nep-pol New Economics Papers
on Positive Political Economics
Issue of 2014‒02‒08
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Relationship between Federal Budget Amendments and Local Electoral Power By Firpo, Sergio; Ponczek, Vladimir; Sanfelice, Viviane
  2. Pork barrel politics, voter turnout, and inequality: An experimental study By Jens Großer; Thorsten Giertz
  3. Political dynasties and poverty: Resolving the “chicken or the egg” question By Mendoza, Ronald; Beja Jr, Edsel; Venida, Victor; Yap II, David
  4. Does Money Make People Right-Wing and Inegalitarian? A Longitudinal Study of Lottery Winners By Powdthavee, Nattavudh; Oswald, Andrew J.
  5. Conflict and the Formation of Political Beliefs in Africa By Achyuta Adhvaryu; James Fenske
  6. Ethnic Heterogeneity, Voting Partecipation and Local Economic Growth. The Case of Belgium By Alessandro Innocenti; Francesca Lorini; Chiara Rapallini
  7. Lobbying in a multidimensional policy space with salient issues By P. Roberti
  8. Political Firms, Public Procurement, and the Democratization Process By Straub, Stéphane
  9. Lobbying, family concerns and the lack of political support for estate taxation By DE DONDER, Philippe; PESTIEAU, Pierre
  10. From Aliens to Citizens: The Political Incorporation of Immigrants By Bevelander, Pieter; Spång, Mikael
  11. The Political Economy of FDI flows into Developing Countries: Does the depth of International Trade Agreements Matter? By Arslan Tariq Rana; Mazen Kebewar
  12. Determinants of local governments’ reelection: New evidence based on a Bayesian approach By Maria Teresa Balaguer-Coll; María Isabel Brun-Martos; Anabel Forte; Emili Tortosa-Ausina

  1. By: Firpo, Sergio (Sao Paulo School of Economics); Ponczek, Vladimir (Sao Paulo School of Economics); Sanfelice, Viviane (University of Rochester)
    Abstract: The objectives of this paper are twofold. First, we investigate whether politicians use resources from the federal budget as a strategy to maintain and expand their political capital. Second, we examine whether such a strategy is rewarded by voters who elect politicians who assist their municipalities through federal expenditures. The main contribution of this study is its illustration of how the use of fiscal policy affects the local political power of legislators in Brazil. We focus on the geographical distribution of votes received by politicians within their electoral districts instead of only examining the final outcomes of reelection efforts. Our findings indicate that politicians tend to favor municipalities that were important to their elections and that voters support candidates who have brought resources to their localities. However, given that Brazil uses a party-open-list proportional representation system for congressional elections, influencing the behavior of voters through amendments is not sufficient to increase a candidate's chances of winning reelection.
    Keywords: voter's preference, pork barrel, politician's strategies, electoral power
    JEL: H7
    Date: 2014–01
  2. By: Jens Großer; Thorsten Giertz
    Abstract: We experimentally study pork barrel politics in two-candidate majoritarian elections. Candidates form distinct supporter groups by favoring some voters in budget spending at the expense of others. We compare voluntary and compulsory costly voting and find that, on average, the former mode induces more narrowly targeted favors and therefore more inequality among otherwise identical voters. When the same candidates act over many elections, such as with parties, they tend to cultivate policy polarization by frequently favoring their exclusive supporters again and avoiding those of the opponent, and with compulsory voting we find additional frequent policy overlap for a separate subset of voters. Our findings are important for understanding how an inclination towards a sustained "divided society" can arise purely from the political process, absent of any coordination devices such as ideological preferences.
    Keywords: Pork barrel politics, voter turnout, inequality, Colonel Blotto games, laboratory experiments
    Date: 2014–01–31
  3. By: Mendoza, Ronald; Beja Jr, Edsel; Venida, Victor; Yap II, David
    Abstract: Political dynasties—members of the same family occupying elected positions sequentially for the same position or simultaneously across different positions—have become a common feature in many developing countries with democratic political systems. In the Philippines, for instance, political dynasties are prevalent in poorer regions, which lead to the following query: does poverty bring about political dynasties, or do political dynasties engender poverty? Using an instrumental variable technique to analyze metrics on political dynasties, we find strong evidence that poverty entrenches political dynasties but weak evidence that political dynasties reduce or exacerbate poverty.
    Keywords: democracy; political dynasty; inclusive growth; political equality; social inequality
    JEL: D70 I39 O53 P16
    Date: 2014–02–01
  4. By: Powdthavee, Nattavudh (London School of Economics); Oswald, Andrew J. (University of Warwick)
    Abstract: The causes of people's political attitudes are largely unknown. We study this issue by exploiting longitudinal data on lottery winners. Comparing people before and after a lottery windfall, we show that winners tend to switch towards support for a right-wing political party and to become less egalitarian. The larger the win, the more people tilt to the right. This relationship is robust to (i) different ways of defining right-wing, (ii) a variety of estimation methods, and (iii) methods that condition on the person previously having voted left. It is strongest for males. Our findings are consistent with the view that voting is driven partly by human self-interest. Money apparently makes people more right-wing.
    Keywords: voting, gender, lottery wins, political preferences, income, attitudes
    JEL: D1 D72 H1 J7
    Date: 2014–01
  5. By: Achyuta Adhvaryu (University of Michigan Stephen M. Ross School of Business); James Fenske (University of Oxford, Department of Economics)
    Abstract: We test whether living through conflict in childhood changes political beliefs and engagement. We combine data on the location and intensity of conflicts since 1945 with nationally representative data on political attitudes and behaviors from 17 sub-Saharan African countries. Exposure from ages 0 to 14 has a very small standardized impact on later attitudes and behaviors. This finding is robust to migration and holds across a variety of definitions, specifications, and sources of data. Our results suggest that at the population level in Africa, conflict does not alter political beliefs, though the most exposed sub-populations may experience large, lasting effects.
    Keywords: conflict, political beliefs, early childhood, Africa
    JEL: D72 D74 O12 O17
    Date: 2014–01
  6. By: Alessandro Innocenti; Francesca Lorini; Chiara Rapallini (Dipartimento di Scienza per l'Economia e l'Impresa)
    Abstract: The paper analyzes the case of Belgium to provide insight into the relationships among ethnic heterogeneity, voting participation and local economic growth. We find that heterogeneity, and external and internal mobility reduce immigrants’ voting participation, while we do not find support for the hypothesis that voting participation is related to local economic growth, with the exception of Flanders, which is the most ethnically homogeneous region of Belgium. This finding is interpreted as showing that an increase in ethnic heterogeneity prevails over other factors in determining local economic performance via a decline in social capital.
    Keywords: ethnic heterogeneity, voting, political participation, local economic growth, Tiebout model.
    JEL: D72 H4 H7 N4 R1
    Date: 2014
  7. By: P. Roberti
    Abstract: We present a citizen-candidate model on a multidimensional policy space with lobbying, where citizens regard some issues more salient than others. We find that special interest groups that lobby on less salient topics move the implemented policy closer to their preferred policy, compared to the ones that lobby on more salient issues. When we introduce two types of citizens, who differ with respect to the salience of issues, we find pooling equilibria where voters are not able to offset the effect of lobbying on the implemented policy. This result is in sharp contrast with previous work on unidimensional citizen-candidate models that predict the irrelevance of lobbying on the implemented policy. In an extension of the model we provide citizens with the possibility of giving monetary contributions to lobbies in order to increase their power. With more than one lobby per dimension we have two findings. First, under some conditions only the most extreme lobbies receive contributions. Second, the effectiveness of a lobby is maximized when the salience of an issue is low in the population and high for a small group of citizens.
    JEL: D72 D74 D78
    Date: 2014–01
  8. By: Straub, Stéphane
    Abstract: In 2008, an opposition coalition defeated the Paraguayan Colorado Party, which had been in power for 61 years, including 35 years of the longest dictatorship in South America. Using data of all the public procurement transactions from 2004 through 2011 and the political connections of the 700 largest public providers, this paper documents how the volume of contracts received by connected firms evolved after this landmark political change. It shows that firms connected with the first ring of power were punished and that there were efficiency gains, mostly in the form of institutions shifting to bigger and more competitive contracts, but that these gains were constrained by the scarcity of entrepreneurs able to step in to replace firms connected to the previous regime. This demonstrates that the potential economic benefits of democratization are hampered by the perverse rent-seeking entrepreneurial incentives created by a long-term single-party authoritarian regime.
    Keywords: Procurement, Political Connections, Rent-seeking, Democratization, Authoritarian regimes.
    JEL: D72 H57 O5
    Date: 2014–01–29
  9. By: DE DONDER, Philippe (Toulouse School of Economics, France); PESTIEAU, Pierre (CREPP, Université de Liège & HEC Belgium; Université catholique de Louvain, CORE, Belgium; Toulouse School of Economics, France)
    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: 2014–01–13
  10. By: Bevelander, Pieter (Malmö University); Spång, Mikael (Malmö University)
    Abstract: This is a draft chapter for the Handbook on Economics of International Migration (Eds. B. R. Chiswick and P. W. Miller) and deals with the political incorporation of immigrants in host societies. Political incorporation is discussed with regard to the regulation of legal status, rights, opportunities, and acquisition of citizenship. We give examples of the legal regulation and policies from several countries in the world, showing thereby the diversity of approaches to political incorporation but also similarities to the regulation of access to residence, rights, and citizenship. We highlight changes in this regard since the Second World War and discuss more recent trends. Moreover, we discuss different factors explaining the variation in incorporation policies. Also, this chapter traces different dimensions of political participation of immigrants, and, finally, we address the expected effects on wider integration of citizenship acquisition.
    Keywords: political participation, minorities, immigration, political incorporation, naturalization, citizenship, non-citizens, rights
    JEL: D72 J15 J61
    Date: 2014–01
  11. By: Arslan Tariq Rana (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans); Mazen Kebewar (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR7322 - Université d'Orléans)
    Abstract: There is considerable debate whether the domestic political institutions (specifically, the country's level of democracy) of the host developing country toward foreign investors are effective in establishing the credibility of commitments are still underway, researchers have also analyzed the effect of international institutions such as (GATT-WTO) membership and Bilateral Investment treaties (BIT) in their role of establishing the credibility of commitment to attract foreign investments. In addition, most recent studies have examined the effect of International Trade Agreements (TAs) on FDI flows as they contain separate investment chapters and dispute settlement mechanism, thus providing confidence to investor regarding the security of their investments. We argue that there are qualitative differences among various types of trade agreements and full-fledged trade agreements (FTA-CU) provide credibility to foreign investors and democracy level in the host country conditions this effect whereas the partial scope agreements (PSA) are not sufficient in providing credibility of commitments and not moderated by democracy. This paper analyses the impact of heterogeneous TAs, and their interaction with domestic institutions, on FDI inflows. Statistical analyses for 122 developing countries from 1970 to 2005 support this argument. The method adopted relies on fixed effects estimator which is robust to control endogeneity on a large panel dataset. The strict erogeneity of results by using a method suggested by Baier and Bergstrand (2007) and no feedback effect found in sample. The results state that (1) More the FTA-CU concluded, larger the amount of FDI inflows are attracted into the developing countries and PSA are insignificant in determining the FDI inflow; (2) FTA CU are complementary to democratic regime whereas the conditional effect of PSA with democracy on levels of FDI inflows is insignificant.
    Keywords: Foreign direct investment, free trade agreements, partial scope agreements, domestic institutions.
    Date: 2014–02–01
  12. By: Maria Teresa Balaguer-Coll (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); María Isabel Brun-Martos (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); Anabel Forte (Department of Economics, Universitat Jaume I, Castellón, Spain); Emili Tortosa-Ausina (IVIE @ Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: This paper analyzes the effect of public spending on the probability of municipal reelection of Spanish local governments during the 2000–2007 period, using Bayesian techniques. The results indicate that, in general, increases in local government spending positively impact on the chances of reelection of local governments. Moreover, the capital expenditure over the whole period affects positively to the reelection probability, although the pre-electoral one is preferred, and the electorate rewards increases in current expenditures only in the period before elections. The use of Bayesian techniques is particularly interesting, since results are not boiled down to a summary effect such as the average; on the contrary, it shows exactly how a given covariate affects the probability of being reelected.
    Keywords: Bayesian, election, local government, opportunistic policies
    JEL: D60 H71 H72 H74 H75
    Date: 2014

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