nep-pol New Economics Papers
on Positive Political Economics
Issue of 2012‒12‒10
six papers chosen by
Eugene Beaulieu
University of Calgary

  1. Migrants` Acquisition of Cultural Skills and Selective Immigration Policies By Moritz Bonn
  2. What do we know about China's CEO's?: evidence from across the whole economy . By Bryson, Alex; Zhou, Minghai
  3. Historical Sources of Institutional Trajectories in Economic Development: China, Japan, and Korea Compared By Aoki, Masahiko
  4. Local government expenditure and council size: Quasi-experimental evidence from Japan By Hirota, Haruaki; Yunoue, Hideo
  5. GINI Intermediate Report WP 5: Political and Cultural Impacts of Inequality By Herman Werfhorst; István György Tóth; Daniel Horn; Márton Medgyesi; Natascha Notten; Christina Haas; Burg, B. (Brian)
  6. Socio-Spatial Transformations, Suburbanisation, and Voting Behaviour in the Vilnius Urban Region By Ubarevičienė, Rūta; Burneika, Donatas; van Ham, Maarten

  1. By: Moritz Bonn
    Abstract: Based on the requirement of OECD countries to permit substantial inflows of immigrants to compensate for the effects of the demographic change, this paper explores the incentives of heterogeneous migrants to acquire host country specific cultural skills to improve their labor market outcomes. The theoretical results predict that the migrants` ambition in achieving such skills is increased if the scope of their respective cultural group is small, social permeability of migrants in the native society is large and individual integration costs are low. Based on these results, I study whether cultural heterogeneity among the migrant population is welfare enhancing for the native population. I find that as long as migrants do not differ too much with regard to their costs of learning the native culture, cultural heterogeneity is beneficial for the host economy. The model provides an explanation for the shift in the immigration policies of the traditional host countries throughout the twentieth century as well as the current immigration policies in the EU member states.
    Keywords: Immigration, Cultural Interaction, Political Economy
    JEL: F22 J15 O31
    Date: 2012
  2. By: Bryson, Alex; Zhou, Minghai
    Abstract: All that we know about the CEO labour market in China comes from studies of public listed companies and state-owned enterprises (SOEs). This paper is the first to examine the operation of the CEO labour market across all sectors of the Chinese economy. We do so using World Bank enterprise data for the first part of the 21st Century. Incentive schemes are commonplace throughout the economy and include contracts linking CEO pay directly to firm performance, annual bonus schemes, the posting of performance bonds, and holding company stock. These incentive mechanisms appear to complement rather than substitute for one another. The elasticity of pay with respect to company performance is one or more in two-fifths of the cases where CEO's have performance contracts, suggesting many face high-powered incentives. CEO's also face a real dismissal threat and financial penalties if they fail to deliver. Incentive contracts are used to attract the most talented executives, as indicated by educational attainment and position in the Communist Party. However, government involvement in the appointment of a CEO reduces the likelihood that the CEO will receive an incentives-based contract, perhaps because governments appoint "bureaucrats" to perform roles which incorporate social and political as well as economic goals. Firms with good corporate governance are more likely to deploy incentive contracts. A picture emerges of a well-functioning labour market for executives in China that exhibits many of the traits common to CEO labour markets in the West.
    Date: 2012–09
  3. By: Aoki, Masahiko (Asian Development Bank Institute)
    Abstract: This essay provides a game-theoretic, endogenous view of institutions, and then applies the idea to identify the sources of institutional trajectories of economic development in China, Japan, and Korea. It stylizes the Malthusian-phase of East Asian economies as peasant-based economies in which small families allocated their working time between farming on small plots—leased or owned—and handcrafting for personal consumption and markets. It then compares institutional arrangements across these economies that sustained otherwise similar economies. It characterizes the varied nature of the political states of Qing China, Tokugawa Japan, and Yi Korea by focusing on the way in which agricultural taxes were enforced. It also identifies different patterns of social norms of trust that were institutional complements to, or substitutes for, political states. Finally, it traces the path-dependent transformations of these state-norm combinations along subsequent transitions to post-Malthusian phases of economic growth in the respective economies.
    Keywords: china; japan; institutional complementarity; institutional change; capitalism; varieties of norms; political economy
    JEL: O43 O53 P51
    Date: 2012–12–03
  4. By: Hirota, Haruaki; Yunoue, Hideo
    Abstract: In order to evaluate a fiscal common-pool problem, this paper focuses on the relationship between local government council size and its expenditure. Generally, local councilors internalize the benefit of public projects targeted at their political jurisdictions, but underestimate and prefer to externalize the cost of public projects due to the national subsidy system. When council sizes become larger, their expenditure might be larger because of the selfish behavior of local council members. This paper estimates the positive effect of local council size on local government expenditure using a dataset of 13,989 municipalities in Japan over a period of 6 years. In Japan, local council size is a deterministic and discontinuous function of municipal population size under legal rules. We pay attention to this exogenous discontinuity and apply a regression discontinuity design to consider an endogeneity bias. The results show that the larger the size of the local council the larger the size of expenditure they undertake. In particular, we find that growing small municipalities tend to increase their expenditures, so that for example, 1% increases in local council size lead to about 1.2% increases of expenditures by small municipalities. Our results show that the fiscal common-pool problem is produced in small municipalities.
    Keywords: fiscal common-pool problem; local council size; government expenditure; regression discontinuity design
    JEL: H11 H72 D72
    Date: 2012
  5. By: Herman Werfhorst (FMG / AIAS, Universiteit van Amsterdam); István György Tóth (TÁRKI Social Research Institute); Daniel Horn (Institute of Economics, Hungarian Academy of Sciences, TÁRKI Social Research Institute (TÁRKI)); Márton Medgyesi; Natascha Notten (Faculteit der Sociale Wetenschappen, Radboud Universiteit Nijmegen); Christina Haas (AIAS, University of Amsterdam); Burg, B. (Brian)
    Abstract: Introduction This report describes the results of work package 5 of the European research project Growing Inequalities’ Impacts (GINI). The GINI project is funded by the seventh Framework Programme of the European Commission. Its main mission is to study the effects of economic and educational inequalities on a wide range of outcomes, including housing, health, family formation, living standards, political participation, social trust and value orientations. Furthermore, the GINI project assesses not only whether inequality is related to such outcomes, but whether public policies have modifi ed or mitigated undesirable outcomes related to inequalities. ....
    Date: 2012–09
  6. By: Ubarevičienė, Rūta (Lithuanian Social Research Centre); Burneika, Donatas (Lithuanian Social Research Centre); van Ham, Maarten (Delft University of Technology)
    Abstract: This paper analyses the interrelationship between the process of suburbanization and a changing political and ethnic landscape in the Vilnius urban region. The region surrounding Vilnius city is dominated by Polish identity residents while those who suburbanise into the region are mainly ethnic Lithuanians. This may lead to potential tension and conflicts in the region which may find its expression in the voting behaviour of residents of the region. Using data from the 1997 and 2011 municipal elections we found that the share of votes for the Polish party in the region decreases over time, while the absolute number of votes for this party increases. At the same time we find increasing voting activity in the suburban ring. The changing electoral behaviour can be regarded as an indicator of a growing ethnic identity. The voting results also identify the zones of the most intense changes in the electoral behavior and thus indicate areas of potential social tensions between two ethnic groups.
    Keywords: suburbanisation, ethnicity, conflict, voting behaviour, electoral data, Lithuania
    JEL: D72 J15 R11 R14 R23
    Date: 2012–11

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