nep-pol New Economics Papers
on Positive Political Economics
Issue of 2013‒09‒26
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Allure or Alternative? Direct Democracy and Party Identification By Matthias Fatke
  2. Focused power: Experiments, the Shapley-Shubik power index, and focal points By Geller, Chris R.; Mustard, Jamie; Shahwan, Ranya
  3. Fiscal Policy over the Election Cycle in Low-Income Countries By Christian Ebeke; Dilan Ölçer
  4. Private, social and self-insurance for long-term care in the presence of family help: A political economy analysis By De Donder, Philippe; Pestieau, Pierre
  5. Can only democracies enhance “Human Development”? Evidence from the Former Soviet Countries By John S L McCombie; Marta Spreafico
  6. The Value of Democracy: Evidence from Road Building in Kenya By Burgess, Robin; Jedwab, Remi; Miguel, Edward; Morjaria, Ameet; Padró i Miquel, Gerard
  7. Walk the Line: Conflict, State Capacity and the Political Dynamics of Reform By Jain, Sanjay; Majumdar, Sumon; Mukand, Sharun
  8. The Dynamic Effect of Social and Political Instability on Output: The Role of Reforms By Lorenzo E. Bernal-Verdugo; Davide Furceri; Dominique M. Guillaume
  9. Overcoming Low Political Equilibrium in Africa: Institutional Changes for Inclusive Development By Léonce Ndikumana
  10. Impact of Corruption on Firm Level Export Decisions By William W. Olney
  11. Economic Cooperation Despite of Political Conflict: The Role of Social Embeddedness in Israeli-Palestinian Food Trade By Merkle, Geesche Marie; Ihle, Rico; Liebe, Ulf

  1. By: Matthias Fatke
    Abstract: This paper presents the first investigation of whether and how party identification is influenced by direct democratic institutions. The concept of party identification is of central interest to political science. Despite declining partisan attachment and increasing dealignment among voters, little systematic evidence exists as to which factors influence individual party identification. Our paper contributes to improving on this lacuna by considering the educative effects of direct democratic institutions. Theoretically, two competing hypotheses are plausible. On the one hand, direct democracy might strengthen political parties and promote the need for cues so that voters succumb to the allure of partisan attachment. On the other hand, direct democracy might provide an alternative to the representational function of political parties thus rendering party identification less essential. Drawing on recent data from the Swiss cantons, we estimate multilevel models. Our analyses, though giving support to the alternative-hypothesis, yield some surprising findings.
    Keywords: Direct democracy, Party identification, Political parties, Dealignment, Educative effects
    Date: 2013–09–11
  2. By: Geller, Chris R.; Mustard, Jamie; Shahwan, Ranya
    Abstract: Experiments evaluate the fit of human behaviour to the Shapley-Shubik power index (SSPI), a formula of voter power. Groups of six subjects with differing votes divide a fixed purse by majority rule in online chat rooms. Earnings proxy for measured power. Chat rooms and processes for selecting subjects reduce or eliminate extraneous forces. Logrolling remains as the primary political force. Subjects' initial proposals for division of the purse allow measurement of effects from focal points and transaction costs. Divisions of purses, net of those effects, closely fit the SSPI, averaging 1.033 of their SSPI values. The SSPI can serve as a control for power imbedded in voting blocs, permitting fuller analysis of other factors that affect political outcomes. --
    Keywords: social choice,public choice,elections,bargaining,coalitions,politico economic,voting power,conflict,election,collective action,majority rule
    JEL: D71 D72 D74
    Date: 2013
  3. By: Christian Ebeke; Dilan Ölçer
    Abstract: Focusing on Low-Income Countries, we investigate the behavior of fiscal variables during and after elections. The results indicate that during election years, government consumption significantly increases and leads to higher fiscal deficits. During the two years following elections, the fiscal adjustment takes the form of increased revenue mobilization in trade taxes and cuts to government investment, with no significant cuts in government consumption. Using a new dataset on national fiscal rules and IMF programs, we find that both the presence of fiscal rules and IMF programs help dampen the magnitude of the political budget cycle in LICs. We conclude that elections not only imply a macroeconomic cost when they take place but also trigger a painful fiscal adjustment in which public investment is largely sacrificed.
    Keywords: Fiscal policy;Political economy;Business cycles;Low-income developing countries;Elections, budgets, fiscal rules, IMF programs
    Date: 2013–06–26
  4. By: De Donder, Philippe; Pestieau, Pierre
    Abstract: We study the political determination of the level of social long-term care insurance when voters also choose private insurance and saving amounts. Agents differ in income, probability of becoming dependent and of receiving family help. Social insurance redistributes across income and risk levels, while private insurance is actuarially fair. The income-to-risk ratio of agents determines whether they prefer social or private insurance. Family support crowds out the demand for both social and, especially, private insurance, as strong prospects of family help drive the demand for private insurance to zero. The availability of private insurance decreases the demand for social insurance but need not decrease its majority chosen level.
    Keywords: crowding out; familism; long-term care; social insurance; voting; weak and strong prospects of family help
    JEL: D72 I13 J14
    Date: 2013–08
  5. By: John S L McCombie (Cambridge Centre for Economic and Public Policy, Department of Land Economy, University of Cambridge); Marta Spreafico (DISCE, Università Cattolica)
    Abstract: Despite the considerable interest in the concept of human development, there has been little research on the political determinants of its dimensions. This paper investigates the role played by the type of political systems on the non-income components of human development. In particular it tests the hypothesis that it is not only democratic countries that enhance spending on health and education, but this might be true of autocratic regimes. The hypothesis is tested for the former Soviet Republics. It is found that expenditure on the social provision of health and education increases with both the degree of democracy and autocracy.
    Keywords: governing authority, human development, political regimes, public expenditure on health and education, panel analysis
    JEL: I10 I20 H51 H52 C33
    Date: 2013–04
  6. By: Burgess, Robin; Jedwab, Remi; Miguel, Edward; Morjaria, Ameet; Padró i Miquel, Gerard
    Abstract: Ethnic favoritism is seen as antithetical to development. This paper provides credible quantification of the extent of ethnic favoritism using data on road building in Kenyan districts across the 1963-2011 period. Guided by a model it then examines whether the transition in and out of democracy under the same president constrains or exacerbates ethnic favoritism. Across the 1963 to 2011 period, we find strong evidence of ethnic favoritism: districts that share the ethnicity of the president receive twice as much expenditure on roads and have four times the length of paved roads built. This favoritism disappears during periods of democracy.
    JEL: D72 L92 O55 R48
    Date: 2013–09
  7. By: Jain, Sanjay (Cambridge University); Majumdar, Sumon (Queen’s University); Mukand, Sharun (University of Warwick)
    Abstract: This paper develops a dynamic framework to analyze the political sustainability of economic reforms in developing countries. First, we demonstrate that economic reforms that are proceeding successfully may run into a political impasse, with the reform’s initial success having a negative impact on its political sustainability. Second, we demonstrate that greater state capacity, to make compensatory transfers to those adversely a.ected by reform, need not always help the political sustainability of reform, but can also hinder it. Finally, we argue that in ethnically divided societies, economic reform may be completed not despite ethnic conflict, but because of it.
    Keywords: Economic Reform, State Capacity, Politics, Redistribution, Compensation, Ethnic Conflict
    Date: 2013
  8. By: Lorenzo E. Bernal-Verdugo; Davide Furceri; Dominique M. Guillaume
    Abstract: The aim of this paper is to analyze the dynamic effect of social and political instability on output. Using a panel of up to 183 countries from 1980 to 2010, the results of the paper suggest that social conflicts have a significant and negative impact on output in the short-term with the magnitude of the effect being a function of the intensity of political instability. The results also show that the recovery of output over the medium-term depends on the ability of the country to implement, in the aftermath of a social instability episode, reforms aimed at improving the level of governance. The results are robust to different checks and estimation strategies.
    Keywords: Political economy;Fiscal reforms;Economic growth;Economic models;social conflicts, reforms, crisis, growth
    Date: 2013–04–23
  9. By: Léonce Ndikumana
    Abstract: This paper examines the role that institutions have played in the performance of African economies over the past decades. It discusses the institutional changes needed to enable African countries to reach inclusive development in the near future. The paper starts from the premise that growth and development are the outcomes of policy choices, which in turn are the outcome of a complex process of political negotiation among various stakeholders – both domestic and foreign – who have interests that may be divergent. In other words, policy choices and the resulting development outcomes constitute a political equilibrium. It is therefore important to understand how such political equilibria arise, how they persist, and how they can be shaped or altered to achieve national goals.� Understanding the forces that govern policy making and the factors that drive growth and its distributional impact can shed light on how African countries can definitively overcome secular low growth and pervasive inequities; in other words how they can overcome low-development political equilibrium and achieve inclusive development. �
    Keywords: political equilibrium; Africa; institutions; growth
    JEL: O1 O55 O11 O43
    Date: 2013
  10. By: William W. Olney (Williams College)
    Abstract: This paper examines the impact of corruption on the self-selection of firms into domestic and export markets. The heterogeneous firm model predicts that corruption decreases the probability that a firm only sells domestically, increases the probability that a firm exports indirectly through an intermediary, and decreases the probability that a firm exports directly. The propositions of the model are tested using a comprehensive data set of over 24,000 firms in more than 90 developing countries. The results confirm both the self-selection of firms according to their productivity and the anticipated impact of corruption. This indicates that in developing countries where corruption is especially severe, intermediaries provide a crucial link to global markets.
    Keywords: Corruption, Exports, Intermediaries
    JEL: F1 D73
    Date: 2013–07
  11. By: Merkle, Geesche Marie; Ihle, Rico; Liebe, Ulf
    Abstract: Against the background of the Middle East conflict we study the role of social embeddedness of economic actors belonging to both conflicting parties for their perceptions of transaction problems and capabilities to solve them. Our analysis is based on a quantitative survey among Israeli food wholesalers. We find vivid economic relationships between Israeli and Palestinian traders, no particular problems occur. Continuity of business relations points to a strong role of social embeddedness. Arabic is frequently used in communication referring to an important role of institutional embeddedness. Various trade impediments due to the conflict do not impact Israeli but Palestinian traders.
    Keywords: Food trade, violent conflict, Social embeddedness, quantitative survey, Israel, Palestinian territories, Cooperation, Food Security and Poverty, International Relations/Trade,
    Date: 2013

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