nep-pol New Economics Papers
on Positive Political Economics
Issue of 2013‒01‒19
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Dynamic Effects of Information on Political Corruption: Theory and Evidence from Puerto Rico By Gustavo J. Bobonis; Luis R. Cámara Fuertes; Rainer Schwabe
  2. What Does "Intending to Vote" Mean? By Rogers, Todd; Aida, Masa
  3. The Political Cost of Reforms By Gino Gancia; Alessandra Bonfiglioli
  4. Public Support for European Integration : A comparative analysis By Kristel Jacquier
  5. Democracy's shortcomings in anti-corruption By Tine Søreide
  6. Decentralization as Unbundling of Public Goods Provision - New Effects of Decentralization on Efficiency and Electoral Control By Antonio Farfan-Vallespin
  7. The geometry of voting power : weighted voting and hyper-­ellipsoids By Nicolas Houy; William S. Zwicker
  8. Isolated Capital Cities and Misgovernance: Theory and Evidence By Campante, Filipe R.; Do, Quoc-Anh; Guimaraes, Bernardo
  9. Fiscal Federalism and European Health System Decentralization: A Perspective By Joan Costa-i-Font
  10. The political economy of Australia’s climate change and clean energy legislation: lessons learned By Spencer, Thomas; Carole-Anne , Senit; Anna, Drutschinin
  11. Trade Liberalization, Democratization and Technology Adoption By Cervellati, Matteo; Naghavi, Alireza; Toubal, Farid
  12. Infrastructure policy and governance failures By Daniel Benitez; Antonio Estache; Tina Søreide

  1. By: Gustavo J. Bobonis; Luis R. Cámara Fuertes; Rainer Schwabe
    Abstract: Does the disclosure of information about corrupt activities induce a sustained reduction in corruption? We use longitudinal data on audits of municipal governments in Puerto Rico to answer this question. We find that corruption is lower in municipalities audited before an election. However, these municipalities do not exhibit decreased levels of corruption in subsequent audits. Mayors in municipalities audited preceding the previous election have higher re-election rates, suggesting that audits enable voters to select more competent politicians. We present a political agency model that rationalizes the observed short-term and dynamic effects of information on corruption and re-election rates. We conclude that audit programs must be timely, sustained, and long-term commitments in order to be effective.
    Keywords: Corruption, information, political agency.
    JEL: D72 H41 K42 O17
    Date: 2012–12
  2. By: Rogers, Todd (Harvard University); Aida, Masa (Greenberg Quinlan Rosner Research)
    Abstract: How accurate are responses to questions about intentions to vote in an upcoming election? Questions of this type are studied in a range of work in political science to understand the effects of other factors on political engagement, as well as in public opinion research. We analyze six phone surveys conducted over two elections which include pre-election vote intention and postelection vote validation (N=24,303). As expected, many who report intending to vote actually do not vote (13% and 54% for the two elections). More surprisingly, high rates people who predicted they would not vote actually do vote (56% and 39%). For both forms of inaccurate self-prediction, respondents were much more accurate when predicting that they would behave consistently with their past behavior than when predicting that they would behave inconsistently with their past behavior. We discuss implications for political science research, behavioral prediction, election administration, and public opinion.
    Date: 2012–11
  3. By: Gino Gancia (CREI and UPF); Alessandra Bonfiglioli (Institute for Economic Analysis)
    Abstract: This paper formalizes in a fully-rational model the popular idea that politicians perceive an electoral cost in adopting costly reforms with future benefits and reconciles it with the evidence that reformist governments are not punished by voters. To do so, it proposes a model of elections where political ability is ex-ante unknown and investment in reforms is unobservable. On the one hand, elections improve accountability and allow to keep well-performing incumbents. On the other, politicians make too little reforms in an attempt to signal high ability and increase their reappointment probability. Although in a rational expectation equilibrium voters cannot be fooled and hence reelection does not depend on reforms, the strategy of underinvesting in reforms is nonetheless sustained by out-of-equilibrium beliefs. Contrary to the conventional wisdom, uncertainty makes reforms more politically viable and may, under some conditions, increase social welfare. The model is then used to study how political rewards can be set so as to maximize social welfare and the desirability of imposing a one-term limit to governments. The predictions of this theory are consistent with a number of empirical regularities on the determinants of reforms and reelection. They are also consistent with a new stylized fact documented in this paper: economic uncertainty is associated to more reforms in a panel of 20 OECD countries.
    Date: 2012
  4. By: Kristel Jacquier (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne)
    Abstract: This paper proposes to study how socio-economic characteristics shape preferences in European matters. It is assumed that social groups threatened by liberalization tend to be more euro-skeptical than others. This hypothesis is tested using individual-level data from two rounds of the European Social Survey. Controlling for national fixed effects and income, we focus on variables of occupational status (International Standard Classification of Occupations ISCO-88, and current occupation). Finally, we include a variable of subjective partisan affiliation to make sure that our results are not concealing a left/right positioning. We argue that the economic status of agents plays a crucial role in explaining cross-sectional variations in public support for the European process in each member state. Additionally, the partisan affiliation confirms that in European matters, socio-economic forces are not a mere reflection of the left/right spectrum.
    Keywords: European integration; political economy; globalization; survey research
    Date: 2012–12
  5. By: Tine Søreide
    Abstract: Citizens of countries with a corrupt political leadership are trapped in a situation, typically characterized by increasing income differences, human rights violations, dysfunctional democracy, limited press freedom, weak access to basic services, such as health and utilities, and it is difficult for them to move to another country to get a better life.  Despite Arab Spring experiences, confronting a government with monopoly on power within its jurisdiction often fall short, and citizens’ success in their efforts to replace an illegitimate government relies on some form of international support. This paper reviews some of the reasons why we see shortcomings in this support. The international anti-corruption initiatives far too often fail to reach the political elite. New laws that could have made it difficult to hide stolen money abroad are not enforced. Pro-democracy initiatives are important, yet not efficient enough for getting rid of corrupt politicians. International pressure for legal reform does not bring change unless the laws are enforced. ‘Other governments’ often fail the citizens in these countries. Instead, they keep a good dialogue with the incumbent in order to improve their chances to get access to resources, secure profitable contracts for ‘their’ firms, or because of military strategies. Narrow interests and competition between countries distort the process towards a world free from political corruption. 
    Date: 2012
  6. By: Antonio Farfan-Vallespin (Department of International Economic Policy, University of Freiburg)
    Abstract: This paper proposes a new perspective for studying decentralization by considering it as the unbundling of public goods provision. We define centralization as the bundled pro- vision of public goods from different tiers (national, sub-national or local) by one single provider held accountable by the voters via elections. We define decentralization as the unbundled provision of public goods of different tiers by a different provider for each tier, each of them accountable to the voters via elections. This novel perspective allows us to identify two new effects of decentralization. The first effect provides an efficiency advantage to centralization because the central provider can reallocate resources among the different tiers of public goods after shocks to the prices of these public goods occur. The second effect shows that unbundling the provision of public goods increases electoral control. Finally, we compare both effects and find that centralization will dominate over decentralization when public goods prices are more volatile and the option of transfer- ring resources among tiers of public goods acts as an insurance device. Decentralization dominates when the environment is more stable and voters can monitor the providers of public goods more tightly.
    Keywords: decentralization, centralization, public goods, electoral control
    JEL: D74 K4
    Date: 2012–11
  7. By: Nicolas Houy (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); William S. Zwicker (Union College - Union College)
    Abstract: In cases where legislators represent districts that vary in population, the design of fair legislative voting rules requires an understanding of how the number of votes cast by a legislator is related to a measure of her influence over collective decisions. We provide three new characterizations of weighted voting, each based on the intuition that winning coalitions should be close to one another. The locally minimal and tightly packed characterizations use a weighted Hamming metric. Ellipsoidal separability employs the Euclidean metric : a separating hyperellipsoid contains all winning coalitions, and omits losing ones. The ellipsoid's proportions, and the Hamming weights, reflect the ratio of voting weight to influence, measured as Penrose-Banzhaf voting power. In particular, the spherically separable rules are those for which voting powers can serve as voting weights.
    Keywords: weighted voting ; voting power ; simple games ; ellipsoidal separability
    Date: 2013–01–11
  8. By: Campante, Filipe R. (Harvard University); Do, Quoc-Anh (Sciences Po, Paris); Guimaraes, Bernardo (Sao Paulo School of Economics)
    Abstract: Motivated by a novel stylized fact--countries with isolated capital cities display worse quality of governance--we provide a framework of endogenous institutional choice based on the idea that elites are constrained by the threat of rebellion, and that this threat is rendered less effective by distance from the seat of political power. In established democracies, the threat of insurgencies is not a binding constraint, and the model predicts no correlation between isolated capitals and misgovernance. In contrast, a correlation emerges in equilibrium in the case of autocracies. Causality runs both ways: broader power sharing (associated with better governance) means that any rents have to be shared more broadly, hence the elite has less of an incentive to protect its position by isolating the capital city; conversely, a more isolated capital city allows the elite to appropriate a larger share of output, so the costs of better governance for the elite, in terms of rents that would have to be shared, are larger. We show evidence that this pattern holds true robustly in the data. We also show that isolated capitals are associated with less power sharing, a larger income premium enjoyed by capital city inhabitants, and lower levels of military spending by ruling elites, as predicted by the theory.
    JEL: D02 D74 R12
    Date: 2012–12
  9. By: Joan Costa-i-Font
    Abstract: How does fiscal decentralisation affect the development of a health system?Evidence from health care decentralisation in Europe can offer some insights to the question above. This paper addresses the effects of health care decentralisation in Europe, and reviews some of the key questions on the design of a health system. We argue that contrary to old mobility argument, the effects of health care decentralisation result from tighter political agency, which generally stands as an alternative to health care privatisation. However, whether efficiency improves after a process of decentralisation depends heavily on the incentives fiscal design exerts on cost –containment, inter-jurisdictional competition, policy innovation and diffusion. Experiences of health care decentralisation highlight important concerns associated with vertical imbalances and limited horizontal imbalances. Finally, health care decentralisation can give rise to a new regional political cycle where citizens can reward or penalise the performance of health policy.
    Keywords: health systems decentralisation, fiscal federalism, health care, political agency
    JEL: H51 I18
    Date: 2012–12
  10. By: Spencer, Thomas; Carole-Anne , Senit; Anna, Drutschinin
    Abstract: In November 2011, Australia adopted a highly innovative, ambitious and comprehensive climate change policy, the Clean Energy Legislative Package(CELP). This outcome was not self-evident.The CELP embeds an innovative carbon pricing mechanism in a comprehensive and highly generous package of complementary measures designed to increase its public acceptability, and environmental and economic efficiency. It is combined with progressive income tax cuts, increases in government transfer payments, and measures to shield emissions and trade-intensive industry and promote investment in renewable energy, energy efficiency and R&D. In addition, the package contains innovative governance mechanisms to shield it from the vagaries of the political cycle, and increase the political and administrative costs of dismantling it. In all, these measures increase the CELP’s chances of survival and provide an example of policy innovation for other countries to follow, keeping in mind their particular national circumstances.
    Keywords: Carbon pricing; political economy of climate policy; Australian climate policy
    JEL: Q52 Q40 Q54
    Date: 2012
  11. By: Cervellati, Matteo (University of Bologna); Naghavi, Alireza (University of Bologna); Toubal, Farid (ENS de Cachan)
    Abstract: We study the role of trade liberalization, democratization and their interaction for technology adoption. A general equilibrium theory with heterogeneous skills predicts a complementarity between trade and political regimes. Openness should accelerate technology adoption if coupled with democratization but may lead to a slow down if these regime changes are imbalanced. We use panel data on technology adoption at the sectoral level for the period 1980-2000 by exploiting within country variation and the heterogenous timing of openness and democratization. The results document the existence of robust positive interactions between these institutional changes for technology adoption and productivity growth.
    Keywords: trade openness, democratization, political economy theory, technology adoption, sector level panel data, cross-country analysis
    JEL: F16 J24 O14 P51 F59
    Date: 2013–01
  12. By: Daniel Benitez; Antonio Estache; Tina Søreide
    Abstract: Interventions to fix market failures in infrastructure have often resulted in some form of governance failure and this contributes importantly to explain shortcomings in the supply of infrastructure services in developing countries and increasingly in developed countries in crisis. The development community continues to address sector dysfunctions from the sector level, often with a ‘one solution fits all’ approach, instead of approaching the political level, which is considered more challenging. This paper presents a systematic structured review of experiences with policy work in light of political economy explanations. Governance failures have different explanations – including populism, patronage, corruption or ownership shares in the private sector. This paper offers a structured framework for identifying the given governance challenge and discusses the need for more tailor-made approaches to sector-reform.
    Keywords: Political economy, Infrastructure, Regulation, Reform
    Date: 2012

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