nep-pol New Economics Papers
on Positive Political Economics
Issue of 2013‒01‒26
seven papers chosen by
Eugene Beaulieu
University of Calgary

  1. The right-wing power of small countries By Franto Ricka
  2. Political determinants of budget deficit in Pakistan: An empirical investigation By Anwar, Mumtaz; Ahmad, Munazza
  3. The lure of authority: Motivation and incentive effects of power By Ernst Fehr; Holger Herz; Tom Wilkening
  4. Domestic Politics and the Formation of International Environmental Agreements By Simon Dietz; Carmen Marchiori; Alessandro Tavoni
  5. A Non-Proposition-Wise Variant of Majority Voting for Aggregating Judgments By García-Bermejo, Juan Carlos
  6. Gender Inequality in North East India By Mahanta, Bidisha; Nayak, Purusottam
  7. Redistribution Effects of Energy and Climate Policy: The Electricity Market By Lion Hirth; Falko Ueckerdt

  1. By: Franto Ricka (EBRD)
    Abstract: This paper investigates the political implications of tax competition between countries of different sizes. We show that smaller countries competing for internationally mobile capital would set lower tax rates than their larger counterparts when run by similar governments. Moreover, small-country governments are actually politically to the right of those in larger countries, adding a second reason for lower tax rates in the former. Then a higher number of small countries competing for capital with large countries not only decreases the large-country tax rates on capital, but also results in more right-wing governments being elected. Small countries thus have ”right-wing power”.
    Keywords: tax competition, government, elections
    JEL: D72 F5
    Date: 2012–12
  2. By: Anwar, Mumtaz; Ahmad, Munazza
    Abstract: This study is an attempt to check some political factors determining budget deficit in Pakistan. It examines the short and long-run relationship between the Budget deficit, democracy and cabinet size for Pakistan's economy. The bounds testing approach to co-integration and (ECM) error-correction models, developed within an autoregressive distributed lag (ARDL) framework is applied to annual data for the period 1976 to 2009 in order to investigate whether a long-run equilibrium relationship exists between the budget deficit and these factors. The result of the bounds test indicates that there exist long-run relationship between the budget deficit and political variables. The results provide strong evidence that large government size will significantly add to the budget deficit. The democracy can help in reducing budget deficit but shows a weaker influence in case of Pakistan for the sample period. --
    Keywords: Budget Deficit,Democracy,ARDL,Pakistan
    JEL: H62 K42
    Date: 2012
  3. By: Ernst Fehr; Holger Herz; Tom Wilkening
    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
  4. By: Simon Dietz (Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science, Department of Geography and Environment, London School of Economics and Political Science); Carmen Marchiori (Department of Geography and Environment, London School of Economics and Political Science); Alessandro Tavoni (Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science)
    Abstract: The theory of international environmental agreements overwhelmingly assumes that governments engage as unitary agents. Each government makes choices based on benefits and costs that are simple national aggregates, and similarly on a single set of national-level motivations, together drawing a strong analogy with the behaviour of an individual or firm in other strategic contexts. In reality, however, various domestic special interests shape environmental policy, including how national governments cooperate on cross-border issues. Therefore in this paper we introduce to a classic model of international environmental cooperation the phenomenon of domestic political competition, whereby lobby groups seek to influence policy by offering to fund political campaigning. We use the model to establish some general conditions for the effects of lobbying on the stringency of policy and the size of coalitions cooperating to provide an environmental good. Using specific functional forms, we obtain a range of further results, including circumstances in which the omission of lobbying results in environmental protection being underestimated.
    Keywords: Game Theory, International Environmental Agreements, Lobbying, Special-Interest Groups, Strategic Cooperation
    JEL: C7 H41 K33 Q2 Q54
    Date: 2012–10
  5. By: García-Bermejo, Juan Carlos (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)
    Abstract: Majority voting is commonly used in aggregating judgments. The literature to date on judgment aggregation (JA) has focused primarily on proposition-wise majority voting (PMV). Given a set of issues on which a group is trying to make collective judgments, PMV aggregates individual judgments issue by issue, and satisfies a salient property of JA rules—independence. This paper introduces a variant of majority voting called holistic majority voting (HMV). This new variant also meets the condition of independence. However, instead of aggregating judgments issue by issue, it aggregates individual judgments en bloc. A salient and straightforward feature of HMV is that it guarantees the logical consistency of the propositions expressing collective judgments, provided that the individual points of view are consistent. This feature contrasts with the known inability of PMV to guarantee the consistency of the collective outcome. Analogously, while PMV may present a set of judgments that have been rejected by everyone in the group as collectively accepted, the collective judgments returned by HMV have been accepted by a majority of individuals in the group and, therefore, rejected by a minority of them at most. In addition, HMV satisfies a large set of appealing properties, as PMV also does. However, HMV may not return any complete proposition expressing the judgments of the group on all the issues at stake, even in cases where PMV does. Moreover, demanding completeness from HMV leads to impossibility results similar to the known impossibilities on PMV and on proposition-wise JA rules in general.
    Keywords: judgment aggregation; judgment aggregation correspondences; proposition-wise majority voting; holistic majority voting
    JEL: D70 D71
    Date: 2013–01
  6. By: Mahanta, Bidisha; Nayak, Purusottam
    Abstract: The present paper is an attempt to analyze the status of gender inequality in North East India using various indicators based on secondary data. The study reveals that the northeast is better off than that of the nation as a whole in terms of gender equality. However inequality between women and men exists in the region in spite of the predominance of various ethnic groups who by and large do not believe in sex discrimination. The study reveals that women are relatively disempowered and enjoy somewhat lower status than that of men in the region. Gender gap exists in terms of access to education, employment and health. A large gender gap exists in political participation both at the levels of state and nation. Among the northeastern states, Meghalaya, Manipur and Mizoram show relatively lesser degree of gender inequality in terms of work participation, literacy, infant mortality and sex ratio. The situation is however adverse in case of Tripura, Assam and Sikkim. The study concludes with an observation that access to education, employment and health are only the enabling factors that may not guarantee the achievement towards the goal, which however, largely depends on the mindset of the people.
    Keywords: Gender; Inequality; North East India
    JEL: O1
    Date: 2013–01–17
  7. By: Lion Hirth (Potsdam-Institute for Climate Impact Research, Vattenfall GmbH); Falko Ueckerdt (Potsdam-Institute for Climate Impact Research)
    Abstract: Energy and climate policies are usually seen as measures to internalize externalities. However, as a side effect, these policies redistribute wealth between consumers and producers, and within these groups. While redistribution is seldom the focus of the academic literature in energy economics, it plays a central role in real world policy debates. This paper compares the redistribution effects of two major electricity policies: support schemes for renewable energy sources, and CO2 pricing. We find that the redistribution effects of both policies are large, and they work in opposed directions: while renewables support transfers wealth from producers to consumers, carbon pricing does the opposite. More specifically, we show that moderate amounts of wind subsidies leave consumers better off even if they bear the costs of subsidies. In the case of CO2 pricing, we find that while suppliers as a whole benefit even without free allocation of emission certificates, large amounts of producer surplus are redistributed between different types of producers. These findings are derived from an analytical model of electricity markets, and a calibrated numerical model of the Northwestern European integrated power system. Our findings imply that a society with a preference for avoiding large redistribution might prefer a mix of policies, even if CO2 pricing alone is the first best climate policy in terms of allocative efficiency.
    Keywords: Carbon Tax, Emission Trading, Redistribution, Consumer Surplus, Producer Surplus, Wind Power Generation, Electricity Market Modelling
    JEL: Q42 Q48 L94 H23 D61 D62 C61 C63
    Date: 2012–11

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