 2012–08
  7. By: Akee, Randall K. Q. (Tufts University); Jorgensen, Miriam (University of Arizona); Sunde, Uwe (University of Munich)
    Abstract: This paper presents an empirical examination of economic and institutional development. Utilizing a novel data set on American Indian tribal nations, we investigate how constitutional design affects economic development, while holding the broader legal and political environment fixed. Instrumental variables regressions, using the party of the US President at the time of the initial adoption of tribal constitutions as an instrument for constitutional design, indicate that parliamentary systems (versus presidential) have a strong positive effect on economic development, while ordinary least squares regressions of current economic outcomes on parliamentary systems of government show no effects. Robustness checks suggest that the results are not explained by differences in other institutions or geographic characteristics. Additional results provide some suggestive evidence that the effects may operate through channels that are typically associated with parliamentary systems, such as larger public employment, and more equitable income distribution.
    Keywords: economic development, constitutional design, political economy
    JEL: D72 N12 O11 O43 P16
    Date: 2012–07
  8. By: Mizuno, Nobuhiro; Naito, Katsuyuki; Okazawa, Ryosuke
    Abstract: This paper investigates the effect of inequality on economic growth in nondemocratic regimes. We provide a model where a self-interested ruler chooses an institution that constrains the policy choice of the ruler. The ruler must care about the support share of citizens to keep power. Under an extractive institution, the ruler can extract a large share of citizens' wealth, but faces a high probability of losing power due to low public support. We show that inequality affects the ruler's trade-off between his or her expropriation of citizens' wealth and hold on power. Larger inequality among citizens makes the support share for the ruler less responsive to the choice of the institution by the ruler. This situation allows the ruler to choose an extractive institution without a significant increase in the risk of losing power. Hence, large inequality leads to extractive institutions and impedes investment and growth. These results provide an explanation for the negative relationship between inequality and growth observed in nondemocratic countries and the negative relationship between inequality and quality of institutions.
    Keywords: Dictatorship; Economic Growth; Inequality; Institutions
    JEL: O11 D31 P16
    Date: 2012–08–06

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