nep-pol New Economics Papers
on Positive Political Economics
Issue of 2013‒07‒20
eight papers chosen by
Eugene Beaulieu
University of Calgary

  1. Tax Compliance and Income Redistribution. A Political Competition Model By Angel Solano-Garcia
  2. Political dynasties and poverty: Resolving the “chicken or the egg” question By Mendoza, Ronald; Beja Jr, Edsel; Venida, Victor; Yap, David
  3. Men Vote in Mars, Women Vote in Venus: A Survey Experiment in the Field By Galasso, Vincenzo; Nannicini, Tommaso
  4. Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections By Quoc-Anh Do; Yen-Teik Lee; Bang Dang Nguyen
  5. Economic Incentives and Social Preferences: Causal Evidence of Non-Separability By Marco Faravelli; Luca Stanca
  6. "Welfare magnetism" in the EU-15? Why the EU enlargement did not start a race to the bottom of welfare states By Skupnik, Christoph
  7. Bowling for fascism: Social capital and the rise of the Nazi Party in Weimar Germany, 1919-33 By Shanker Satyanath; Nico Voigtländer; Joachim Voth
  8. Cycles in Politics: Experimental evidence that quorum rules discourage turnout and promote election boycotts By Luís Francisco Aguiar-Conraria; Pedro C. Magalhães; Christoph A. Vanberg

  1. By: Angel Solano-Garcia (Globe and Department of Economic Theory and Economic History, University of Granada.)
    Abstract: This paper analyzes the political economy of income redistribution when voters are concerned about tax compliance. We consider a two stagemodel where there is a two party competition over the tax rate in the first stage and voters decide about their level of tax compliance in the second stage. We model political competition à la Wittman with the ideology of parties endogenously determined at equilibrium. We calibrate the model for an average of EU-27 countries. Numerical simulations provide the tax rates proposed by the two parties and the level of tax compliance. We find that a decrease in confidence in tax morale, and an increase in parties’ uncertainty about the preferences of the median voter increase the probability that the party offering the lowest income tax will win and decrease tax compliance.
    Keywords: tax evasion, ideological parties, income redistribution, ethical voters.
    JEL: D72 H26
    Date: 2013–07–09
  2. By: Mendoza, Ronald; Beja Jr, Edsel; Venida, Victor; Yap, David
    Abstract: "Political dynasty" refers to the situation wherein members of the same family are occupying elected positions either in sequence for the same position, or simultaneously across different positions. In the Philippines, political dynasties are prevalent in areas with more severe poverty. Two explanations for this situation have been proposed: poverty brings about political dynasties, or political dynasties engender poverty. These arguments suggest that the relationship between political dynasties and poverty can be treated as an empirical question. (So which one is the chicken, and which one is the egg?) In order to examine the direction of causality between political dynasties and poverty, this paper turns to provincial-level data from the Philippines and develops novel metrics on political dynasties: the shares of total positions occupied by dynastic politicians, of the largest dynastic clan as regards total positions, and of dynastic concentration inspired by the industrial concentration literature. To address endogeneity, instrumental variables for poverty are used, consisting of indicators for rainfall and the geographical distance to Manila (the Capital). The results we find are striking: poverty entrenches political dynasties; education appears to have no bearing on political dynasties; and the media affect only the largest political dynasties. There is less evidence that political dynasties bring about poverty.
    Keywords: democracy; political dynasty; inclusive growth; political equality; social inequality
    JEL: D70 I39 O53 P16
    Date: 2013–06–30
  3. By: Galasso, Vincenzo (USI Università della Svizzera Italiana); Nannicini, Tommaso (Bocconi University)
    Abstract: This paper investigates the differential response of male and female voters to competitive persuasion in political campaigns. During the 2011 municipal elections in Milan, a sample of eligible voters was randomly divided into three groups. Two were exposed to the same incumbent's campaign but to different opponent's campaigns, with either a positive or a negative tone. The third – control – group received no electoral information. The campaigns were administered online and consisted of a bundle of advertising tools (videos, texts, slogans). Stark gender differences emerge. Negative advertising increases men's turnout, but has no effect on women. Females, however, vote more for the opponent and less for the incumbent when they are exposed to the opponent's positive campaign. Exactly the opposite occurs for males. Additional tests show that our results are not driven by gender identification with the candidate, ideology, or other voter's observable attributes. Effective strategies of persuasive communication should thus take gender into account. Our results may also help to reconcile the conflicting evidence on the effect of negative vs. positive advertising, as the average impact may wash out when aggregated across gender.
    Keywords: gender differences, political campaigns, competitive persuasion
    JEL: D72 J16 M37
    Date: 2013–07
  4. By: Quoc-Anh Do (Département d'économie); Yen-Teik Lee; Bang Dang Nguyen
    Abstract: Using the network of university classmates among corporate directors and politicians and the regression discontinuity design of close gubernatorial elections from 1999 to 2010, we identify the positive and significant impact of social-network based political connections on firm value. Firms connected to elected governors increase value by 1.36% on average surrounding the election date. Political connections are more valuable in a state with a higher level of regulation and corruption, in smaller firms, and in firms dependent on external finance. Firms connected to election winners invest more, earn better operating performance, hold more cash, and enjoy better long-term stock performance.
    Keywords: Political connection; firm value; social network; close election; gubernatorial election; regression discontinuity design.
    JEL: G3 G28 G30 G34 G38
    Date: 2013–03
  5. By: Marco Faravelli; Luca Stanca
    Abstract: This paper provides a direct test of the hypothesis that agents' objective functions are non-separable in economic incentives and social preferences. We study experimentally fixed-prize contests using a 2x2 design, varying orthogonally the degree of competition of the incentive mechanism (all-pay auction vs. lottery) and the presence or absence of social returns to bidding (rent seeking vs. public good). The results indicate that either stronger competition or positive social returns have positive main effects on bids. In addition, we find a negative interaction between the all-pay auction mechanism and the public good environment, leading us to reject separability. This finding provides causal evidence that economic incentives may negatively affect pro-social behavior.
    Keywords: Contests, Public goods, Rent-seeking, Social preferences, Separability, Laboratory experiments
    JEL: C91 D44 H41
    Date: 2013–07
  6. By: Skupnik, Christoph
    Abstract: According to the welfare magnet hypothesis, migrants with a high likelihood of claiming benefits cluster in the most generous welfare systems. After the introduction of the freedom of movement for Eastern European workers, EU-15 countries can thus be expected to reduce public benefits in order to avoid becoming welfare magnets. However, OECD data on benefits do not support the prediction of a race to the bottom in protection levels. Using data from the EU-LFS 2004 to 2011, I analyze the determinants of migration flows and find that, in contrast to theory, welfare state variables do not significantly affect migration flows when controlling for temporary political restrictions of the freedom of movement (2+3+2 rule). This explains why the pressure to modify national welfare spending is small. Furthermore, evidence is found that the restrictions completely offset the incentive effects of work-related pull factors and thereby hamper an efficient allocation of labor across national borders. --
    Keywords: Determinants of migration flows,EU enlargement,welfare magnet
    JEL: F2 H2 J2 J5 J6
    Date: 2013
  7. By: Shanker Satyanath; Nico Voigtländer; Joachim Voth
    Abstract: Social capital – a dense network of associations facilitating cooperation within a community – typically leads to positive political and economic outcomes, as demonstrated by a large literature following Putnam. A growing literature emphasizes the potentially "dark side" of social capital. This paper examines the role of social capital in the downfall of democracy in interwar Germany by analyzing Nazi party entry rates in a cross-section of towns and cities. Before the Nazi Party's triumphs at the ballot box, it built an extensive organizational structure, becoming a mass movement with nearly a million members by early 1933. We show that dense networks of civic associations such as bowling clubs, animal breeder associations, or choirs facilitated the rise of the Nazi Party. The effects are large: Towns with one standard deviation higher association density saw at least one-third faster growth in the strength of the Nazi Party. IV results based on 19th century measures of social capital reinforce our conclusions. In addition, all types of associations – veteran associations and non-military clubs, "bridging" and "bonding" associations – positively predict NS party entry. These results suggest that social capital in Weimar Germany aided the rise of the Nazi movement that ultimately destroyed Germany's first democracy.
    Keywords: social capital, democracy, political economy, Weimar Germany, Nazi Party
    JEL: N44 P16 Z10
    Date: 2013–06
  8. By: Luís Francisco Aguiar-Conraria (Universidade do Minho - NIPE); Pedro C. Magalhães (University of Lisbon, Social Sciences Institute); Christoph A. Vanberg (Alfred-Weber-Institut, University of Heidelberg)
    Abstract: In most instances of collective decision-making, it cannot be expected that all persons who are entitled to vote will end up doing so. This has led institutional designers, out of concerns with the “legitimacy” of decisions, to introduce quorum requirements. A prominent example of this can be found in the context of direct democracy mechanisms, such as referenda and initiatives. We discuss the results of an experiment about the consequences of such quora. We show that quora lead to overall decreases in participation rates, dramatically increasing the likelihood of full-fledged electoral boycotts on the part of status quo supporters.
    Date: 2013

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