nep-pol New Economics Papers
on Positive Political Economics
Issue of 2012‒12‒22
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Conditional Cash Transfers, Political Participation, and Voting Behavior By Javier E. Baez; Adriana Camacho; Emily Conover; Román A. Zárate
  2. Democracy Undone. Systematic Minority Advantage in Competitive Vote Markets By Casella, Alessandra; Turban, Sébastien
  3. A Poll Tax by any Other Name: The Political Economy of Disenfranchisement By Daniel B. Jones; Werner Troesken; Randall Walsh
  4. The Efficacy and Efforts of Interest Groups in Post Elections Policy Formation By Epstein, Gil S.; Mealem, Yosef; Nitzan, Shmuel
  5. Divided Majority and Information Aggregation: Theory and Experiment By Bouton, Laurent; Castanheira, Micael; Llorente-Saguer, Aniol
  6. Political competition and the (in)effectiveness of redistribution in a federation By Ikuho Kochi & Raúl Alberto Ponce Rodríguez
  7. GINI DP 43: Educational Selectivity and Preferences about Education Spending By Daniel Horn
  8. Non-Linear Geographics and the Economics of Transition and Democratization By Elise S. Brezis; Thierry Verdier
  9. Decentralized Aid and Democracy By Joaquin Morales Belpaire
  10. A Guide to the Political Economy of Reforming Energy Subsidies By Commander, Simon
  11. Tax Evasion, Inequality and Progressive Taxes: A Political Economy Perspective By Radhika Lahiri; Mark Phoon
  12. GINI DP 47: Support for Democracy in Cross-National Perspective: The Detrimental Effect of Economic Inequality By Robert Andersen
  13. Does the Leader’s Ethnicity Matter? Ethnic Favoritism, Education and Health in Sub-Saharan Africa By Raphaёl Franck; Ilia Rainer
  14. The Lure of Authority: Motivation and Incentive Effects of Power By Fehr, Ernst; Herz, Holger; Wilkening, Tom
  15. Promiscuous Elites and Economic Development By Elise S. Brezis
  16. Political motives in climate and energy policy By Annegrete Bruvoll, Hanne Marit Dalen and Bodil M.Larsen

  1. By: Javier E. Baez; Adriana Camacho; Emily Conover; Román A. Zárate
    Abstract: This paper estimates the effect of enrollment in a large scale anti-poverty program in Colombia, Familias en Acción (FA), on intent to vote, turnout and electoral choice. For identification we use discontinuities in program eligibility and variation in program enrollment across voting booths. We find that FA has a positive effect on political participation in the 2010 presidential elections by increasing the probability that program beneficiaries register to vote and cast a ballot, particularly among women. Regarding voter's choice, we find that program participants expressed a stronger preference for the official party that implemented and expanded the program. These results are also more evident among women. Overall, the findings show that voters respond to targeted transfers and that these transfers can foster support for incumbents, thus making the case for designing political and legislative mechanisms that avoid successful anti-poverty schemes from being captured by political patronage.
    Date: 2012–09–19
  2. By: Casella, Alessandra; Turban, Sébastien
    Abstract: We study the competitive equilibrium of a market for votes where voters can trade votes for a numeraire before making a decision via majority rule. The choice is binary and the number of supporters of either alternative is known. We identify a sufficient condition guaranteeing the existence of an ex ante equilibrium. In equilibrium, only the most intense voter on each side demands votes and each demand enough votes to alone control a majority. The probability of a minority victory is independent of the size of the minority and converges to one half, for any minority size, when the electorate is arbitrarily large. In a large electorate, the numerical advantage of the majority becomes irrelevant: democracy is undone by the market.
    Keywords: majority voting; minority; vote buying; vote trading; voting
    JEL: C62 C72 D70 D72 P16
    Date: 2012–12
  3. By: Daniel B. Jones; Werner Troesken; Randall Walsh
    Abstract: In this paper, we examine the political economy of voting rights in the American South. We begin by measuring the impact of both formal laws and informal modes of voter suppression on African-American political participation. In contrast to prior research, we find evidence that both formal and informal modes of voter suppression were important and mutually reinforcing. Part of our analysis includes explicitly identifying the magnitude and causal effects of lynching on black voter participation. We then turn to analyzing to the relatively unexplored question of how disenfranchisement–and the accompanying shifts in political power–affected policy outcomes, congressional voting, and partisan control of state and federal legislatures.
    JEL: H0 J15 N11
    Date: 2012–12
  4. By: Epstein, Gil S. (Bar-Ilan University); Mealem, Yosef (Netanya Academic College); Nitzan, Shmuel (Bar-Ilan University)
    Abstract: This paper presents a new model of interest groups and policy formation in the legislature. In our setting, the already given party ideological predispositions and power distribution determine the expected policy outcome. Our analysis applies to the case of un-enforced or enforced party discipline as well as to two-party and multi-party (proportional representation) electoral systems. The interest groups' objective is to influence the outcome in their favor by engaging in a contest that determines the final decision in the legislature. Our first result clarifies how the success of an interest group hinges on the dominance of its ideologically closer party and, in general, the coalition/opposition blocks of parties under un-enforced party or coalition/opposition discipline. Such dominance is defined in terms of ideological inclination weighted by power. Our second result clarifies how the success of an interest group hinges on the dominance of its ideology in the ruling coalition (party) in a majoritarian system with enforced coalition (party) discipline. We then clarify under what condition an interest group prefers to direct its lobbying efforts to two parties or the two coalition and opposition blocks of parties under un-enforced discipline rather than to the members of the ruling coalition (party) under enforced discipline. The lobbying efforts under un-enforced and enforced party discipline are also compared. Finally, we clarify the effect of ideological predispositions and power on the efforts of the interest groups.
    Keywords: policy formation, political parties, ideological predispositions, electoral power, post-elections lobbying, enforced party discipline
    JEL: D70 D72 D74 D78
    Date: 2012–11
  5. By: Bouton, Laurent; Castanheira, Micael; Llorente-Saguer, Aniol
    Abstract: This paper both theoretically and experimentally studies the properties of plurality and approval voting when the majority is divided as a result of information imperfections. The minority backs a third alternative, which the majority views as strictly inferior. The majority thus faces two problems: aggregating information and coordinating to defeat the minority candidate. Two types of equilibria coexist under plurality: either voters aggregate information, but this requires splitting their votes, or they coordinate but cannot aggregate information. With approval voting, expected welfare is strictly higher, because some voters multiple vote to achieve both goals at once. In the laboratory, we observe both types of equilibrium under plurality. Which one is selected depends on the size of the minority. Approval voting vastly outperforms plurality. Finally, subject behavior suggests the need to study asymmetric equilibria.
    Keywords: Approval Voting; Experiments; Multicandidate Elections; Plurality
    JEL: C72 C92 D70 P16
    Date: 2012–11
  6. By: Ikuho Kochi & Raúl Alberto Ponce Rodríguez (Universidad Autónoma de Ciudad Juárez)
    Abstract: We analyze political and economic conditions in which the effectiveness of public redistribution might be low in a federation. In our economy, the central government redistributes income while local governments provide a pro poor local public good. If local public spending falls as a response to the ex-post tax-transfer distribution of income engineered by the policy of the central government then public redistribution might be ineffective in redistributing welfare. In this paper we address this issue. Our main findings are: first, if the party of some local government represents a coalition of voters with labor earning abilities below the average earning ability of the economy and the aggregate net transfer from the redistributive program is negative for residents in the locality then local public spending falls in this district as a response to the redistributive policy of the central government. Second, if local governments of all districts are controlled by parties representing voters with sufficiently high marginal utilities of income and labor earning abilities below the nationwide average labor earning ability then public redistribution induces all local governments to reduce local public spending.
    Keywords: Redistributive effects, state and local governments, fiscal policy and behavior of agents, elections
    JEL: H23 H76 H3 D72
    Date: 2012–07–01
  7. By: Daniel Horn (Institute of Economics, Hungarian Academy of Sciences, TÁRKI Social Research Institute (TÁRKI))
    Abstract: This paper argues that preferences for educational redistribution are not driven by income but by the level of education. While income and preferences for educational redistribution follow the conventional story – rich want less spending –, the level of education associates positively with spending on education, which effect is altered by the selectivity of the education system. Highly educated citizens are relatively more likely to support government spending on education in countries where the system is selective compared to highly educated people’s preferences in countries with comprehensive systems.
    Keywords: spending on education, selectivity, preferences on government spending, ISSP1996, ISSP2006
    Date: 2012–04
  8. By: Elise S. Brezis (Bar-Ilan University); Thierry Verdier
    Abstract: The purpose of this paper is to analyze the effects of geography on the transition process in authoritarian political regimes, and to investigate the nature of the links between political change, economic reforms and geographic location. A simple model of transition and democratization is presented wherein we show that the effectiveness of repression by the incumbent elite is a negative function of the distance to the “free world”. In consequence, there are conflicting effects of geography on political power shifting. The paper provides a rationale for the counterintuitive fact that the first authoritarian country to start a transition process towards democratization is not necessarily the one nearest to the free world.
    Keywords: conflicts; democratization; elites; geography; repression; transition process.
    JEL: D74 P26 P36
    Date: 2012–08
  9. By: Joaquin Morales Belpaire
    Abstract: The last three decades have seen an important surge of the non-governmental sector in the provision of foreign aid. Using NGOs to deliver aid can be a solution to bypass corrupt authorities, avoiding that aid resources are captured by local elites. However NGOs may also act as surrogates for governmental provision of public goods. This implies that citizens make their own governments less accountable. In democratic countries, this can reduce electoral support for provision of public services by the state and harm the poor that don't directly benefit from the NGOs' projects. We develop a theoretical model of vote over public finances to analytically characterise the effect of decentralised aid on welfare. We find that non-governmental aid can harm the poor, weaken governance and aggravate inequalities by crowding-out governmental expenditures. These inefficiencies occur even in a flawless institutional context. We also find that the crowding-out effect can be mitigated if NGOs target countries with low income inequalities or by focusing on humanitarian-oriented missions.
    Keywords: NGOs, Democracy, Foreign Aid, Decentralized Aid, Development, Public Economics, Political Economics
    Date: 2012
  10. By: Commander, Simon (EBRD, London)
    Abstract: Energy subsidies are used widely. Although adverse from an efficiency perspective, subsidies confer private benefits on particular groups and, once introduced, tend to be persistent. This paper examines the reasons why and possible ways of overcoming the barriers to reform. The starting point is to look at the motives lying behind the adoption of energy subsidies. Distributional motives were found to figure prominently while the role of interested parties or lobbies is also common. The paper then looks at the characteristics of countries that use energy subsidies. Countries with weak institutions – often non-democracies – tend to be associated with higher subsidies. The paper then looks at how country level conditions and constraints can be identified. An analytical-cum-policy framework allowing identification of the key constraints is proposed before turning to the types of policies – contingent on institutional capacity – that can address those constraints, such as compensating transfers. The paper also indicates how a better understanding of citizens’ policy preferences and the trade-offs that are likely to be accepted is essential for designing reform.
    Keywords: political economy, energy, subsidies, transfers
    JEL: H20 H23 J65 J68
    Date: 2012–12
  11. By: Radhika Lahiri (QUT); Mark Phoon
    Abstract: This paper revisits the original Allingham and Sandmo (1972) framework with a view towards addressing the issue of tax compliance, and examining the political economy implications of tax evasion for progressivity in the tax structure. In so doing, we ‘start from scratch’ by constructing a simple extension of the basic Allingham and Sandmo construct that allows agents to initially decide whether to evade taxes or not. We then use a step-by-step model building procedure by taking both the basic model and its ‘evade-or-not’ counterpart towards a dynamic macroeconomic framework. We find that the ‘evade or not’ assumption has strikingly different and more realistic implications for the extent of evasion, and demonstrate that it is a more appropriate modeling strategy in the context of macroeconomic models. Furthermore, our numerical analysis suggests that the political outcome for the tax rate for a given level of inequality is conditional on whether there is a large or small or large extent of evasion in the economy, although changes in inequality do not matter for this outcome.
    Keywords: Tax Evasion; Inequality; Political Economy
    JEL: H26 D63 E60
    Date: 2012–12–10
  12. By: Robert Andersen (Sociology, University of Toronto)
    Abstract: Using survey data and national statistics on 35 modern democracies, this research explores the relationship between economic and political conditions and support for democracy. As expected from modernization theory, support for democracy tends to be highest in countries with a high level of economic development. More importantly, however, I contribute a new finding that income inequality matters much more. Specifically, citizens from countries with relatively low levels of income inequality tend to be more likely than others to support democracy. I also find that household income is positively related to support for democracy in most countries, though it tends to have its strongest effect if economic development is high and income inequality is low. Finally, even after taking into account the level of economic development in one’s country, people from former Communist countries tends to have far less support for democracy than those from more established democracies.
    Date: 2012–07
  13. By: Raphaёl Franck (Bar-Ilan University); Ilia Rainer
    Abstract: In this paper we reassess the role of ethnic favoritism in Sub-Saharan Africa. Using data from 18 African countries, we study how primary education and infant mortality of ethnic groups were affected by changes in the ethnicity of the countries’ leaders during the last fifty years. Our results indicate that the effects of ethnic favoritism are large and widespread, thus providing support for ethnicity-based explanations of Africa’s underdevelopment. We also conduct a crosscountry analysis of ethnic favoritism in Africa. We find that ethnic favoritism is less prevalent in countries with one dominant religion. In addition, our evidence suggests that stronger fiscal capacity may have enabled African leaders to provide more ethnic favors in education but not in infant mortality. Finally, political factors, linguistic differences and patterns of ethnic segregation are found to be poor predictors of ethnic favoritism.
    Date: 2012–03
  14. By: Fehr, Ernst (University of Zurich); Herz, Holger (University of Zurich); Wilkening, Tom (University of Melbourne)
    Abstract: Authority and power permeate political, social, and economic life, but empirical knowledge about the motivational origins and consequences of authority is limited. We study the motivation and incentive effects of authority experimentally in an authority-delegation game. Individuals often retain authority even when its delegation is in their material interest – suggesting that authority has non-pecuniary consequences for utility. Authority also leads to over-provision of effort by the controlling parties, while a large percentage of subordinates under-provide effort despite pecuniary incentives to the contrary. Authority thus has important motivational consequences that exacerbate the inefficiencies arising from suboptimal delegation choices.
    Keywords: organizational behavior, incentives, experiments and contracts
    JEL: C92 D83 D23
    Date: 2012–11
  15. By: Elise S. Brezis (Bar-Ilan University)
    Abstract: This paper analyzes the interconnection between elites and its effects on economic growth. For decades, the bureaucratic elite has been joining the business elite after leaving office, and this in growing numbers. This relationship has been termed “the revolving door” in English, “pantouflage” in French, and “amakudari” [descent from heaven] in Japanese. The purpose of this paper is to explain why this social behavior takes place, and why the political elite does not try to prevent it. Moreover, this paper shows that the bureaucratic elite obtains excessive bureaucratic power, and that promiscuous elites actually lead to lower economic growth.
    Keywords: elites, bureaucracy, abuse of power, revolving door, economic growth.
    JEL: H10 H70 O11 O43
    Date: 2012–08
  16. By: Annegrete Bruvoll, Hanne Marit Dalen and Bodil M.Larsen (Statistics Norway)
    Abstract: Standard economic theory provides clear guidance on the design of cost-efficient policy in the presence of imperfect markets and externalities. However, observed policies reveal extensive discrepancies between principles and practise. Based on interviews with core politicians from the Norwegian parliament, we investigate causes for the lack of cost efficiency in climate and energy policy. We find that politicians agree with the notion of cost efficiency in principle, but rather than ascribing efficient instruments directed at specific policy goals, they include concerns for industrial and regional development, income distribution and employment in the environmental policy design. Lacking insight in the functioning of economic instruments and perceptions of a non-binding budget constraint also violate the requirements for efficient policy decisions. The findings point to the role of economists and social scientists to communicate the functioning of complex instruments. Improved compensation procedures could help reduce the politicians’ incentives to undermine efficiency in order to avoid unwanted distributional effects.
    Keywords: policy instruments; policy formulation; political processes; climate policy frameworks; energy policy
    JEL: Q48 Q54 Q58
    Date: 2012–12

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