nep-pol New Economics Papers
on Positive Political Economics
Issue of 2013‒05‒19
fourteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Local politics and economic geography By Berliant, Marcus; Tabuchi, Takatoshi
  2. Politics 2.0: The Multifaceted Effect of Broadband Internet on Political Participation By Filipe R. Campante; Ruben Durante; Francesco Sobbrio
  3. What to put on and what to keep off the Table? A Politician's Choice of which Issues to address By Rei S. Sayag; Otto H. Swank
  4. Isolated Capital Cities, Accountability and Corruption: Evidence from US States By Filipe R. Campante; Quoc-Anh Do
  5. Isolated Capital Cities and Misgovernance: Theory and Evidence By Filipe R. Campante; Quoc-Anh Do; Bernardo V. Guimaraes
  6. Do More Powerful Interest Groups have a Disproportionate Influence on Policy? By Zara Sharif; Otto H. Swank
  7. The Political Economy of Finance By Enrico Perotti
  8. The Impact of Indonesian Political Reform on Public Goods Provision; Market Efficiency; Security, Law and Order; and Political Participation By Muliadi Widjaja
  10. Democratic Values Transmission By Brañas Garza, Pablo; Espinosa Alejos, María Paz; Giritligil, Ayca E.
  11. War, resilience and political engagement in Africa By Achyuta Adhvaryu; James Fenske
  12. Demography of political economy : the baby-boom generation. By Belliveau, Stefan
  13. Political Mergers as Coalition Formation: An Analysis of the Heisei Municipal Amalgamations By Eric Weese
  14. Networks and Collective Action By Ramon Flores; Maurice Koster; Ines Lindner; Elisenda Molina

  1. By: Berliant, Marcus; Tabuchi, Takatoshi
    Abstract: We consider information aggregation in national and local elections when voters are mobile and might sort themselves into local districts. Using a standard model of private information for voters in elections in combination with a New Economic Geography model, agglomeration occurs for economic reasons whereas voter stratification occurs due to political preferences. We compare a national election, where full information equivalence is attained, with local elections in a three-district model. We show that full information equivalence holds at a stable equilibrium in only one of the three districts when transportation cost is low. The important comparative static is that full information equivalence is a casualty of free trade. When trade is more costly, people tend to agglomerate for economic reasons, resulting in full information equivalence in the political sector. Under free trade, people sort themselves into districts, most of which are polarized, resulting in no full information equivalence in these districts. We examine the implications of the model using data on corruption in the legislature of the state of Alabama and in the Japanese Diet.
    Keywords: information aggregation in elections; informative voting; new economic geography; local politics
    JEL: D72 D82 R12
    Date: 2013–05–15
  2. By: Filipe R. Campante; Ruben Durante; Francesco Sobbrio
    Abstract: We investigate the impact of the diffusion of high-speed Internet on different forms of political participation, using data from Italy. We exploit differences in the availability of ADSL broadband technology across municipalities, using the exogenous variation induced by the fact that the cost of providing ADSL-based Internet services in a given municipality depends on its relative position in the pre-existing voice telecommunications infrastructure. We first show that broadband Internet had a substantial negative effect on turnout in parliamentary elections between 1996 and 2008. However, we also find that it was positively associated with other forms of political participation, both online and offline: the emergence of local online grassroots protest movements, and turnout in national referenda (largely opposed by mainstream parties). We then show that the negative effect of Internet on turnout in parliamentary elections is essentially reversed after 2008, when the local grassroots movements coalesce into the Five-Star Movement (M5S) electoral list. Our findings are consistent with the view that: 1) the effect of Internet availability on political participation changes across different forms of engagement; 2) it also changes over time, as new political actors emerge who can take advantage of the new technology to tap into the existence of a disenchanted or demobilized contingent of voters; and 3) these new forms of mobilization eventually feed back into the mainstream electoral process, converting “exit” back into “voice”.
    JEL: D72 L82 L86
    Date: 2013–05
  3. By: Rei S. Sayag (Erasmus University Rotterdam); Otto H. Swank (Erasmus University Rotterdam)
    Abstract: At the start of their term, politicians often announce which issue they intend to address. To shed light on this agenda setting, we develop a model in which a politician has to decide whether or not to address a public issue. Addressing an issue means that the politician investigates the issue and next chooses for either a major reform or a minor reform. Not addressing an issue means that the status quo is maintained. Politicians differ in their ability to make correct decisions. They want to make good decisions and want to come across as able decision makers. An important characteristic of the model is that politicians and voters have different priors concerning the desirability of a major reform. We show that electoral concerns may lead to anti-pandering. Politicians tend to put issues on their political agenda when voters are relatively pessimistic about a major reform, and keep issues off the table when voters are optimistic about major reform.
    Keywords: Agenda Setting, Career concerns, Pandering
    JEL: D72 D78 D82 P16
    Date: 2012–11–27
  4. By: Filipe R. Campante; Quoc-Anh Do
    Abstract: We show that isolated capital cities are robustly associated with greater levels of corruption across US states, in line with the view that this isolation reduces accountability, and in contrast with the alternative hypothesis that it might forestall political capture. We then provide direct evidence that the spatial distribution of population relative to the capital affects different accountability mechanisms over state politics: newspaper coverage, voter knowledge and information, and turnout. We also find evidence against the capture hypothesis: isolated capitals are associated with more money in state-level campaigns. Finally, we show that isolation is linked with worse public good provision.
    JEL: D72 D73 L82 R12 R23 R50
    Date: 2013–05
  5. By: Filipe R. Campante; Quoc-Anh Do; Bernardo V. Guimaraes
    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 D78 R12
    Date: 2013–05
  6. By: Zara Sharif (Erasmus University Rotterdam); Otto H. Swank (Erasmus University Rotterdam)
    Abstract: Decisions-makers often rely on information supplied by interested parties. In practice, some parties have easier access to information than other parties. In this light, we examine whether more powerful parties have a disproportionate influence on decisions. We show that more powerful parties influence decisions with higher probability. However, in expected terms, decisions do not depend on the relative strength of interested parties. When parties have not provided information, decisions are biased towards the less powerful parties. Finally, we show that compelling parties to supply information destroys incentives to collect information.
    Keywords: information collection, communication, interest groups, decision-making
    JEL: D72 D78 D82 H39
    Date: 2012–12–05
  7. By: Enrico Perotti (University of Amsterdam)
    Abstract: This survey reviews how a recent political economy literature helps explaining variation in governance, competition, funding composition and access to credit. Evolution in political institutions can account for financial evolution, and appear critical to explain rapid changes in financial structure, such as the Great Reversal in the early XX century, unlike time-invariant legal institutions or cultural traits. Future research should model the sources and consequences of financial instability, and to predict how major redistributive shocks will shape regulatory choices and financial governance.
    Keywords: political institutions, property rights, investor protection, financial development, access to finance, entry, banking
    JEL: G21 G28 G32 P16
    Date: 2013–02–25
  8. By: Muliadi Widjaja (Department of Economics, Faculty of Economics, University of Indonesia)
    Abstract: The purpose of this paper is to observe how the changes of political regime, fiscal decentralization, degree of openness in Indonesia after the 1998 political turbulence affect the economic institution and public goods provision. Because available time series data are limited, estimation on individual country parameter is obtained by applying panel data regional convergence method. The findings are that, while the changes of political settings from dictatorial to democracy worsen economic institution in Indonesia, it does not change the public goods provision in Indonesia.
    JEL: B52
    Date: 2013–04
  9. By: Beghin, John C.; Li, Yuan
    Abstract: We build a parsimonious partial equilibrium political-economy model for a tradable good associated with a negative externality mitigated by a single quality standard. The policy-maker solves for the standard that maximizes a weighted sum of welfare measures reflecting rent-seeking activities. Derived comparative statics are ambiguous but provide useful guidance for the econometric specification. We empirically implement the derived reduced form to econometrically investigate the determinants of protectionism in maximum residue limits affecting food trade among a large number of countries. Protectionism is measured using an index of stringency of MRLs relative to Codex international standards as in Li and Beghin (2012). Higher-income countries tend to protect their domestic market and their consumers’ health more than lower income countries do; MRL stringency and tariffs are substitute policy instruments; the impact of democratization on strictness of MRLs shows a inverted u-shaped pattern; and the quality of governmental institutions increases MRL protection.  
    Keywords: political economy; NTMs; Non-tariff measures; MRL; endogenous; NTBs; food trade; maximum residue limits
    JEL: F13 Q17 Q18
    Date: 2013–05–08
  10. By: Brañas Garza, Pablo; Espinosa Alejos, María Paz; Giritligil, Ayca E.
    Abstract: This study addresses the issue of intergenerational transmission of democratic values embedded in social choice rules. We focus on a few rules which have been the focus of social choice theory: plurality, plurality with a runoff, majoritarian compromise, social compromise and Borda rule. We confront subjects with preferences profiles of a hypothetical electorate over a set of four alternatives. Different rules produce different outcomes and subjects decide which alternative should be chosen for the society whose preference profile is shown. We elicit each subject's preferences over rules and his/her parents' and check whether there is any relationship; 186 students and their parents attended the sessions at Istanbul Bilgi University. Overall, we find support for the hypothesis of parental transmission of democratic values and gender differences in the transmitted rule.
    Keywords: experiments, political transmission, democratic values, social choice
    JEL: D71 D72 C90
    Date: 2013
  11. By: Achyuta Adhvaryu; James Fenske
    Abstract: We test whether early-life war exposure influences later-life political engagement in Africa. We combine data on the location and intensity of conflicts since 1945 with nationally representative data on political attitudes and behaviors from 17 sub-Saharan African countries. Exposure from ages 0 to 14 has a very small (standardized) impact on later attitudes and behaviors. Our results are robust to migration, and hold across several definitions, specifications, and sources of data. Our results are consistent with recent studies demonstrating that, on average, individuals and localities recover quickly from the destructive effects of conflict, though those most exposed experience large and prolonged effects.
    Date: 2013
  12. By: Belliveau, Stefan
    Abstract: This working paper attributes a (potential) path of per-capita US output to demographic effects of the post-war baby boom. To the extent that the baby-boom generation predominates among age cohorts in the US population, a life-cycle model suggests a secular trend in per-capita GDP that is largely congruent with realized (and realizing) potential economic growth.
    Keywords: Demography, US, 1945-2046; economic growth; neoclassical growth model;population dynamics
    JEL: J11 O41
    Date: 2013–05–11
  13. By: Eric Weese (Economic Growth Center, Yale University)
    Abstract: Due to moral hazard problems, municipal mergers in Japan did not result in as many amalgamations as a central planner would have chosen. The inefficiency of the decentralized mergers is calculated using structural parameter estimates based on observed mergers and actual national government policies. Estimation requires neither an equilibrium selection assumption nor the enumeration of all possible mergers.
    Keywords: boundaries, mergers, moment inequalities, municipalities
    JEL: C63 D71 H77
    Date: 2013–04
  14. By: Ramon Flores (Universidad Carlos III de Madrid); Maurice Koster (University of Amsterdam); Ines Lindner (VU University Amsterdam); Elisenda Molina (Universidad Carlos III de Madrid)
    Abstract: This paper proposes a new measure for a group's ability to lead society to adopt their standard of behavior, which in particular takes account of the time the group takes to convince the whole society to adopt their position. This notion of a group's power to initiate action is computed as the reciprocal of the resistance against it, which is in turn given by the expected absorption time of a related finite state partial Markov chain that captures the social dynamics. The measure is applicable and meaningful in a variety of models where interaction between agents is formalized through (weighted) binary relations. Using Percolation Theory, it is shown that the group power is monotonic as a function of groups of agents. We also explain the differences between our measure and those discussed in the literature on Graph Theory, and illustrate all these concerns by a thorough analysis of two particular cases: the Wolfe Primate Data and the 11S hijackers' network.
    Keywords: Collective action, Social networks, Influence and diffusion models, Network intervention, Group centrality measures
    JEL: C79 D01 D71
    Date: 2012–03–29

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