nep-pol New Economics Papers
on Positive Political Economics
Issue of 2013‒07‒28
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Do Politicians Shirk when Reelection Is Certain? Evidence from the German Parliament By Bernecker, Andreas
  2. Military Expenditures and Political Regimes: An Analysis Using Global Data, 1963-2001 By Unal Tongur; Sara Hsu; Adem Yavuz Elveren
  3. Overconfidence in Political Behavior By Pietro Ortoleva; Erik Snowberg
  4. From Military Instruments of Dictatorship to Political Instruments of Democracy: Regimes of Exception in Bolivia 2000?2010 By Claire Wright; Ana Soliz Landivar
  5. Risks, responsibility and public respect: Cases of entrepreneurs elected in the USA and in Russia By Konstanin Yanovsky; Sergey Zhavoronkov; Daniel Shestakov
  6. What's left of the left? Partisanship and the political economy of labour market reform: why has the social democratic party in Germany liberalised labour markets? By Patrick Lunz
  7. REBUILDING THE DEMOCRACY OF THE TAXPAYER By Konstanin Yanovsky; Sergey Zhavoronkov; Sergey Shulgin; Ilia Zatcovetzky
  8. Bowling for Fascism: Social Capital and the Rise of the Nazi Party in Weimar Germany, 1919-33 By Shanker Satyanath; Nico Voigtländer; Hans-Joachim Voth
  9. Is direct democracy a problem or a promise for fiscal outcomes? The case of the United States By Agnese Sacchi; Aline Pennisi
  10. The Political Economy of Oil and the Crisis of the Arab State System By Daniel Atzori
  11. From Green Users to Green Voters By Diego Comin; Johannes Rode
  12. Political Economy of Fiscal Unions By Jan Fidrmuc
  13. Political crisis and suspension of duty-free access in Madagascar : assessment of impacts on the garment industry By Fukunishi, Takahiro

  1. By: Bernecker, Andreas
    Abstract: Does stiffer electoral competition reduce political rent-seeking behavior? For a microanalysis of this question, I construct a new data set spanning the years 2005 to 2012 covering biographical and political information of German members of parliament (MPs) and including attendance rates in voting sessions for the first time. For the parliament elected in 2009, I show that indeed MPs who expect to face a close race in their district show significantly and relevantly lower absence rates in parliament beforehand. MPs of governing parties seem to react less to electoral competition. These results are confirmed by an analysis of the parliament elected in 2005, by several robustness checks, and also by employing an instrumental variable strategy exploiting convenient peculiarities of the German electoral system. This study is also the first to analyze how MPs elected via party lists react to different levels of electoral competition.
    Keywords: Accountability , Political Competition , Quality of Politicians , Rent-Seeking , Absences
    JEL: D72 H11 J45
    Date: 2013
  2. By: Unal Tongur (Department of Economics, METU); Sara Hsu (State University of New York at New Paltz, USA); Adem Yavuz Elveren (Department of Economics, METU and Sutcu Imam University)
    Abstract: This paper examines the determinants of military expenditures with a special focus on political regimes for more than 130 countries for the period of 1963-2001 by employing a dynamic panel data analysis. The paper aims at contributing to the literature by utilizing a recently constructed political regimes data set and considering income inequality, a key variable that has not received substantial attention in the context of political regimes, growth and military expenditures. Covering a large set of countries and an extended time period, the paper reveals further evidence on the linkage between democracy and military expenditures. Our results yield two crucial facts. First, social democratic political regimes have a tendency to spend less on armaments as a share of the national income; compared to social democracy all other political regimes are likely to have higher military burdens, confirming previous findings of the negative relationship between level of democracy and military burden. Second, the analysis shows that higher income inequality, regardless of the model specification and inequality measure, is associated with lower military burden.
    Keywords: Military expenditure, income inequality, terror, political regime, democracy, dictatorship
    JEL: C33 H56
    Date: 2013–07
  3. By: Pietro Ortoleva; Erik Snowberg
    Abstract: This paper studies, theoretically and empirically, the role of overconfidence in political behavior. Our model of overconfidence in beliefs predicts that overconfidence leads to ideological extremeness, increased voter turnout, and increased strength of partisan identification. Moreover, the model makes many nuanced predictions about the patterns of ideology in society, and over a person's lifetime. These predictions are tested using unique data that measure the overconfidence, and standard political characteristics, of a nationwide sample of over 3,000 adults. Our predictions, eight in total, find strong support in this data. In particular, we document that overconfidence is a substantively and statistically important predictor of ideological extremeness and voter turnout.
    JEL: C83 D03 D72 D83
    Date: 2013–07
  4. By: Claire Wright (University of Salamanca, Spain); Ana Soliz Landivar (GIGA German Institute of Global and Area Studies)
    Abstract: The aim of this study is to discover the role played by regimes of exception (RoEs) in contemporary Bolivian politics. RoEs have been seldom studied by political scientists, despite constituting a key legacy of authoritarian regimes that have survived the transitions to democracy in Latin America. Focusing on the case of Bolivia, the research is based on relevant laws as well as 65 presidential decrees, which are analyzed with the method of content analysis. As a result of the analysis, we show that in Bolivia both the legal framework and political use of RoEs have moved on from a purely repressive mechanism to a more administrative one. The study has important implications for how RoEs are conceptualized from a theoretical point of view as well as for our understanding of the nature of emergency politics in fragile democracies in recent years.
    Keywords: Bolivia, democracy, regimes of exception, presidents, decrees, content analysis.
    Date: 2013–03
  5. By: Konstanin Yanovsky (Gaidar Institute for Economic Policy); Sergey Zhavoronkov (Gaidar Institute for Economic Policy); Daniel Shestakov (Gaidar Institute for Economic Policy)
    Abstract: Adam Smith pointed out public respect, prestige as significant component of compensation "for some employment" ("honorableness... of employment"). We assumed, the public moral sanction on success (Weber), public demand for "self-made man" should correlate positively with number of businessmen elected (US Senators, Russian governors and State Duma Deputies). Expressive voting of this sort could support positive pro-market patterns (create positive externalities) - contrary to the "expressive policy (behavior) trap" (Hillman, 2010). During the USA "classical" period ("First 150 years" M. Friedman recommended to take as a model for underdeveloped countries), successful entrepreneurs enjoyed obvious advantages in elections. The same was true for outstanding military-men, for civilian experienced in combat and decorated with awards it also greatly improved their chances to be elected. To hold military heroes in public respect was equivalent of public demand for more quality pure public good "defense" provision. Arising of leftist parties and coalitions, standing for mixed public goods priority provision, accompanied by sensible changes in public respect distribution. Lawyers, businessmen and army officers (military heroes) are crowded out by public servants, "social activists", public school teachers since "Universal Suffrage" institution introduction. In Russia, entrepreneurial status, especially a successful entrepreneurs status, is accompanied by no tangible public recognition. However, the self-esteem of individuals employed in business remains relatively high. The officers "ahead start" was almost unobservable in Russia after very first elections. With our data we also found that economic freedom indicators associated with greater prestige of entrepreneurs within society are positively correlated with voting for pro-market parties and negatively correlated with voting for left.
    Keywords: employment prestige, business prestige, public respect, roving anti-business bandit, stationary anti-business bandit, and leftists' electoral support measured negative perception of business
    JEL: D72 K22 P16 Z13
    Date: 2013
  6. By: Patrick Lunz
    Abstract: The German social democratic party initiated in 2003 the greatest overhaul of labour market legislation in decades, severely cutting unemployment benefits and slashing employment protection legislation. How can we explain this radical policy shift? This paper will present a counter-intuitive answer, arguing that the SPD implemented the reforms because of electoral interests. The rationale is two-fold and relates to changes in labour market policy supply and policy demand. First, the German social democrats strategically adjusted their labour market policy supply, seeking to maximise their office pay-offs by appealing to the median voter in a competitive political space. Second, the shift in policy-supply is also a reaction to changes in labour market policy-demand, with crucial segments of the electorate turning more favourably to welfare state retrenchment. This shift disproportionally benefited the conservative CDU and liberal FDP and forced the SPD to reposition itself in the party landscape.
    Date: 2013–07–16
  7. By: Konstanin Yanovsky (Gaidar Institute for Economic Policy); Sergey Zhavoronkov (Gaidar Institute for Economic Policy); Sergey Shulgin (Gaidar Institute for Economic Policy); Ilia Zatcovetzky (Gaidar Institute for Economic Policy)
    Abstract: The voter - bureaucrat is locked into a situation of a conflict of interests: as a conscientious citizen, he or she should support optimal expenditure levels for providing certain public goods, but as a person whose wellbeing and career depend on the volume of expenditures for providing public goods, he or she is interested in supporting volumes and prices which obviously exceed the levels acceptable for most citizens of the state. The bureaucrat is also interested in obtaining excess control and regulatory empowerment and authorization. It follows that a conscientious and enlightened functionary should submit a statement about a conflict of interests, and abstain from voting until retirement or demotion. A large and growing group of voters is made up of “professional” recipients of aid. It follows that persons, whose interests include the redistribution of resources of the taxpayers in their own favor, also have no moral right to make decisions by voting during elections. This applies in part also to those entrepreneurs who derive most of their income from the budget. Another grounding factor is the historical statistics of state budget balancing (the dynamics of state debt) and inflation (see Appendix 4: The History of Inflation and Budgetary Deficit after the Introduction of Universal Suffrage). In the age before universal suffrage, problems of financing were almost always an outcome of military cataclysms or other external shocks of a similar magnitude. In the age of universal suffrage, budgetary deficit, growing state debt, and inflation have become the norm.
    Keywords: Universal suffrage, conflict of interest, taxpayers' democracy, pure and mixed public goods
    JEL: D72 D73 H41 N40 P16
    Date: 2013
  8. By: Shanker Satyanath; Nico Voigtländer; Hans-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
  9. By: Agnese Sacchi; Aline Pennisi
    Abstract: In time of worry for large deficits, the question on whether direct democracy can be a problem or a promise to better rule modern societies may arise. Both theoretical and empirical studies provide mixed answers. This paper investigates both the indirect (i.e. the existence) and the direct effects (i.e. the usage) of direct democracy institutions on major fiscal outcomes across the American States during 1992-2009. Being based on a more recent time span than previous contributions, our study includes more detailed information such as the type of institution, the voting result, and the topics of concern. The main results suggest that States permitting initiatives spend less than those without, confirming some previous findings. However, when initiatives are effectively used, their practice contributes to increase spending among those States allowing them. The intensity of different initiatives also matters for fiscal outcomes as well as the nature of topics involved.
    Keywords: Voter initiatives; Fiscal policy; Positive constitutional economics; State government. (*)
    JEL: H71 H72 P16 O51
    Date: 2013–07
  10. By: Daniel Atzori (FEEM and Agenzia Giornalistica Italia (AGI))
    Abstract: This paper argues that the so-called Arab spring is part of a tectonic shift which signals the frailty of the Arab state system as such. Countries benefitting from oil and gas rents have been more resilient, because of their potential to create systems of incentives and disincentives in order to prevent disruptive social change. Islamism, whose emergence is connected with rentier state dynamics is, at the same time, an opportunity and a threat for the survival of the Arab state and, in general, of the Arab states system. In this context, national oil companies can increasingly be conceptualized not merely as instruments of the state, but as bulwarks of nation-state legitimacy in a period of chaos.
    Keywords: Oil, Energy, Political Economy, MENA, Globalization, Arab Spring
    JEL: N5 O1 P1 Q3 Q4
    Date: 2013–06
  11. By: Diego Comin; Johannes Rode
    Abstract: We estimate the effect of the diffusion of photovoltaic (PV) systems on the fraction of votes obtained by the German Green Party. The logistic diffusion of PV systems offers a new identification strategy. We take first differences and instrument adoption rates (i.e. the first difference in the diffusion level) by lagged diffusion levels. The existing rationales for non-linearities in diffusion, and ubiquity of logistic curves ensure that our instrument is orthogonal to variables that directly affect voting patterns. We find that the diffusion of domestic PV systems caused 25 percent of the increment in green votes between 1998 and 2009.
    Date: 2013–07–01
  12. By: Jan Fidrmuc
    Abstract: I formulate a political-economy model of a fiscal union where the threat of secession imposes a limit on fiscal redistribution between regions. I argue that the trade-off between implementing the region's preferred fiscal policy and benefiting from inter-regional risk sharing depends on the nature of economic shocks. Specifically both correlation of shocks across regions and their persis- tence over time are important. The gains from inter-regional risk sharing are potentially large when shocks are negatively correlated and temporary. In con- trast, unions with negatively correlated permanent shocks are likely to prove politically unviable.
    Date: 2013–07
  13. By: Fukunishi, Takahiro
    Abstract: The export-oriented garment industry in Madagascar has displayed robust growth, thus both contributing to the economy and creating formal employment opportunities. However, it experienced a critical situation after the political turmoil that occurred in 2009. Our investigation using original firm data and published trade data demonstrates that the political turmoil itself did not affect garment exports, though suspension of duty-free access to the US market (AGOA) resulting from the turmoil had a huge impact on exports and factory closures. Estimates indicate that AGOA suspension caused export values to fall by 70%–75%, increasing the probability of a factory’s closure by 57.8%. Its impact on employment emerged through factory closures, which accounted for 27.8% of job losses in low-skilled positions, or 6405 jobs. We did not find evidence that the AGOA suspension affected low-skilled and female workers more intensively, though this distinction requires further investigation. Regardless of whether this suspension is anti-poor, however, it is clear that the AGOA suspension hurt poor workers rather than those who caused the turmoil.
    Keywords: Madagascar, Apparel industry, Exports, Politics, Employment, Manufacturing Exports, Garment Industry, Political Crisis, Duty-free Access
    JEL: D21 F14 F16 J63 L67 O55
    Date: 2013–07

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