|
on Positive Political Economics |
| By: | Baskaran, Thushyanthan; da Fonseca, Mariana Lopes |
| Abstract: | In 2001, the state parliament of the German federal state of Hesse abolished a 5 percent legal electoral threshold for local elections. This reform had a stronger effect on municipalities with larger councils because implicit electoral thresholds decrease with council size. Exploiting discontinuities in a state law that exogenously maps population to council size, we implement a difference in discontinuity design to study the political consequences of abolishing an electoral threshold. The dataset covers all 426 Hessian municipalities over the period 1989-2011. Our results suggest that the seat and vote shares of small parties increased in municipalities that were affected more strongly by the abolishment. In addition, municipalit ies exposed to stronger treatments reduced their council size, presumably to limit political competition. -- |
| Keywords: | electoral rules,electoral thresholds,voting |
| JEL: | D70 D72 D78 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:177&r=pol |
| By: | François Facchini (Université Paris-Sud - Faculté Jean Monnet, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Mickaël Melki (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne) |
| Abstract: | We provide a test of the impact of voters' political ideology on economic growth and of the role of preferences for government size as a transmission channel. We focus on France from the beginning of its stable democratic experience in 1871. A move of voters' ideology to the right increases economic growth over total observation period. However, the growth effect of ideology is mediated by voters' preferences for government size only during the post-World War II period. For reverse causality concerns, we use the political ideology of other historical democracies as an instrument variable for France's ideology. |
| Keywords: | Political ideology; economic growth; public spending |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00917617&r=pol |
| By: | Brollo, Fernanda; Troiano, Ugo |
| Abstract: | This paper analyzes the effect the gender of local policymakers on policy outcomes. Analyzing a rich dataset from Brazilian municipalities and using a regression discontinuity design, we find that municipalities ruled by female mayors have better health outcomes, receive more federal discretionary transfers, and have lower corruption. Additionally, male mayors hire more temporary public employees than their female counter-parts when they are allowed to run for re-election, and when municipal elections are approaching. These findings suggest that male mayors may promote more political patronage than female mayors and that men and women may respond differently to local election incentives. |
| Keywords: | gender, politics, health, corruption, patronage |
| JEL: | D72 I18 J00 J16 P16 |
| Date: | 2013–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:52244&r=pol |
| By: | Gabriel Romero (Departamento de Economía); Iñigo Iturbe-Ormaetxe Kortajarene (Universidad de Alicante) |
| Abstract: | We present a model in which individuals choose both the level of provision of a public good and the quota of low-skilled immigrants that are allowed into the country. Individuals can supplement the public good in the private market. Immigrants affect natives through three channels: (i) the labor market; (ii) tax collection; (iii) the quality of the public good. We find that the higher the political weight of the rich (highly skilled) is, the less tolerant the poor and the middle-class are toward immigration and the more demanding they are toward increasing public spending. The rich are the most favorable to immigration. As they have more weight, the political outcome is closer to their preferences and further from the preferences of the other groups. We use data from the European Social Survey to test the implications of our model. |
| Keywords: | Probabilistic voting model, public goods, immigration |
| JEL: | H41 J61 D72 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2013-09&r=pol |
| By: | De Feo, Giuseppe; De Luca, Giacomo |
| Abstract: | We study the impact of organized crime on electoral competition. Assuming that the mafia is able to bring votes to the supported party in exchange of money, we show that (i) the strongest party is willing to pay the highest price to secure mafia services; (ii) the volume of electoral trade with the mafia increases with political competition and with the efficiency of the mafia. Studying in detail parliamentary elections in Sicily for the period 1946- 1992, we document the significant support given by the Sicilian Mafia to the Christian Democratic party, starting at least from the 1970s. This is consistent with our theoretical predictions, as political competition became much tighter during the 1970s and the Sicilian mafia experienced an extensive centralization process towards the end of the 1960s, which increased substantially its control of the territory. We also provide evidence that in exchange for its electoral support the mafia got economic advantages for its activities in the construction industry. |
| Keywords: | electoral competition, mafia, Cosa Nostra, electoral fraud, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:529&r=pol |
| By: | Andrew E. Clark; Emanuela D'Angelo |
| Abstract: | The paper uses 18 waves of BHPS data to provide evidence of the roles of both own social status and upward mobility relative to one's parents on job and life satisfaction, preferences for redistribution, pro-public sector attitudes and voting. Both own social status and greater mobility with respect to parents are positively associated with subjective well-being. However, this symmetric effect disappears for political preferences. While greater social status is associated with less favourable attitudes to redistribution and the public sector, greater upward mobility is associated with more Left-wing attitudes. These attitudes translate into actual reported voting behaviour. Upwards social mobility produces satisfied Left-wingers. |
| Keywords: | Social Mobility, Satisfaction, Redistribution, Inequality, Voting |
| JEL: | A14 C25 D31 D63 J28 J62 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1252&r=pol |
| By: | Krenz, Astrid |
| Abstract: | We examine the long-run effects of the political institutional framework, measured by the political risk component of the International Country Risk Guide, on trade. Our results suggest that an improved political institutional framework is both a cause and a consequence of increased trading activity. However, we find no significant relationship in case of exporting activity for the high-income countries and the countries that possess better political institutions. -- |
| Keywords: | political institutions,trade,cointegration analysis |
| JEL: | F14 F55 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:182&r=pol |
| By: | Sourav Bhattacharya |
| Abstract: | In this paper, we study conditions under which the Condorcet Jury Theorem extends to the spatial model of elections. In the model, individuals with ideal points distributed over a unidimensional policy space vote over two alternatives, the location of one of which is uncertain. By employing the techniques used in Bhattacharya (2013), we identify the entire set of symmetric equilibria for almost every voting rule. If there is uncertainty about whether the outcome induced by the policy alternative is to the right or to the left of the status quo, then an election produces three outcomes, exactly one of which is full information equivalent. In the other two equilibria, the status quo always wins. This Â…finding provides a novel explanation for status quo bias in referenda and the growing incumbent advantage in US elections. |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:517&r=pol |
| By: | Arvate, Paulo; Barbosa, Klenio de Souza; Fuzitani, Eric |
| Abstract: | A corporate firm may influence policies in its favor by transferring money to political candidates. However, empirical studies which document evidence about the return on campaign donations are rare (Großer, Reuben and Tymula, 2013). In this paper we estimate the net expected return of a campaign donation in eight Brazilian states using a Regression Discontinuity Design (RDD) to separate the return of winning and losing state deputy candidates in the electoral coalition in 2006. Our results show that that the net return is quite high (i.e., the investment of donor firms is almost 2% of the net expected return), and is larger among traditional electoral parties than any other parties, on average. Looking at the heterogeneity of local executive and legislative levels, we find that net returns are higher when donor firms finance deputies within a governor’s electoral coalition than deputies outside this coalition. |
| Date: | 2013–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:eesptd:336&r=pol |
| By: | Della Vigna, Stefano; Enikolopov, Ruben; Mironova, Vera; Petrova, Maria; Zhuravskaya, Ekaterina |
| Abstract: | How do nationalistic media affect animosity between ethnic groups? We consider one of Europe’s deadliest conflicts since WWII: the Serbo-Croatian conflict. We show that, after a decade of peace, cross-border nationalistic Serbian radio triggers ethnic hatred towards Serbs in Croatia. Mostly attracted by non-political content, many Croats listen to Serbian public radio (intended for Serbs in Serbia) whenever signal is available. As a result, the vote for extreme nationalist parties is higher, and ethnically offensive graffiti are more common, in Croatian villages with Serbian radio reception. A laboratory experiment confirms that Serbian radio exposure causes anti-Serbian sentiment among Croats. |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:docweb:1312&r=pol |
| By: | Sourav Bhattacharya; Paulo Barelli |
| Abstract: | We provide a simple condition that is both necessary and sufficient for aggregation of private information in large elections where all voters have the same preference. In some states of the world, all voters prefer A; and in other states, all voters prefer B. Each voter draws a private signal independently from a distribution conditional on the state. According to our condition, there should be a hyperplane in the simplex over signals that separates the conditional distributions in states where A is preferred from those in states where B is preferred. If this condition is satisfied, information is aggregated in an equilibrium sequence: even under incomplete information, the preferred outcome obtains almost surely in each state. If the hyperplane condition is violated, there exists no feasible strategy profile that aggregates information. Therefore, information aggregation holds only for special environments. |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:515&r=pol |
| By: | Daron Acemoglu; Suresh Naidu; Pascual Restrepo; James A. Robinson |
| Abstract: | In this paper we revisit the relationship between democracy, redistribution and inequality. We first explain the theoretical reasons why democracy is expected to increase redistribution and reduce inequality, and why this expectation may fail to be realized when democracy is captured by the richer segments of the population; when it caters to the preferences of the middle class; or when it opens up disequalizing opportunities to segments of the population previously excluded from such activities, thus exacerbating inequality among a large part of the population. We then survey the existing empirical literature, which is both voluminous and full of contradictory results. We provide new and systematic reduced-form evidence on the dynamic impact of democracy on various outcomes. Our findings indicate that there is a significant and robust effect of democracy on tax revenues as a fraction of GDP, but no robust impact on inequality. We also find that democracy is associated with an increase in secondary schooling and a more rapid structural transformation. Finally, we provide some evidence suggesting that inequality tends to increase after democratization when the economy has already undergone significant structural transformation, when land inequality is high, and when the gap between the middle class and the poor is small. All of these are broadly consistent with a view that is different from the traditional median voter model of democratic redistribution: democracy does not lead to a uniform decline in post-tax inequality, but can result in changes in fiscal redistribution and economic structure that have ambiguous effects on inequality. |
| JEL: | O10 P16 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19746&r=pol |
| By: | Kerr, William R. (Harvard Business School, Bank of Finland, and NBER) |
| Abstract: | In cross-sectional studies, countries with greater income inequality typically exhibit less support for government-led redistribution and greater acceptance of wage inequality (e.g., United States versus Western Europe). If individual nations evolve along this pattern, a vicious cycle could form with reduced social concern amplifying primal increases in inequality due to forces like skill-biased technical change. Exploring movements around these long-term levels, however, this study finds mixed evidence regarding the vicious cycle hypothesis. On one hand, larger compensation differentials are accepted as inequality grows. This growth in differentials is of a smaller magnitude than the actual increase in inequality, but it is nonetheless positive and substantial in size. Weighing against this, growth in inequality is met with greater support for government-led redistribution to the poor. These patterns suggest that short-run inequality shocks can be reinforced in the labor market but do not result in weaker political preferences for redistribution. |
| Keywords: | inequality; social preferences; social norms; redistribution; welfare; class warfare |
| JEL: | D31 D33 D61 D63 D64 D72 H23 H53 I38 J31 R11 |
| Date: | 2013–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2013_031&r=pol |
| By: | Stefano DellaVigna; Ruben Durante; Brian Knight; Eliana La Ferrara |
| Abstract: | An extensive literature has studied lobbying by special interest groups. We analyze a novel lobbying channel: lobbying businessmen-politicians through business proxies. When a politician controls a business, firms attempting to curry favors shift their spending towards the politician's business. The politician benefits from increased revenues, and the firms hope for favorable regulation in return. We investigate this channel in Italy where government members, including the prime minister, are not required to divest business holdings. We examine the evolution of advertising spending by firms over the period 1994 to 2009, during which Silvio Berlusconi was prime minister on and off three times, while maintaining control of Italy's major private television network, Mediaset. We predict that firms attempting to curry favor with the government shift their advertising budget towards Berlusconi's channels when Berlusconi is in power. Indeed, we document a significant pro-Mediaset bias in the allocation of advertising spending during Berlusconi's political tenure. This pattern is especially pronounced for companies operating in more regulated sectors, as predicted. Using a model of supply and demand in the advertising market, we estimate one billion euros of extra revenue to Berlusconi's group. We also estimate the expected returns in regulation to politically motivated spenders of similar magnitude, stressing the economic importance of this lobbying channel. These findings provide an additional rationale for rules on conflict of interest. |
| JEL: | D73 P48 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19766&r=pol |
| By: | Resul Cesur; Naci H. Mocan |
| Abstract: | Turkey, which is a predominantly Muslim country, enacted an education law in 1997 which increased the compulsory secular education from five to eight years. We employ a unique nation-wide survey of adults in 2012 to investigate the impact of education on religiosity, lifestyles and political preferences by using exposure to the law as an instrument for schooling. The data set includes information about the extent of religiosity, lifestyle choices (e.g. modern, conservative, religious), ethnic background (e.g. Kurd, Turk, Arab) and the religious sect of the respondents (Sunni, Alevite Shii’te, etc.) The results show that the reform had a significant impact on middle school completion for both men and women, with stronger effects on women. An increase in education, generated by exposure to the law, decreases women’s propensity to identify themselves as religious. Education also lowers women’s tendency to wear a religious head cover (head scarf, religious turban or burka) and it increases their propensity to have a modern lifestyle. Education reduces women’s propensity to cast a vote for Islamic parties, but it has no impact on the propensity to vote. Education has no statistically significant impact on men’s religiosity or their tendency to vote for Islamic parties. The results are robust to controlling for indicators of individuals’ economic well-being as well as variations in empirical specification of the treatment by the law. Using a smaller version of the survey, conducted in 2008, we perform a variety of tests, which demonstrate that the results are not due to a cohort effect. Finally, we show that the effect of education on religiosity and voting preference is not working through migration, residential location or labor force participation. |
| JEL: | I21 I28 K4 Z1 Z12 Z18 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19769&r=pol |
| By: | Feng, Xunan (Shanghai University); Johansson, Anders C. (Stockholm China Economic Research Institute); Zhang, Tianyu (Chinese University of Hong Kong) |
| Abstract: | We study how Chinese private entrepreneurs benefit from participating in politics. Using original hand-collected data on listed firms controlled by private entrepreneurs, we document a significant positive relationship between political participation and change in firm performance. We also provide evidence that the change in social status cannot explain the change in performance. We then identify several ways through which firms gain preferential treatment when the controlling entrepreneur participates in politics: better access to debt financing, preferential tax treatment, more government subsidies, and superior access to regulated industries. |
| Keywords: | Political participation; Entrepreneurs; Corporate governance; Rent seeking; Debt financing; Tax burden; Government subsidies; Mergers and acquisitions; Regulated industries; China |
| JEL: | G30 G32 G34 H20 P26 |
| Date: | 2013–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hascer:2013-028&r=pol |
| By: | Sutirtha Bagchi |
| Abstract: | In politically competitive jurisdictions, there can be strong electoral incentives to underfund public pensions in order to keep current taxes low. I examine this hypothesis using panel data for 2,000 municipal pension plans from Pennsylvania. The results suggest that as a municipality becomes more politically competitive, it tends to have pension plans that are less funded, more generous, and use higher interest rates at which to discount future actuarial liabilities. An increase in the level of political competition by one standard deviation leads to a decline in the actuarial funded ratio of about 7â10 percent, an increase in the annual average retirement benefits of about $470â620 per retiree, and an increase in the interest rate for discounting actuarial liabilities of about 5 basis points. Instrumental Variable (IV) estimates generated using demographic characteristics of the population as instruments corroborate these findings. |
| JEL: | H75 J45 |
| Date: | 2013–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:jmp:jm2013:pba941&r=pol |
| By: | Zohal Hessami (Department of Economics, University of Konstanz, Germany) |
| Abstract: | This paper examines the relationship between corruption and the composition of public expenditures. First, I derive a theoretical model that links the degree of corruption in a country - to be understood as the prevailing culture of corruption - to distortions in the budget composition. The transmission channel is a rent-seeking contest where firms from different sectors pay bribes to politicians and bureaucrats to influence public procurement decisions, which give rise to endogenous rents. I then test the implications of the theoretical model with a dataset covering 29 OECD countries over the 1996-2009 period. Consistent with theoretical predictions, the relative share of expenditures on categories that involve public procurement, high-technology goods, and non-competitive markets (health and environmental protection including waste management) increases with corruption. This distortion occurs at the expense of spending categories that do not involve public procurement (social protection and recretion, culture and religion). |
| Keywords: | Corruption; rent-seeking; public procurement; budget composition |
| JEL: | D72 D73 H11 H50 |
| Date: | 2013–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:1327&r=pol |
| By: | Vera van Hüllen |
| Abstract: | On the basis of a brief reconstruction of the causes and impacts of the Euro crisis, this paper explores, counterfactually and hypothetically, whether the new Euro regime, insisting on fiscal austerity and supply-side reforms, could have prevented the rise of the crisis or is able to deal with its disastrous economic and socialimpact. A comparison with the likely impact of transfer-based Keynesian reflation suggests that, in both cases, economic success is uncertain, while both approaches are likely to produce severely negative sideeffects. In light of such dismal policy choices, attempts to politicize European election campaigns are morelikely to provoke unmanageable policy conflict than to overcome the input-oriented, democratic deficit ofEuropean economic governance |
| Keywords: | fiscal policy; Euro; European elections; legitimacy |
| Date: | 2013–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:erp:kfgxxx:p0052&r=pol |
| By: | Anyanwu John (African Development Bank); Andrew E. O. Erhijakpor |
| Abstract: | Understanding the effect of oil wealth on democracy is important. National democratic institutions provide a check on governmental power and thereby limit the potential of public officials to amass personal wealth and to carry out unpopular policies. Democracy promotion has thus been at the top of the US and West European foreign policy agenda since the end of the Cold War. Recently rising coups d’états attempts and oil discoveries in some African countries, high energy prices and the North African and Middle East situation characterized by revolutions have made the question of the link between oil wealth and democracy timelier than ever. This paper uses recent data on historical oil wealth to provide new evidence on the effect of oil wealth on democracy in Africa from 1955 to 2008. We find that oil wealth is statistically associated with a lower likelihood of democratization when we estimate the relationship in a pooled cross-sectional and time-series setting. In addition, when estimated using fixed effects, the strong negative statistical association continues to hold. Indeed, this result is robust to the source of oil wealth data, the choice and treatment of the variables set, and the sample selection. Our results also show other interesting and important results. The cross-country evidence examined in the study confirms that the “Lipset/Aristotle/modernization hypothesis” (that prosperity stimulates democracy) is a strong empirical regularity. Also, the propensity for democracy rises with population size, population density, ethnic fractionalization, having British legal origin or colonial heritage, and having a supportive institutional environment in the form of maintenance of the rule of law. However, apart from oil wealth, democracy tends to fall with linguistic fractionalization and rough (mountainous) terrain. Moreover, consistent with the data, North Africa consistently fails to favor democratic development. |
| Date: | 2013–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:adb:adbwps:988&r=pol |
| By: | Markus Brückner; Antonio Ciccone; Andrea Tesei |
| Abstract: | We examine the effect of oil price fluctuations on democratic institutions over the 1960-2007 period. We also exploit the very persistent response of income to oil price fluctuations to study the effect of persistent (oil price-driven) income shocks on democracy. Our results indicate that countries with greater net oil exports over GDP see improvements in democratic institutions following upturns in international oil prices. We estimate that a 1 percentage point increase in per capita GDP growth due to a positive oil price shock increases the Polity democracy score by around 0.2 percentage points on impact and by around 2 percentage points in the long run. The effect on the probability of a democratic transition is around 0.4 percentage points. |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2013-18&r=pol |
| By: | Leonid Polishchuk (Department of Economics and Laboratory for Applied Analysis of Institutions and Social Capital, NRU Higher School of Economics (Moscow, Russia)); Georgiy Syunyaev (Department of Economics and Laboratory for Applied Analysis of Institutions and Social Capital, NRU Higher School of Economics) |
| Abstract: | We provide a theory and empirical evidence showing that the rotation of ruling elites in combination with elites' asset ownership could improve property rights protection, and that such association holds for non-democratic political regimes when it is based on elites' concerns about security of their own property rights in the event they lose power. Such incentives provide a solution to the credible commitment problem in maintaining secure property rights when institutional restrictions on expropriation are weak or absent. |
| Keywords: | Endogenous property rights, credible commitment, ``stationary bandit'' |
| JEL: | K11 O17 P14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:43/ec/2013&r=pol |
| By: | Francesco Guala; Luigi Mittone |
| Abstract: | Nudge policies are typically justified from paternalistic premises: nudges are acceptable if they benefit the individuals who are nudged. A tacit assumption behind this strategy is that the biases of decision that choice architects attempt to eliminate generate costs that are paid mainly by the decision-makers. For example, in the case of intertemporal discounting, the costs of preference reversal are paid by the discounters. We argue that this assumption is unwarranted. In the real world the costs of reversal are often transferred onto other individuals. But if this is the case, the biases create externalities, and nudges are best justified from a political rather than paternalistic standpoint. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:1307&r=pol |
| By: | Ebeke Christian; Yogo Urbain Thierry |
| Abstract: | Using both cross-country and individual level African data, this paper demonstrates that remittance inflows significantly lower the propensity to vote during national elections in Sub-Saharan Africa. This effect is robust to empirical specifications aimed at dealing with the endogeneity of remittance inflows at both country and household level data. This result adds to the literature highlighting the potential damaging effects of remittances on long term development. |
| Date: | 2013–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:adb:adbwps:989&r=pol |
| By: | Bergh, Andreas (Research Institute of Industrial Economics (IFN)); Mirkina, Irina (IMT Institute for Advanced Studies); Nilsson, Therese (Research Institute of Industrial Economics (IFN)) |
| Abstract: | Using World Bank data on institutional quality and the KOF Globalization Index, we examine over 100 countries from 1992 to 2010 to analyze the relationship between economic and social globalization and six measures of institutional quality. Theoretically, the incentives of elites to respond to globalization by improving institutions should differ between low-income and high-income countries. Empirically, increasing economic flows and social globalization are followed by improving institutions in rich countries, while the effect is the opposite for low-income countries. Previous findings of positive effects of trade on institutional quality are likely driven by rich countries. |
| Keywords: | Globalization; Institutional quality; Developing countries |
| JEL: | H83 O11 |
| Date: | 2013–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0997&r=pol |