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on Positive Political Economics |
| By: | Stan Veuger (American Enterprise Institute); Tim Ganser |
| Abstract: | We propose a model of voter decision-making in proportional representation systems: ultra-rational strategic voters construct expectations of coalitions and policy outcomes based on expected seat distributions and vote to maximize their expected utility from the implemented policy. |
| Keywords: | voting,proportional representation |
| JEL: | A |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:aei:rpaper:40362&r=pol |
| By: | Majumdar, Sumon (Queens University); Mukand, Sharun W (University of Warwick) |
| Abstract: | The paper examines the role of policy intervention in engendering institutional change. We show that first order changes in the political structure (e.g. introduction of democracy) may be undermined by local political interests and result in persistence in institutions and the (poor) quality of governance. The paper identifies two effects of development policy as a tool for institutional change. One, by increasing political accountability, it may encourage nascent democratic governments to invest in good institutions – the incentive effect. However, we show that it also increases the incentive of the rentier elite to tighten their grip on political institutions – the political control effect. Which of these dominate determine the overall impact on institutional quality. Under some conditions, by getting the elite to align their economic interests with that of the majority, development policy can lead to democratic consolidation and economic improvement. However if elite entrenchment is pervasive, then comprehensive change may require more coercive means. |
| Keywords: | political structure |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:131&r=pol |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:185&r=pol |
| By: | Tetsuo Ono (Graduate School of Economics, Osaka University) |
| Abstract: | This paper presents an overlapping-generation model featuring probabilistic vot- ing over two policy issues, namely, pension and public goods. To capture the forward-looking behavior of voters, we characterize a Markov-perfect political equi- librium in which the two policy variables are conditioned on a payoff-relevant state variable, that is, capital. It is shown that (i) as the population ages, the pension- to-GDP ratio and the growth rate of capital increase, but the public goods-to-GDP ratio decreases and (ii) the pension-to-GDP and public goods-to-GDP ratios are too high and the growth rate too low from the standpoint of social welfare. |
| Keywords: | Economic Growth; Population Aging; Probabilistic Voting; Public Pension; Public Goods Provision |
| JEL: | D70 E24 H55 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1417&r=pol |
| By: | Brollo, Fernanda (University of Warwick); Troiano, Ugo (University of Michigan) |
| Abstract: | This paper analyzes the eect of the gender of local policymakers on policy outcomes. Analyzing a rich dataset from Brazilian municipalities and using a regression discon- tinuity design, we nd that municipalities ruled by female mayors have better health outcomes, receive more federal discretionary transfers, and have lower corruption. Addi- tionally, male mayors hire more temporary public employees than their female counter- parts when they are allowed to run for re-election, and when municipal elections are approaching. These ndings suggest that male mayors may promote more political pa- tronage than female mayors and that men and women may respond dierently to local election incentives. |
| Keywords: | election incentives, Brazil |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:161&r=pol |
| By: | Bruno Amable (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne, CEPREMAP - Centre pour la recherche économique et ses applications, IUF - Institut Universitaire de France - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique) |
| Abstract: | This paper analyses the French political crisis since the late 1970s by investigating the links between the social structure and the economic policy expectations of the electorate. To this end, data on post-electoral survey are used to estimate structural models of political support to political parties for 1978 and 2012, and the estimation results are used to propose an analysis of the French crisis. The enduring French political crisis is found to be the expression of contradictions between the economic policies implemented by the successive governments and the existence of a dominant social bloc, i.e. a coalition of social groups that would politically support the dominant political strategy. Since 1978, both the right and the left have failed to find a solution to the contradictions between the policies they implemented and the expectations of their social bases, which are themselves inhabited by tensions and contradictions that evolve with the structure of French capitalism. The failure of all governing coalitions so far is a new expression of that of the "modernists" to take into account the expectations of the popular classes. |
| Keywords: | France; political crisis; political economy; social base |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00973926&r=pol |
| By: | Jain, Sanjay (Cambridge University); Majumdar, Sumon (Queen’s University); Mukand, Sharun (University of Warwick) |
| Abstract: | This paper develops a dynamic framework to analyze the political sustainability of economic reforms in developing countries. First, we demonstrate that economic reforms that are proceeding successfully may run into a political impasse, with the reform’s initial success having a negative impact on its political sustainability. Second, we demonstrate that greater state capacity, to make compensatory transfers to those adversely a.ected by reform, need not always help the political sustainability of reform, but can also hinder it. Finally, we argue that in ethnically divided societies, economic reform may be completed not despite ethnic conflict, but because of it. |
| Keywords: | Economic Reform, State Capacity, Politics, Redistribution, Compensation, Ethnic Conflict |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:156&r=pol |
| By: | Lake, James (Southern Methodist University); Millimet, Daniel L. (Southern Methodist University) |
| Abstract: | Even if free trade creates net welfare gains for a country as a whole, the associated distributional implications can undermine the political viability of free trade. We show that trade-related redistribution increases the political viability of free trade in the US. We do so by assessing the causal effect of expected redistribution associated with the US Trade Adjustment Assistance program on US Congressional voting behavior on eleven Free Trade Agreements (FTAs) between 2003 and 2011. We find that a one standard deviation increase in redistribution leads to more than a 3% point increase in the probability of voting in favor of an FTA for the median representative. In addition, a one standard deviation decrease in redistribution across the entire US would have precluded passage of two of the eleven FTAs in our sample. |
| Keywords: | free trade agreements, trade adjustment assistance, political economy, redistribution |
| JEL: | F13 H50 J65 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8086&r=pol |
| By: | Fuentes-Nieva, Ricardo; Galasso, V. Nicholas |
| Abstract: | Economic inequality is rapidly increasing in the majority of countries. The wealth of the world is divided in two: almost half going to the richest one percent; the other half to the remaining 99 percent. The World Economic Forum has identified this as a major risk to human progress. Extreme economic inequality and political capture are too often interdependent. Left unchecked, political institutions become undermined and governments overwhelmingly serve the interests of economic elites to the detriment of ordinary people. |
| Keywords: | inequality, economic inequality, wealth inequality, income inequality, democracy,political representation |
| JEL: | F1 F5 H1 H23 H5 O1 O17 |
| Date: | 2014–01–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:54984&r=pol |
| By: | M. Rosaria Alfano; A. Laura Baraldi |
| Abstract: | Previous empirical studies analysing the effect of electoral systems on growth lack unanimous answers as they miss-specify mixed systems in the empirical setting, that is, they neglect to consider the proportionality degree of mixed electoral systems. This work supplies the missing answers by properly distinguishing the three types of electoral rules using a proportionality degree index, that is, the Gallagher index. We estimate a non-linear relationship between the Gallagher proportionality index and the per capita GDP growth using cross-country panel data. Our findings show that the proportionality degree is significant for growth; mixed systems (characterised by an intermediate level of proportionality), combining the different advantages of both proportional and plurality systems, solve the problem of the accountability-responsiveness and the political-government instability trade-offs. As a consequence, they reach relatively higher growth rates with respect to more “extreme” electoral rules. |
| Keywords: | Economic Growth, Electoral System, Proportionality index. |
| JEL: | C23 D72 H1 |
| Date: | 2014–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2014_06&r=pol |
| By: | Spolaore, Enrico (Tufts University) |
| Abstract: | Europe’s monetary union is part of a broader process of integration that started in the aftermath of World War II. In this “political guide for economists” we look at the creation of the euro within the bigger picture of European integration. How and why were European institutions established? What are the goals and determinants of European Integration? What is European integration really about? We address these questions from a political-economy perspective, building on ideas and results from the economic literature on the formation of states and political unions. Specifically, we look at the motivations, assumptions, and limitations of the European strategy, initiated by Jean Monnet and his collaborators, of partially integrating policy functions in a few areas, with the expectation that more integration will follow in other areas, in a sort of chain reaction towards an “ever-closer union.” The euro with its current problems is a child of that strategy and its limits |
| Keywords: | European integration |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:141&r=pol |
| By: | Florian Scheuer; Alexander Wolitzky |
| Abstract: | This paper studies optimal dynamic tax policy under the threat of political reform. A policy will be reformed ex post if a large enough political coalition supports reform; thus, credible policies are those that will continue to attract enough political support in the future. If the only credible reform threat is to fully equalize consumption, we find that optimal marginal capital taxes are U-shaped, so that savings are subsidized for the middle class but are taxed for the poor and rich. If ex post the government may strategically propose a reform other than full equalization in order to secure additional political support, then optimal capital taxes are instead progressive throughout the income distribution. |
| JEL: | D31 D82 E62 H21 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20043&r=pol |
| By: | A. Soci; A. Maccagnan; D. Mantovani |
| Abstract: | This paper presents an empirical investigation about the effect of an increase in economic inequality on some aspects of the quality of a democracy. The main novelty of the paper lies in its methodology: it applies to a single country (instead of a pool of countries) - the UK - in a long run perspective. Using survey data, we select three questions and check whether an increase in inequality alters the answers to these questions, subject to other control variables. Another novelty is the use of several measures of inequality (rather than the usual GINI only) both for disentangling what happens in the different parts of the income distribution and for avoiding the dependence of the results on the choice of the indicator. The main finding is that a higher level of income inequality impacts negatively on citizens’ satisfaction with democracy and positively on their political participation. |
| JEL: | D33 D72 D63 O15 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp935&r=pol |
| By: | Wantchekon, Leonard (Princeton University); Garcia-Ponce, Omar (New York University) |
| Abstract: | We show that current levels of democracy in Africa are linked to the nature of its independence movements. Using different measures of political regimes and historical data on anti-colonial movements, we find that countries that experienced rural insurgencies tend to have autocratic regimes, while those that faced urban protests tend to have more democratic institutions. We provide evidence for causality in this relationship by using rough terrain as an instrument for rural insurgency, and by performing a sensitivity analysis. Finally, the evidence suggests that the adoption of rural insurgency perpetuated the use of violence as a form of conflict resolution. |
| Keywords: | Africa, Colonial History, Critical Junctures, Democracy, Modernization. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:173&r=pol |
| By: | Jean-Pierre Tranchant (Institute of Development Studies); Patricia Justino (Institute of Development Studies); Cathérine Müller (Institute of Development Studies) |
| Abstract: | We analyse the combined effect of political violence and adverse climatic shocks on child nutrition. Instrumental variable models using longitudinal data from Andhra Pradesh, India, yield two key results: (i) drought has an adverse effect on child nutrition in Andhra Pradesh only in violence-affected communities, and (ii) political violence has large negative effects on child nutrition through a reduction of the ability of households to cope with drought. FE-2SLS results are complemented by the use of a unique natural experiment created by a ceasefire in 2004. Results show that the eight months ceasefire period reversed the adverse effects of drought in communities previously affected by the conflict. Potential mechanisms explaining the strong joint welfare effect of conflict and drought are the failure of economic coping strategies in areas of violence and restricted access to public goods and services. |
| Keywords: | Malnutrition, India, Drought, Naxal, Conflict |
| JEL: | I15 I30 O12 O15 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:hic:wpaper:173&r=pol |
| By: | Welander, Anna (Lund University); Lyttkens, Carl Hampus (Lund University); Nilsson, Therese (Research Institute of Industrial Economics (IFN)) |
| Abstract: | Good health is crucial for human and economic development. In particular poor health in childhood seems to be of utmost concern since it causes irreversible damage and have implications later in life. Recent research suggests globalization is a strong force affecting adult and child health outcomes. Yet, there is much unexplained variation with respect to the globalization effect on child health, in particular in low- and middle-income countries. One factor that could explain such variation across countries is the quality of democracy. Using panel data for 70 developing countries between 1970 and 2009 this paper disentangles the relationship between globalization, democracy, and child health. Specifically the paper examines how globalization and a country's democratic status and historical experience with democracy, respectively, affect infant mortality. In line with previous economic research, results suggest that globalization reduces infant mortality and that the level of democracy in a country generally improves child health outcomes. We also find that democracy matters for the size of the globalization effect on child health. If e.g. Côte d'Ivoire was a democracy in the 2000–2009 period, this effect would translate into 1,200 fewer infant deaths in an average year compared to the situation without democracy. |
| Keywords: | Globalization; Democracy; Health; Developing Countries |
| JEL: | I15 P16 |
| Date: | 2014–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1016&r=pol |