nep-pol New Economics Papers
on Positive Political Economics
Issue of 2014‒03‒22
eighteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Awareness, Microtargeting of Voters, and Negative Electoral Campaigning By Burkhard S; Hee Yeul Woo
  2. Political Competition and the Limits of Political Compromise By Alexandre B. Cunha; Emanuel Ornelas
  3. Resource rents, power, and political stability By Kjetil Bjorvatn; Mohammad Reza Farzanegan
  4. Does Money Make People Right-Wing and Inegalitarian? A Longitudinal Study of Lottery Winners By Powdthavee, Nattavudh; Oswald, Andrew J.
  5. Does Secular Education Impact Religiosity, Electoral Participation and the Propensity to Vote for Islamic Parties? Evidence from an Education Reform in a Muslim Country By Cesur, Resul; Mocan, Naci
  6. Decentralization, Vertical Fiscal Imbalance, and Political Selection By Massimo Bordignon; Matteo Gamalerio; Gilberto Turati
  7. US Aid for Israel – A Historical Overview By Konstantin Yanovskiy
  8. Bowling for fascism: social capital and the rise of the Nazi Party By Shanker Satyanath; Nico Voigtländer; Hans-Joachim Voth
  9. God does not play dice, but people should: random selection in politics, science and society By Bruno S. Frey; Lasse Steiner
  10. Corruption’s and Democracy’s effects on Economic Growth By Zaouali, Amira
  11. The agricultural invasion and the political economy of agricultural trade policy in Belgium, 1875-1900 By VAN DIJCK, Maarten; TRUYTS, Tom
  12. Democratic values transmission By Pablo Branas-Garza; Maria Paz Espinosa; Ayca Ebru Giritligil
  13. European Integration: Partisan Motives or Economic Benefits? By Esteve, Patrícia; Theilen, Bernd, 1965-
  14. Competence versus Trustworthiness: What Do Voters Care About? By Fabio Galeotti; Daniel John Zizzo
  15. The labor market effects of trade unions - Layard meets Melitz By Jochen Michaelis; Marco de Pinto
  16. ‘Cold, Calculating Political Economy’: Fixed costs, the Rate of Profit and the Length of the Working Day in the Factory Act Debates, 1832-1847. By Toms, Steven
  17. Measuring Public Preferential Polarization By Ugur Ozdemir; Ali Ihsan Ozkes
  18. The State Independent from voters: Rent Revenue Incomes and the Resource Curse By Vladimir Mau; Ilia Zatcovecky; Konstantin Yanovskiy

  1. By: Burkhard S; Hee Yeul Woo (Department of Economics, University of California Davis)
    Abstract: In modern elections, ideologically motivated candidates with a wealth of information about individual voters and sophisticated campaign strategies are faced by voters who lack awareness of some political issues and are uncertain about the exact political positions of candidates. We study to what extent electoral campaigns can raise awareness of issues and unravel information about candidates' political positions. We allow for microtargeting in which candidates target messages to subsets of voters. A candidate's message consists of a subset of issues and some information on her political position in the multi-dimensional policy subspace spanned by this subset of issues. The information provided can be vague, it can be even silent on some issues, but candidates are not allowed to bluntly lie about their ideology. Every voter votes for the candidate she expects to be closest to her but takes into account only the subspace spanned by the issues that come up during the campaign. We show that any prudent rationalizable election outcome is the same as if voters have full awareness of issues and complete information of policy points, both in parliamentary and presidential elections. We show by examples that these results may break down when there is lack of electoral competition, when candidates are unable to use microtargeting, or when voters have limited abilities of political reasoning. Allowing for negative campaigning restores the positive results if voters' political reasoning abilities are limited. It can even be achieved with just public campaign message in the presidential elections while parliamentary elections still require microtargeting of voters.
    Keywords: electoral competition, multidimensional policy space, microtargeting, dog-whistle politics, negative campaigning, ideological candidates, presidential elections, parliamentary elections, persuasion games, verifiable information, unawareness, framing, prudent rationalizability, forward-induction
    JEL: C72 D71 P16
    Date: 2014–03–11
  2. By: Alexandre B. Cunha; Emanuel Ornelas
    Abstract: We consider an economy where competing political parties alternate in office. Due to rent-seeking motives, incumbents have an incentive to set public expenditures above the socially optimum level. Parties cannot commit to future policies, but they can forge a political compromise where each party curbs excessive spending when in office if they expect future governments to do the same. We find that, if the government cannot manipulate state variables, more intense political competition fosters a compromise that yields better outcomes, potentially even the first best. By contrast, if the government can issue debt, vigorous political competition can render a compromise unsustainable and drive the economy to a low-welfare, high-debt, long-run trap. Our analysis thus suggests a legislative trade-off between restricting political competition and constraining the ability of governments to issue debt.
    Keywords: Political turnover, efficient policies, public debt
    JEL: E61 E62 H30 H63
    Date: 2014–03
  3. By: Kjetil Bjorvatn (Norwegian School of Economics); Mohammad Reza Farzanegan (University of Marburg)
    Abstract: We study the association between resource rents and political stability, highlighting the importance of the distribution of political power as a mediating factor. We present a simple theoretical model showing that increased rents are likely to be positively associated with the stability of a powerful incumbent while destabilizing a less powerful incumbent. Our empirical analysis confirms this prediction: Using panel data for more than 120 countries from 1984-2009, our results show that rents can promote political stability, but only when the political power is sufficiently concentrated. Indeed, if the incumbent is sufficiently weak, rents fuel instability. Our main results hold when we control for the effects of income, quality of institutions, time varying common shocks, country fixed effects and various additional covariates
    Keywords: resource rent, political power, political stability, conflict
    Date: 2014
  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.
    Date: 2014
  5. By: Cesur, Resul (University of Connecticut); Mocan, Naci (Louisiana State University)
    Abstract: Using a unique survey of adults in Turkey, we find that an increase in educational attainment, due to an exogenous secular education reform, decreases women's propensity to identify themselves as religious, lowers their tendency to wear a religious head cover (head scarf, turban or burka) and increases the tendency for modernity. Education reduces women's propensity to vote for Islamic parties. There is no statistically significant impact of education on men's religiosity or their tendency to vote for Islamic parties and education does not influence the propensity to cast a vote in national elections for men or women. The impact of education on religiosity and voting preference is not working through migration, residential location or labor force participation.
    Keywords: education, religion, Islam, Muslim, voting, modernity, head scarf, burka, Islamic party
    JEL: I2 Z12 D72
    Date: 2014–03
  6. By: Massimo Bordignon (Department of Economics and Public Finance, Catholic University, Milano, Italy); Matteo Gamalerio (Department of Economics, University of Warwick, Coventry, UK); Gilberto Turati (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: In a career-concern model of politics with endogenous candidacy and different types of politicians, following a decentralization reform, politicians with different skills are elected in municipalities characterized by different levels of autonomous resources. As an effect, consumer welfare increases only, or mainly, in richer municipalities. We test these predictions by exploiting the differentiated reduction in Vertical Fiscal Imbalance in Italian municipalities, due to the strong difference in the tax base, following the decentralization reforms of the '90s. Results strongly support our predictions and are robust to several alternative stories.
    Keywords: decentralization, vertical ?scal imbalance, quality of politicians
    JEL: D72 D78
    Date: 2014–03
  7. By: Konstantin Yanovskiy (Gaidar Institute for Economic Policy)
    Abstract: Historical data on US aid to Israel illustrates incentives of political leaders and special interests, first and foremost in Israel. As on the early stages of Alliance Israel military capabilities could provide valuable services to USA, undermining USSR influence in the Middle East, the current relations are hard to explain by mutual national interests. The paper focus on the political actors' personal incentives, provides explanation for growing exploitation of US Aid by the special interests in Israel, while significance of the aid is approaching to insignificant level and contributes negatively to the country Defense capacity because of political conditionality imposed. The data presented could support a new vision of US-Israel alliance: ceasing of the US Aid programs for Middle East could contribute both countries Defense needs.
    Keywords: Political conditionality; Special interests; political leverage
    JEL: D74 D78 D72 F35
    Date: 2014
  8. By: Shanker Satyanath; Nico Voigtländer; Hans-Joachim Voth
    Abstract: Social capital is often associated with desirable political and economic outcomes. This paper contributes to a growing literature on its "dark side". We examine the role of social capital in the downfall of democracy in interwar Germany. We analyze Nazi Party entry in a cross-section of cities, and show that dense networks of civic associations such as bowling clubs, choirs, and animal breeders went hand-in-hand with a rapid rise of the Nazi Party. Towns with one standard deviation higher association density saw at least one-third faster entry. All types of associations – veteran associations and non-military clubs, “bridging” and “bonding” associations – positively predict NS Party entry. Party membership, in turn, predicts electoral success. These results suggest that social capital aided the rise of the Nazi movement that ultimately destroyed Germany’s first democracy. We also show that the effects of social capital were more important in the starting phase of the Nazi movement, and in towns less sympathetic to its message.
    Keywords: Social capital, democracy, institutions, associations, networks
    JEL: D72 N34 N44 P16 Z10
    Date: 2014–03
  9. By: Bruno S. Frey; Lasse Steiner
    Abstract: This paper discusses and proposes random selection as a component in decision-making in society. Random procedures have played a significant role in history, especially in classical Greece and the medieval city-states of Italy. We examine the important positive features of decisions by random Mechanisms. Random processes allow representativeness with respect to individuals and groups. They significantly reduce opportunities to influence political decisions by means of bribery and corruption and decrease the large expenses associated with today’s democratic election campaigns. Random mechanisms can be applied fruitfully to a wide range of fields, including politics, the judiciary, the economy, science and the cultural sector. However, it is important that random selection processes are embedded in appropriately designed institutions.
    Keywords: Random selection, lot, democracy, representativeness, corruption
    JEL: D72 D73 P16 H10
    Date: 2014–03
  10. By: Zaouali, Amira
    Abstract: Economists have a long argue that political process such as democracy and corruption are important for economic growth. Our objective in this paper is to demonstrate that one of democracy's indirect posititive effects is its ability to mitigate the negative effect of corruption on economic growth. Although most democratic countries in our sample have a high level of corruption, the electoral mechanism inhibits leaders from engaging in acts of corruption that cause damage to economic performance and thus jeopardize their political survival. Utilizing a dynamic panel data approach for more than 40 countries over the period 2000- 2011, the results show that in democratic countries, corruption has no significant effect on economic growth, while the non-democratic countries suffer the negative effects of corruption that retard economic growth.
    Keywords: Corruption, Democracy, Economic Growth, dynamic panel.
    JEL: C23 E02 O43 O47
    Date: 2014–03–18
  11. By: VAN DIJCK, Maarten (Flemish Heritage Agency, B-1210 Brussels; Faculty of Business Ecoomics, University of Hasselt); TRUYTS, Tom (CEREC, Saint Louis University; Université catholique de Louvain, CORE, Belgium)
    Abstract: After 1875, cheap grain from the United States and Russia flooded the European markets. Many countries like Germany, France, and Sweden turned to agricultural trade protection, while others, like the UK and Denmark, held on to a free trade position. Belgium adopted a middle position, leaving its grain markets open but protecting animal husbandry, dairy production, and the processing of foodstuffs. The econometric analysis of the votes of Belgian Members of Parliament on four proposals to install protectionist measures on agricultural trade seeks to identify which economic or political interests explain the Belgian policy option.
    Date: 2014–02–12
  12. By: Pablo Branas-Garza (Business School, Middlesex University London); Maria Paz Espinosa (Departamento de Fundamentos Analisis Economico II,University of the Basque Country; BRiDGE,University of the Basque Country); Ayca Ebru Giritligil (BELIS, Istanbul Bilgi University)
    Abstract: This study addresses the issue of intergenerational transmission of democratic values embedded in social choice rules. We focus on a few rules which have been the focus of social choice theory: plurality, plural- ity with a runoff, majoritarian compromise, social compromise and Borda rule. We confront subjects with preferences profiles of a hypothetical electorate over a set of four alternatives. Different rules produce different outcomes and subjects decide which alternative should be chosen for the society whose preference profile is shown. We elicit each subject’s pref- erences over rules and his/her parents’ and check whether there is any relationship; 186 students and their parents attended the sessions at Is- tanbul Bilgi University. Overall, we find support for the hypothesis of parental transmission of democratic values and gender differences in the transmitted rule.
    Date: 2014–01
  13. By: Esteve, Patrícia; Theilen, Bernd, 1965-
    Abstract: In this paper we examine the influence of economic factors to explain partisan support for European integration over the last three decades. We find that partisan support is larger in `poorer' countries with direct economic bene fits from EU membership. On the contrary, parties in countries aff ected by the Maastricht criteria are more Euro-sceptical. Moreover, we find weak evidence for larger partisan support in countries with more developed welfare states, and that the support for European integration fluctuates in parallel with the business cycle. Finally, our results indicate that the importance of economic factors in determining partisan support for European integration has grown in recent periods. JEL classi fication: F15, F42, F53, F55, H60. Key words: European Integration; Partisan Ideology; Maastricht Criteria; European Budget; Benefi ts from Trade.
    Keywords: Europa -- Integració econòmica, Pressupost -- Comunitat Europea, Països de la, 339 - Comerç. Relacions econòmiques internacionals. Economia mundial. Màrqueting,
    Date: 2014
  14. By: Fabio Galeotti (University of East Anglia); Daniel John Zizzo (University of East Anglia)
    Abstract: Appointing public officials is an important feature of modern democracies. Citizens are periodically asked to select amongst different candidates whom they want to appoint as public officials in central or local governments. There may be a trade-off on the extent to which candidates are seen as competent versus the extent to which they are seen as trustworthy. In our experiment, we ask voters to select a public official, on the competence and trustworthiness of which their final payoffs depend. We measure the competence of candidates in a real effort task and their trustworthiness in a trust game, and provide this information to voters when they make their voting decision. By looking at cases where there is a competence-trustworthiness trade-off, we can then measure the extent to which competence and trustworthiness matter in electoral decisions. We find that, in general, most voters tend to select the candidate rationally, based on who provides the highest expected profit irrespectively of trustworthiness and competence, but there is a bias towards caring about trustworthiness when the difference in expected profits between the two candidates is small enough.
    Date: 2014–03
  15. By: Jochen Michaelis (Department of Economics, University of Kassel); Marco de Pinto (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: Trade unions are typically able to convert their industrial power into political power. We show that, depending on the parameter constellation, stronger trade unions may be welfare-improving in terms of an increase in aggregate employment and output, if they successfully lobby for lower trade barriers set by the government.
    Keywords: Trade unions, lobbying, trade liberalization
    JEL: F13 F16 J51
    Date: 2014–03
  16. By: Toms, Steven
    Abstract: The paper re-analyses the evidence presented by pro and anti-regulation interests during the debates on factory reform. To do so it considers the interrelationship between fixed costs, the rate of profit and the length of the working day. The interrelationship casts new light on the lobbying positions on either side of the debate. It does so by comparing the evidence presented in the debates before parliament and associated pamphlets with actual figures contained in the business records of implicated firms. As a result the paper identifies the compromise position of the working day length compatible with reasonable rates of profit based on actual cost structures. It is thereby able to reinterpret the validity of the claims of contemporary political economy used to support the cases for and against factory regulation.
    Keywords: Factory Acts, working hours, rate of profit, cost structure, accounting records
    JEL: J21 J31 L50 L67 M4 N4 N44 N8 O14 O15 O38
    Date: 2014–03–13
  17. By: Ugur Ozdemir (Wallis Institute of Political Economy - University of Rochester); Ali Ihsan Ozkes (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: We adapt an axiomatically derived measure of polarization due to Esteban and Ray (1994) to measure polarization of political preferences. Previous work used different measures such as variance, kurtosis, Cronbach's alpha, median distance to median and the mean distance between groups. Yet, none of these measures are theoretically connected to a notion of polarization. Although the initiation of the current one is in the lieu of income inequality measurement, it is conceptually suitable for preferential polarization as well. This paper offers a methodology for that purpose. The second contribution of the paper is that we use the Aldrich-McKelvey Scaling to correct for differential-item functioning in estimating ideal points of the individuals. We use the American National Election Survey Data for years between 1984-2008 to implement the theory offered in the paper. Our findings suggest that there is not a statistically significant increasing trend in polarization in this time period in many issue dimensions but there is an upward trend in the latent ideology dimension which is significant during the 1990s.
    Date: 2014–03–03
  18. By: Vladimir Mau (RANEPA); Ilia Zatcovecky (Samuel Neaman Institute for Advanced Studies in Science and Technology); Konstantin Yanovskiy (Gaidar Institute for Economic Policy)
    Abstract: If the authorities have the opportunity to receive incomes uncontrolled by society, this gives them great freedom of action. Such incomes do not depend on the quality of the public goods delivered, nor on the investment climate. Given a certain minimal level of organization, taxpayers can try to impose on the government, which needs their money, their own terms for using the resources received (and history has shown that this can often be done successfully). The history of many modern parliaments began with gatherings convened by the people whose money and armed forces made up the might of the state. The absence of a need for the regime in power to ask its subjects for financial support in return for guarantees and privileges makes the regime’s forces, which are far superior in comparison with any individual market agent’s capacity, practically uncompensated for in any way. And if the government’s incomes enable it to offer bribes to citizens, then the authorities’ uncontrollability can weaken or even destroy the democratic institutions already in existence. Under such conditions, there can be no talk of constraints capable of providing universal secure guarantees for business independently of the will of the ruler..
    Keywords: Rent revenue, voters' corruption, voters bribe, demand for institutions
    JEL: D72 D73 P16 O33
    Date: 2014

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