nep-pol New Economics Papers
on Positive Political Economics
Issue of 2014‒05‒24
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Can Institutions Cure Clientelism?: Assessing the Impact of the Australian Ballot in Brazil By Daniel Gingerich
  2. Electoral cycles in savings bank lending By Englmaier, Florian; Stowasser, Till
  3. Politics Under the Weather: Droughts, Parties and Electoral Outcomes By Sebastián J. Miller; Paulo Bastos
  4. An Empirical Analysis of Trade-Related Redistribution and the Political Viability of Free Trade By James Lake; Daniel L. Millimet
  5. The Impact of Political Majorities on Firm Value: Do Electoral Promises or Friendship Connections Matter? By Renaud Coulomb; Marc Sangnier
  6. Decentralization, Fiscal Effort and Social Progress in Colombia at the Municipal Level, 1994-2009: Why Does National Politics Matter? By Fabio Sánchez Torres; Mónica Pachón
  7. Superstars in politics: the role of the media in the koizumi regime By Yamamura, Eiji; Sbatini, Fabio
  8. A geometric examination of majorities based on difference in support By Richard Baron; Mostapha Diss; Eric Rémila; Philippe Solal
  9. Elite capture of democratic politics: The role of social identity By David Juarez-Luna; Christian Ghiglino

  1. By: Daniel Gingerich
    Abstract: This paper examines how the adoption of the Australian ballot (AB), and ipso facto, the transition from the nominal to effective secret vote, shaped the nature of party politics in Brazil. Engaging the literature on political clientelism, the impact of the AB on three outcomes is studied: 1) the ideological leanings of voters at the ballot box; 2) the degree of electoral control enjoyed by local vote brokers; and 3) the capacity of citizens to effectively participate in the electoral process. In order to get leverage on these issues, the paper utilizes an original dataset -painstakingly assembled from regional electoral archives- which contains municipal-level vote returns for federal deputy and senate contests during the period before and after the AB's introduction in Brazil (1958-1962). The dataset exploits the fact that the AB was introduced at different times in different states and for different offices in the country, thereby creating an unprecedented opportunity to assess the impact of this institution. Using a triple difference-in-difference procedure, the study finds that the AB: 1) shifted the ideological balance of power from Right to Left; 2) did not greatly weaken the hand of vote brokers; and 3) greatly increased the proportion of wasted votes cast in elections.
    Keywords: political participation, Democracy, Elections, IDB-WP-428
    Date: 2013–09
  2. By: Englmaier, Florian; Stowasser, Till
    Abstract: We provide causal evidence that German savings banks – where local politicians are by law involved in their management – systematically adjust lending policies in response to local electoral cycles. The different timing of county elections across states and the existence of a control group of cooperative banks – that are very similar to savings banks but lack their political connectedness – allow for clean identification of causal effects of county elections on savings banks’ lending. These effects are economically meaningful and robust to various specifications. Moreover, politically induced lending increases in incumbent party entrenchment and in the contestedness of upcoming elections.
    Keywords: Bank lending cycles; political business cycles; political connectedness; public banks; government ownership of firms
    JEL: G21 D72 D73
    Date: 2014–05–14
  3. By: Sebastián J. Miller; Paulo Bastos
    Abstract: The increased occurrence of extreme weather conditions leading to drought is a key development challenge. This paper studies how these extreme events interact with the political process at the local level using rich administrative data for drought declarations and mayoral elections in Brazil. While accounting for current and historical rainfall patterns, the paper finds that that: i) municipalities led by a mayor affiliated with the President¿s party are more likely to receive formal drought declarations prior to the municipal election; and ii) receiving a drought declaration reinforces the electoral advantage of incumbent mayors running for reelection. These results are robust to the inclusion of a rich set of controls for municipal attributes.
    Keywords: Elections, Disasters, Climate Change, IDB-WP-455
    Date: 2013–10
  4. By: James Lake (Southern Methodist University); Daniel L. Millimet (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: 2014–05
  5. By: Renaud Coulomb (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), Grantham Research Institute - London School of Economics (LSE)); Marc Sangnier (AMSE - Aix-Marseille School of Economics - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM))
    Abstract: This paper simultaneously estimates the impact of political majorities on the values of firms that would benefit from the platforms of the two main candidates at the 2007 French presidential election, Ségolène Royal and Nicolas Sarkozy, and of those that are ruled or owned by Sarkozy's friends. We use prediction-market data to track each candidate's victory probability, and investigate how this relates to firms' abnormal returns. Our estimates suggest that the value of firms that would likely benefit from the platforms of Royal and Sarkozy changed by 1% and 2%, respectively, with the candidates' victory probabilities, and that firms connected to Sarkozy out-performed others by 3% due to his election.
    Keywords: political majority; prediction markets; firm value; abnormal returns; political connections
    Date: 2014–05
  6. By: Fabio Sánchez Torres; Mónica Pachón
    Abstract: The present paper explores the relationship between political competition and effective public goods delivery systems in a decentralized context to study whether the awareness generated through such a competitive environment and the existence of more political options are a part of the causal mechanisms for effective governance. In particular, we want to observe the effect of electoral competition on the incentives to build fiscal capacity and provide public goods such as education and water, that are to a large extent the responsibility of the local municipalities. The research hypothesis is that political competition strengthens the decentralized municipalities through building their local fiscal capacity. In turn, the fiscal capacity is the fundamental variable that explains the differences in sector performance across local governments. Local fiscal capacity brings about better policy outcomes, as well as a better match between resources and the needs - what we call responsiveness - which simultaneously ensures greater efficiency in local spending. Using a rich panel municipal dataset from 1994 till 2009, we have shown that on comparing the differences across education and the water and sewerage sectors, the power of fiscal effort appears to be the driving force behind better policy outcomes than any other resource commonly made available to the municipalities, such as national transfers or royalties.
    Keywords: Democracy, Decentralization, fiscal policy, local policy, water, sanitation
    Date: 2013–07
  7. By: Yamamura, Eiji; Sbatini, Fabio
    Abstract: This paper explores the role of mass media on people’s perceptions of charismatic leaders, focusing on Japan’s Koizumi regime. We conduct an empirical assessment, looking at the influence of television and newspapers on the support for Koizumi and his principal policy. This study uses individual-level data collected immediately after Koizumi’s 2005 landslide win. The major findings are: (1) frequency of exposure to mass media is positively related to support for Koizumi but not to support for his principal policy and (2) the effect of watching television is only observed for women and that of reading the newspaper only for men. Thus, a charismatic male leader on television has a greater influence than his policy on female voters. The psychological effect of an “attractive” male leader on female voters is amplified through television. Despite no support from special interest groups, Koizumi won the election because of a televised superstar effect.
    Keywords: Mass media, television, newspaper, election, Koizumi regime, superstar effect
    JEL: D72 L82 L88
    Date: 2014–05–06
  8. By: Richard Baron (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon - Université Jean Monnet - Saint-Etienne - Université Claude Bernard - Lyon I); Mostapha Diss (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon - Université Jean Monnet - Saint-Etienne - Université Claude Bernard - Lyon I); Eric Rémila (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon - Université Jean Monnet - Saint-Etienne - Université Claude Bernard - Lyon I); Philippe Solal (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon - Université Jean Monnet - Saint-Etienne - Université Claude Bernard - Lyon I)
    Abstract: Reciprocal preferences have been introduced in the literature of social choice theory in order to deal with preference intensities. They allow individuals to show preference intensities in the unit interval among each pair of options. In this framework, majority based on difference in support can be used as a method of aggregation of individual preferences into a collective preference: option a is preferred to option b if the sum of the intensities for a exceeds the aggregated intensity of b in a threshold given by a real number located between 0 and the total number of voters. Based on a three dimensional geometric approach, we provide a geometric analysis of the non transitivity of the collective preference relations obtained by majority rule based on difference in support. This aspect is studied by assuming that each individual reciprocal preference satisfies a g-stochastic transitivity property, which is stronger than the usual notion of transitivity
    Keywords: Geometric voting ; Reciprocal preferences ; Difference in support ; Stochastic transitivity
    Date: 2014
  9. By: David Juarez-Luna; Christian Ghiglino
    Abstract: In the present paper we uncover a novel mechanism through which a minority can gain a disproportionate power in a perfectly functioning democracy, decides on a unique redistributive instrument, the tax rate. We show that a minority characterised by a high degree of social identification may, in the presence of ideological motives, influence the policy outcome. In particular, a rise in social identification among the rich minority may be able to reduce the tax rate. Importantly, this may happen even if the minority is more ideological than the majority. Finally, we attempt an explanation of the divide in the tax rate between the US and Europe.
    Date: 2014–04–27

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