nep-pol New Economics Papers
on Positive Political Economics
Issue of 2014‒08‒09
eighteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Political Economy of Dynamic Elections: A Survey and Some New Results By César Martinelli; John Duggan
  2. Ideological Polarization and the Media By Mickael Melki; Andrew Pickering
  3. Surprise me if you can: influence of newspaper endorsements in US Presidential elections By Agustin Casas; Yarine Fawaz; Andre Trindade
  4. Axiomatic districting By Puppe, Clemens; Tasnádi, Attila
  5. Political Booms, Financial Crises By Helios Herrera; Guillermo Ordoñez; Christoph Trebesch
  6. The Rentier State at Work: Comparative Experiences of the Resource Curse in East Asia and the Pacific By Naazneen H. Barma
  7. Polarization and Government Debt By Mickael Melki; Andrew Pickering
  8. Comparing the influence of conflict on the perceptions of rich and poor: testing the hypothesis of Acemoglu and Robinson By Eiji Yamamura
  9. World Price Shocks, Income, and Democratization By Ben Zissimos
  10. Communication effects, ethnicity, and support for secessionism in stateless nations: results from a survey experiment in Catalonia By Yannis Karagiannis
  11. Explaining Political Leadership: Germany’s Role in Shaping the Fiscal Compact By Magnus G. Schoeller
  12. Collective Action and Armed Group Presence in Colombia By Margarita Gáfaro; Ana Maria Ibáñez; Patricia Justino
  13. Myths of Political Independence, or How Not to Solve the Corruption Problem: Lessons for Vietnam By Martin Painter
  14. Differential Effects of Law, Culture and Political Risk on Fees, Performance and Risk-taking Behavior of Mutual Fund Managers By Mehri, Meryem
  15. The Politics of Market Linkage: Linking Domestic Climate Policies with International Political Economy By Jessica F. Green; Thomas Sterner; Gernot Wagner
  16. Democratic representation and religion. Differences and convergences between the European Parliament and the US House of Representatives By François Foret
  17. Why Internal Conflict Deteriorates State Capacity? Evidence from Colombian Municipalities By Mauricio Cárdenas; Marcela Eslava; Santiago Ramírez
  18. Unorthodoxy in legislation: The Hungarian experience By Deák, Dániel

  1. By: César Martinelli (Centro de Investigacion Economica (CIE), Instituto Tecnológico Autónomo de México (ITAM)); John Duggan (University of Rochester)
    Abstract: We survey and synthesize the political economy literature on dynamic elections in the two traditional settings, spatial preferences and rent-seeking, under perfect and imperfect monitoring of politicians actions. We define the notion of stationary electoral equilibrium, which encompasses previous approaches to equilibrium in dynamic elections since the pioneering work of Barro (1973), Ferejohn (1986), and Banks and Sundaram (1998). We show that repeated elections mitigate the commitment problems of both politicians and voters, so that a responsive democracy result holds in a variety of circumstances; thus, elections can serve as mechanisms of accountability that successfully align the incentives of politicians with those of voters. In the presence of term limits, however, the possibilities for responsiveness are limited. We also touch on related applied work, and we point to areas for areas for fruitful future research, including the connection between dynamic models of politics and dynamic models of the economy.
    Keywords: dynamic elections, electoral accountability, median voter, political agency, responsiveness
    Date: 2014
  2. By: Mickael Melki; Andrew Pickering
    Abstract: Greater media presence may facilitate information transmission and consensus, or amplify existing political differences. In the OECD greater media penetration is strongly correlated with reduced ideological polarization in the electorate. Observed increases in media penetration lead observed reductions in measured polarization, suggesting that this relationship is causal
    Keywords: Ideological Polarization, Media
    JEL: D72
    Date: 2014–06
  3. By: Agustin Casas; Yarine Fawaz; Andre Trindade
    Abstract: Using the daily trade of futures from the prediction markets site Intrade, we pin down the effect of printed newspapers endorsements (announcement of an explicit support for a political candidate) on the candidates' likelihood of winning. It is established that unexpected endorsements have a large impact on voters' behavior. However, we show that this effect is only true when the endorsement is a coherent one: if a newspaper that praises conservative (liberal) policies endorses a candidate with liberal (conservative) ideas, the endorsement does not impact the candidate's probability of winning, as it is regarded as incoherent. Our measure for coherence comes from Gentzkow and Shapiro (2005), but we also use Ansolabehere and Snyder (2004)'s \propensity to endorse Democrats" to show that a surprise endorsement has a large and potentially tipping effect in a tied contest
    JEL: L82 D7
    Date: 2014–07
  4. 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.
    Keywords: districting, gerrymandering
    JEL: D72
    Date: 2014
  5. By: Helios Herrera; Guillermo Ordoñez; Christoph Trebesch
    Abstract: We show that political booms, measured by the rise in governments' popularity, predict financial crises above and beyond other better-known early warning indicators, such as credit booms. This predictive power, however, only holds in emerging economies. We show that governments in emerging economies are more concerned about their reputation and tend to ride the short-term popularity benefits of weak credit booms rather than implementing politically costly corrective policies that would help prevent potential crises. We provide evidence of the relevance of this reputation mechanism.
    JEL: D82 E44 E51 E58 G01 H12 N10 N20
    Date: 2014–07
  6. By: Naazneen H. Barma
    Abstract: Countries rich in natural resources do not all experience the resource curse in the same way. The rentier state logic holds that the main political–economic impacts of resource dependence rest on how the state handles windfall resource rents. I differentiate how countries experience the resource curse by disaggregating the rentier effect into how governments generate and distribute resource rents. A simple typology of variation in rentier state experiences explains how the overall credibility of intertemporal commitment and degree of political inclusiveness in a country determine its distinct experience of the resource curse. Four brief country cases—comparing the micro political economy of natural resource governance in Laos, Papua New Guinea, Mongolia, and Timor-Leste—illustrate how intertemporal credibility and political inclusiveness affect patterns of resource rent generation and rent distribution. Different countries experience the resource curse in different ways, with implications for policy attempts at mitigation.
    Keywords: resource curse; rentier state; natural resource sector governance; intertemporal commitment; political inclusivness
  7. By: Mickael Melki; Andrew Pickering
    Abstract: When voters discount the future there is pressure on governments to increase debt. Governments are more able to resist this temptation if voters are polarized ideologically. Policy contrasts starkly with models of ‘strategic debt’ wherein debt is predicted to increase with polarization. Using time-varying polarization measures generated from ideology data from party manifestos we …find a sizable and statistically significant negative association between ideological polarization and debt levels in OECD countries.
    Keywords: Public Debt, Ideological Polarization
    JEL: H63
    Date: 2014–07
  8. By: Eiji Yamamura
    Abstract: Conflict can cause negative externalities to arise, and this can result in economic loss. Such externalities are also thought to influence individualsf perceptions about economic issues. Acemoglu and Robinson (2000) provide their hypothesis that the political elite extend the franchise to avoid revolution or social unrest. For the purpose of empirically testing this hypothesis, the present paper explores how the degree of conflict between rich and poor people is associated with individual preferences for income redistribution and perceptions regarding income differences. This paper used cross-country individual-level data covering 26 countries and consisting of 20,000 observations. After controlling for individual characteristics, the key findings are as follows: (1) an individual is more likely to prefer income redistribution policy in countries where people perceive conflict between rich and poor to be high; (2) an individual is more likely to consider the income difference to be too large in countries where people perceive conflict between rich and poor to be high; and (3) after dividing the sample into high- and low-income earners, the above key findings are only obtained for high-income earners and not for low-income earners.
    Date: 2014–07–31
  9. By: Ben Zissimos (Department of Economics, University of Exeter)
    Abstract: This paper shows how a world price shock can increase the likelihood that democratization must be used to resolve the threat of revolution. Initially, a ruling elite may be able to use trade policy to maintain political stability. But a world price shock can push the country into a situation where the elite face a commitment problem that only democratization can resolve. Because the world price shock may also reduce average incomes, the model provides a way to understand why the level of national income per capita and democracy may not be positively correlated. The model is also useful for understanding dictatorial regimes ?rebuttal of World Bank calls to keep their export markets open in the face of the 2007-08 world food crisis.
    Keywords: Democracy, institutions, price shocks, social con?ict, trade policy.
    JEL: D30 D74 F11 F13 P16
    Date: 2014
  10. By: Yannis Karagiannis
    Abstract: Over the past twenty years or so, economic and cultural interdependence has gone hand in hand with the rise of nationalism, particularly in stateless nations. For example, Catalan politics has increasingly focused on the issue of secession from the rest of Spain. As in Flanders, Quebec, Scotland, and elsewhere, the ensuing polarization of opinion creates two questions of paramount importance for social scientists: (a) How strong are individual preferences? and (b) what determines these preferences? To answer these questions, we use a custom-designed survey experiment (N = 913) which allows us to estimate the effect of frames net of confounding effects, and to determine other determinants of preferences. We find that frames matter even in polarized political times and when voters have had enough time to form their judgement on a given issue. We also detect a strong role for ethnicity, measured as the number of Catalan-speaking grandparents and language spoken at home, as well as for the geographical scope of professional activity. Our findings help challenge the economic approach to politics, whereby agents hold well-defined and constant preferences, and give support to the view that both short- and long-run constructivist elements play a crucial role in centrifugal political movements.
    Date: 2014–06–30
  11. By: Magnus G. Schoeller
    Abstract: This paper explores the origins and the impact of political leadership: Why and how do political leaders emerge? And, once in charge, how do these leaders influence outcomes? What determines their success or failure? In order to answer these questions, the paper presents a theory of political leadership which takes into account both the structural and the behavioral aspects of the concept. More precisely, it argues that the emergence and the impact of leadership represent two different analytical steps. A leader emerges if there is a supply of and demand for leadership. While the supply depends on a leader’s expected benefits, the demand is determined by the followers’ status quo costs. Both demand and supply are also influenced by the relevant institutions’ capacity to manage situational challenges. The second step, in contrast, concerns a leader’s impact. Since leadership as a process consists in the use of strategies, there can be an impact only if the intensity of the strategies employed by the leader is greater than the intensity of the strategies required by the situational circumstances. While a leader’s capacity to employ strategies is determined by the material, institutional and ‘soft’ power resources at disposal, the intensity of strategies actually needed to influence outcomes depends on the heterogeneity of preferences and on the adaptability of the institutional setting to be changed. The theory is applied within the scope of the current Euro-crisis by conducting a qualitative analysis of Germany’s role in shaping the European Fiscal Compact. Although the empirical findings corroborate the theory, the case study reveals that further comparative research on political leadership is needed.
    Date: 2014–07–15
  12. By: Margarita Gáfaro; Ana Maria Ibáñez; Patricia Justino
    Abstract: The main objective of this paper is to provide empirical evidence on the mechanisms that shape the relationship between violent conflict and collective action. Conflict dynamics in Colombia allow us to exploit rich variation in armed group presence and individual participation in local organizations. Our identification strategy is based on the construction of contiguous-pairs of rural communities that share common socio-economic characteristics but differ in armed group presence. This allows us to control for unobservable variables that may affect local participation and conflict dynamics simultaneously. The results show that the presence of armed groups increases overall participation in local organizations, with a particularly strong effect on political organizations. Contrary to existing results, we find that stronger individual participation may arise from coercion exercised by armed groups and not from a more vibrant civil society.
    Keywords: collective action, political organizations, armed groups, violent shocks
    Date: 2014–07–11
  13. By: Martin Painter
    Abstract: Corruption is widely identified as a critical problem for developing economies and is also viewed as a priority issue by international organisations and donors. Governments such as Vietnam place anti-corruption high on their policy agenda. However, external observers regularly criticise them for not meeting their targets. The problem with the critique is that it mostly places the blame on implementation failures when the issue is as much a design failure. Templates for anti-corruption success in fact misread the practical lessons. One element of the standard template, the need for an ‘independent’ anti-corruption enforcement system, misreads the meaning and empirical reality of ‘independence’. Evidence is presented from Singapore, Hong Kong and Indonesia to show that their anti-corruption agencies are ‘independent’ more in the sense that they are powerful, rather than in the sense that they are apolitical. The lesson for Vietnam is that misleading design principles such as ‘political independence’ are a distraction from the task of strengthening the anti-corruption law enforcement system.
    Keywords: corruption; Vietnam; good governance; political independence; anti-corruption reform
  14. By: Mehri, Meryem
    Abstract: This paper considers an international sample of conventional and Islamic mutual funds to assess whether law, culture, and political risk affect the performance and risk-taking behavior of mutual funds. Overall, the results show strongly that legal conditions, culture, and political risk have robust differential effects on performance and risk-taking behavior of Islamic and conventional funds. We find that Islamic and conventional funds in developing countries with lower legal conditions, higher corruption and political risk have higher performance. Likewise, in such conditions, both of Islamic and conventional funds have lower return volatility and systematic risk. Overall, Hoefsted culture's values affect significantly the performance and risk-taking behavior of fund managers with robust differential effects between Islamic and conventional funds. The components of country legality and political risk Index have significant differential effects between Islamic and conventional funds. Overall, the data show the fund manager characteristics (experience, qualifications, etc) and specific fund features matter for the performance and risk-taking behavior of fund managers.
    Keywords: Risque; Sociétés d'investissement; Risque politique; Contrats incitatifs; Performance; Risk; Managerial Compensation; Incentive Contracts; Mutual funds; Law and finance; Political risk;
    JEL: K29 G23 G24
    Date: 2014–06
  15. By: Jessica F. Green (Case Western Reserve University, USA); Thomas Sterner (Environmental Defense Fund and University of Gothenburg, Sweden); Gernot Wagner (Environmental Defense Fund and Columbia University’s School of International and Public Affairs, USA)
    Abstract: After twenty years of global negotiations, the world is still far from a comprehensive climate agreement. The ‘top-down’ approach embodied by the Kyoto Protocol has all but stalled, chiefly due to disagreements over levels of ambition and objections to financial transfers. To avoid those problems, many have shifted their focus on bottom-up ‘linkage’ of regional, national, and sub-national cap-and-trade systems. Decentralized architecture has its appeals, but we argue that linkage among carbon markets ultimately faces the same obstacles that are at the heart of global climate negotiations. Linkage can potentially reduce overall costs of tackling climate change by leveraging the differences in the marginal costs of emissions reductions across nations. However, as incomes, ideologies and other conditions diverge—and, thus, potential economic gains from linkage increase—political obstacles to linkage grow. We identify four obstacles to successful linkage: potential for gaming of targets; objections to financial transfers; the difficulty of close regulatory coordination; and incompatibility with other domestic policy objectives. Linkage, thus, may be an important political instrument and learning process but it provides no end run around international “global warming gridlock” (Victor 2011). A functioning global climate policy architecture still requires close international coordination with a balance of ‘bottom-up’ and ‘top-down’ elements. Only with this realization—and by employing a gradual process toward full linkage—can early carbon market linkages help facilitate a path towards a successful global climate architecture.
    Keywords: Climate Change, Global Warming, Cap and Trade, Carbon Tax, Linkage, Climate Finance, Political Economy, Kyoto, Copenhagen, Paris
    JEL: Q5 Q54 Q58
    Date: 2014–07
  16. By: François Foret
    Abstract: It is common to oppose a secular Europe to a religious America. As representatives of cultural diversity and popular sovereignty, Parliaments are the best illustrations of mutual arrangements between politics and religion. Little data is available on religion at the EP, in contrast to the rich scholarship on the Congress. Relying on the first survey of its kind on members of the European Parliament (MEPs), the article analyses what they believe and what they do with these beliefs. The purpose is to understand how religion interacts with representation and political socialization of MEPs within and outside the assembly. The American House of Representatives is used as a reference case study. Overall, there are significant differences between European and American legislators, mainly due to their distinct social, cultural, political and institutional environments. However, several common logics may also be seen at work, suggesting that the EU is not as exceptional as is often thought.
    Keywords: European Parliament
    Date: 2014–05–15
  17. By: Mauricio Cárdenas; Marcela Eslava; Santiago Ramírez
    Abstract: Previous work has documented a negative correlation between internal conflict and state capacity. We attempt to shed light on mechanisms that underlie this relationship, using data for Colombian municipalities. We rely on identifying heterogeneous effects of different types of violent events on state capacity, taking advantage of variability across municipalities in the prevalence of specific manifestations of conflict and their intensity. Our findings suggest that events making civilians feel targeted affect the state’s capacity to collect taxes, while those reflecting a stronger military capacity of illegal armies, in particular their large-scale attacks, affect the state’s capacity to provide public goods.
    Keywords: State capacity; state capacity at the local level; internal conflict; Colombia
    Date: 2013–12–11
  18. 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

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.