nep-pol New Economics Papers
on Positive Political Economics
Issue of 2014‒08‒02
seven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Germanys housing policy after the general elections of 2013 By Ramón, Sotelo
  2. Politics of Religiously Motivated Lending: An Empirical Analysis of Aid Allocation by the Islamic Development Bank By Hernandez , Diego; Vadlamannati , Krishna Chaitanya
  3. A latent democracy measure 1850-2000 By Peter Foldvari
  4. The middle class in contemporary South Africa: Comparing rival approaches By Ronelle Burger; Cindy Lee Steenekamp; Servaas van der Berg; Asmus Zoch
  5. The Evolution of Development Strategy as Balancing Market and Government Failure By Devarajan, Shantayanan; Kanbur, Ravi
  6. Reconciling Observed Tariffs and the Median Voter Model By Swati Dhingra
  7. Presidents and the U.S. Economy: An Econometric Exploration By Alan S. Blinder; Mark W. Watson

  1. By: Ramón, Sotelo
    Abstract: During the electoral campaign for the general elections held on 22nd September 2013 the lobby group representing the tenants proposed a rent regulation in the housing sector concerning also new contracts for existing housing beyond social housing. This proposal was immediately included into their political agenda by the social democrats (SPD) and very shortly afterwards also taken as a position by chancellor Merkel as leader of the Cristian Democratic Party (SPD), although many doubts were expressed within her own party. Only the liberal party opposed to any type of rent control, but did in the end not enter parliament. After elections a coalition between the Social Democrats and the Cristian Democratic Parties was established and the implementation of the rent control fixed. This paper analyses the political reasons for the behavior of Angela Merkel, looks at the expected results from this rent control concerning the allocation of flats, the proportion of home-ownership, the ongoing segregation within cities, and the future construction of new housing.
    Date: 2014
  2. By: Hernandez , Diego; Vadlamannati , Krishna Chaitanya
    Abstract: We investigate whether lending by the Islamic Development Bank mirrors Saudi Arabia’s political interests based on religious affinity using panel data for its 56 member countries over the 1970 to 2007 period. Our results indicate that Sunni regime countries receive favorable treatment in terms of loan allocation, as well as Shia majority populated countries in exceptional occasions of conflict with other religious minority groups, while non-Muslim countries are the least favored. There is also evidence that lending by the World Bank to the same group of countries and over the same time frame does not respond to the political stance of Saudi Arabia founded on religion. These findings reveal the advantage that Saudi Arabia gains by assuming the leadership of a Regional Development Bank in contrast to coordinating common strategies in a global International Financial Institution with other large shareholders for whom religion might not be essential for political alliances.
    Keywords: Development aid; Arab aid; Islamic Development Bank; Sunni-Shia politics.
    Date: 2014–07–17
  3. By: Peter Foldvari
    Abstract: In this paper we apply a factor analysis with a measurement error model to extract the latent democracy variable from the components of polity2 and Vanhanen’s Index of Democracy, under the assumption that each of these components are driven by a common latent factor with different amount of measurement errors. We use the estimated latent democracy variable to estimate the distribution of democracy across countries over the 1860- 2000 period.
    Keywords: latent variable estimation, democracy, factor analysis
    Date: 2014–07
  4. By: Ronelle Burger (Department of Economics, University of Stellenbosch); Cindy Lee Steenekamp (Department of Political Science, University of Stellenbosch); Servaas van der Berg (Department of Economics, University of Stellenbosch); Asmus Zoch (Department of Economics, University of Stellenbosch)
    Abstract: In the light of the economic, political and social significance of the middle class for South Africa’s emerging democracy, we critically examine contrasting conceptualisa-tions of social class. We compare four rival approaches to empirical estimation of class: an occupational skill measure, a vulnerability indictor, an income polarisation approach and subjective social status. There is considerable variation in who is classified as middle class based on the definition that is employed and, in particular, a marked difference between subjective and objective notions of social class. We caution against overoptimistic predictions based on the growth of the black middle class. While the surge in the black middle class is expected to help dismantle the association between race and class in South Africa, the analysis suggests that notions of identity may adjust more slowly to these new realities and consequently, racial integration and social cohesion may emerge with a substantial lag.
    Keywords: middle class, social class, South Africa
    JEL: D31 I31 J15
    Date: 2014
  5. By: Devarajan, Shantayanan; Kanbur, Ravi
    Keywords: International Development, Political Economy,
    Date: 2013
  6. By: Swati Dhingra
    Abstract: Median voter theory applied to trade policy predicts positive tariffs in capital-abundant countries and negative tariffs in labor-abundant countries. Negative tariffs are rare, and this paper reconciles the median voter theory with observed protectionism across countries. By considering large countries, I show the optimal tariff is a sum of the median voter component and a positive in terms of trade component. Positive terms of trade effects raise tariffs in all countries, and can overcome the negative median voter component in labor-abundant countries. Testing the tariff prediction with cross-section and panel data from the 1990s, I show the median voter component is negative in labor-abundant countries and positive in capital-abundant countries. As expected, terms of trade effects raise tariffs across all countries and are stronger among non-members of the WTO.
    Keywords: Median voter, trade policy, Heckscher Ohlin, terms of trade, WTO
    JEL: F11 F13 F59
    Date: 2014–07
  7. By: Alan S. Blinder; Mark W. Watson
    Abstract: The U.S. economy has grown faster—and scored higher on many other macroeconomic metrics—when the President of the United States is a Democrat rather than a Republican. For many measures, including real GDP growth (on which we concentrate), the performance gap is both large and statistically significant, despite the fact that postwar history includes only 16 complete presidential terms. This paper asks why. The answer is not found in technical time series matters (such as differential trends or mean reversion), nor in systematically more expansionary monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly from more benign oil shocks, superior TFP performance, a more favorable international environment, and perhaps more optimistic consumer expectations about the near-term future. Many other potential explanations are examined but fail to explain the partisan growth gap.
    JEL: E30 E60
    Date: 2014–07

This nep-pol issue is ©2014 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.