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on Positive Political Economics |
| By: | Monica Martinez-Bravo (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | New democracies experience greater electoral fraud and more clientelistic spending than established democracies. This paper shows that the body of appointed local officials that a new democracy inherits from the previous regime is a key determinant of the extent of these practices. With a unique dataset from the first post-Soeharto election in Indonesia, I show that the alignment of electoral results between village and district levels is considerably stronger for villages with appointed village heads than for those with elected village heads. I present a model that provides an intuitive interpretation of these results: Appointed officials have stronger incentives to influence voters because of their political career concerns. |
| Keywords: | Institutions, local elections, clientelism, new democracies. |
| JEL: | D72 P16 O12 O17 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2013_1302&r=pol |
| By: | Daron Acemoglu; James A. Robinson; Ragnar Torvik |
| Abstract: | Voters often dismantle constitutional checks and balances on the executive. If such checks and balances limit presidential abuses of power and rents, why do voters support their removal? We argue that by reducing politician rents, checks and balances also make it cheaper to bribe or in?uence politicians through non-electoral means. In weakly-institutionalized polities where such non-electoral in?uences, particularly by the better organized elite, are a major concern, voters may prefer a political system without checks and balances as a way of insulating politicians from these in?uences. When they do so, they are e?ectively accepting a certain amount of politician (presidential) rents in return for redistribution. We show that checks and balances are less likely to emerge when the elite is better organized and is more likely to be able to in?uence or bribe politicians, and when inequality and potential taxes are high (which makes redistribution more valuable to the majority). We also provide case study evidence from Bolivia, Ecuador and Venezuela and econometric evidence on voter attitudes from a Latin American survey consistent with the model. |
| Keywords: | corruption, checks and balances, political economy, redistribution, separation of powers, taxes |
| JEL: | H1 O17 P48 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:bny:wpaper:0010&r=pol |
| By: | Colignatus, Thomas |
| Abstract: | Economic policy depends not only on national elections but also on coalition bargaining strategies. In coalition government, minority parties bargain on policy and form a majority coalition, and select a Prime Minister from their mids. In Holland the latter is done conventionally with Plurality, so that the largest party provides the chair of the cabinet. Alternative methods are Condorcet, Borda or Borda Fixed Point. Since the role of the Prime Minister is to be above all parties and represent the nation and to be there for all citizens, it would enhance democracy and likely be optimal if the potential Prime Minister is selected from all parties and at the start of the bargaining process. The performance of the four selection rules is evaluated using the results of the 2012 Dutch Parliamentary elections. The impossibility theorem by Kenneth Arrow (Nobel memorial prize in economics 1972) finds a crucially different interpretation. |
| Keywords: | Political economy; public choice; political science; optimal representation; electoral systems; elections; coalition; impossibility theorem |
| JEL: | D71 C88 A2 |
| Date: | 2013–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:44158&r=pol |
| By: | Xuepeng Liu; Emanuel Ornelas |
| Abstract: | We study the relationship between participation in free trade agreements (FTAs) and the sustainability of democracy. Our model shows that FTAs can critically reduce the incentive of authoritarian groups to seek power by destroying protectionist rents, thus making democracies last longer. This gives governments in unstable democracies an extra motive to form FTAs. Hence, greater democratic instability induces governments to boost their FTA commitments. In a dataset with 116 countries over 1960-2007, we find robust support for these predictions. They help to rationalize the rapid simultaneous growth of regionalism and of worldwide democratization since the late 1980s. |
| Keywords: | Regionalism, rent destruction, political regimes, trade liberalization |
| JEL: | F13 D72 F53 F15 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1184&r=pol |
| By: | Ehrhart, H. |
| Abstract: | This article analyses the impact of the electoral calendar on the composition of tax revenue (direct versus indirect taxes). It thus represents an extension of traditional political budget-cycle analyses assessing the impact of elections on overall revenue. Panel data from 56 developing countries over the 1980-2006 period reveals a clear pattern of electorally-related policy interventions. Taking the potential endogeneity of election timing into account, we find robust evidence of lower indirect taxes being applied by incumbent governments in the period just prior to an election. Indirect tax revenue in election years is estimated to be 0.3 GDP percentage points lower than in other years, corresponding to a fall of about 3.4% of the average figure in the sample countries, while there is no such relationship with direct tax revenue. |
| Keywords: | Political budget cycles, Elections, Taxation, Developing countries. |
| JEL: | D72 E62 O10 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:419&r=pol |
| By: | Philip Osafo-Kwaako; James A. Robinson |
| Abstract: | In this paper we investigate the empirical correlates of political centralization using data from the Standard Cross-Cultural Sample. We specifically investigate the explanatory power of the standard models of Eurasian state formation which emphasize the importance of high population density, inter-state warfare and trade as factors leading to political centralization. We find that while in the whole world sample these factors are indeed positively correlated with political centralization, this is not so in the African sub-sample. Indeed, none of the variables are statistically related to political centralization. We also provide evidence that political centralization, where it took place, was indeed associated with better public goods and development outcomes. We conclude that the evidence is quite consistent with the intellectual tradition initiated in social anthropology by Evans-Pritchard and Fortes in the 1940s which denied the utility of Eurasian models in explaining patterns of political centralization in Africa. |
| JEL: | N17 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18770&r=pol |
| By: | Vítor Castro (Faculty of Economics University of Coimbra, GEMF and NIPE, Portugal); Rodrigo Martins (Faculty of Economics University of Coimbra and GEMF, Portugal) |
| Abstract: | This paper analyses the presence of duration dependence in Portuguese local governments’ tenure employing continuous and discrete-time duration analyses over a set of spells of time in office for the period 1979-2005. Our results show that the more time a party remains in office, the higher is the likelihood of leaving it. However, more flexible polynomial-in-time, cubic splines and time-dummies specifications show that the behaviour of that likelihood is not monotonic: it increases but only until the third term, then it decreases until the sixth term before starting to increase again. This study also shows that the likelihood of an incumbent party leaving office, given his tenure, is affected by the local economic environment, political support, the effective number of parties, the dimension of the municipality and the age of its leader. Additionally, it shows that that likelihood is consistently lower when the party leader/mayor decides to run for another term. |
| Keywords: | Terms in Office, Portugal, Duration Dependence, Parties. |
| JEL: | D72 H79 C41 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:wpaper:2013-04.&r=pol |
| By: | Steven Craig (University of Houston); Wided Hemissi (University of Houston); Satadru Mukherjee (University of Memphis); Bent E. Sorensen (University of Houston) |
| Abstract: | This paper uses Carroll's (1992) buffer stock model to study government savings behavior exemplifi ed by the Unemployment Insurance (UI) programs of U.S. states from 1976 to 2008. We find strong empirical support for the model from regressions and simulations. Empirically, we fi nd that political consump- tion, defi ned in the context of the model from discretionary components of UI benefi ts and taxes, rises when savings and other spendable resources rises. We calibrate and simulate the model using the methodology pioneered by Jappelli, Padula, and Pistaferri (2008) and we find the model fits well. A key implica- tion is that intertemporal planning by governments is expressed by a trade-off between impatience (politicians' desire to immediately expend all savings) and risk aversion (politicians' fear of running out of resources to support UI). We quantify the amount of fiscal stimulus from the UI program under buffer stock saving. |
| Keywords: | buffer stock, state goverment saving, unemployment insurance |
| JEL: | H11 H74 E21 |
| Date: | 2012–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:hou:wpaper:201302845&r=pol |
| By: | Ibon Galarraga; Luis M. Abadie; Alberto Ansuategi |
| Abstract: | Energy labels are used to promote the purchase of efficient appliances. Many countries in Europe use subsidies (namely energy efficiency rebates) to support these purchases as it is the case of Spain. A figure ranging from 50 to 105€ subsidy has been granted in the past for the acquisition of the most efficient appliances. This paper first analyses the impact of a 80€ subsidy on the dishwasher market and compares the results with a 40 € tax for non-labelled ones. The results take into account the effects that the policies generate in the market segment that is a close substitute, that is, cross effects. The paper shows that the subsidy is expensive for the Government, generates some welfare losses and it also generates a rebound effect as a consequence of the increase in the total number of appliances sold. The 40 € tax does not cost money to the Government, it generates a lower welfare loss and reduces the energy bill. However, the analysis is extended to go beyond the two extreme scenarios: subsidies without taxes and taxes without subsidies. Different combinations of both instruments are suggested and they are assessed based on their performance regarding economic efficiency, environmental effectiveness and political feasibility. |
| Keywords: | Energy efficiency rebates, deadweight losses, rebound effect |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:bcc:wpaper:2013-05&r=pol |