nep-pol New Economics Papers
on Positive Political Economics
Issue of 2014‒07‒05
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Guns and Votes By Laurent Bouton; Paola Conconi; Francisco Pino; Maurizio Zanardi
  2. How do Political and Economic Institutions Affect Each Other? By Braunfels, Elias
  3. The Runner-Up Effect By Santosh Anagol; Thomas Fujiwara
  4. Demographische Alterung und politische Machtverhältnisse By Sven Stadtmüller
  5. Dictators Walking the Mogadishu Line: How Men Become Monsters and Monsters Become Men By Shaun Larcom; Mare Sarr; Tim Willems
  6. Electoral politics and regional development. Assessing the geographical allocation of public investment in Turkey By Davide Luca; Andrés Rodríguez-Pose
  7. Partisan conflict By Azzimonti-Renzo, Marina
  8. The political economy of social accountability in rural Uganda By Sophie King
  9. Corruption in Turbulent Times: a Response to Shocks? By Joël CARIOLLE
  10. Livelihoods Limitations: The Political Economy of Urban Poverty in Bangladesh By Nicola Banks
  11. Raising the Price of Talk: An Experimental Analysis of Transparent Leadership By Daniel Houser; David M. Levy; Kail Padgitt; Sandra J. Peart; Erte Xiao
  12. Unorthodoxy in legislation: The Hungarian experience By Deák, Dániel

  1. By: Laurent Bouton; Paola Conconi; Francisco Pino; Maurizio Zanardi
    Abstract: Why are U.S. congressmen reluctant to support gun control regulations, despite the fact that most Americans are in favor of them? We argue that re-election motives can lead politicians to take a pro-gun stance against the interests of an apathetic majority of the electorate, but in line with the interests of an intense minority. We develop a model of gun control choices in which incumbent politicians are both office and policy motivated, and voters differ in the direction and intensity of their preferences. We derive conditions under which politicians support gun control early in their terms, but oppose them when they approach re-election. We test the predictions of the model by analyzing votes on gun-related legislation in the U.S. Senate, in which one third of the members are up for re-election every two years. We find that senators are more likely to vote pro gun when they are close to facing re-election, a result which holds comparing both across and within legislators. Only Democratic senators "flip flop'' on gun control, and only if the group of pro-gun voters in their constituency is of intermediate size.
    JEL: D72 I18
    Date: 2014–06
  2. By: Braunfels, Elias (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: This paper provides evidence for the mutually reinforcing relation of political and economic institutions. To overcome problems of endogeneity I utilize lag instruments within a GMM framework for dynamic panel data. Employing recently developed tests, I show that limiting the number of lag instruments and collapsing the instrument matrix eliminates many and weak instrument biases. My major findings are that (i) improving economic institutions has a large positive effect on future political institutions, and (ii) political institutions have a positive but quantitatively smaller eect on current economic institutions. In addition, (iii) political instability positively affects future political institutions. In line with predictions from the institutional literature, the timing of effects is such that political institutions depend on lags of explanatory variables, while economic institutions are contemporaneously determined. Moreover, results are driven by countries with initially low political institutions implying that in these countries, much is to be gained from institutional reform.
    Keywords: Political Economy; Economic Institutions.
    JEL: O10 P16
    Date: 2014–06–30
  3. By: Santosh Anagol; Thomas Fujiwara
    Abstract: Exploiting regression discontinuity designs in Brazilian, Indian, and Canadian first-past-the-post elections, we document that second-place candidates are substantially more likely than close third-place candidates to run in, and win, subsequent elections. Since both candidates lost the election and had similar electoral performance, this is the effect of being labeled the runner-up. We explore the potential mechanisms for this runner-up effect, including selection into candidacy, heuristic behavior by political actors, and the runner-up obtaining an advantage from strategic coordination (being more likely to become a focal point). Selection into candidacy is unlikely to explain the effect on winning subsequent elections, and the weight of evidence suggests the effect is driven by strategic coordination. We find no effect of finishing in third-place versus fourth-place.
    JEL: D03 D72 O10
    Date: 2014–06
  4. By: Sven Stadtmüller
    Abstract: Since election results routinely show that elderly people are especially prone to cast their votes for the German Conservatives and do hardly sympathize with the Greens, the question arises: Does the ageing of the electorate go along with an increasing asymmetry of electoral chances? The article examines whether the electoral success of the Conservatives in the elderly population stems from a long-standing party affiliation or from emerging conservative attitudes in the lifecourse. Using Data from the German Socio-economic Panel (SOEP) the results provide support for cohort effects: In the prospering era after World War II, many people established an affiliation towards the Conservatives and retained it. The "Babyboomers" instead show (1) a much lesser extent of support for the Conservatives (2) a much higher sympathy towards the Greens and (3) a higher rate of disenchantment with political parties at the same time. In sum, the ageing of the electorate may result in better electoral chances for the Greens rather than the conservatives.
    Keywords: Population ageing, election, party identification, cohort effects
    Date: 2014
  5. By: Shaun Larcom (University of Cambridge and SOAS); Mare Sarr (University of Cape Town); Tim Willems (University of Oxford)
    Abstract: History offers many examples of dictators who worsened their behavior significantly over time (like Zimbabwe’s Robert Mugabe), while there are also cases of dictators who have displayed remarkable improvements (like Jerry Rawlings of Ghana). We show that such mutations can result from rational behavior when the dictator’s flow use of repression is complementary to his accumulated stock of wrongdoings. This complementarity gives rise to two steady states (one where repression is low and one where repression is high) and implies that any individual rising to power in this setup has the potential to end up as either a moderate leader, or as a dreaded tyrant. Our model shows that dictators are more likely to derail with higher levels of divertible funds available, for example stemming from fungible aid inflows or from the exploitation of natural resources
    Keywords: Dictatorship, Repression, Political violence, Resource curse, Learning, Multiple steady states
    JEL: D72 D74 N47 O10
    Date: 2014–07
  6. By: Davide Luca; Andrés Rodríguez-Pose
    Abstract: One of the most important decisions that governments face is how to allocate the public resources necessary for development, given each countrys budget constraints. According to the literature on the links between wealth and institutional performance, highly kleptocratic countries are expected to show higher levels of politicisation of the public purse. The article tests the extent to which socioeconomic criteria (equity and efficiency) or electoral concerns determined the geographical distribution of public investment in the 81 provinces of Turkey between 2004 and 2012. Our results show that, although electoral concerns mattered for the allocation, socioeconomic measures remained the most relevant predictors of investment. Moreover, in contrast to official regional development policy principles, the Turkish state tended to favour areas with a higher level of development over those with greater ‘socioeconomic need’. Our results therefore challenge much of the distributive politics literature, which has overly emphasised the role of pork-barrel in public policy-making. At the same time, they underline the need of paying more attention to the political economy of regional development strategies.
    Keywords: Regional development policies, distributive politics, public investments, political geography, Turkey.
    JEL: H76 O12 O53 R12 R58
    Date: 2014–06
  7. By: Azzimonti-Renzo, Marina (Federal Reserve Bank of Philadelphia)
    Abstract: American politics have become extremely polarized in recent decades. This deep political divide has caused significant government dysfunction. Political divisions make the timing, size, and composition of government policy less predictable. According to existing theories, an increase in the degree of economic policy uncertainty or in the volatility of fiscal shocks results in a decline in economic activity. This occurs because businesses and households may be induced to delay decisions that involve high reversibility costs. In addition, disagreement between policymakers may result in stalemate, or, in extreme cases, a government shutdown. This adversely affects the optimal implementation of policy reforms and may result in excessive debt accumulation or inefficient public-sector responses to adverse shocks. Testing these theories has been challenging given the low frequency at which existing measures of partisan conflict have been computed. In this paper, I provide a novel high-frequency indicator of the degree of partisan conflict. The index, constructed for the period 1891 to 2013, uses a search-based approach that measures the frequency of newspaper articles that report lawmakers' disagreement about policy. I show that the long-run trend of partisan conflict behaves similarly to political polarization and income inequality, especially since the Great Depression. Its short-run fluctuations are highly related to elections, but unrelated to recessions. The lower-than-average values observed during wars suggest a “rally around the flag" effect. I use the index to study the effect of an increase in partisan conflict, equivalent to the one observed since the Great Recession, on business cycles. Using a simple VAR, I find that an innovation to partisan conflict increases government deficits and significantly discourages investment, output, and employment. Moreover, these declines are persistent, which may help explain the slow recovery observed since the 2007 recession ended.
    Keywords: Economic policy; Partisan conflic; Politics; Polarization; Business cycles;
    Date: 2014–06–01
  8. By: Sophie King
    Abstract: Abstract Social accountability has become an important new buzzword among development actors seeking to understand the forms of state-society synergy that may be supportive of better public services. Advocates suggest demand-side initiatives are key to increasing the power of the poor in service provision but sceptics are concerned such mechanisms may generate mistrust of existing democratic processes while failing to challenge structural inequalities between disadvantaged citizens and political elites. This paper advances these debates by presenting qualitative research findings about political capabilities outcomes for different stakeholders within rural health and education services resulting from the social accountability interventions of a research and development NGO in Western Uganda. The paper supports arguments in the literature for NGOs to engage in more politicized strategies aimed at tackling structural inequality when seeking to advance the political capabilities of disadvantaged groups. The findings also suggest however, that within the restricted political space of rural Uganda at the current juncture, NGOs can generate limited improvements to service provision by bringing local state and civil society elites together for deliberative problem-solving.
    Date: 2014
  9. By: Joël CARIOLLE (FERDI)
    Abstract: Economic instability may trigger ex ante and ex post corruption strategies, respectively resulting from the perception and experience of economic fluctuations. Using measures of export instability reflecting its ex ante and ex post effects, dynamic panel estimations are conducted with corruption perception data covering 62 developed and developing countries over 1985-2005; and cross-section estimations with aggregated data on 22,062 firms' bribe reports in 38 developing countries. Estimations support a positive ex post effect of both positive and adverse sharp export fluctuations on corruption, channeled by restricted credit access and weak democratic institutions. By contrast, a deterrent ex post effect of both positive and negative normal export fluctuations is found, channeled by facilitated credit access and effective democratic institutions. Estimations also support a positive ex ante effect of instability on corruption, especially when access to financial markets is restricted. Therefore, when institutions are dysfunctional, both favorable and adverse shocks may increase corruption prevalence.
    JEL: D10 O11 O12 O17
    Date: 2014–06
  10. By: Nicola Banks
    Abstract: Abstract Frameworks for understanding urban poverty have taken an asset-based approach that assesses livelihoods strategies on the basis of a household’s portfolio of assets. Research in Dhaka, Bangladesh reveals the limitations of such approaches. Their narrow focus on households and depoliticized definition of social capital may capture experiences of urban poverty, but cannot reconcile these with the significance of the structural drivers of urban poverty. Our understanding of urban poverty must recognize the informal systems of governance that dominate resource distribution at the community-level and keep the resources necessary for household improvement confined to a relatively small elite. Excluded from the accumulation networks that provide a platform for household mobility for the well-connected, most urban poor households are reliant upon survival networks in their search for security. Only through extending our analysis beyond the household to explore their position within this local political economy can we recognize the significant limitations placed on their efforts to extend and improve their livelihoods.
    Date: 2014
  11. By: Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); David M. Levy (Center for the Study of Public Choice and Department of Economics, George Mason University); Kail Padgitt (Tax Foundation); Sandra J. Peart (University of Richmond); Erte Xiao (Department of Social and Decision Sciences Carnegie Mellon University)
    Abstract: Does transparent leadership promote cooperative groups? We address this issue using a public goods experiment with exogenously selected leaders who are able to send non-binding contribution suggestions to the group. To investigate the effect of transparency in this setting we vary the ease with which a leader’s actions are known by the group. We find leaders’ suggestions encourage cooperation in all treatments, but that both leaders and their group members are more likely to follow leaders’ recommendations when institutions are transparent so that non-leaders can easily see what the leader does. Consequently, transparency leads to significantly more cooperation, higher group earnings and reduced variation in contributions among group members. Length: 46
    Keywords: experimental economics
    Date: 2014–06
  12. By: Deák, Dániel
    Abstract: This paper deals with legal unorthodoxy. The main idea is to study the so-called unorthodox taxes Hungary has adopted in recent years. The study of unorthodox taxes will be preceded by a more general discussion of how law is made under unorthodoxy, and what are the special features of unorthodox legal policy. Unorthodoxy challenges equality before the law and is critical towards mass democracies. It also raises doubts on the operability of the rule of law, relying on personal skills, or loyalty, rather than on impersonal mechanisms arising from checks and balances as developed by the division of political power. Besides, for lack of legal suppositions, legislation suffers from casuistry and regulatory capture.
    Keywords: unorthodox economic and legal policies, populism, special industry levies, quality of legislation, rule of law, legal certainty, substantive and procedural justice, review of constitutional provisions
    JEL: K20
    Date: 2014

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