nep-pol New Economics Papers
on Positive Political Economics
Issue of 2013‒09‒28
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Dissent in Parliament as Reputation Building By Brandon Schaufele
  2. Benchmarking Politicians By Estache, Antonio; Foucart, Renaud
  3. Majority Runoff Elections: Strategic Voting and Duverger's Hypothesis By Laurent Bouton; Gabriele Gratton
  4. Complementary Roles of Connections and Performance in Political Selection in China By Jia, Ruixue; Kudamatsu, Masayuki; Seim, David
  5. Political power and aid tying practices in the development assistance committee countries By Pincin, Jared
  6. Measuring Political Information Rents: Evidence from the European Agricultural Reform By Grüner, Hans Peter; Müller, Daniel
  7. Political Booms, Financial Crises By Guillermo Ordonez; Christoph Trebesch; Helios Herrera
  8. Globalization and Democracy: A Short Introduction By Khan, Haider
  9. Economic Democracy By Murray, Michael

  1. By: Brandon Schaufele (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: Dissenting votes in parliamentary systems are overt displays of defiance by individual Members of Parliament (MPs) vis-à-vis their parties. Dissension is particularly surprising as in the vast majority of situations voting against one's party yields no change in legislative outcomes while still generating costs for MPs. This study examines the decisions of elected representatives who face conflicting incentives. A model is developed where MPs choose to dissent in an effort to build reputations with their local constituents. Using all 32,216 observations at MP-bill-vote level for the 39th Parliament of Canada, a reputation building hypothesis is specified and tested. I provide evidence that MPs whose previous election was competitive are 13 percent more likely to cast any dissenting vote and, for a one standard deviation decrease in expected margin of victory, 2.3 percent more likely to defect on any given vote, results which suggest that MPs are actively attempting to build reputations with their local constituents
    Keywords: Canadian Parliament; dissent; elections; local politics; politician behavior; reputation
    JEL: D72 D78 H19
    Date: 2013
  2. By: Estache, Antonio; Foucart, Renaud
    Abstract: We study a political system in which voters can optimally pick between political platforms, but cannot screen the quality of individual politicians associated with these platforms. A bad individual achievement can correspond to either incompetence (adverse selection) or corruption (moral hazard). Information could improve, if independent experts assess achievements as compared to commitments, allowing independent judges to investigate possible corruption. We find that while good experts are always beneficial as they increase transparency, the impact of the quality of judges is ambiguous. Above a threshold, with risk-averse social planners, good judges increase the incentive-compatible punishment of politicians, at the cost of possible judiciary mistakes.
    JEL: D7 D82
    Date: 2013–05
  3. By: Laurent Bouton (Department of Economics, Georgetown University); Gabriele Gratton (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: The majority runoff system is widely used around the world. Yet, our understanding of its properties and of voters’ behavior is limited. In this paper, we fully characterize the set of strictly perfect voting equilibria in large three-candidate majority runoff elections. Considering all possible distributions of preference orderings and intensities, we prove that only two types of equilibria can exist. First, there are always equilibria in which only two candidates receive votes. Second, there may exist an equilibrium in which three candidates receive votes. Its characteristics challenge common beliefs: (i) neither sincere voting by all voters, nor push over tactics (i.e. supporters of the front-runner voting for a less-preferred candidate in order to in?uence who will face the front-runner in the second round) are supported in equilibrium, and (ii) the winner does not necessarily have democratic legitimacy since the Condorcet winner may not even participate in the second round.
    Keywords: Strategic Voting, Runoff Elections, Poisson Games
    JEL: D72
    Date: 2013–09
  4. By: Jia, Ruixue; Kudamatsu, Masayuki; Seim, David
    Abstract: Who becomes a top politician in China? We focus on provincial leaders, a pool of candidates for top political office, and examine how their chance of being promoted depends on performance - measured by provincial economic growth - and connections with top politicians - measured by past joint work in the same branch of government. A simple theoretical framework suggests that performance and connections may interact, an aspect ignored in the previous literature. Over the period 1993-2009, we find a positive correlation between promotion and growth that is robustly stronger for connected provincial leaders than for unconnected ones. This evidence indicates that performance and connections are complements in the Chinese political selection process. Auxiliary evidence suggests that the documented promotion pattern does not distort the allocation of talent.
    Keywords: Chinese provincial leaders; political selection in autocracy; promotion; social networks
    JEL: O53 P26
    Date: 2013–06
  5. By: Pincin, Jared
    Abstract: This paper examines on a panel of 22 OECD Development Assistance Committee countries whether fragmentation of executive power and the degree of competition in the legislative branch of government increases the amount of tied aid over the 1979-2009 period. Fragmentation and competition are broadly defined as the degree to which the costs of a dollar of aid expenditure are internalized by decision makers and the relative strength of the government’s position vis-à-vis legislative composition respectively. The empirical results show tied aid, both in levels and as a percentage of total aid, increases as the number of decision makers within the government increases and decreases as the proportion of excess seats a governing coalition holds above a simple majority increases.
    Keywords: Official Development Assistance (ODA); tied aid; fragmented government; political economy
    JEL: F35
    Date: 2013–08–01
  6. By: Grüner, Hans Peter; Müller, Daniel
    Abstract: This paper develops a method to estimate information rents of losers of a reform who receive a monetary compensation. Our method explicitly accounts for survey respondents' reluctance to reveal a willingness to accept which is smaller than the actual compensation. We apply our approach to the case of the 2005 European agricultural reform using uniquely gathered survey data from farmers in Lower Saxony, Germany. We find empirical indications for strategic misreporting. Correcting for these effects with a structural model, we find that information rents are in the order of up to 15 per cent of total compensation paid. Moreover, we show that the reform could not have been implemented distinctly cheaper by conditioning compensation schemes on observable factors.
    Keywords: European agricultural reform; information rents
    JEL: D70 D78 H20
    Date: 2013–04
  7. By: Guillermo Ordonez (University of Pennsylvania); Christoph Trebesch (University of Munich); Helios Herrera (Columbia University)
    Abstract: Credit booms seem to be among the main predictors of financial crises. We find that, in emerging economies, political booms measured by increases in incumbents' popularity are important predictors too, not only of financial crises but of economic crises more generally. We propose a model in which governments concerned about their reputation and popularity ride the benefits of credit booms and delay corrective actions to prevent crises. We discuss the policy implication of the model and the consistency of its testable implications with data.
    Date: 2013
  8. By: Khan, Haider
    Abstract: The main purpose of this work is to address a puzzle and suggest strategies towards solutions that are freedom-enhancing. The puzzles: why is there such a tendency towards regionalization and even nationalist protectionism despite the rhetoric of globalization, the structural adjustment policies of the IFIs( International Financial Institutions), and the recognized merits of a rules-based global system? The main argument offered is that there is a contradiction in the heart of the current US and the IFIs-led globalization that stems from their seeming refusal to understand the implications of unevenness in the real world. This also has led to their neglect of some vital principles of global justice. By ignoring issues of equity, the current leaders of globalization now risk losing economic efficiency if the world becomes further fragmented. Using an extension of Sen’s capabilities approach---called the social capabilities approach--- the role of deepening democracy in the global political economy is shown to be crucial in this process.
    Keywords: globalization; democracy; social capabilities approach; unevenness; IFIs; freedom; global justice; global political economy
    JEL: A13 F3
    Date: 2013–08
  9. By: Murray, Michael
    Abstract: This working paper is an encyclopedia entry on Economic Democracy written for: Rowe, Debra ACHIEVING SUSTAINBILITY, Cengage Publishing. The focus of the entry is on steps for advancing economic democracy, such as encouraging local self-reliance, and building up of local economies by supporting workplace cooperatives, non-profits, credit unions, and small businesses.
    Keywords: Economic Democracy, local self-reliance
    JEL: H00 H4 H7 H70
    Date: 2013–09–11

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