nep-pol New Economics Papers
on Positive Political Economics
Issue of 2014‒08‒28
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. Women’s representation in local politics: Evidence from The Philippines By Valente, Jordan; Moreno, Frede
  2. Capital Taxation under Political Constraints By Alexander Wolitzky; Florian Scheuer
  3. The Glass Ceiling in Politics: Formalization and Empirical Tests By Folke, Olle; Rickne, Johanna
  4. Lobbying over Exhaustible-Resource Extraction By Achim Voss; Mark Schopf
  5. It’s Politics, Stupid! Political Constraints Determine Governments’ Reactions to the Great Recession By Jan-Egbert Sturm; Fabian Gunzinger
  6. How Much Does Political Uncertainty Matter? The Case of Louisiana Under Huey Long By Gabriel P. Mathy; Nicholas L. Ziebarth
  7. Can Elected Minority Representatives Affect Health Worker Visits? Evidence from India By Kaletski, Elizabeth; Prakash, Nishith
  8. Will China Escape the Middle-income Trap? A Politico-economic Theory of Growth and State Capitalism By Yikai Wang
  9. The New Hampshire Effect: Behavior in Sequential and Simultaneous Election Contests By Zeynep B. Irfanoglu; Shakun D. Mago; Roman M. Sheremeta
  10. Commitment versus Discretion in a Political Economy Model of Fiscal and Monetary Policy Interaction By David Miller

  1. By: Valente, Jordan; Moreno, Frede
    Abstract: Although at the beginning of the 21st century, over 95 percent of all countries in the world have granted women the right to vote and the right to stand for election (Ballington & Karam, 2005), gender equality in terms of representation in political structures remains to be a challenge around the world. This study seeks to determine the level of political representation of women at the level of the smallest unit of Philippine government—the village or barangay. Data comparison—within a span of 11 years—using the results of the July 15, 2002 and October 28, 2013 barangay elections, shows an increase of women’s representation in the 98 barangays of Zamboanga City, Philippines. After the 2013 barangay elections, the total number of female Barangay Captains increased to 14 compared to 8 in the 2002 election results. A total of 159 female Barangay Councilors were also elected in 2013, an increase of 14 percent compared to the 139 female councilors who won in the 2002 elections. The increasing number of elected female barangay officials in 2013 reached 173 women (22 percent) compared to 147 (19 percent) in 2002. In year 2013, a total of 147 women (18.75 percent) were elected as barangay officials out of 784 barangay positions throughout the city. The study concludes that women’s participation in politics at the barangay level is directly and inversely proportional to the representation of men in the same political structures. While existing laws and pertinent public policies promoting women’s equal representation with men in local politics and the efforts to improve the political landscape for women around the world, still the political structures, even at the smallest unit of the government, is a male-dominated arena.
    Keywords: women, politics, gender, governance, election
    JEL: I3 I31 I38 I39 L2 Y8 Y80 Z1 Z13 Z18
    Date: 2014–08–08
  2. By: Alexander Wolitzky (Stanford University); Florian Scheuer (Stanford University)
    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 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.
    Date: 2014
  3. By: Folke, Olle (Columbia University); Rickne, Johanna (Research Institute of Industrial Economics (IFN))
    Abstract: There is a scarcity of women and minorities at the apex of political power. This paper formalizes the concept of the glass ceiling for political organizations and builds on previous research to suggest four testable criteria. A glass ceiling exists if women and/or racial minorities (1) are discriminated against in the organization’s promotion process and (2) the discrimination increases in severity for the top levels of power and over an individual’s career trajectory. We suggest a series of empirical tests for this phenomenon and apply them to longitudinal data on Swedish politicians. Results show that women face a glass ceiling, while minorities’ career disadvantages are more severe at the earlier career steps (a "sticky floor").
    Keywords: Glass ceiling; Political careers; Subnational politics; Women and politics; Supply of politicians; Gender inequality; Racial inequality
    JEL: H10 J16 J21 J45
    Date: 2014–08–12
  4. By: Achim Voss (University of Muenster); Mark Schopf (University of Paderborn)
    Abstract: Consider a lobby group of exhaustible-resource suppliers, which bargains with the government over the extraction of an exhaustible resource and over contribution payments. We characterize the path of contributions and the resulting extraction path, taking into account how the environmental damage of resource usage and the demand elasticity change optimal extraction. A high marginal environmental damage reduces the governmentÕs preferred extraction, a high price elasticity of resource demand reduces that of the lobby. We show that if the former effect dominates, the equilibrium contributions in a setting of repeated bargaining exceed those under full commitment.
    Keywords: Environmental Policy, Exhaustible Resources, Political Economy, Lobbying, Nash Bargaining, Dynamic Programming
    JEL: D72 Q31 Q38 Q58
    Date: 2014–03
  5. By: Jan-Egbert Sturm (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Fabian Gunzinger (Swiss National Bank, Switzerland)
    Abstract: Relying on a large sample of countries, this paper quantifies the effect of political constraints, as measured by legislative control by the incumbent government, on the size of fiscal stimulus packages that have been put in place as reaction to the Great Recession. The results suggest that on average, political constraints reduced the size of a country's fiscal stimulus packages by between 1.2 and 2.8 percentage points of GDP (depending on the stimulus measure used). This substantial effect is significant and robust to a number of alternative dependent variables and specifications. The results are thus in line with the widely held, but never tested, perception that political reality limits the de facto application of discretionary fiscal policy as reaction to negative economic shocks.
    Keywords: legislative control, fiscal stimulus, Great Recession
    JEL: E02 E32 E62 E65 H12 P48
    Date: 2014–08
  6. By: Gabriel P. Mathy; Nicholas L. Ziebarth
    Abstract: We study the role of political uncertainty on economic outcomes using the case of Huey Long's tenure as governor of Louisiana during the Great Depression. We construct two well-established measures of uncertainty specifically for Louisiana using primary sources: stock price volatility and newspaper mentions of uncertainty. Combining these uncertainty measures with employment data from the Census of Manufactures, we attempt to identify the effects of political uncertainty using the state of Mississippi as a control group. We find limited evidence for the significance of political uncertainty in a standard differences-in-differences framework, even when restricting our attention to border counties. Finally, we conduct an event study on the unexpected assassination of Long in September 1935, and again we find no effect on employment. We conclude that whatever political uncertainty was attributable to Huey Long mattered very little for economic outcomes.
    Date: 2014
  7. By: Kaletski, Elizabeth (University of Connecticut); Prakash, Nishith (University of Connecticut)
    Abstract: This paper examines the relationship between elected minority representatives, Scheduled Castes and Scheduled Tribes, and health worker visits in rural India. We estimate the effect of minority representation on the frequency of visits to villages by health workers by exploiting the state variation in the share of seats reserved for the two groups in state legislative assemblies mandated by the Constitution of India. Using data from state and village level surveys on fifteen major Indian states, we find that Schedule Tribe representatives increase the frequency of visits by both doctors and mobile medical units. On the other hand, Scheduled Caste representatives have a tendency to decrease the frequency of visits by mobile medical units. Potential explanations for the differential impact of SC and ST representatives are also explored, including geographic isolation, support for the Congress Party, and relative population shares.
    Keywords: health, minorities, affirmative action, public goods provision, India
    JEL: I18 I38 J15
    Date: 2014–08
  8. By: Yikai Wang
    Abstract: Is China's rapid growth sustainable if the labor and capital market distortions persist? Will democratization occur given that Chinese middle-class are supportive of the regime? To answer the above questions, this paper proposes a politico-economic theory, as follows. In oligarchy, a political elite extracts surplus from the state sector and taxes the private sector, but it also needs political support from sufficiently many citizens to maintain its power. “Divide-and-rule†strategy is implemented to guarantee such support: state workers receive high wages and become supporters of the elite, while wages of private workers are reduced due to the policy distortion. In the short-run, the low wages in the private sector lead to rapid growth of the private firms and total output. However, long-run growth is harmed by capital market distortions favoring the state firms. The theory suggests that the economy develops along a three-stage transition: “rapid growthâ€, “state capitalismâ€, and two cases in the third stage: “middle-income trap†or “sustained growthâ€, depending on whether democratization occurs endogenously. The theory is consistent with salient aspects of China's recent development and gives predictions on China's future development path.
    Date: 2014
  9. By: Zeynep B. Irfanoglu (Department of Agricultural Economics, Purdue University); Shakun D. Mago (Department of Economics, Robins School of Business, University of Richmond); Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and the Economic Science Institute, Chapman University)
    Abstract: This experimental study compares sequential and simultaneous election contests. Consistent with the theory, we find evidence of the “New Hampshire effect” in the sequential contests, i.e., the winner of the first electoral battle wins the overall contest with much higher probability than the loser of the first battle. However, contrary to the theory, sequential contests generate higher expenditure than the simultaneous contests. This is mainly because in the sequential contests losers of the first battle do not decrease their expenditure in the second battle while winners of the first battle increase (instead of decreasing) their expenditure in the second battle. We discuss the implications of our findings both for policy makers and social scientists.
    Keywords: election, sequential contests, simultaneous contests, experiments
    JEL: C72 C73 C91 D72
    Date: 2014
  10. By: David Miller (Federal Reserve Board)
    Abstract: Price commitment results in lower welfare. I explore the consequences of price commitment by pairing an independent monetary authority issuing nominal bonds with a fiscal authority whose endogenous spending decisions are determined by a political economy model. Without price commitment, nominal bonds are backed by a new form of endogenous commitment that overcomes time inconsistency to make tax smoothing possible. With price commitment, nominal bonds will be used for both tax smoothing and wasteful spending. Price commitment eliminates monetary control over fiscal decisions. I show that the combination observed in advanced economies of a politically distorted fiscal authority and an independent monetary authority with nominal bonds and without price commitment is the solution to a constrained mechanism design problem that overcomes time inconsistency and results in the highest welfare.
    Date: 2014

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