nep-pol New Economics Papers
on Positive Political Economics
Issue of 2014‒11‒07
eight papers chosen by
Eugene Beaulieu
University of Calgary

  1. What do you know about your mayor? Voters’ information and jurisdiction size By Nicolas GAVOILLE; Jean-Michel JOSSELIN; Fabio PADOVANO
  2. The Micro-Foundation of Party Competition and Issue Ownership: The Reciprocal Effects of Citizens' Issue Salience and Party Attachments By Anja Neundorf; James Adams
  3. Petro Populism By Egil Matsen; Gisle J. Natvik; Ragnar Torvik
  4. Tax Policy under the “Generational Election System” By Doi, Takero
  5. Institutional Constraints to Political Budget Cycles in the Enlarged EU By Esther Ademmer; Ferdinand Dreher
  6. Who Wins Olympic Bids? By Wolfgang Maennig; Christopher Vierhaus
  7. Identifying the robust economic, geographical and political determinants of FDI: An extreme bounds analysis By Chanegriha, Melisa; Stewart, Chris; Tsoukis, Chris
  8. The Effect of the Decentralization Degree on Corruption: A New Interpretation By Maria Rosaria Alfano; Anna Laura Baraldi; Claudia Cantabene

  1. By: Nicolas GAVOILLE (CREM-CNRS and Condorcet Center, University of Rennes 1, France); Jean-Michel JOSSELIN (CREM-CNRS and Condorcet Center, University of Rennes 1, France); Fabio PADOVANO (CREM-CNRS and Condorcet Center, University of Rennes 1, France, Department of Political Sciences, University Roma Tre, Italy)
    Abstract: This paper examines which set of informations voters use when they cast their vote. On the one hand, electoral accountability models assume that voters rely on past policy decisions of the incumbent politician. Gathering this information is, however, often costly. On the other hand, voters may prefer to rely on low-cost information, such as politicians’ personal observable characteristics. If incentives to collect costly information decrease as the size of the jurisdiction increases, a greater share of voters should take these “information shortcuts” in larger municipalities. To test those hypotheses, we use an original dataset encompassing 896 French municipalities of more than 10,000 inhabitants over the period 2000-2012. We find that although there is no correlation between mayors’ competence and their observable characteristics, voters rely on such information shortcuts. Mayors’ past policy-making matters only in small municipalities.
    Keywords: Political leaders, political selection, voters, French municipalities, jurisdiction size
    JEL: H11 D72 H72
    Date: 2014–06
  2. By: Anja Neundorf; James Adams
    Abstract: While previous research on the reciprocal effects of citizens' issue attitudes and their party support emphasize citizens' issue positions, political competition revolves equally around issue salience, i.e., debates over which issue areas political parties should prioritize. Using multi-wave panel data from Germany and Great Britain, we analyze the reciprocal effects of citizens' issue salience and their party support over the period 1984-2009, and we conclude that citizens' issue priorities both influence and are influenced by their party attachments, and, moreover, that these effects are linked to parties' long-term policy emphases as articulated in their election manifestos. This effect is strongest among supporters of a small issue-orientated niche party, the Greens.
    Date: 2014
  3. By: Egil Matsen; Gisle J. Natvik; Ragnar Torvik
    Abstract: We aim to explain petro populism - the excessive use of oil revenues to buy political support. To reap the full gains of natural resource income politicians need to remain in office over time. Hence, even a rent-seeking incumbent who prioritizes his own welfare above that of citizens, will want to provide voters with goods and services if it promotes his probability of remaining in office. While this incentive benefits citizens under the rule of rent-seekers, it also has the adverse effect of motivating benevolent policymakers to short-term overprovision of goods and services. In equilibrium politicians of all types indulge in excessive resource extraction, while voters reward policies they realize cannot be sustained over time.
    Keywords: resource curse, political economy
    JEL: D72 O13 Q33
    Date: 2014
  4. By: Doi, Takero
    Abstract: This chapter investigates the effects of introducing the “generational election system” proposed by Ihori and Doi (1998). The generational election system (or the election district by generation) consists of election districts divided by not only region but also generation. In industrial countries, intergenerational conflicts of interest are large at present. In particular, the older generation has more political power because of aging and fewer children. In an electoral system that consists of election districts divided only by region, conflicts of interest among regions can be dealt with in the Congress, but intergenerational conflicts are buried in each district because the opinions of older people dominate those of younger people. Therefore, this chapter analyzes the effects of introducing the generational election system using an overlapping generations model. The results of the voting equilibrium show that the preferred policy of the younger generation can be better represented in the generational election system compared with the current majoritarian system. Furthermore, the selected policy does not depend on the turnout rate of the younger generation. These results suggest that introducing the generational election system benefits both the younger and future generations.
    JEL: H20 D72 H31
    Date: 2014–09
  5. By: Esther Ademmer; Ferdinand Dreher
    Abstract: This paper revisits Political Budget Cycles (PBCs) in the enlarged European Union (EU). Based on a panel of 25 current EU member states from 1996 to 2012, we show that governments frequently fiscally stimulate the economy prior to elections; a phenomenon that is seemingly not only an ‘Eastern problem’ of the EU’s new members, as has been suggested in the literature. We argue that fiscal institutions are apt to reduce the extent of opportunistic fiscal behaviour both in these younger democracies as well as in other EU member states that lack a strong press to hold governments accountable. Yet, we conclude that in order to eradicate PBCs in the enlarged EU, a powerful press remains key
    Keywords: Central and Eastern Europe, Enlargement, Fiscal Institutions, Political Budget Cycles, Press Freedom
    JEL: D72
    Date: 2014–09
  6. By: Wolfgang Maennig (Chair for Economic Policy, University of Hamburg); Christopher Vierhaus (Chair for Economic Policy, University of Hamburg)
    Abstract: The prospect of hosting the Olympic Games is attractive to many cities around the world. This article examines 147 variables’ potential to discriminate successful from unsuccessful Olympic bids. Our stepwise, rank-ordered logistic regression model includes nine determinants supporting the contention that economic, political and sports/Olympic factors are important. Hosts are characterized by larger markets and higher medium-term growth economies. Olympic bids that follow a political liberalization are rewarded with additional votes. Moreover, cities offering winning bids are more experienced at hosting and have no dispute with the International Olympic Committee (IOC). IOC members disfavor bids lacking a sufficient number of existing stadiums and bidding cities of fewer than 2.5 million inhabitants. Finally, we observe “it is the country’s turn” election behavior – countries that have not hosted the Olympics for a long period are favored.
    Keywords: Olympic Summer Games, mega events, indicators, host election, bidding process, IOC
    Date: 2014–10–07
  7. By: Chanegriha, Melisa (Middlesex University, London, UK); Stewart, Chris (Kingston University London); Tsoukis, Chris (London Metropolitan University, UK)
    Abstract: Understanding what determines Foreign Direct Investment (FDI) inflows remains a primary concern of economists and policy makers; yet, the uncertainty surrounding FDI theories and empirical approaches has created much ambiguity regarding the determinants of FDI. This paper undertakes an exhaustive search for robust determinants of FDI. We apply Extreme Bound Analysis to deal with model uncertainty, using a large panel data set that covers 168 countries from 1970 to 2006. We consider 58 potential determinants of FDI that include economic, geographic and political variables. We show that more than half of the previously suggested FDI determinants are not robust. Our findings reaffirm the view that, in order to become attractive destinations for foreign investors, countries need to reinforce their infrastructure facilities, liberalise their local and global investment policies, improve the quality of governance institutions and reduce internal conflict and political risk.
    Keywords: Foreign direct investment; Extreme Bounds Analysis; panel data; economic geographic and political determinants.
    JEL: C40 F21
    Date: 2014–09–28
  8. By: Maria Rosaria Alfano; Anna Laura Baraldi; Claudia Cantabene
    Abstract: This work contributes to empirical studies on decentralization and corruption by trying to resolve the uncertainty that the literature so far has shown. It also gives reasons supporting the ‘best’ decentralization structure which a country can adopt to discourage corrupt behaviour, and suggests an intermediate degree of decentralization. The trade-off between the moral hazard and the adverse selection aspect of the principal-agent framework, that emerges in this literature, can be better captured by a non-linear specification (e.g. cubic, as the more general non-linear model); neither very small nor very high degrees of decentralization are appropriate against corruption, but an intermediate one. Being monitored by the voters, local politicians, in a intermediate decentralized setting, have an incentive to perform in the voters interest and, being local resources they manage not very much, they have little incentive to appropriate part of such resources for personal use.
    Keywords: Corruption, Decentralization, Principal-agent theory.
    JEL: H7 D73 C33
    Date: 2014–10–10

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