nep-pol New Economics Papers
on Positive Political Economics
Issue of 2013‒11‒16
23 papers chosen by
Eugene Beaulieu
University of Calgary

  1. Sitting on the fence: Pork - barrels and democratization under threat of conflict. The case of Ghana, 1996 - 2004 By Mesplé-Somps, Sandrine; André, Pierre
  2. Path-Breakers: How Does Women’s Political Participation Respond to Electoral Success By Sonia Bhalotra; Irma Clots-Figueras; Lakshmi Iyer
  3. Inequality Dynamics and the Politics of Redistribution By Tetsuo Ono
  4. Happy Voters By Liberini, Federica; Redoano, Michela; Proto, Eugenio
  5. Attribution Error in Economic Voting: Evidence from Trade Shocks By Rosa C. Hayes; Masami Imai; Cameron A. Shelton
  6. Does being Elected Increase Subjective Entitlements? Evidence from the Laboratory By Arne Robert Weiss; Irenaeus Wolff
  7. National Parties, Political Processes and the EU democratic deficit: The Problem of Europarties Institutionalization. By Fabio Sozzi
  8. The organization of political parties and the politics of bureaucratic reform By Cruz, Cesi; Keefer, Philip
  9. When Ideas Trump Interests: Preferences, World Views, and Policy Innovations By Dani Rodrik
  10. The dark side of the vote: Biased voters, social information, and information aggregation through majority voting By Morton, Rebecca B.; Piovesan, Marco; Tyran, Jean-Robert
  11. Political Motivations and Electoral Competition: Equilibrium Analysis and Experimental Evidence By Michalis Drouvelis; Alejandro Saporiti; Nicolaas J. Vriend
  12. Homeowners, Renters and the Political Economy of Property Taxation By Eric J. Brunner; Stephen L. Ross; Rebecca K. Simonsen
  13. Government Ideology in Donor and Recipient Countries: Does Political Proximity Matter for the Effectiveness of Aid? By Axel Dreher; Anna Minasyan; Peter Nunnenkamp
  14. The Power of Coalitions: Participation and Governance in California’s Public-Private Welfare State By Eaton, Charlie; Weir, Margaret
  15. Health and the Political Agency of Women By Sonia Bhalotra; Irma Clots-Figueras
  16. Business Cycles with Revolutions By Lance Kent; Toan Phan
  17. Enriching the Neo-Kaleckian Growth Model: Nonlinearities, Political Economy, and Financial Factors By Thomas I. Palley
  18. National borders matter...where one draws the lines too By Vicard, Vincent; Lavallée, Emmanuelle
  19. Betting on Secession: Quantifying Political Events Surrounding Slavery and the Civil War By Charles W. Calomiris; Jonathan Pritchett
  20. Rhetoric in legislative bargaining with asymmetric information By Chen, Ying; Eraslan, Hülya
  21. Racial Cues and Attitudes toward Redistribution: A Comparative Experimental Approach By Shanto Iyengar
  22. ASEAN 2030: Challenges of Building a Mature Political and Security Community By Acharya, Amitav
  23. Ideology and endogenous constitutions By Riboni, Alessandro

  1. By: Mesplé-Somps, Sandrine; André, Pierre
    Abstract: This paper studies political competition in the case of a democratization process. We present an illustrative model describing political competition when the opposition threatens the stability of the country. In some cases, our model predicts the government should invest in opposition districts to avoid political agitation. This contrasts with existing literature on established democracies, where public funds usually target ruling, party supporters or electorally tight districts. We empirically observe the first democratic changeover in Ghana in 2000. Implement- ing a diff-in-diff strategy, we find that districts with a leading political party member appear to receive slightly more public funds when their party is not in charge. This phenomenon is found in urban areas and in areas that vote the most for this leading member’s party. Hence it occurs in places with the potential for political agitation.
    Keywords: Public goods; Elections; Politics; Ghana;
    JEL: D72 O55 R53
    Date: 2013–04
  2. By: Sonia Bhalotra; Irma Clots-Figueras; Lakshmi Iyer
    Abstract: This paper analyzes the effect of a woman’s electoral victory on women’s subsequent political participation. Using the regression discontinuity afforded by close elections between women and men in India’s state elections, we find that a woman winning office leads to a large and significant increase in the share of female candidates from major political parties in the subsequent election. This stems mainly from an increased probability that previous women candidates contest again, an important margin in India where a substantial number of incumbents do not contest re-election. There is no significant entry of new female candidates, no change in female or male voter turnout and no spillover effects to neighboring areas. Further analysis points to a reduction in party bias against women candidates as the main mechanism driving the observed increase in women’s candidacy.
    Date: 2013–11–13
  3. By: Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This paper analyzes the political economy of public education and lump-sum transfer in an overlapping-generation model of a two-class society in which the dy- namics of inequality is driven by the accumulation of human capital. The two redistributive policies are determined by voting, while private education which sup- plements public education is purchased individually. The model, which includes two-dimensional voting, demonstrates the following two types of stable steady-state equilibria which are in line with the evidence: a high-inequality equilibrium with government spending in favor of public education, and a low-inequality equilibrium with government spending in favor of lump-sum transfer.
    Keywords: Public education, political economy, inequality
    JEL: D72 D91 I24
    Date: 2013–10
  4. By: Liberini, Federica (ETH, Zurich); Redoano, Michela (University of Warwick); Proto, Eugenio (University of Warwick)
    Abstract: In this paper we investigate whether or not recent initiatives taken by governments and international organizations to come up with indicators of SubjectiveWell Being (SWB) to inform policy makers go in the same direction as citizens expectations on what policy makers should do. We test retrospective voting hypotheses by using standard measures of SWB as a proxy for utility instead of the commonly used indicators of economic and …nancial circumstances. Using the British Household Panel Survey Data we …nd that citizens who are satis…ed with their life are more likely to cast their vote in favour of the ruling party, even taking into account ideological preferences. We show that SWB in‡uences voting decision even when the event a¤ecting the SWB is beyond the government’s control, like the spouse death.
    Keywords: Wellbeing, Political Competition, Swing Voter Hypothesis, Retrospective Voting.
    Date: 2013
  5. By: Rosa C. Hayes (Federal Reserve Bank of New York); Masami Imai (Department of Economics, Wesleyan University); Cameron A. Shelton (Claremont McKenna College)
    Abstract: This paper exploits the international transmission of business cycles to examine the prevalence of attribution error in economic voting in a large panel of countries from 1990-2009. We find that voters, on average, exhibit a strong tendency to oust incumbent governments during an economic downturn, regardless of whether the recession is home-grown or merely imported from trading partners. However, we find important heterogeneity in the extent of attribution error. A split sample analysis shows that countries with more experienced voters, more educated voters, and possibly more informed voters—all conditions which have been shown to mitigate other voter agency problems—do better in distinguishing imported from domestic growth.
    Keywords: Economic voting; Political agency problem
    JEL: E3 E6
    Date: 2013–10
  6. By: Arne Robert Weiss (Department of Economics, University of Köln, Germany); Irenaeus Wolff (Department of Economics, University of Konstanz, Germany and TWI Kreuzlingen, Switzerland)
    Abstract: In Geng, Weiss, and Woff (2011), we pointed to the possibility that a voting mechanism may create or strengthen an entitlement effect in political-power holders relative to a random-appointment mechanism. This comment documents that such an effect, if it exists, is not robust.
    Keywords: Elections, Electoral Campaigns, Dictator Game, Social Distance, Entitlement, Experiment
    JEL: D72 D03 C91
    Date: 2013–10–31
  7. By: Fabio Sozzi
    Abstract: In classical party democracy, elections serve as an “instrument of democracy†(Powell 2000): they are the mechanism to connect policy preferences of the electors (within the electoral arena) to the political production (within the legislative arena). At the European level the linkage seems to be lost because the political actors performing in the two arena are not the same and the logics of behaviour are quite different. The EU calls for truly “Europarties†to become more democratic in its procedural and substantive prerequisites and this entails not only a progressive emancipation of party structures at European level but also an integration between them. In fact, we will have full Europarties only when the two party structures at EU level are either independent from national parties and linked to each other: if intra- and extra- parliamentary faces become really European and connected entities, legislators will be accountable to voters and, consequently, democratic deficit will decline. The main aims of this paper are, firstly, to investigate if and to what extent political parties at European level are able to perform the electoral and legislative functions in the two separated arena and, secondly, if intra- and extra- parliamentary faces of the Europarties are still separated or, rather, have become integrated. In other words, I will delineate the process of institutionalization of the Europarties looking at their progressive autonomy from national parties and systemness/integration at European level (Panebianco 1988).
    Keywords: political parties
    Date: 2013–03–01
  8. By: Cruz, Cesi; Keefer, Philip
    Abstract: Bureaucratic reform is a priority of donor organizations, including the World Bank, but is notoriously difficult to implement. In many countries, politicians have little interest in the basic financial and personnel management systems that are essential to political oversight of bureaucratic performance. To explain this, this paper presents a new perspective on the political economy of bureaucracy. Politicians in some countries belong to parties that are organized to allow party members to act collectively to limit leader shirking. This is particularly the case with programmatic parties. Such politicians have stronger incentives to pursue public policies that require a well-functioning public administration. Novel evidence offers robust support for this argument. From a sample of 439 World Bank public sector reform loans in 109 countries, the paper finds that public sector reforms are more likely to succeed in countries with programmatic political parties.
    Keywords: Public Sector Economics,Public Sector Management and Reform,Public Sector Expenditure Policy,Public Sector Corruption&Anticorruption Measures,Intergovernmental Fiscal Relations and Local Finance Management
    Date: 2013–11–01
  9. By: Dani Rodrik
    Abstract: The contemporary approach to political economy is built around vested interests – elites, lobbies, and rent-seeking groups which get their way at the expense of the general public. The role of ideas in shaping those interests is typically ignored or downplayed. Yet each of the three components of the standard optimization problem in political economy – preferences, constraints, and choice variables – rely on an implicit set of ideas. Once the manner in which ideas enter these frameworks is made explicit, a much richer and more convincing set of results can be obtained. In particular, new ideas about policy—or policy entrepreneurship—can exert an independent effect on equilibrium outcomes even in the absence of changes in the configuration of political power.
    JEL: F5 P16
    Date: 2013–11
  10. By: Morton, Rebecca B.; Piovesan, Marco; Tyran, Jean-Robert
    Abstract: We experimentally investigate information aggregation through majority voting when some voters are biased. In such situations, majority voting can have a dark side, that is, result in groups making choices inferior to those made by individuals acting alone. In line with theoretical predictions, information on the popularity of policy choices is beneficial when a minority of voters are biased, but harmful when a majority is biased. In theory, information on the success of policy choices elsewhere de-biases voters and alleviates the inefficiency. However, in the experiment, providing social information on success is ineffective and does not de-bias voters. --
    Keywords: Condorcet Jury Theorem,information aggregation,majority voting,social information
    JEL: C92 D7 D02 D03
    Date: 2013
  11. By: Michalis Drouvelis (University of Birmingham); Alejandro Saporiti (University of Manchester); Nicolaas J. Vriend (Queen Mary, University of London)
    Abstract: classical one-dimensional election game with two candidates. These candidates are interested in power and ideology, but their weights on these two motives are not necessarily identical. Apart from obtaining the well known median voter result and the two-sided policy differentiation outcome, the paper uncovers the existence of two new equilibrium configurations, called 'one-sided' and 'probabilistic' policy differentiation, respectively. Our analysis shows how these equilibrium configurations depend on the relative interests in power (resp., ideology) and the uncertainty about voters' preferences. The theoretical predictions are supported by the data collected from a laboratory experiment, as we observe convergence to the Nash equilibrium values at the aggregate as well as at the individual levels in all treatments, and the comparative statics effects across treatments are as predicted by the theory.
    Keywords: Electoral competition, Power, Ideology, Uncertainty, Nash equilibrium, Experimental evidence.
    JEL: C72 C90 D72
    Date: 2013–10
  12. By: Eric J. Brunner (University of Connecticut); Stephen L. Ross (University of Connecticut); Rebecca K. Simonsen (Columbia University)
    Abstract: Many economists have cited fiscal illusion as an argument against specific types of taxes arguing that less visible taxes may cause voters to systematically underestimate the true burden of taxation. The higher willingness of renters to support an increase in the property tax, often referred to as renter illusion, is often used as one of the classic examples of fiscal illusion. In this paper we use detailed micro-level survey data of registered voters in California to provide new evidence on the renter illusion hypothesis. The survey data contains voter responses to two key questions: 1) their willingness to pay higher property taxes to expand funding for public services and 2) their willingness to pay higher sales taxes to fund those services. Using a difference-in-differences estimation strategy to control for individual specific preferences for public service spending, we find first that renters are approximately 10 to 15 percentage points more likely than homeowners to favor a property tax increase over a sales tax increase to fund public services. However, further analysis indicates that our results are not driven by the voting behavior of renters. Results based solely on the sample of renters indicate that renters are indifferent between a property tax increase and a sales tax increase. In contrast, homeowners strongly oppose a property tax increase relative to a sales tax increase. These results cast doubt on the strong version of the renter illusion hypothesis that suggests renters believe they do not pay the property tax. Further analysis reveals that the strong opposition among homeowners to the property tax is not associated with the relative tax burden faced by homeowners. Examining the variation in tax burden created by Proposition 13 in California, we find that homeowner aversion to the property tax does not increase with the homeowner’s relative tax burden. These findings of homeowner aversion to property taxes are consistent with recent work suggesting that salience matters when voters evaluate taxes, but also suggest that increased salience does not necessarily lead to more careful consideration of individual tax burdens.
    Keywords: fiscal illusion, renter effect, tax salience, tax burden, property tax
    JEL: H2 H7 R5
    Date: 2013–10
  13. By: Axel Dreher; Anna Minasyan; Peter Nunnenkamp
    Abstract: Political proximity between donor and recipient governments may impair the effectiveness of aid by encouraging favoritism. By contrast, political misalignment between donor and recipient governments may render aid less effective by adding to transaction costs and giving rise to incentive problems. We test these competing hypotheses empirically by considering the political ideology of both governments along the left-right spectrum in augmented models on the economic growth effects of aid. Following the estimation approach of Clemens et al. (2012), we find that aid tends to be less effective when political ideology differs between the donor and the recipient
    Keywords: aid effectiveness, economic growth, politics and aid, government ideology
    JEL: O19 O11 F35 F53
    Date: 2013–08
  14. By: Eaton, Charlie; Weir, Margaret
    Abstract: Between 1980 and 2010 California’s health care policy field shifted from a business-dominated, closed-door pattern of decision making to an open political arena in which a wide-ranging and diversely resourced coalition advocating on behalf of beneficiaries had become an accepted partner in policymaking. This article examines this transformation, considering its broader implications for the political dynamics of the public-private welfare state and the role of advocacy groups in defending beneficiary interests. Our argument emphasizes coalition-building, probing not just which interests combine forces, but also showing how coalitions can expand over time and build their range of capabilities. We focus on three processes that build effective coalitions to influence public private policymaking: 1) an initial link that joins previously unconnected groups in umbrella organizations; 2) resource expansion that enlarges the engaged base by funding more diverse groups and expanding alliances with those organizations; 3) institutionalization of coalitional engagement by changing the rules of the game using such policy levers as regular hearings, provisions for participation, and transparency.  We conclude by showing how these capabilities have positioned California to implement the Affordable Care Act and consider the implications for other states.
    Keywords: Social and Behavioral Sciences
    Date: 2013–08–02
  15. By: Sonia Bhalotra; Irma Clots-Figueras
    Abstract: We investigate whether women’s political representation in state legislatures improves public provision of antenatal and early childhood health services in the districts from which they are elected, arguing that the costs of poor services in this domain are disproportionately borne by women. Using several large representative samples of data from India and accounting for potential endogeneity of politician gender and the sample composition of births, we find that a 10 percentage point increase in women’s political representation results in a 2.1 percentage point reduction in neonatal mortality, an outcome that is closely tied to investments in maternal health. Importantly, we are able to probe the underlying mechanisms. We find that politician gender exerts an impact on both the health infrastructure and the information and encouragement that recent studies suggest is important in determining the demand for public health services. Not only are more public health facilities built under women but there is an increase in antenatal care visits, institutional delivery and breastfeeding. Our findings contribute evidence in favour of women’s political representation as an under-utilised tool for addressing infectious disease and death in developing countries.
    Date: 2013–11–13
  16. By: Lance Kent (Department of Economics, College of William and Mary); Toan Phan (Department of Economics, UNC-Chapel Hill)
    Abstract: This paper develops an empirical macroeconomic framework to analyze the relationship between major political disruptions and business cycles of a country. We combine a new dataset of political revolutions (mass domestic political campaigns to remove dictators and juntas) across the world since 1960, with coup data and traditional macro data (of output, investment, trade, inflation and exchange rate). We then build a panel vector-autoregression model with two novel ingredients: (1) political disruptions and (2) an estimated probability of such disruptions. We find that both terms have statistically and economically significant impacts on business cycles. Interestingly, the impacts of the second term dominate those of the first, both statistically and economically. This suggests that our measure of political risk captures an important source of time-varying uncertainty and volatility in many countries.
    Keywords: business cycles, political risk, time-varying uncertainty, panel VAR
    Date: 2013–11–05
  17. By: Thomas I. Palley
    Abstract: This paper expands the neo-Kaleckian growth model to include nonlinearities, political economy factors, and interest rate and stock market effects. The expansions enrich the model and enhance its capacity to analyze and explain developments within contemporary capitalist economies. Nonlinearities can potentially make economies both wage- and profit-led, and failure to control for nonlinearities may result in misleading conclusions about the structure of the economy. Political economy analysis suggests capital’s desire for profit maximization results in a lower growth rate. Lastly, the paper shows why q theory of investment is inconsistent with the neo-Kaleckian approach to capital accumulation and a higher q can be associated with a fall in the rate of investment.
    Keywords: wage-led, profit-led, nonlinearities, q theory, stock market, political economy
    JEL: E12 O41 O33
    Date: 2013
  18. By: Vicard, Vincent; Lavallée, Emmanuelle
    Abstract: The fact that crossing a political border dramatically reduces trade flows has been widely documented in the literature. The increasing number of borders has surprisingly attracted much less attention. The number of independent countries has indeed risen from 72 in 1948 to 192 today. This paper estimates the effect of political disintegration since World War II on the measured growth in world trade. We first show that trade statistics should be considered carefully when assessing globalization over time, since the definition of trade partners varies over time. We document a sizeable resulting accounting artefact, which accounts for 17% of the growth in world trade since 1948. Second, we estimate that political disintegration alone since World War II has raised measured international trade flows by 9% but decreased actual trade flows (including inter-regional trade) by 4%.
    Keywords: Trade; Commerce; Frontières; Trade Statistics; Political Disintegration; Borders;
    JEL: N70 F02
    Date: 2013
  19. By: Charles W. Calomiris; Jonathan Pritchett
    Abstract: Abraham Lincoln’s election produced Southern secession, Civil War, and abolition. Using a new database of slave sales from New Orleans, we examine the connections between political news and the prices of slaves for 1856-1861. We find that slave prices declined by roughly a third from their 1860 peak, reflecting increased southern pessimism regarding the possibility of war and the war’s possible outcome. The South’s decision to secede reflected the beliefs that the North would not invade to oppose secession, and that emancipation of slaves without compensation was unlikely, both of which were subsequently dashed by Lincoln’s actions.
    JEL: G18 N31 N41 P16
    Date: 2013–11
  20. By: Chen, Ying; Eraslan, Hülya
    Abstract: We analyze a three-player legislative bargaining game over an ideological and a distributive decision. Legislators are privately informed about their ideological intensities, i.e., the weight placed on the ideological decision relative to the weight placed on the distributive decision. Communication takes place before a proposal is offered and majority rule voting determines the outcome. We show that it is not possible for all legislators to communicate informatively. In particular, the legislator who is ideologically more distant from the proposer cannot communicate informatively, but the closer legislator may communicate whether he would \compromise "or flight" on ideology. Surprisingly, the proposer may be worse off when bargaining with two legislators (under majority rule) than with one (who has veto power), because competition between the legislators may result in less information conveyed in equilibrium. Despite separable preferences, the proposer is always better off making proposals for the two dimensions together.
    Date: 2013–01–01
  21. By: Shanto Iyengar
    Abstract: Support for welfare in the US is heavily influenced by citizens’ racial attitudes, especially citizens’ attitudes toward Blacks. Indeed, the fact that many Americans think of welfare recipients as poor Blacks (and especially poor Black women) is a common explanation for Americans’ comparatively low support for redistribution cross-nationally. In this study, we extend existing work on how racialized portrayals of recipients affect attitudes toward redistribution. The data for the analysis are drawn from a new and unique online survey experiment, implemented by YouGov with representative samples (n=1200) in each of the US, UK and Canada. Relying on a series of survey vignettes, we manipulate program type (welfare vs. unemployment insurance) as well as the ethno-racial background of recipients (through morphed photos and common ethnicized names). In doing so, we seek to make three specific contributions. First, we test whether support for a means-tested program like welfare is lower than support for contribution-based program like unemployment insurance. Second, we extend the American literature to explore whether there is an anti-Black bias in other countries. Third, we examine whether citizens respond to other minority groups (Asians and Southeast Asians) in a similar manner. Parallel survey designs allows for an unprecedented comparative analysis of the underlying political-psychological sources of support (or lack of support) for redistributive policies across Anglo-Saxon democracies. The paper concludes by considering the implications of this study in light of growing immigrant-driven diversity in North America and Europe.
    Keywords: public opinion
    Date: 2013–07–25
  22. By: Acharya, Amitav (Asian Development Bank Institute)
    Abstract: The paper examines ASEAN’s political and security challenges and prospects in the coming two decades. The challenges facing ASEAN could be classified into six broad categories: (1) the shifting balance of power in the Asia Pacific; (2) the persistence of intra-ASEAN territorial conflicts; (3) the territorial dispute in the South China Sea, (4) the programs of military modernizations undertaken by ASEAN states and the resulting prospects for an intra-ASEAN arms race, (5) uncertainty and strife caused by demands for domestic political change, and (6) the dangers posed by transnational (non-traditional) security threats. The conditions for ASEAN to build a mature political-security community are also discussed.
    Keywords: asean 2030; political security; community security; balance of power; territorial conflict; non-traditional security; asean-prc relations
    JEL: F50 F51 F53 F55
    Date: 2013–11–05
  23. By: Riboni, Alessandro
    Abstract: We study a legislature where decisions are made by playing an agenda-setting game. Legislators are concerned about their electoral prospects but they are also genuinely concerned for the legislature to make the correct decision. We show that when ideological polarization is positive but not too large (and the status quo is extremely inefficient), institutions in which the executive has either no constraints (autocracy) or many constraints (unanimity) are preferable to democracies that operate under an intermediate number of constraints (simple majority rule). When instead ideological polarization is large (and the status quo is only moderately inefficient), simple majority turns out to be preferable.
    Keywords: Majority rule; Position-taking preferences; Ideological polarization; Strategic interactions; Agenda-setting game;
    JEL: D7 D02
    Date: 2013

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