nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒02‒05
fourteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Moderating Political Extremism: Single Round vs Runoff Elections under Plurality Rule By Bordignon, Massimo; Nannicini, Tommaso; Tabellini, Guido
  2. Persuading voters By Ricardo Alonso; Odilon Câmara
  3. Political competition and the limits of political compromise By Alexandre B. Cunha; Emanuel Ornelas
  4. Returns to Office in National and Local Politics By Kotakorpi, Kaisa; Poutvaara, Panu; Terviö, Marko
  5. Varying Political Economy Weights of Protection: The Case of Colombia By Baybars Karacaovali
  6. Legislative Vetoes and Corruption: The Effect of Formal Checks on Governance By B. Heller, William; P. Kyriacou, Andreas; Roca-Sagalés, Oriol
  7. Do People Support Compensation for Trade Liberalization? Evidence from a survey experiment in Japan (Japanese) By KUNO Arata
  8. Democracy and football. By Ignacio Lago-Peñas; Carlos Lago-Peñas; Santiago Lago-Peñas
  9. Does Female Suffrage Increase Public Support for Government Spending? Evidence from Swiss Ballots By Hofer, Katharina E.
  10. The Indigenous Roots of Representative Democracy By Jeanet Bentzen; Jacob Gerner Hariri; James A. Robinson
  11. Political credit cycles: the case of the Euro zone By Jesús Fernández-Villaverde; Luis Garicano; Tano J. Santos
  12. Policymakers' Horizon and Trade Reforms: the Protectionist Effect of Elections By Giovanni Facchini; Maurizio Zanardi
  13. Democratization and Barriers to Entry in a Two-Dimensional Voting Model. By Dmitry A. Veselov
  14. Immigration and the Political Economy of Public Education: Recent Perspectives By Ortega, Francesc; Tanaka, Ryuichi

  1. By: Bordignon, Massimo; Nannicini, Tommaso; Tabellini, Guido
    Abstract: We compare single round vs runoff elections under plurality rule, allowing for partly endogenous party formation. Under runoff elections, the number of political candidates is larger, but the influence of extremist voters on equilibrium policy and hence policy volatility is smaller, because the bargaining power of the political extremes is reduced compared to single round elections. The predictions on the number of candidates and on policy volatility are confirmed by evidence from a regression discontinuity design in Italy, where cities above 15,000 inhabitants elect the mayor with a runoff system, while those below hold single round elections.
    Keywords: electoral rules; policy volatility; regression discontinuity design
    JEL: C14 D72 H72
    Date: 2014–12
  2. By: Ricardo Alonso; Odilon Câmara
    Abstract: In a symmetric information voting model, an individual (information controller) can influence voters’ choices by designing the information content of a public signal. We characterize the controller’s optimal signal. With a non-unanimous voting rule, she exploits voters’ heterogeneity by designing a signal with realizations targeting di↵erent winning-coalitions. Consequently, under simple-majority voting rule, a majority of voters might be strictly worse o↵ due to the controller’s influence. We characterize voters’ preferences over electoral rules, and provide conditions for a majority of voters to prefer a supermajority (or unanimity) voting rule, in order to induce the controller to supply a more informative signal.
    Keywords: information control; persuasion; voting
    JEL: D72 D83
    Date: 2014–06–03
  3. By: Alexandre B. Cunha; Emanuel Ornelas
    Abstract: We consider an economy where competing political parties alternate in office. Due to rent-seeking motives, incumbents have an incentive to set public expenditures above the socially optimum level. Parties cannot commit to future policies, but they can forge a political compromise where each party curbs excessive spending when in office if they expect future governments to do the same. We find that, if the government cannot manipulate state variables, more intense political competition fosters a compromise that yields better outcomes, potentially even the first best. By contrast, if the government can issue debt, vigorous political competition can render a compromise unsustainable and drive the economy to a low-welfare, high-debt, long-run trap. Our analysis thus suggests a legislative trade-off between restricting political competition and constraining the ability of governments to issue debt.
    Keywords: Political turnover; efficient policies; public debt
    JEL: E61 E62 H30 H63
    Date: 2014–03
  4. By: Kotakorpi, Kaisa; Poutvaara, Panu; Terviö, Marko
    Abstract: We apply a regression discontinuity design to estimate the returns to being elected to parliament or to a municipal council. We present a bootstrap approach for measuring electoral closeness in any electoral system, and apply it to the Finnish proportional open list system. Getting elected to parliament increases annual earnings initially by about €20,000. The time profile of the earnings effect suggests that the returns accrue mainly during the time in office, while the effect on subsequent earnings is small. Getting elected to a municipal council increases subsequent annual earnings by about €1,000.
    Keywords: political careers; regression discontinuity; returns to office
    JEL: D72 J45
    Date: 2014–12
  5. By: Baybars Karacaovali (University of Hawaii at Manoa)
    Abstract: In this paper, we examine trade policy determinants and trade reform in a devel-oping country setting by using a political economy of trade policy model where the government determines tariffs by balancing the political support from the producers against consumers and places a higher political weight on producersÂ’welfare relative to average citizens. We then expand it in several directions to guide our subsequent estimations at the three-digit industry level for Colombia between 1983 and 1998. We account for import substitution motives for protection and the government's move away from these policies leads to unilateral trade liberalization. We innovatively allow the political weights to vary based on key industry variables beyond a common denominator. The sectors with higher employment, labor cost, and preferential trade agreement (PTA) import shares receive a larger political weight compared to otherwise similar sectors. The novelty of our approach is estimating the effect of sectoral characteristics on protection Â…ltered through the political weights. We obtain more realistic estimates for these weights and provide some evidence for a slowing down effect of PTAs for trade liberalization.
    Keywords: Political economy of trade policy, trade liberalization, preferential trade agreements, empirical trade
    JEL: F13 F14 F15
    Date: 2015–01
  6. By: B. Heller, William; P. Kyriacou, Andreas; Roca-Sagalés, Oriol
    Abstract: What keeps corruption in check? Politicians have incentives to both avoid and actively oppose corruption when voters can hold them accountable for it. But to punish malfeasance voters have to know about it, and corrupt actors don’t want such information to be easy to find. Moreover, we argue that the very people best positioned to observe and block corruption—legislators with influence in the policy-making process—also are well-positioned to benefit from corruption. We thus focus on political elites and explore the conditions affecting the corrupt exercise of influence in the policy-making process. To that end, we look at the role of institutional checks in the legislative process and conclude, contra conventional wisdom, that as the number of checks increase so also should corruption increase, all else equal. This conclusion follows from the argument that checks give the individuals who control them influence and, importantly, an incentive to collude with other veto players in order to channel public resources to private ends. As long as the benefits of collusion (e.g., among coalition partners or even copartisans) outweigh the costs, increasing the number and potency of checks only increases opportunities for corruption. We find, testing our claim against data from a sample of 97 countries, strong support for our hypothesized relationship between institutional checks and corruption.
    Keywords: Veto players, checks, corruption, governance, panel data
    JEL: D72 D73
    Date: 2014–12–12
  7. By: KUNO Arata
    Abstract: It is frequently argued that the Trade Adjustment Assistance (TAA) program works not only as a "remedial device" for compensating losers from trade liberalization, but also as a "political device" for easing protectionist pressure and materializing further liberalization. This paper presents new evidence from a survey experiment in Japan conducted in 2012 on the determinants of voters' preferences toward a remedial as well as a political device of TAA.<br />Our results suggest that: 1) When people are primed to think about the remedial aspect of TAA, "would-be losers" from trade are more likely to support TAA. 2) However, preference toward trade liberalization is not necessarily correlated with the same individual's preference toward TAA, implying that monetary compensation cannot mitigate people's non-economic concerns over liberalization. 3) If we primed respondents to think about the political device of TAA, a wide range of respondents, except for potential losers, become more supportive toward compensating trade losers.<br />This additional and conditional support toward TAA by some respondents including expected trade winners may be undermined, if they find the ex-post level of trade liberalization to be unsatisfactory.
    Date: 2015–01
  8. By: Ignacio Lago-Peñas; Carlos Lago-Peñas; Santiago Lago-Peñas
    Abstract: In this paper we explore to what extent political regimes affect the competitive balance in domestic football (soccer) leagues. Relying on data from around 50 European countries and over 2,000 domestic leagues, we show that the percentage of league competitions won by the most successful club in the country is substantially lower in democracies than in non-democracies. Democratic transitions and higher levels of democracy trigger pressures to increase the competitive balance in football leagues in two ways. First, the link between non-democracies and specific teams breaks when a country experiences a transition to democracy. Second, the economic liberalization that takes place in transitions to democracy disperses resources and generates competition among descending and ascending teams. Finally, the competitive balance of domestic leagues has not been greatly affected by the Bosman transfer ruling, a sectorial liberalization shock on football labor markets.
    Keywords: Democracy, Football, Market, Political Regime, Transition
    JEL: L83 P52
    Date: 2015–01
  9. By: Hofer, Katharina E.
    Abstract: In this paper, I challenge the notion that women prefer larger governments than men which is why extending the franchise to women has led to an increase in government spending in many industrialized countries. I estimate the average treatment effect of being female on support for government spending, by analyzing the voting outcomes of two similar Swiss referendum votes concerning the federal government's authorization to levy income, capital and turnover taxes. The first ballot took place shortly before the extension of suffrage to women in February 1971, and the other one directly thereafter. Based on municipal voting data, I relate the increase in the electorate to the difference in acceptance rates for the two propositions. Surprisingly, I find that approval for government spending is higher among the male population. Further, I conduct a mediation analysis based on post-ballot surveys after comparable votes in 1981, 1991, and 1993. The intrinsic direct effect of being female proves to be the driving force behind the negative gender gap. In contrast, socioeconomic mediators like employment status or education turn out to play a weaker role.
    Keywords: Female Suffrage; Gender Preference Gap; Voting; Direct Democracy; Mediation
    JEL: J16 H10 D72
    Date: 2015–01
  10. By: Jeanet Bentzen (Department of Economics, Copenhagen University.); Jacob Gerner Hariri (Department of Economics, Copenhagen University); James A. Robinson (Department of Government, Harvard University)
    Abstract: We document that rules for leadership succession in ethnic societies that antedate the modern state predict contemporary political regimes; leadership selection by election in indigenous societies is associated with contemporary representative democracy. The basic association, however, is conditioned on the relative strength of the indigenous groups within a country; stronger groups seem to have been able to shape national regime trajectories, weaker groups do not. This finding extends and qualifies a substantive qualitative literature, which has found in local democratic institutions of medieval Europe a positive impulse towards the development of representative democracy. It shows that contemporary regimes are shaped not only by colonial history and European in uence; indigenous history also matters. For practitioners, our findings suggest that external reformers' capacity for regimebuilding should not be exaggerated.
    Date: 2014–12–20
  11. By: Jesús Fernández-Villaverde; Luis Garicano; Tano J. Santos
    Abstract: We study the mechanisms through which the adoption of the Euro delayed, rather than advanced, economic reforms in the Euro zone periphery and led to the deterioration of important institutions in these countries. We show that the abandonment of the reform process and the institutional deterioration, in turn, not only reduced their growth prospects but also fed back into financial conditions, prolonging the credit boom and delaying the response to the bubble when the speculative nature of the cycle was already evident. We analyze empirically the interrelation between the financial boom and the reform process in Greece, Spain, Ireland, and Portugal and, by way of contrast, in Germany, a country that did experience a reform process after the creation of the Euro.
    Keywords: financial crisis; bubbles; Euro crisis; political economy
    JEL: D2 D72 E44 F33 F36
    Date: 2013–07–31
  12. By: Giovanni Facchini; Maurizio Zanardi
    Date: 2014
  13. By: Dmitry A. Veselov (National Research University Higher School of Economics)
    Abstract: We propose a simple quality-ladder model with heterogeneous agents differing in their skills and wealth endowment to explain the persistence of barriers to entry in new democracies. In the model agents vote for a rate of redistribution and for the level of barriers to entry, which protect the incumbent firms from competition with new entrants. We show that even if a society democratizes, under certain conditions this leads only to the rise of redistribution, rather than to the elimination of barriers to entry. We show that this argument is particularly relevant for countries with a low level of human capital and high inequality in incomes and in skills.
    Keywords: Barriers to entry, majority voting, quality-ladders model, income inequality, skills inequality, persistence of economic institutions.
    JEL: O33 P16
    Date: 2015–01
  14. By: Ortega, Francesc (Queens College, CUNY); Tanaka, Ryuichi (National Graduate Institute for Policy Studies Japan)
    Abstract: This paper reviews the recent literature on the effects of immigration on the public education of the host country, emphasizing the political economy implications. In particular, we are interested on what happens to enrollment in public schools and the quality of education in these schools. Our review of the literature, which includes both quantitative and empirical studies, suggests the following conclusions. First, immigration has triggered native flight toward private schools in a wide variety of contexts. Some studies also find that the households that switch to private schools tend to be those with higher socio-economic status. Secondly, because of these changes in school choices, one consequence of large-scale immigration is that it appears to undermine the political support for public education, resulting in a deterioration in the funding and quality of public schools that seems to affect negatively the educational outcomes of disadvantaged native students. We offer some suggestions for policies that might help mitigate the negative consequences of immigration outlined above so that host countries can maximize the overall economic benefits of immigration.
    Keywords: education, public school, immigration, naturalization
    JEL: D7 F22 H52 H75 J61 I22 I24
    Date: 2015–01

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