nep-pol New Economics Papers
on Positive Political Economics
Issue of 2014‒04‒05
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political selection in the skilled city By Antonio Accetturo
  2. More than Words and Good Intentions: The Political Agenda-Setting Power Behind Foreign Aid Mechanisms By Riaño Rodríguez, Juan Felipe
  3. Free and Fair Elections – A New Database By Sylvia Bishop; Anke Hoeffler
  4. Politicizing Europe: The Challenge of Executive Discretion By Jonathan White
  5. Predictability and Power in Legislative Bargaining By S. Nageeb Ali; B. Douglas Bernheim; Xiaochen Fan
  6. Military Spending and Democracy By Jennifer Brauner
  7. European Integration: Partisan Motives or Economic Benefits? By Patricia Esteve-González & Bernd Theilen
  8. Elite Influence? Religion, Economics, and the Rise of the Nazis By Spenkuch, Jörg; Tillmann, Philipp
  9. Reform or Radicalism: Left Social Movements from the Battle of Seattle to Occupy Wall Street By Rowe, James K; Carroll, Myles
  10. Axiomatic districting By Puppe, Clemens; Tasnádi, Attila
  11. Listen to the Market, Hear the Best Policy Decision, but Don't Always Choose it By David Reinstein; Joon Song
  12. Innovation in State-owned Enterprises: Reconsidering the Conventional Wisdom By Belloc, Filippo

  1. By: Antonio Accetturo (Bank of Italy)
    Abstract: This paper studies the impact of citizens’ human capital on the characteristics of elected politicians in democratic elections for the post of mayor. By using a change in the rules for Italian mayoral elections and a difference-in-differences estimator, I find that cities endowed with a larger amount of human capital tend to elect mayors that have a higher educational attainment and that were previously employed in skill-intensive jobs. This result is quantitatively small but robust to omitted variables or selection issues.
    Keywords: human capital externalities, political selection, cities
    JEL: D7 I20 H8
    Date: 2014–03
  2. By: Riaño Rodríguez, Juan Felipe
    Abstract: In this paper, international aid is examined as a tool for political agenda-setting. A theoretical model is constructed for the analysis, incorporating the incentives created by foreign aid, on the political benefits of recipient governments. The model also incorporates the compensating benefits provided by these governments through the legitimization of the donor country's political agenda. The main results of this model indicate that governments which offer international assistance can influence the political agenda of recipient countries through two channels: 1) By reducing the political costs of official intervention in issues that receive aid, and 2) By generating incentives for additional political rent-seeking. The results are studied in the case of aid provided by the USA to Colombia during the period 1998-2012, which shows the power of US presidents to establish part of the Colombian political agenda related to drugs and terrorism. The results are obtained through a novel content analysis of presidential speeches in both countries and from a set of estimates corrected by possible problems of endogeneity in foreign aid allocation.
    Keywords: Agenda-Setting, Foreign Aid, Content Analysis, International-Politics
    JEL: F02 F35 F54 F59
    Date: 2014–03–26
  3. By: Sylvia Bishop; Anke Hoeffler
    Abstract: The holding of elections has become universal but only about half of all elections have been free and fair. Electoral malpractice not only distorts the quality of representation but has implications for political, social and economic outcomes. Existing datasets either provide broad information on election quality for large panels or they provide very detailed information on electoral processes and events for a small number of elections. Our data collection effort closes this gap. We provide an assessment of elections that is closely tied to the commonly used term ‘free and fair’ and base this proxy on ten variables for a global panel. Our preliminary results suggest that there are a number of elections that are unfree but fair. Most observer organisations concentrate on the election as an event, i.e. whether the election was fair. We therefore recommend that international organisations should put more emphasis on monitoring the run up to the elections, i.e. whether the elections were free.
    Date: 2014
  4. By: Jonathan White
    Abstract: Political decision-making in the Euro-crisis has relied heavily on executive discretion, exercised at speed and rationalised with reference to the pressing demands of emergency. This paper explores the challenges raised for political opposition, notably challenges of a temporal kind. With its deviations from policy and procedural norms, discretionary politics tends towards a politics without rhythm, leading to major asymmetries between decision-makers and voices of opposition. These centre on issues of timing and the ability to identify authorship and content of decisions. Such asymmetries arguably correspond to an underlying one between the temporality of political decision-making and of contemporary finance capitalism, with agents of the former increasingly inclined to pursue ‘fast policy’ as a means to keep pace. A democratic response is likely to involve strengthening and synchronising the rhythms of parliamentary politics, as well as being receptive to forms of opposition less reliant on the rhythms that discretion subverts.
    Keywords: democracy
    Date: 2014–02–21
  5. By: S. Nageeb Ali; B. Douglas Bernheim; Xiaochen Fan
    Abstract: This paper examines the relationship between the concentration of political power in legislative bargaining and the predictability of the process governing the recognition of legislators. Our main result establishes that, for a broad class of legislative bargaining games, if the recognition procedure permits the legislators to rule out some minimum number of proposers one round in advance, then irrespective of how patient the individual legislators are, Markovian equilibria necessarily deliver all economic surplus to the first proposer. We also examine the extent to which alternative bargaining protocols can limit the concentration of power.
    JEL: D72 D78
    Date: 2014–03
  6. By: Jennifer Brauner (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: This paper examines empirically whether democracies allocate fewer resources to the military than dictatorships do. It employs a panel of up to 112 countries over the period 1960-2000 to estimate a standard demand for military spending model. While papers on the determinants of military spending generally include democracy as a control variable, with a few exceptions, it is not the focus of their enquiry. This paper addresses resulting problems in the existing literature concerning data quality and the appropriate measurement of key variables, as well as the question of causality between military spending and democracy. It finds that democracies spend less on the military as a percentage of GDP than autocracies do and that causality runs from regime type to military spending.
    Keywords: Military expenditure, regime type, political economy, defence economics, democracy.
    Date: 2014–03
  7. By: Patricia Esteve-González & Bernd Theilen
    Abstract: In this paper we examine the influence of economic factors on partisan support for European integration over the last three decades. We find that partisan support is larger in ‘poorer’ countries with direct economic benefits from EU membership. On the other hand, parties in countries affected by the Maastricht criteria are more Euro-sceptical. We also 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.
    Keywords: Maastricht Treaty; budget; trade policy
    Date: 2014–02–05
  8. By: Spenkuch, Jörg; Tillmann, Philipp
    Abstract: Adolf Hitler's seizure of power was one of the most consequential events of the twentieth century. Yet, our understanding of which factors fueled the astonishing rise of the Nazis remains highly incomplete. This paper shows that religion played an important role in the Nazi party's electoral success -- dwarfing all available socioeconomic variables. To obtain the first causal estimates we exploit plausibly exogenous variation in the geographic distribution of Catholics and Protestants due to a peace treaty in the sixteenth century. Even after allowing for sizeable violations of the exclusion restriction, the evidence indicates that Catholics were significantly less likely to vote for the Nazi Party than Protestants. Consistent with the historical record, our results are most naturally rationalized by a model in which the Catholic Church leaned on believers to vote for the democratic Zentrum Party, whereas the Protestant Church remained politically neutral.
    Keywords: religion, fascism, elite influence, Nazis, Weimar Germany
    JEL: D72 N00 N34 N94 Z12
    Date: 2014–03–30
  9. By: Rowe, James K; Carroll, Myles
    Abstract: We examine two recent cases of relative Left success—the Battle of Seattle and Occupy Wall Street—and argue that in each case an effective dynamism between radical and reform wings drove gains. This analysis is not meant to deny political difference and hawk false unity. Instead we want to challenge the luxury of mutual dismissal with the actually existing benefits of movement dynamism. By dynamism we mean contributions arising from different activist wings and productively interacting to increase overall movement power. Our ultimate claim is that the North American Left will yield greater success by becoming more self-conscious about the concrete benefits of movement dynamism.
    Keywords: Life Sciences, Social and Behavioral Sciences, Reform, Revolution, Battle of Seattle, Occupy Wall Street, Social Movements, Left politics
    Date: 2014–03–01
  10. By: Puppe, Clemens; Tasnádi, Attila
    Abstract: In a framework with two parties, deterministic voter preferences and a type of geographical constraints, we propose a set of simple axioms and show that they jointly characterize the districting rule that maximizes the number of districts one party can win, given the distribution of individual votes (the "optimal gerrymandering rule"). As a corollary, we obtain that no districting rule can satisfy our axioms and treat parties symmetrically. (character testing: ú ü ű ó ö Å‘ á é)
    Keywords: districting, gerrymandering
    Date: 2014
  11. By: David Reinstein; Joon Song
    Abstract: Real-world policymakers want to extract investors private information about a policy's likely effects by listening to "asset markets". However, this brings the risk that investors will profitably "manipulate" prices to steer policy. We model the interaction between a policymaker and an informed (profit-seeking) investor who can buy/short-sell an asset from uniformed traders. We characterize when the investor's incentives do not align with the policymaker's, implying that to induce truth-telling behaviour the policymaker must commit to sometimes ignoring the signal (as revealed by the investor's behaviour driving the asset's price). This implies a commitment to executing the policy with a probability depending on the asset's price. We develop a taxonomy for the full set relationships between private signals, asset values, and policymaker welfare, characterizing the optimal indirect mechanism for each case. We find that where the policymaker is ex-ante indifferent, she commits to sometimes/never executing after a bad signal, but always executes after a good signal. Generically, this "listeneing" mechanism leads to higher (policymaker) welfare then ignoring the signals. We discuss real-world evidence, implications for legislative processes, and phenomena such as "trial balloons" and "committing political capital".
    Date: 2014–02–01
  12. By: Belloc, Filippo
    Abstract: A very well established economic literature maintains that State-owned enterprises (SOEs) are inefficient comparatively to privately-owned ones (POEs). In this paper we argue that SOEs' inefficiency is not due to the State ownership per se, rather it is caused by some conditions other than ownership which SOEs often, but not necessarily, relate to. In particular, we focus on dynamic efficiency - specifically, the production of technological innovation - of SOEs in manufacturing industries, where SOEs should contend with POEs in a competitive environment. We suggest that targeted measures aimed at increasing managers' commitment to long-term investment strategies and at reducing corruption and political interference, though being complex and difficult to implement, can be much more (positively) incisive on long-run technical progress than the simple privatization of companies. This leaves room for exploration and implementation of policies that might reconcile State ownership and market competition in industrial sectors.
    Keywords: State-owned enterprises; innovation; privatization.
    JEL: H11 L33 O31 P12
    Date: 2013–11–01

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