nep-pol New Economics Papers
on Positive Political Economics
Issue of 2014‒02‒02
24 papers chosen by
Eugene Beaulieu
University of Calgary

  1. Preferential Voting, Accountability and Promotions into Political Power: Evidence from Sweden By Folke, Olle; Persson, Torsten; Rickne, Johanna
  2. How do Female Preferences Influence Political Decisions by Female and Male Representatives? By Stadelmann, David; Portmann, Marco; Eichenberger, Reiner
  3. Lobbying and Elections By Klingelhöfer, Jan
  4. Electoral cycles in savings bank lending By Stowasser, Till; Englmaier, Florian
  5. The Condorcet paradox revisited By Herings P.J.J.; Houba H
  6. The political economy of trade and migration:Evidence from the U.S. Congress By Steinhardt, Max; Conconi, Paola; Facchini, Giovanni; Zanardi, Maurizio
  7. Political support in hard times: Do people care about national welfare? By Friedrichsen, Jana; Zahn, Philipp
  8. Economic Stagnation and Stable Growth: The Persistence and Survival of Growth Regimes under Political Transitions By Hakobyan, Lilit
  9. Elected or Appointed? How the Nomination Scheme of the City Manager Influences the Effects of Government Fragmentation By Garmann, Sebastian
  10. Does female suffrage increase public support for government spending? Evidence from Swiss ballots By Jaronicki, Katharina
  11. The Trans-Atlantic Slave Trade and Local Political Fragmentation in Africa By Nonso Obikili
  12. Voting to Tell Others By Stefano DellaVigna; John A. List; Ulrike Malmendier; Gautam Rao
  13. Lobbying, family concerns and the lack of political support for estate taxation By De Donder, Philippe; Pestieau, Pierre
  14. Do Electoral Rules Make Legislators Differently Responsive to Fiscal Transfers? Evidence from German Municipalities By Köthenbürger, Marko; Egger, Peter; Smart, Michael
  15. Elections and Market Provision of Information By Bruns, Christian
  16. The Political Economics of Higher Education Finance for Mobile Individuals By Übelmesser, Silke; Borck, Rainald; Wimbersky, Martin
  17. Pivotality and Responsibility Attribution in Sequential Voting By Bjšrn Bartling; Urs Fischbacher; Simeon Schudy
  18. Political Transition, Economic Growth and Reoccurring Crisis in Countries with and without Experience of Military Dictatorship By Hakobyan, Lilit
  19. On Political Regime Changes in Arab Countries By Raouf Boucekkine; Fabien Prieur; Klarizze Puzon
  20. Electoral Systems and Corruption: the Effect of the Proportionality Degree By Alfano, Maria Rosaria; Baraldi, Anna Laura; Papagni, Erasmo
  21. The Political Economy of Local Infrastructure Planning By Leonardo Romeo; Paul Smoke
  22. Majority Vote on Educational Standards By Schwager, Robert
  23. Lobbying and the Power of Multinational Firms By Polk, Andreas; Schmutzler, Armin; Müller, Adrian
  24. Maritime Piracy: Socio-Economic, Political, and Institutional Determinants By Thomas Gries; Margarete Redlin

  1. By: Folke, Olle (Columbia University); Persson, Torsten (Institute for International Economic Studies); Rickne, Johanna (Research Institute of Industrial Economics (IFN))
    Abstract: Preferential voting has been introduced in a number of proportional election systems over the last 20 years, mainly as a means to increase the accountability of individual politicians. But most of these reforms have been criticized as blatant failures. In this paper, we discover a genuinely new fact, which calls into question this negative evaluation. We show that preferential voting in a general election can operate as a stand-in internal primary election for top party positions. To do this, we rely on a unique data set from four waves of Swedish local elections, which includes every nominated politician in each of 290 municipal assemblies. We use a natural-experiment (regression-discontinuity) approach to estimate the causal effect of winning the most preferential votes on becoming the local party leader, and find that narrow "list winners" are over 50 percent more likely to become party leaders than their runner-ups. Comparing across politicians, the effect of list winning is the strongest for competent politicians, who are also more likely to draw preferential votes than mediocre politicians. Comparing across municipalities, the response to narrow list winning is the strongest within unthreatened governing majorities, where voters also use the preferential vote the most frequently.
    Keywords: Preferential Voting; Accountability; Regression Discontinuity Design
    JEL: H70
    Date: 2014–01–17
  2. By: Stadelmann, David; Portmann, Marco; Eichenberger, Reiner
    Abstract: Exploiting a natural voting experiment we identify female preferences for real policy issues in the electorate. We then analyze whether female or male politicians in parliament more closely correspond to female preferences. Holding constant revealed constituent preferences, there is generally no difference between male and female politicians with respect to representation of female preferences. However, when focusing only on social and redistribution issues, we find that female politicians correspond in their decisions more closely to female preferences. --
    JEL: J16 D72 H50
    Date: 2013
  3. By: Klingelhöfer, Jan
    Abstract: In using their citizen candidate framework, Besley and Coate (2001) fi nd that if citizen candidates with sufficiently extreme preferences are available, lobbying has no in fluence on equilibrium policy. I show that this result does not hold in a model with ideological parties instead of citizen candidates. Even if forward-looking voters are aware that lobbying will take place, their choice between policies is di erent when lobbies do and do not exist. In many cases, the majority of voters is better off with lobbying. --
    JEL: D72 D70 C72
    Date: 2013
  4. By: Stowasser, Till; Englmaier, Florian
    Abstract: We provide causal evidence that German savings banks where local politicians are by law involved in their management systematically adjust lending policies in response to local electoral cycles. The different timing of county elections across states and the existence of a control group of cooperative banks that are very similar to savings banks but lack their political connectedness allow for clean identification of causal effects of county elections on savings banks lending. These effects are economically meaningful and robust to various specifications. Moreover, politically induced lending increases in incumbent party entrenchment and in the contestedness of upcoming elections. --
    JEL: D72 D73 G21
    Date: 2013
  5. By: Herings P.J.J.; Houba H (GSBE)
    Abstract: We analyze the Condorcet paradox within a strategic bargaining model with majority voting, exogenous recognition probabilities, and no discounting. Stationary subgame perfect equilibria (SSPE) exist whenever the geometric mean of the players' risk coefficients, ratios of utility differences between alternatives, is at most one. SSPEs ensure agreement within finite expected time. For generic parameter values, SSPEs are unique and exclude Condorcet cycles. In an SSPE, at least two players propose their best alternative and at most one player proposes his middle alternative with positive probability. Players never reject best alternatives, may reject middle alternatives with positive probability, and reject worst alternatives. Recognition probabilities represent bargaining power and drive expected delay. Irrespective of utilities, no delay occurs for suitable distributions of bargaining power, whereas expected delay goes to infinity in the limit where one player holds all bargaining power. Contrary to the case with unanimous approval, a player benefits from an increase in his risk aversion.
    Keywords: Stochastic and Dynamic Games; Evolutionary Games; Repeated Games; Bargaining Theory; Matching Theory; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior;
    JEL: C73 C78 D72
    Date: 2013
  6. By: Steinhardt, Max; Conconi, Paola; Facchini, Giovanni; Zanardi, Maurizio
    Abstract: Over the last decades, the United States has become increasingly integrated in the world economy. Very low trade barriers and comparatively liberal migration policies have made these developments possible. What drove US congressmen to support the recent wave of globalization? While much of the literature has emphasized the differences that exist between the political economy of trade and migration, in this paper we find that important similarities should not be overlooked. In particular, our analysis of congressional voting between 1970 and 2006 suggests that economic drivers that work through the labor market play an important role in shaping representatives' behavior on both types of policies. Representatives from more skilled-labor abundant districts are more likely to support both trade liberalization and a more open stance vis-a-vis unskilled immigration. Still, important systematic differences exist: welfare state considerations and network effects have an impact on the support for immigration liberalization, but not for trade; Democratic lawmakers are systematically more likely to support a more open migration stance than their Republican counterparts, and the opposite is true for trade liberalization. --
    JEL: F22 H00 J61
    Date: 2013
  7. By: Friedrichsen, Jana; Zahn, Philipp
    Abstract: During the Great Recession mass demonstrations indicated weakened political support in Europe. We show that growing dissatisfaction often reflects poor economic conditions and unemployment is particularly important. Using individual level data for 16 Western European countries for 1976-2010, we find that national economic performance matters even beyond personal economic outcomes. Finally, while the effects of growth and unemployment rates are the same across demographic subsets, the effect of inflation is heterogeneous. Well-educated or working individuals put a relatively higher weight on price stability than the less skilled or not working. Our findings reinforce the political importance of employment and growth policies. --
    Keywords: political support,satisfaction with democracy,growth,unemployment,collectivism
    JEL: H11 O43 P16
    Date: 2013
  8. By: Hakobyan, Lilit (Department of Economics, Umeå School of Business and Economics)
    Abstract: This paper analyses the survival of four different growth regimes conditional on political regime transitions that occurred during the first or prior year of the economic regime. The results suggest that in countries with no history of military dictatorship (MD), the episodes of fast-growing regimes initiated by political democratisation have an approximately 40% lower hazard of termination than the miracle growth episodes that were not started by political transitions. This finding does not hold in countries in which the consolidation of democracy is complicated by the historical role played by the army in the governing process. Additional analyses are carried out for the effect of political transitions on the duration of ongoing economic regimes. The data does not support the argument that “order” and the “rule of law” promote economic growth under more authoritarian regimes, which commonly feature authoritarian leaders during times of economic crisis. Political transitions of both directions under an economic crisis render the ongoing economic regime more durable. In contrast political transitions (of both directions) seem to be economically more efficient under the regime of stagnation.
    Keywords: Heckman correction for selection bias; economic growth regimes; survival analyses; political transition
    JEL: C21 O43 O57 P16
    Date: 2014–01–23
  9. By: Garmann, Sebastian
    Abstract: Empirical work on the causal effect of government fragmentation finds diversified results. This might be explained by the fact that studies typically are settled in different institutional environments. To assess in how far the political system might shape the effects of fragmentation, this paper measures the causal effect of a change in the nomination scheme of the city manager on the council size effect. I utilize a combination of a Regression Discontinuity Design with a Difference-in-Difference Approach applied to a large panel data set of German municipalities. The paper finds that when the manager is appointed by the council, there is no significant council size effect, while there is negative effect when the manager is elected by the voters. This indicates that the political system indeed matters. --
    JEL: C21 D72 H72
    Date: 2013
  10. By: Jaronicki, Katharina
    Abstract: Does the enfranchisement of women lead to an increase in public support for government spending? By utilizing a natural experiment from Switzerland, I test this hypothesis empirically. I analyze the voting outcomes of two very similar referendum ballots concerning the federal government's competency to levy income, capital and turnover taxes. The first ballot has taken place shortly before the extension of suffrage to women in February 1971, and the other thereafter. To shed light on the existence of gender gaps in approval for government spending, I first estimate the additional turnout due to the introduction of female suffrage, and then estimate the additional turnout's impact on the percentage of yes votes. Surprisingly, I find that approval for government spending is higher among the male population. To overcome concerns that the results might only hold conditionally on voter participation decisions, I provide additional evidence from a probit analysis of a post-ballot survey. These are conducted for voters and non-voters and confirm that the results extend to the non-voting population. My results complement the findings of previous literature which suggest that in the analysis of gender preference gaps for government expenditure spending categories like e.g. welfare and non-welfare items should be distinguished. --
    JEL: J16 H10 D72
    Date: 2013
  11. By: Nonso Obikili
    Abstract: I examine the possibility that the trans-Atlantic slave trades influenced the political institutions of villages and towns in precolonial Africa. Using anthropological data, I show that villages and towns of ethnic groups with higher slave exports were more politically fragmented during the precolonial era. I use instrumental variables to show that the relationship is at least partly causal. I argue this fragmentation is important for relative economic development because it still influences political institutions today. I support this argument by using more contemporary data to show that areas with higher precolonial political fragmentation have a higher incidence of bribery.
    Keywords: Trans-Atlantic, Slave trade, Poltical
    Date: 2014
  12. By: Stefano DellaVigna; John A. List; Ulrike Malmendier; Gautam Rao
    Abstract: Why do people vote? We argue that social image plays a significant role in explaining turnout: people vote because others will ask. The expectation of being asked motivates turnout if individuals derive pride from telling others that they voted, or feel shame from admitting that they did not vote, provided that lying is costly. We design a field experiment to estimate the effect of social image concerns on voting. In a door-to-door survey about election turnout, we experimentally vary (i) the informational content and use of a flyer pre-announcing the survey, (ii) the duration and payment for the survey, and (iii) the incentives to lie about past voting. Our estimates suggest significant social image concerns. For a plausible range of lying costs, we estimate the monetary value of voting `because others will ask' to be in the range of $5-$15 for the 2010 Congressional election. In a complementary get-out-the-vote experiment, we inform potential voters before the election that we will ask them later whether they voted. We find suggestive evidence that the treatment increases turnout.
    JEL: C93 P48
    Date: 2014–01
  13. By: De Donder, Philippe; Pestieau, Pierre
    Abstract: We provide an explanation for why estate taxation is surprisingly little used over the world, given the skewness of the estate distribution. Taxing estates implies meddling with intra-family decisions, which may be frown upon by many. At the same time, the concentration of estates means that a low proportion of the population stands to gain a lot by decreasing estate taxation. We provide an analytical model, together with numerical simulations, where agents bequeathing large estates make monetary contributions that are used to play up the salience of the encroachment aspects of estate taxation on family decisions in order to decrease its political support.
    Keywords: estate taxation, family values, political economy, lobbying, Kantian equilibrium.
    JEL: D72 H31
    Date: 2013–12
  14. By: Köthenbürger, Marko; Egger, Peter; Smart, Michael
    Abstract: The paper empirically analyzes whether electoral rules make legislators differently responsive to changes in fiscal incentives. Key to the analysis are two unique reforms in the German state of Lower Saxony which changed (i) the municipal charter by replacing the council-manager system (featuring appointed mayors) by a mayor-council system (with directly-elected mayors) and (ii) the fiscal incentives inherent to the equalization system. We find that municipalities with appointed mayors react less strongly to changes in fiscal incentives. The change in municipal tax rates is three times smaller compared with a system of direct mayoral elections. We point to the different electoral incentives of mayors in the two systems to explain the result. --
    JEL: D78 H70 D72
    Date: 2013
  15. By: Bruns, Christian
    Abstract: Economists usually think that rational voters have little incentives to acquire costly information. We present a theoretical model to show that, in contrast to this widely held belief, rational voters acquire considerable amounts of information if media technology is available because then they do not condition their informational decisions on being pivotal. The model also shows that the quality of media coverage is inefficiently low because voters have incentives to free-ride. Further, we show how the quality of information depends on the size of the electorate, the prior knowledge of voters and on the technology to produce information. --
    JEL: D72 D83 H41
    Date: 2013
  16. By: Übelmesser, Silke; Borck, Rainald; Wimbersky, Martin
    Abstract: We study voting over higher education finance in an economy with two regions and two separated labor markets. Households dffer in their financial endowment and their children's ability. Non-students are immobile. Students decide where to study; they return home after graduation with exogenous probability. The voters of the two regions decide on whether to subsidize higher education costs or whether to rely on tuition fees only. We find that in equilibrium, in both regions a majority votes for subsidies when the return probability is suffi ciently small. When that probability is large, both regions opt for full tuition finance. Interestingly, the higher the return probability, the smaller are the equilibrium subsidy rates, but the larger are the numbers of exchange students. --
    JEL: H52 H42 D72
    Date: 2013
  17. By: Bjšrn Bartling; Urs Fischbacher; Simeon Schudy
    Abstract: Are people blamed for being pivotal if they implement an unpopular outcome in a sequential voting process? We conduct an experimental voting game and analyze how pivotality affects responsibility attribution by parties who can be negatively affected by the voting outcome. We measure responsibility attribution by assigned punishment points and find that pivotal decision makers are blamed significantly more than non-pivotal decision makers. Moreover, we find that some voters avoid being pivotal by voting strategically to delegate the pivotal vote to subsequent decision makers.
    Keywords: Pivotality, voting, responsibility attribution, blame, delegation, experiment
    Date: 2014
  18. By: Hakobyan, Lilit (Department of Economics, Umeå School of Business and Economics)
    Abstract: This paper analyses the experience of 83 countries from the period of 1950-2004 and addresses the following question: when do democratic transitions produce (good) bad economic outcomes. Following the theoretical papers of Acemoglu et al. (2004, 2008(a)), an attempt is made to control for both de jure and de facto sides of political power. In addition, the countries with and without the experience of Military Dictatorship (MD) are analysed separately. The results imply that concentration of economic power per se produces bad economic outcomes. Besides, the data seem to contain an indication that democratisation induces additional socially wasteful investments into de facto political power. In addition, the analyses suggest that, when the army assumes political leadership, countries with low concentration of economic power demonstrate better economic performance. In terms of Acemoglu et al. (2007), this may support the idea that the institutional environment switches from a “weak” to a “strong” one. Finally, the potential trade-off between democratisation and political stability seems to be mainly relevant to the degree of severity of reoccurring economic crises in countries with MD experience.
    Keywords: de facto and de jure political power; economic growth; structural breaks; Markov-switching chain; military dictatorship; political transition
    JEL: D72 O43 O57 P26
    Date: 2014–01–23
  19. By: Raouf Boucekkine (AMSE - Aix-Marseille School of Economics - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM)); Fabien Prieur (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - Université Montpellier I - CNRS : UMR5474 - Institut national de la recherche agronomique (INRA) : UR1135 - Centre international de hautes études agronomiques méditerranéennes [CIHEAM]); Klarizze Puzon (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - Université Montpellier I - CNRS : UMR5474 - Institut national de la recherche agronomique (INRA) : UR1135 - Centre international de hautes études agronomiques méditerranéennes [CIHEAM])
    Abstract: We develop a dynamic game to provide with a theory of Arab spring-type events. We consider two interacting groups, the elite vs the citizens, two political regimes, dictatorship vs a freer regime, the possibility to switch from the first to the second regime as a consequence of a revolution, and finally the opportunity, for the elite, to affect the citizens' decision through concession and/or repression strategies. In this framework, we provide a full characterization of the equilibrium of the political regime switching game. First, we emphasize the role of the direct switching cost of a revolution (for the citizens) and of the elite's self-preservation options. Under the concession strategy, when the switching cost is low, the elite can't avoid the political regime change. She optimally adapts to the overthrow of their political power by setting the rate of redistribution to the highest possible level, thereby extending the period during which she has full control on resources. This surprising result actually illustrates the role of the timing of events in these situations of interaction between the ruling elite and the people. When the direct switching is high, the elite can ultimately select the equilibrium outcome and adopts the opposite strategy, i.e. she chooses the lowest level of redistribution that allows her to stay in power forever. The same kind of results are obtained when the elite relies on repression to keep the citizens under control. Next, the equilibrium properties under a mix of repression and redistribution are analyzed. It is shown that in situations where neither repression (only) nor redistribution (only) protect the elite against the uprising of citizens, a subtle mixture of the two instruments is sufficient to make the dictatorship permanent. Based on our theoretical results, we finally examine the reason for such a large variety of decisions and outcomes during the Arab Spring events.
    Keywords: political transitions; revolution; natural resources; optimal timing; regime switching; dynamic game
    Date: 2014–01
  20. By: Alfano, Maria Rosaria; Baraldi, Anna Laura; Papagni, Erasmo
    Abstract: This work provides a parametric and semi-parametric analysis of the relationship between the proportionality degree of an electoral system and corruption. This allows us to properly consider mixed electoral systems alongside the two traditional ones, proportional and plurality. Results show that a reduction in the proportionality degree within the same proportional system is not beneficial in fighting corruption because it weakens the monitoring power of opponents (their representativeness reduces) without the introduction of the voters’ monitoring. On the contrary, mixed rules allow both monitors to exercise their power to induce politicians to avoid corrupt behaviour. Increasing plurality elements into mixed systems is beneficial only up to certain proportionality degrees, after which the corresponding level of corruption begins to grow. Therefore, for governors who want to adopt mixed electoral systems, the choice of their proportionality degree becomes fundamental.
    Keywords: Electoral Systems, Corruption, Proportionality degree
    JEL: C23 D72
    Date: 2014–01–03
  21. By: Leonardo Romeo (New York University); Paul Smoke (Wagner Graduate School of Public Service)
    Abstract: Developing countries face considerable challenges in the design and operation of local infrastructure planning systems in decentralized or decentralizing countries. Many of these are well documented, but the complex political economy environment in which planning evolves has received insufficient attention. The forces driving decentralization and other public sector reforms shape how planning emerges, functions and performs. Local planning involves a range of differentially empowered and variously motivated actors at multiple levels and in diverse ways. The dynamics among them can support or undermine authentic local planning, with potentially significant implications for results. This paper reviews the evolution of local infrastructure planning with a focus on least developed countries, outlining the key expected and observed relationships among decentralization, planning systems and infrastructure development. The main goal is to create greater awareness of political economy issues that could inform the design and management of more effective and pragmatic local infrastructure planning systems.
    Date: 2014–01–14
  22. By: Schwager, Robert
    Abstract: The direct democratic choice of an examination standard, i.e., a performance level required to graduate, is evaluated against a utilitarian welfare function. It is shown that the median preferred standard is inefficiently low if the marginal cost of reaching a higher performance reacts more sensitively to ability for high than for low abilities, and if the right tail of the ability distribution is longer than the left tail. Moreover, a high number of agents who choose not to graduate may imply that the median preferred standard is inefficiently low even if these conditions fail. --
    JEL: I21 D72 I28
    Date: 2013
  23. By: Polk, Andreas; Schmutzler, Armin; Müller, Adrian
    Abstract: Can multinational firms exert more power than national firms by influencing politics through lobbying? To answer this question, we analyze the extent of national environmental regulation when policy is determined in a lobbying game between a government and firm. We compare the resulting equilibrium regulation levels, outputs and welfare for national and multinational firms, depending on such parameters as the potential environmental damages, transportation costs and the influence of the firm. For low transportation costs, output and pollution of a national firm is always as least as high as for a multinational; this changes for high transportation costs and intermediate damage parameters. When there is no lobbying, welfare levels are always higher with multinationals than with national firms. However, the existence of lobbying may reverse this ordering. --
    JEL: D72 F23 L51
    Date: 2013
  24. By: Thomas Gries (University of Paderborn); Margarete Redlin (University of Paderborn)
    Abstract: Over the last twenty years piracy has become an increasing threat. Yet there are only very few econometric studies that examine under which conditions this phenomenon arises. As the number of maritime piracy and armed robbery incidents is characterized as count data and exhibits overdispersion, we apply random-effects negative binomial regressions for a panel dataset covering the period 1991-2010. Our results indicate that poor socio-economic, political, and institutional conditions in the host country increase the likelihood of piracy attacks.
    Keywords: Maritime Piracy, Economic Development
    JEL: C25 F51 P16 O10
    Date: 2014–01

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