nep-pol New Economics Papers
on Positive Political Economics
Issue of 2014‒03‒15
fourteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Household Demand for Low Carbon Public Policies: Evidence from California By Matthew J. Holian; Matthew E. Kahn
  2. Careerist Experts and Political Incorrectness By Chia-Hui Chen; Junichiro Ishida
  3. The Political Coase Theorem: Experimental Evidence By Sebastian Galiani; Gustavo Torrens; Maria Lucia Yanguas
  4. The Political Economy of Publicly Provided Private Goods By Dotti, Valerio
  5. Are Justices of the US Supreme Court Islands Unto Themselves? Examining external influences on US Supreme Court rulings in securities cases By J.W. Fedderke and M. Mentoruzzo
  6. Decentralization and the Welfare State: What Do Citizens Perceive? By Diaz-Serrano, Luis; Rodríguez-Pose, Andrés
  7. Election Fairness and Government Legitimacy in Afghanistan By Eli Berman; Michael Callen; Clark Gibson; James D. Long
  8. Impact of Internal Migration on Political Participation in Turkey By Ali T. Akarca; Aysit Tansel
  9. Constitutional Rules and Efficient Policies By Michela Cella; Giovanna Iannantuoni; Elena Manzoni
  10. Direct democracy and local government efficiency By Asatryan, Zareh; De Witte, Kristof
  12. On a class of threshold public goods games: With applications to voting and the Kyoto Protocol By Bolle, Friedel
  13. A Theory of the Intergenerational Dynamics of Inflation Beliefs and Monetary Institutions By Etienne Farvaque; Alexander Mihailov
  14. The political economy of Byzantium: transaction costs and the decentralisation of the Byzantine Empire in the twelfth century By Richard Knight

  1. By: Matthew J. Holian; Matthew E. Kahn
    Abstract: In recent years, Californians have voted on two key pieces of low carbon regulation. The resulting voting patterns provide an opportunity to examine the demand for carbon mitigation efforts. Household voting patterns are found to mirror the voting patterns by the U.S Congress on national carbon legislation. Political liberals and more educated voters favor such regulations while suburbanites tend to oppose such initiatives. Survey responses at the individual level are shown to predict the spatial variation in actual voting patterns and hence convergent validity for results obtained with stated preference data on voting markets.
    JEL: Q54 R41
    Date: 2014–03
  2. By: Chia-Hui Chen; Junichiro Ishida
    Abstract: While political correctness is a dominant norm in many public situations, we also observe behaviors that are apparently ''politically incorrect,'' often from professionals and experts. This paper examines the flip side of political correctness as analyzed in Morris (2001) to shed some light on the elusive notion of political incorrectness and elucidate its equilibrium and welfare properties. We show that there are circumstances in which unbiased experts deliberately take a politically incorrect stance out of reputational concerns and identify key elements which give rise to this perverse reputational incentive. The results suggest that political incorrectness cannot necessarily be viewed as a sign of blunt honesty when informed experts have long-term reputational concerns. We also examine the welfare consequences of political incorrectness and argue that this form of information manipulation can be beneficial under some conditions.
    Date: 2014–03
  3. By: Sebastian Galiani; Gustavo Torrens; Maria Lucia Yanguas
    Abstract: The Political Coase Theorem (PCT) states that, in the absence of transaction costs, agents should agree to implement efficient policies regardless of the distribution of bargaining power among them. This paper uses a laboratory experiment to explore how commitment problems undermine the validity of the PCT. Overall, the results support theoretical predictions. In particular, commitment issues matter, and the existence of more commitment possibilities leads to better social outcomes. Moreover, we find that the link is valid when commitment possibilities are asymmetrically distributed between players and even when a redistribution of political power is required to take advantage of those possibilities. However, we also find that at low levels of commitment there is more cooperation than strictly predicted by our parameterized model while the opposite is true at high levels of commitment, and only large improvements in commitment opportunities have a significant effect on the social surplus, while small changes do not.
    JEL: C92 D72
    Date: 2014–02
  4. By: Dotti, Valerio
    Abstract: Abstract Traditional Political Economy models typically imply a strong relationship between income inequality and public intervention in redistributive policies. Empirical evidence suggests that this may hold true only for certain kinds of policies, for instance cash transfers or education, but in the case of other policies with redistributive effects such as social security and some publicly provided private goods this may not hold true. Abstract In this paper I develop a method to derive the sign of the relationship between income inequality and degree of public intervention in education in a Probabilistic Voting model in which the consumers-voters are also allowed to choose other forms of redistribution. Abstract I show that the relationship between income inequality and governmental intervention implied in the traditional literature is mainly a result of the restrictive assumptions of those models. Abstract I also show that this method can deliver sharp predictions even in presence of those non-convexities in individual preferences that are usually described as a feature induced by public provision of education in the traditional literature in Public Economics. Abstract I argue that the relationship between income inequality and public intervention in schooling is a natural and promising field in which the tool proposed can be useful for empirical purposes and that can help to better explain some patterns described in the literature about public intervention in education.
    Keywords: Keywords: Political Economy; Probabilistic models; public provision; income inequality
    JEL: H44 H52
    Date: 2014–02–27
  5. By: J.W. Fedderke and M. Mentoruzzo
    Abstract: This paper examines whether the voting behavior of Supreme Court justices in 49 cases related to securities legislation since 1936, shows systematic variation in a range of measures of the personal ideological stance of the justices, a range of measures of prevailing economic conditions, and a range of measures of prevailing political conditions. We find that the voting behavior does vary significantly with respect to all three. Conservative justices are more likely to vote against shareholder rights, and in favour of business rights, than are more liberal justices. Under increasing inflation, increased real growth, a rising public debt/GDP ratio, and a weak stock market Supreme Court justices are more likely to favour business rights than shareholder rights. Finally, across a range of measures of contestation of the political space in Congress, we find a systematic statistically significant association with the voting behavior of Supreme Court justices.
    Keywords: Supreme Court, Justice, United States
    Date: 2014
  6. By: Diaz-Serrano, Luis; Rodríguez-Pose, Andrés
    Abstract: Trust in public institutions and public policies are generally perceived as a precondition for economic recovery in times of recession. Recent empirical evidence tends to find a positive link between decentralization and trust. But our knowledge about whether decentralization – through increased trust – improves the perception of the delivery and effectiveness of public policies is still limited. In this paper we estimate the impact of fiscal and political decentralization on the perception of the state of the education system and of health services, by using the 2002, 2004, 2006 and 2008 waves of the European social survey. The analysis of the views of 160,000 individuals in 31 European countries indicates that while the effect of fiscal decentralization on the perception of the state of the health and education system is unambiguously positive, political decentralization affects citizen’s satisfaction with education and health delivery in different ways. The influence of political decentralization, however, is highly contingent on whether we consider the capacity of the local or regional government to exercise authority over its citizens (self-rule) or to influence policy at the national level (shared-rule).
    Keywords: Education, health, satisfaction, fiscal and political decentralization, Europe
    JEL: H11 H77
    Date: 2014–03–05
  7. By: Eli Berman; Michael Callen; Clark Gibson; James D. Long
    Abstract: International development agencies invest heavily in institution building in fragile states, including expensive interventions to support democratic elections. Yet little evidence exists on whether elections enhance the domestic legitimacy of governments. Using the random assignment of an innovative election fraud-reducing intervention in Afghanistan, we find that decreasing electoral misconduct improves multiple survey measures of attitudes toward government, including: (1) whether Afghanistan is a democracy; (2) whether the police should resolve disputes; (3) whether members of parliament provide services; and (4) willingness to report insurgent behavior to security forces.
    JEL: H41 O10 O17 O53 P16
    Date: 2014–03
  8. By: Ali T. Akarca (Department of Economics, University of Illinois at Chicago); Aysit Tansel (Department of Economics, METU)
    Abstract: During last sixty years, Turkish population moved from one province to another at the rate of about 7-8 percent per five-year interval. As a consequence of this massive internal migration, population residing in a province other than the one they were born in increased from 12 percent in 1950 to 39 percent in 2011. Impact of this population instability on provincial turnout rates in 2011 parliamentary election is studied, controlling for the effects of other socio-economic, demographic, political and institutional factors. Consequences of migration both at destinations and origins are considered. According to robust regressions estimated, the relationship between turnout and education is inverse U-shaped, and between turnout and age, U-shaped. The latter reflects generational differences as well. Large population, large number parliament members to be elected from a constituency, participation by large number of parties, and existence of a dominant party depress the turnout rate. A percentage increase in the proportion of emigrants among the people born in a province reduces turnout rate in that province by 0.13 percentage points, while a percentage increase in the ratio of immigrants in the population of a province reduces it by 0.06 percentage points. However, at destinations where large numbers of immigrants from different regions are concentrated, the opportunity afforded to immigrants to elect one of their own, reduces the latter adverse impact significantly and in some cases turns it to positive.
    Keywords: election turnout, internal migration, political participation, Turkey, voter behavior.
    JEL: D72 J61
    Date: 2014–03
  9. By: Michela Cella; Giovanna Iannantuoni; Elena Manzoni
    Abstract: This paper compares the ability to select the efficient policy of a parliamentary and a presidential constitutional setup. In order to do it we build a dynamic theoretical model with asymmetric information that succeeds in addressing both the politicians �accountability and the competence dimensions. The main difference between the two institutional frameworks is the presence of the confidence vote in the parliamentary system that may cause elections before the natural end of the legislature. The equilibrium predictions suggest that, exactly because of the different incentives created by the confidence vote, the parliamentary system has a higher probability of selecting the efficient policy the higher is the quality of politicians that are member of the legislative body.
    Keywords: presidential system, parliamentary system, comparison con�dence vote, hierarchical accountability
    JEL: C72 D72
    Date: 2014–03
  10. By: Asatryan, Zareh; De Witte, Kristof
    Abstract: This paper studies the role of direct democracy in ensuring efficient and cost effective provision of goods and services in the public sector. The sample consists of the population of municipalities in the German State of Bavaria, where in the mid-1990s considerable direct democratic reforms granted citizens with wide opportunities to directly participate in local affairs through binding initiatives. Using information on the municipal resources and the municipal provision of public goods, and applying a fully non-parametric approach to estimate local government overall efficiency, the analysis shows that more direct democratic activity is associated with higher government efficiency. This result suggests that more inclusive governance through direct decision-making mechanisms may induce more accountable and less inefficient governments. --
    Keywords: Direct democracy,Public sector efficiency,Conditional efficiency
    JEL: C14 D7 H7
    Date: 2014
    Date: 2014
  12. By: Bolle, Friedel
    Abstract: The launch of a public project requires support from enough members of a group. Members (players) are differently important for the project and have different cost/benefit relations. There are players who profit and players who suffer from the launch of the project. Examples are the Kyoto protocol, voting with different weights (shareholders, the UN with the veto power of the Security Council members), and international scientific or military expeditions. As coordination on one of the usually many pure strategy equilibria is difficult, mixed strategy equilibria are the focus of this investigation. If all players profit from the launch of the project then, despite the unnecessary costs, the requirement of full contributions is a Pareto-improvement to every original threshold. The contribution probabilities of some player types defined by their importance are characterized according to their cost/benefit relations. --
    Keywords: Threshold Public Goods,Provision Point Mechanism,Voting
    JEL: D72 H41
    Date: 2014
  13. By: Etienne Farvaque (Université du Havre, Faculté des A¤aires Internationales); Alexander Mihailov (Department of Economics, University of Reading)
    Abstract: We develop a stochastic overlapping-generations model with endogenously evolving heterogeneous beliefs on the degree of inflation protection to be provided by markets versus the monetary authority. It incorporates adaptive learning from inflation history and imperfect empathy in the cultural transmission of beliefs. Analytical results on endogenous inflation beliefs and socially-optimal inflation are derived first in a within-generation voting equilibrium that defines a particular degree of inflation aversion of a society's monetary institution. Then further theoretical and simulation analysis of the intergenerational dynamics of inflation and inflation beliefs provides insights into the long-run evolution of population types and social institutions, exploring the interactions of three central forces: the persistence of inflation, the degree of inflation aversion of the central bank and the recurrent irregular cycles of agent type proportions and subsequent majority switches. Our main contribution consists in showing how the endogenous transmission of inflation beliefs and monetary institutions in a stochastic economic environment can be understood as a process of intergenerational learning from history combined with a political economy mechanism that amends legislation and a socialization process that transmits experienced knowledge.
    Keywords: evolving beliefs, in?ation aversion, adaptive learning, voting equilibrium, cultural transmission, monetary institutions
    JEL: D72 D83 E31 E58 H41 J10
    Date: 2014–03–01
  14. By: Richard Knight
    Abstract: This thesis aims to contribute to an explanation of how the development of political institutions is influenced by the costs of information and exchange across society in a pre-modern context. The Byzantine Empire in the twelfth century presents an apparent paradox of an expanding economy alongside a weakening central state. Application of a dynamic transaction-cost framework can illustrate how political and economic decentralisation can rationally occur as non-state actors begin to gain a comparative transaction-cost advantage over the state. Geopolitical and economic developments of the late-eleventh and twelfth century empowered non-state provincial interests in the Byzantine Empire to the detriment of the central state apparatus, including the imperial bureaucracy. Economic growth, an increasingly fluid provincial political environment, and the decline of the imperial navy simultaneously raised the transaction costs of the state and lowered the transaction costs of local interests. This shift prompted the decentralisation of power that ultimately contributed to the destruction of the Byzantine state in 1204. The state faced increasing relative costs of information acquisition, security provision, and tax collection as provincial transaction costs declined and state networks were allowed to degrade. Decentralisation of political and economic power became first possible, then practical, and finally unavoidable in a process that fatally undermined the cohesion of the empire. This thesis uses a transaction cost framework to provide an economically informed explanation of political decline that complements the traditional politically focused narrative and begins to address the contradiction apparent in a state ruling over increasingly prosperous territory, yet proving so fragile by the closing years of the twelfth century.
    Keywords: Byzantium; Komnenian; transaction costs; political economy; twelfth-century
    JEL: B11 N0
    Date: 2014–02

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