nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒01‒31
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Intergenerational Politics, Government Debt, and Economic Growth By Tetsuo Ono
  2. Political Institutions and Government Spending Behavior: Theory and Evidence from Iran By S. F. Dizaji ; M. R. Farzanegan ; A. Naghavi
  3. Hearing the voice of future generations: A laboratory experiment of ``Demeny voting’’ By Yoshio Kamijo ; Yoichi Hizen ; Tatsuyoshi Saijo
  4. Why farm support Persists: An Explanation Grounded in Congressional political Economy By Freshwater, David ; Leising, Jordan
  5. Correlates and Determinants of Direct Democracy By Lorenz Blume ; Bernd Hayo ; Stefan Voigt
  6. Give Everybody a Voice! The Power of Voting in a Public Goods Experiment with Externalities By Christoph Engel ; Bettina Rockenbach
  7. A Dream Deferred: the Microfoundations of Direct Political Action in Pre- and Post-democratization South Africa By Biniam Bedasso
  8. Long-run effects of democracy on income inequality : evidence from repeated cross-sections By Balcazar, Carlos Felipe
  9. Do Politicians' Relatives Get Better Jobs? Evidence from Municipal Elections By Marcel Fafchamps ; Julien Labonne
  10. Queuing Up For Justice: Elections and Case Backlogs By Siddhartha Bandyopadhyay ; Bryan C McCannon
  11. Power indices when players can commit to reject coalitions By László Á. Kóczy
  12. Political uncertainty and household savings By Rolf Aaberge ; Kai Liu ; Yu Zhu
  13. Fairness, socialization and the cultural deman for redistribution By Gilles Le Garrec

  1. By: Tetsuo Ono (Graduate School of Economics, Osaka University )
    Abstract: This study presents a two-period overlapping-generations model featuring en- dogenous growth and intergenerational conflict over fiscal policy. In particular, we characterize a Markov-perfect political equilibrium of the voting game between gen- erations, and show the following results. First, population aging incentivizes the government to invest more in capital for future public spending, and thus produces a positive effect on economic growth. Second, when the government finances its spending by issuing bonds, an introduction of a balanced budget rule results in a higher growth rate. Third, to obtain a normative implication of the political equi- librium, we compare it to an allocation chosen by a benevolent planner who takes care of all future generations. Here, we show that the political equilibrium attains a lower growth rate than that in the planner's allocation.
    Keywords: Economic Growth; Government Debt; Overlapping Generations; Pop- ulation Aging; Voting
    JEL: D72 D91 H63
    Date: 2014–06
  2. By: S. F. Dizaji ; M. R. Farzanegan ; A. Naghavi
    Abstract: This study examines how quality of political institutions affects the distribution of government budget in Iran. We first introduce a mechanism through which this can shift government expenditure from patronage to more constructive public spending. Using impulse response functions (IRF) and variance decomposition analysis (VDC) on the basis of Vector Autoregressive (VAR) model, our results imply that a positive shock towards more democratic institutions leads to negative and statistically significant response of military spending and positive and statistically significant response of education expenditures. Our results are robust to different political institutional quality indicators, ordering of variables in the VAR and different specifications of government spending categories.
    JEL: H11 H41 P16 O53 O43
    Date: 2015–01
  3. By: Yoshio Kamijo (School of Economics and Management, Kochi University of Technology ); Yoichi Hizen (School of Economics and Management, Kochi University of Technology ); Tatsuyoshi Saijo (School of Economics and Management, Kochi University of Technology )
    Abstract: We report the first experimental evidence on the effect of ``Demeny voting,’’ wherein some people (e.g., parents) are given additional votes as proxy for the future generation (e.g., their children). In our experiment, three subjects are separated into the present and future generations, two of them regarded as the present generation. The present generation members are asked to determine the resource allocation between the present and future generations by majority voting. We compare voting behaviors and outcomes between ordinary majority voting (i.e., each of the two in the present generation has one vote) and Demeny voting (i.e., one of the two has two votes while the other has one vote). We obtain mixed evidence on whether the outcome of Demeny voting reflects the interest of the future generation. A remarkable finding is that half of the subjects who voted in favor of the future generation under ordinary voting reversed their decisions when they were given only one vote under Demeny voting; that is, they voted in favor of the present generation. This finding highlights the need, when planning to introduce Demeny voting, to consider the behaviors of not only people who are given additional votes but also those with only one vote. Finally, we compare voting behaviors between male and female subjects. We find that female subjects use their additional votes for the future generation more frequently than male subjects do, implying that women are less likely to abuse their proxy position than are men.
    Keywords: Aging Society, Demeny Voting, Laboratory Experiment
    JEL: C91 D72 J13
    Date: 2015–01
  4. By: Freshwater, David ; Leising, Jordan
    Abstract: In the paper we provide an explanation of the persistence of the commodity titles in US farm bills that is grounded in core theories of the policy process from the political science literature. The political science literature explains policy continuity and policy change from a number of different perspectives and we use these to explain why the commodity titles of farm bills have persisted in the face of considerable opposition and how in response the Agriculture Committees have introduced incremental change to the content of farm bills to facilitate each bill’s passage. Unlike the standard approach of agricultural economists which focuses on the broader national economic efficiency impacts of farm programs, we concentrate on, narrower local political forces that affect individual Members of the Congress, and on the legislative process that created each farm bill.
    Keywords: agricultural policy, farm bill, political economy, policy change, Agricultural and Food Policy, Political Economy, Q18,
    Date: 2015–01–14
  5. By: Lorenz Blume (University of Marburg ); Bernd Hayo (University of Marburg ); Stefan Voigt (University of Hamburg )
    Abstract: This paper studies correlates and determinants of direct democracy institutions (DDIs), such as referendums and initiatives, based on the premise that constitutions themselves are endogenous. Our sample covers as many as 132 countries from 1950 to 2006. We find that the likelihood that a country includes DDIs in its constitution increases over time, particularly during the 1990s and 2000s. In our econometric analysis, we employ a two-tier approach, the first tier analyzing the time-invariant factors associated with the existence of DDIs, the second tier focusing on changes in time-variant factors. We discover that (i) new constitutions make the introduction of DDIs more likely; (ii) the degree of democratization is positively related to constitutions containing DDIs; (iii) an increase in the number of riots and assassinations raises the likelihood of constitutionally anchoring DDIs; (iv) if political leaders achieved power or were removed from office through irregular means, the introduction of DDIs is more likely; if they leave office due to health reasons, DDIs are less likely to be included in the constitution; and (v) religious fractionalization is negatively associated with the possibility of referendums.
    Keywords: Direct Democracy, Referendums, Initiatives, Endogenous Constitutions
    JEL: D72 H11 P51
    Date: 2015
  6. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn ); Bettina Rockenbach (University of Cologne )
    Abstract: We study the effect of voting when insiders’ public goods provision may affect passive outsiders. Without voting insiders’ contributions do not differ, regardless of whether outsiders are positively or negatively affected or even unaffected. Voting on the recommended contribution level enhances contributions if outsiders are unaffected and internalizes the negative externality by lowering contributions when outsiders are negatively affected. Remarkably, voting does not increase contributions when it would be most desirable, i.e. with a positive externality. Here, participants vote for high contributions, yet compliance is poor. Unfavorable payoff comparisons to the outsiders that gain a windfall profit drive contributions down.
    Keywords: experiment, Public Good, externality, voting
    JEL: H41 D43 L13 C92 C91 D62 D03 H23
    Date: 2014–11
  7. By: Biniam Bedasso
    Abstract: Persistent protests might endanger the stability of young democracies because the economic legacies of the old autocratic regimes tend to outlive their political structures. This paper seeks to explore the micro-level predictors of protest potential in South Africa before and after the end of apartheid. The results of the cohort analysis reveal that the political consciousness of the anti-apartheid struggle has a lasting effect. The gap between actual income and expected returns to education explains protest potential better than comparison of one’s income with that of a reference group. The effect of race on protest potential has diminished over time.
    Keywords: protest, relative welfare, cohort, democratization, South Africa
    JEL: D74 P16
    Date: 2014
  8. By: Balcazar, Carlos Felipe
    Abstract: This paper assesses the link between democracy and inequality. Inequality is measured at the cohort level with pseudo-panel data built from nine Latin American countries'household surveys (1995-2009, biannual). Democracy is measured as a stock during long periods of time both before and after each cohort's year of birth. The paper presents evidence that long-run historical patterns in the degree of democracy relate to income inequality. However, this relationship is non-monotonic: inequality ?rst increases with the stock of democracy before falling. The paper also presents evidence that education may be a mechanism explaining this result.
    Keywords: Parliamentary Government,Population Policies,Labor Policies,Inequality,Political Economy
    Date: 2015–01–01
  9. By: Marcel Fafchamps ; Julien Labonne
    Abstract: We estimate the impacts of being connected to politicians on occupational choice. We use an administrative dataset collected in 2008-2010 on 20 million individuals and rely on naming conventions to assess family links to candidates in elections held in 2007 and 2010. We first estimate the value of political connections by applying a regression discontinuity design to close elections in 2007. Those estimates likely combine the benefits from connections to current office-holders and the cost associated with being related to a losing candidate. We use individuals connected to successful candidates in the 2010 elections as control group and find that relatives of current office-holders are more likely to employed in better paying occupations. Relatives of candidates who narrowly lost in 2007 have lower occupations. A third-party randomly split our dataset in two and gave us sample 1. Once the review is completed, we will apply the approved methodology to sample 2.
    Date: 2014
  10. By: Siddhartha Bandyopadhyay ; Bryan C McCannon
    Abstract: We analyze the impact of prosecutor elections on case backlogs. Previous evidence has shown that re-election pressures result in more cases going to trial. Since trials require time and resources, one can expect an effect on the queue. Two competing theories are developed: one of signalling quality in an asymmetric information environment and one of effort exertion, each of which can explain increased trials before election, but differ in their predfictions regarding the impact on backlogs. A district-level, panel data set of caseload flows in North Carolina is analyzed. Evidence is presented that contested re-elections are associated with a decrease in the number of cases handled and an acceleration of the growth of the backlog. This suggests that retention concerns lead to signaling which causes distortions, re-allocating resources from disposing cases to prosecuting cases at trial.
    Keywords: case backlog, elections, prosecutor
    JEL: K41 D82
    Date: 2014–08
  11. By: László Á. Kóczy (Óbuda University )
    Abstract: Power indices have been used to evaluate the allocation of power in a wide range of voting situations. While they use the language of game theory known measures of a priori voting power are hardly more than statistical expectations assuming the random behaviour of the players. We introduce a model where players can reject certain partnerships in cooperation. For normalised indices strategic rejection may increase power. Our notion of a strategic power index is well dened if power is measured by an index that takes only minimal winning coalitions into account. Keywords and phrases: quarrelling, rejected coalitions, a priori voting power, power indices, minimal winning coalitions, rational players.
    Keywords: Apportionment, voting, elections, Venice Commission, proportionality, lexicographic ordering JEL Codes: C71, D71.
    Date: 2013–11
  12. By: Rolf Aaberge ; Kai Liu ; Yu Zhu (Statistics Norway )
    Abstract: Despite macroeconomic evidence pointing to a negative aggregate consumption response due to political uncertainty, few papers have used microeconomic panel data to analyze how households adjust their consumption after an uncertainty shock. We study household savings and expenditure adjustment from an unexpected, large-scale and rapidly evolving political shock that occurred largely in May 1989 in Beijing, China. Using monthly micro panel data from a sample of the Urban Household Survey, we present evidence that a surge in political uncertainty resulted in significant temporary increases in savings among urban households in China. Our estimates also suggest the channel through which increase in savings is achieved: the increase in savings is driven by reductions in semi-durable expenditure and frequency of major durable adjustment. The uncertainty effect is more pronounced among older, wealthier, and more socially advantaged households. We interpret our findings using existing models of precautionary behavior. By focusing on time variation in uncertainty, our identification strategy avoids many of the potential problems in empirical studies of precautionary savings such as self-selection and life-cycle effects. Our findings on the channel of adjustment also coincide with the predictions from models on consumer durables adjustment combined with income uncertainty.
    Keywords: China; household savings; uncertainty
    JEL: D91 J3 E21
    Date: 2014–12
  13. By: Gilles Le Garrec (OFCE )
    Abstract: When studying redistributive attitudes, surveys show that individuals do care about fairness. They also show that the cultural environment in which individuals grow up aspects their preferences about redistribution. In this article we include these two components of the demand for redistribution in order to develop a mechanism for the cultural transmission of the concern for fairness. The preferences of the young are partially shaped through the observation and imitation of others.choices in a way that is consistent with the so- cialization process. More specifically, observing during childhood how adults have collectively failed to implement fair redistributive policies lowers the concern for fairness or the moral cost of not supporting fair taxation. Based on this mechanism, the model exhibits a multiplicity of history-dependent steady states that may account for the huge and persistent differences in redistribution observed between Europe and the United States. It also explains why immigrants from countries with a preference for greater redistribution continue to support higher redistribution in their destination country.
    Keywords: Redistribution; fairness; majority rule; socialization; endogenous preference
    JEL: H53 D63 D72
    Date: 2014–12

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