nep-pol New Economics Papers
on Positive Political Economics
Issue of 2013‒08‒23
five papers chosen by
Eugene Beaulieu
University of Calgary

  1. Electoral competition for the 2+1 electoral rule and the close alternatives By Martin Gregor
  2. Optimal Resource Rent By Rustam Jamilov
  3. Preferences for Redistribution and Perception of Fairness: An Experimental Study By Ruben Durante; Louis Putterman; Joël van der Weele
  4. "The People Want the Fall of the Regime": Schooling, Political Protest, and the Economy By Filipe Campante
  5. "Political Economy of Trade Liberalization: The Case of Postwar Japan" By Megumi Naoi; Tetsuji Okazaki

  1. By: Martin Gregor (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: The Anglo-American double-member districts employing plurality-at-large are frequently criticized for giving a large majority premium to a winning party, since the large premium may decrease proportionality of the elected assembly relative to single-member districts. We demonstrate that the premium stems from a limited degree of voters' discrimination associated with only two positive votes on the ballot. To enhance voters' ability to discriminate, we consider alternative electoral rules that give voters more positive and negative votes. We identify strict voting equilibria of several alternative rules in a situation where candidates differ in binary ideology and binary quality, voters' ideology-types are binomially distributed, voters are strategic, and a candidate's policy is more salient than candidate's quality. The most generous rules such as approval voting and combined approval-disapproval voting only replicate the electoral outcomes of plurality-at-large. The best performance in a double-member district is achieved by a rule that assigns two positive votes and one negative vote to each voter (2+1 rule). Under a strict and sincere pure-strategy equilibrium of the 2+1 rule, the second largest group frequently wins the second seat and high-quality candidates gain seats more likely than low-quality candidates. The 2+1 rule increases the scope for a voter's discrimination while avoiding the underdog effects and overstating of preferences associated with an unrestricted number of negative votes.
    Keywords: electoral rules, strategic voting, negative votes, plurality-at-large
    JEL: D7
    Date: 2013–06
  2. By: Rustam Jamilov
    Abstract: This paper develops the first systematic attempt to model and empirically estimate the concept of optimal resource renting. Optimal rent is found to be positively affected by increases in the recession buffer and resource endowment, and negatively affected by the opportunity cost of hoarding. The model is then tested empirically on Norway, an oil-rich state, and actual renting is found to be systematically diverging from the optimal rent series. At least a third of the variation in actual renting is always left unexplained by the economic variables of the model, and should be attributed to the institutional and political factors that lie beyond the scope of our analysis.
    Keywords: Rent-Seeking, Resources Policy, Public Finance
    JEL: D72 L71 O17
    Date: 2013–03–15
  3. By: Ruben Durante; Louis Putterman; Joël van der Weele
    Abstract: We conduct a laboratory experiment to study how demand for redistribution of income depends on self-interest, insurance motives, and social concerns relating to inequality and efficiency. Our choice environments feature large groups of subjects and real world framing, and differ with respect to the source of inequality (earned or arbitrary), the cost of taxation to the decision maker, the dead-weight loss of taxation, uncertainty about own pre-tax income, and whether the decisionmaker is affected by redistribution. We estimate utility weights for the different sources of demand for redistribution, with the potential to inform modeling in macroeconomics and political economy.
    Keywords: income distribution, political economy, redistribution, social preferences.
    Date: 2013
  4. By: Filipe Campante (Harvard University)
    Abstract: We provide evidence that economic circumstances are a key intermediating variable for understanding the relationship between schooling and political protest. Using the World Values Survey data, we find that individuals with higher levels of schooling, but whose income outcomes fall short of that predicted by a comprehensive set of their observable characteristics, in turn display a greater propensity to engage in protest activities. We argue that this evidence is consistent with the idea that a decrease in the opportunity cost of the use of human capital in labor markets encourages its use in political activities instead, and is unlikely to be explained solely by either a pure grievance effect or by self-selection. We then show separate evidence that these forces appear to matter too at the country level: Rising education levels coupled with macroeconomic weakness are associated with increased incumbent turnover, as well as subsequent pressures toward democratization.
    Date: 2013
  5. By: Megumi Naoi (Department of Political Science, University of California, San Diego); Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract:    This paper proposes a unified method for precise evaluation of the error orders in asymptotic expansions of an option price and its Greeks under a general stochastic volatility model. In particular, our technique is based on the Malliavin calculus approach of Kusuoka (2003), and the properties of Kusuoka-Stroock functions are effectively applied.
    Date: 2013–08

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