nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒02‒28
twenty-two papers chosen by
Eugene Beaulieu
University of Calgary

  1. The role of non-voting in shifts in support for Italian political parties (2006-2008) By Luana Russo
  2. The allocation of transport infrastructure in Swedish municipalities: welfare maximization, political economy or both? By Jussila Hammes , Johanna ; Nilsson, Jan-Eric
  3. Overlapping political budget cycles in the legislative and the executive By Dirk Foremny ; Ronny Freier ; Marc-Daniel Moessinger ; Mustafa Yeter
  4. Voting behaviour and public employment in Nazi Germany By Stephan E. Maurer
  5. Politics and investment: Examining the territorial allocation of public investment in Greece By Andrés Rodríguez-Pose ; Yannis Psycharis ; Vassilis Tselios
  6. The Dynamics of Sovereign Default Risk and Political Turnover By Almuth Scholl
  7. Decentralization, Vertical Fiscal Imbalance, and Political Selection By Massimo Bordignon ; Matteo Gamalerio ; Gilberto Turati
  8. The Welfare State and Migration: A Dynamic Analysis of Political Coalitions By Razin, Assaf ; Sadka, Efraim ; Suwankiri, Benjarong
  9. Issue-salience, Issue-divisiveness and Voting Decisions By Stephen Ansolabehere ; M. Socorro Puy
  10. Electoral Contributions and the Cost of Unpopularity By Thomas Bassetti ; Filippo Pavesi
  11. Get Rid of Unanimity: The Superiority of Majority Rule with Veto Power By Bouton, Laurent ; Llorente-Saguer, Aniol ; Malherbe, Frédéric
  12. Gathering support from rivals: the two rivals case By Bannikova, Marina
  13. Global capital markets, housing prices, and partisan fiscal policies By Ben Ansell ; Lawrence Broz
  14. Optimal Mechanisms for the Control of Fiscal Deficits By Grüner, Hans Peter
  15. The Impact of Party Affiliation of U.S. Governors on Immigrants' Labor-Market Outcomes By Louis-Philippe Beland ; Bulent Unel
  16. Natural Disasters and Clientelism: the Case of Floods and Landslides in Colombia* By Jorge Gallego
  17. Inconsistent voting behavior in the FOMC By Lähner, Tom
  18. The Political and Bureaucratic Influence of the Defense Industrial Lobby in the Chinese Policy Process By ANDERSON, Eric
  19. Estimation of Several Political Action Effects of Energy Prices By Andrew B. Whitford
  20. Determinants Of Corruption Perceptions: Transitional Vs. Developed Economies By Andrey V. Aistov ; Elvina Mukhametova
  21. The East Asian Political Economy: Stylized Facts and Security Debaters By HAGGARD, Stephan
  22. Voting on Prices vs. Voting on Quantities in a World Climate Assembly By Martin L. Weitzman

  1. By: Luana Russo
    Abstract: The 2008 Italian Parliamentary Elections showed the highest abstention rate in Italianhistory (19.5%) up until that moment (a new record was set in 2013). Even though thisabstention rate might seem quite low in comparison with some other Western democracies,it has been steadily increasing over time. Furthermore, recent research shows that theintermittent non-vote is increasing as well. The voter?s individual decision on whether or notto vote depends on the circumstances at each election, taking into consideration the type ofelection, the quality of the candidates, and so forth. By employing an ecological inferencemethod on the Italian aggregate data, this paper assesses what happened in terms ofelectoral realignment and differential abstention. It also aims to find out which parties arenow gaining or losing support from non-voters in the 2008 Parliamentary Italian elections.
    Date: 2014–12–01
  2. By: Jussila Hammes , Johanna (VTI ); Nilsson, Jan-Eric (VTI )
    Abstract: The choice of transport infrastructure projects to include in the National Transport Infrastructure Plans in Sweden is often said to be motivated by the weighing of cost against social benefits. Examining the projects that are included in the Plans, it is clear, however, that not all projects have positive net present values, and are therefore more costly to build than the benefits they create. This paper studies alternative models that might explain the choice of projects. Two political economy models, the district demand and the swing voter with lobbying, are tested, and a model that accounts for the spatial distribution of the projects, as well as the possibility that priorities are based on welfare concerns, is estimated. No support is found for the political economy models. What explains investment volume is the existence of CBA results for a project, which may indicate that welfare benefits have an impact, as do the spatial spillovers from a project’s benefits and lobbying, especially by the municipalities concerned.
    Keywords: Distributive politics; Fiscal federalism; Lobbying; Party competition; Political economy; Transport infrastructure; Spatial analysis; Sweden
    JEL: D60 D72 D78 R42
    Date: 2015–02–20
  3. By: Dirk Foremny (Universidad de Barcelona & IEB ); Ronny Freier (German Institute for Economic Research (DIW Berlin) & Free University Berlin ); Marc-Daniel Moessinger (Centre for European Economic Research (ZEW Mannheim) ); Mustafa Yeter (Centre for European Economic Research (ZEW Mannheim) )
    Abstract: We advance the literature on political budget cycles by testing separately for cycles in expenditures for elections in the legislative and the executive. Using municipal data, we can separately identify these cycles and account for general year effects. For the executive branch, we show that it is important whether the incumbent re-runs. To account for the potential endogeneity associated with this decision, we apply a unique instrumental variables approach based on age and pension eligibility rules. We find sizable and significant effects in expenditures before council elections and before joint elections when the incumbent re-runs.
    Keywords: Election cycles, municipal expenditures, council and mayor elections, instrumental variables approach
    JEL: H11 H71 H72 H74
    Date: 2015
  4. By: Stephan E. Maurer
    Abstract: This paper analyses whether the German National Socialists used economic policies to reward their voters after their rise to power in 1933. Using data on public employment in the armed forces, public administrations and related professions from the German occupational censuses in 1925, 1933 and 1939 and addressing the potential endogeneity of the National Socialist vote share in 1933 by way of an instrumental variables strategy based on a similar party in Imperial Germany 1912, I find that cities with higher National Socialist vote shares experienced a relative increase in public employment: for every additional percentage point in the vote share, the number of public employment jobs increased by around 3.5 percent. When measured relative to the total population, a one standard-deviation increase in the 1933 vote share led to an increase in the share of public employment of a quarter of a standard deviation.
    Keywords: political connections; public employment; political economy; Nazi regime
    JEL: D72 D73 N44 N94
    Date: 2015–02
  5. By: Andrés Rodríguez-Pose ; Yannis Psycharis ; Vassilis Tselios
    Abstract: This paper discusses how electoral politics shapes the regional allocation of public investment expenditures per capita in Greece. Using regional public investment data for 10 political periods (1975-2009), combined with electoral data by constituency, a model is proposed which captures the influence of politics on the regional distribution of public investment expenditures. The results of the analysis point to a strong relationship between electoral results and regional public investment spending. Greek governing parties have tended to reward those constituencies returning them to office. Moreover, an increase in both the absolute and relative electoral returns of the governing party in a region has traditionally been followed by greater public investment per capita in that region. Regions where the governing party (whether Liberal or Socialist) has held a monopoly of seats have been the greatest beneficiaries of this type of pork-barrel politics.
    Keywords: public investment, elections, pork-barrel politics, political geography, Greece
    JEL: H77 H50 R12 R58 Z18
    Date: 2015–02
  6. By: Almuth Scholl (Department of Economics, University of Konstanz, Germany )
    Abstract: This paper develops a stochastic dynamic politico-economic model of sovereign debt to analyze the interaction of sovereign default risk and political turnover. Two parties differ in their preferred size of public spending which is financed by taxes and external debt. Electoral outcomes are characterized by tradeoffs between the economic benefits from the incumbent's policies against idiosyncratic ideological aspects. Quantitative simulations replicate the typical empirical facts of emerging markets. Endogenous political turnovers increase the parties' discrepancies between debt and default policies. Debt crises are associated with adverse economic shocks and trigger political turnovers. Political turnovers generate defaults even without negative shocks.
    Keywords: sovereign debt, default risk, political turnover, fiscal policy
    JEL: E62 F34 F41 D72
    Date: 2015–02–25
  7. By: Massimo Bordignon (Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore ); Matteo Gamalerio (University of Warwick ); Gilberto Turati (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche, Università di Torino )
    Abstract: In a career-concern model of politics with endogenous candidacy and different types of politicians, following a decentralization reform, politicians with different skills are elected in municipalities characterized by different levels of autonomous resources. As an effect, consumer welfare increases only, or mainly, in richer municipalities. We test these predictions by exploiting the differentiated reduction in Vertical Fiscal Imbalance in Italian municipalities, due to the strong difference in the tax base, following the decentralization reforms of the '90s. Results strongly support our predictions and are robust to several alternative stories.
    Keywords: decentralization, vertical fiscal imbalance, quality of politicians
    JEL: D72 D78
    Date: 2013–11
  8. By: Razin, Assaf ; Sadka, Efraim ; Suwankiri, Benjarong
    Abstract: We develop a dynamic political-economic theory of welfare state and immigration policies, featuring three distinct voting groups: skilled workers, unskilled workers, and old retirees. The essence of inter - and intra-generational redistribution of a typical welfare system is captured with a proportional tax on labor income to finance a transfer in a balanced-budget manner. We provide an analytical characterization of political-economic equilibrium policy rules consisting of the tax rate, the skill composition of migrants, and the total number of migrants. When none of these groups enjoy a majority (50 percent of the voters or more), political coalitions will form. With overlapping generations and policy-determined influx of immigrants, the formation of the political coalitions changes over time. These future changes are taken into account when policies are shaped. Naturally, a lower rate of population growth (that is, an aging population) increases the political clout of the old (the left group). But it also increases the burden on the young (particularly, the skilled).
    Keywords: center; dynamics of left and right coalitions; intra- and inter-generational transfers
    JEL: E10 F15 H10
    Date: 2015–02
  9. By: Stephen Ansolabehere (Government Department, Harvard University ); M. Socorro Puy (Department of Economic Theory, Universidad de Málaga )
    Abstract: We present a framework to analyze the relative importance of issues for the electorate. We distinguish two concepts -- issue salience and issue divisiveness -- and present those in the context of the multidimensional spatial model. Issue salience, which is widely studied in empirical and theoretical models, is the weight of one issue over another in a typical voter's utility function. Issue divisiveness is the differentiation between the issues, which depends on the positions or alignments of competing parties and candidates on each issue. We show that empirical research commonly conflates salience and divisiveness, as the regression coefficient in a multiple regression of vote choice on issues reflects both, the weight or salience of each issue and the distinctiveness of the two parties on each issue. We analyze the example of regional elections in the Basque province of Spain to demonstrate the mechanics and value of the approach developed. The politics of this region provide a good instance where debate over the importance of ideology and nationalism conflates salience and divisiveness.
    Keywords: Issue-Silence; Issue-Divisiveness; Positional Issues; Basque Elections
    Date: 2015–01
  10. By: Thomas Bassetti (University of Padova ); Filippo Pavesi (Department of Economics (University of Verona) )
    Abstract: When considering contributions to electoral campaigns in the U.S., the data reveals that total contributions within industries tend to vary signifcantly over time. To explain this evidence, we present a model in which interest groups finance politicians that require funding for campaign advertising in exchange for policy favors. Our model predicts that interest groups related to industries that experience a rise (decline) in popularity will reduce (increase) the amount of resources devoted to campaign financing. Intuitively, an industry that suffers from a loss of popularity will face greater costs of obtaining policy favors, since it must provide candidates with greater contributions for campaign advertising, in order to compensate for its decline in reputation. The empirical analysis, based on U.S. House elections between 2000 and 2004, strongly supports this finding.
    Keywords: Campaign Finance, Interest Groups, Elections, Popularity
    JEL: D72 P16
    Date: 2015–02
  11. By: Bouton, Laurent ; Llorente-Saguer, Aniol ; Malherbe, Frédéric
    Abstract: Consider a group of agents whose goal is to reform the status quo if and only if this is Pareto improving. Agents have private information and may have common or private objectives, which creates a tension between information aggregation and minority protection. We propose a simple voting system -majority rule with veto power- that essentially resolves this tension, for it combines the advantageous properties of both majority and unanimity rules. We argue that our results shed new light on the evolution of voting rules in EU institutions and could guide policy reforms in cases such as juries in the US.
    Keywords: constructive abstention; information aggregation; Pareto criterion; unanimity rule; veto power
    JEL: D70
    Date: 2015–02
  12. By: Bannikova, Marina
    Abstract: Two voters must choose between two alternatives. Voters vote in a fixed linear order. If there is not unanimity for any alternative, the procedure is repeated. At every stage, each voter prefers the same alternative to the other, has utilities decreasing with stages, and has an impatience degree representing when it is worth voting for the non-preferred alternative now rather than waiting for the next stage and voting for the preferred alternative. Intuition suggests that the more patient voter will get his preferred alternative. I found that in the unique solution of the sequential voting procedure obtained by backward induction, the first voter get his preferred alternative at the first stage independently from his impatience rate. Keywords: sequential voting, impatience rate, multi-stage voting, unanimity
    Keywords: Vot, Decisió, Presa de, 32 - Política, 33 - Economia,
    Date: 2014
  13. By: Ben Ansell ; Lawrence Broz
    Abstract: In recent years, global imbalances have channeled the excess savings of surplus countries toward the real estate markets of deficit countries. By consequence, the deficit countries that attracted lots of foreign capital experienced large run-ups in house prices while the surplus countries that exported capital exhibited flat or slow house price growth. We argue that international capital flows affect the fiscal policy preferences of both voters and political parties by way of their impact on housing prices. Where capital inflows are large and housing prices are rising, we expect voters to respond by demanding both lower taxes and less publicly-provided social insurance. This is because rising house prices allow homeowners to “self insure” against income losses due to unemployment, illness, and old age. We present survey evidence that supports this claim. Furthermore, we find that responses to house prices are mirrored in capital exporting countries: households become more supportive of both taxes and social insurance as home prices remain flat or decline. Finally, we show that political parties are the mechanisms through which the fiscal preferences of households find policy expression. Taxes and social insurance spending tend to fall (rise) where the right (left) is in power and capital inflows are driving up housing prices. In capital exporting nations, by contrast, we find an attenuation of these partisan fiscal policy outcomes.
    Keywords: Sovereign Default; Debt Crises; Political Survival; Networks; Voter Behavior.
    JEL: R21
    Date: 2015–02–01
  14. By: Grüner, Hans Peter
    Abstract: This paper shows that a simple two-stage voting mechanism may implement a constrained optimal state dependent decision about the size of the fiscal deficit. I consider a setup with strategic fiscal deficits à la Tabellini and Alesina (1990). Three groups of voters are informed about the productivity of current public spending. Voters differ in their preferences for public goods and swing voters' preferences may change over time. The current government decides on the current spending mix and it has an incentive to strategically overspend. Under certain conditions, a simple two-stage mechanism in which a deficit requires the approval by a supermajority in parliament implements a constrained optimal decision. When the current majority is small, political bargaining may further increase social welfare. However, when the current majority is large, a supermajority mechanism with bargaining leads to a biased spending mix and reduces welfare whereas the laissez faire mechanism may yield the first best. An appropriately adjusted majority threshold can deal with this problem.
    Keywords: constitutional choice; fiscal policy rules; mechanism design
    JEL: D82 H62
    Date: 2015–02
  15. By: Louis-Philippe Beland ; Bulent Unel
    Abstract: Do immigrants have better labor-market outcomes under Democratic governors? By exploiting variations associated with close elections in a regression discontinuity (RD) design applied on gubernatorial elections in 50 states over the last two decades, we find that immigrants are more likely to be employed, work longer hours and more weeks, and have higher earnings under Democratic governors. We present evidence that Democratic governors implement policies which create better labor-market conditions in certain occupations where immigrants are concentrated. Our findings are robust to a number of different specifications, controls, and samples.
  16. By: Jorge Gallego
    Abstract: Abstract What are the eects of natural disasters on electoral results? Some authors claim that catastrophes have a negative eect on the survival of leaders in a democracy because voters have a propensity to punish politicians for not preventing or poorly handling a crisis. In contrast, this paper nds that these events might be benecial for leaders. Disasters are linked to leader survival through clientelism: they generate an in- ow of resources in the form of aid, which increase money for buying votes. Analyzing the rainy season of 2010-2011 in Colombia, considered its worst disaster in history, I use a dierence-in-dierences strategy to show that in the local election incumbent parties beneted from the disaster. The result is robust to dierent specications and alternative explanations. Moreover, places receiving more aid and those with judicial evidence of vote-buying irregularities, are more likely to reelect the incumbent, supporting the mechanism proposed by this paper.
    Keywords: Clientelism, Natural Disasters, Difference in differences
    JEL: H41 H84 Z18
    Date: 2015–02–11
  17. By: Lähner, Tom
    Abstract: This paper examines determinants of inconsistent voting behavior in the Federal Open Market Committee (FOMC). Inconsistent voting behavior is defined as a changing preference on the preferred interest rate voiced in the policy go-around relative to the interest rate preference cast in the formal voting. It is hypothesized that the change in transparency in 1993 as well as individual characteristics of FOMC members may play a significant role in inconsistent voting behavior. Using FOMC voting data extracted from verbatim transcripts from 1989 until 2008 results can be summarized as follows: The regime shift in transparency has a significant impact on the probability of casting inconsistent votes. After 1993, the probability of casting inconsistent votes decreases significantly, on average by 3.3%. FOMC members with longer tenure on the committee have a lower probability of casting inconsistent votes. Further results suggest that Board members and bank presidents differ significantly, with bank presidents casting inconsistent votes more often than Board members do. This relation holds true for gender as well, with female members casting more inconsistent votes than males. In addition, political aspects and career backgrounds also contribute to explaining inconsistent voting behavior in the FOMC. Conditional effects reveal that after the change in transparency differences between Board members and bank presidents remain, whereas differences between male and female members have diminished. Further results suggest that FOMC members with a career in the government sector have been strongly affected by the regime shift in transparency.
    Keywords: FOMC; transcript data, inconsistent voting; logit estimations
    JEL: E43 E52 E58
    Date: 2015–01
  18. By: ANDERSON, Eric
    Keywords: Social and Behavioral Sciences, China, policy history, defense innovation, defense policy
    Date: 2015–01–01
  19. By: Andrew B. Whitford
    Abstract: One important effect of price shocks in the United States has been increased political attention paid to the structure and performance of oil and natural gas markets, along with some governmental support for energy conservation. This paper describes how price changes helped lead the emergence of a political agenda accompanied by several interventions, as revealed through Granger causality tests on change in the legislative agenda.
    Date: 2015–02
  20. By: Andrey V. Aistov (National Research University Higher School of Economics ); Elvina Mukhametova (National Research University Higher School of Economics )
    Abstract: In this paper we explore relationships between corruption perceptions and such characteristics as the size of shadow economy, GDP per capita, well-being, the Happy Planet Index (HPI), and quality of institutions. Special attention is paid to the comparison of transitional economies with countries that joined the European Union in 2004 and 2007, and developed countries. It is shown that irrespective of whether the economy is developed or transitional, negative dependence of corruption perceptions on shadow economy switches to positive if the size of the shadow economy increases over 15% of the official GDP. After the shadow economy passes 45%, the Transparency International Corruption Perceptions Index ceases to respond to growth of the shadow economy. Our estimates conrm that transition in countries is accompanied by growth of GDP per capita and a decrease in the level of corruption perceptions. For these reasons, transitional countries and countries where transition is over belongs to different clusters according to these indicators. This is not true for well-being and the HPI. It is not surprising that a regression analysis shows that "control of corruption" and "regulatory quality" are significant for reducing corruption perceptions both in transitional and other economies. It is interesting that "government effectiveness" and "voice and accountability" are significant only for transitional economies and insignificant in others. "Rule of law" and "political stability" are insignificant both in transitional and in developed countries
    Keywords: corruption, quality of institutions, the CPI score, shadow economy, transitional economies, well-being
    JEL: D73 O17 H11 P37
    Date: 2015
  21. By: HAGGARD, Stephan
    Keywords: Social and Behavioral Sciences, China, East Asia, regional security, economic growth
    Date: 2013–04–01
  22. By: Martin L. Weitzman
    Abstract: This paper posits the conceptually useful allegory of a futuristic "World Climate Assembly" that votes on global carbon emissions via the basic principle of majority rule. Two variants are considered. One is to vote on a universal price (or tax) that is internationally harmonized, but the proceeds from which are domestically retained. The other is to vote on the overall quantity of total worldwide emissions, which are then distributed for free (via a pre-decided fractional subdivision formula) as individual allowance permits that are subsequently marketed in an international cap-and-trade system. The model of the paper suggests that the majority-voted price is likely to be less distortionary and easier to enact than the majority-voted total quantity of permits. While the study is centered on a formal model, the tone of the policy discussion resembles more an exploratory think piece.
    JEL: F51 H41 Q54
    Date: 2015–02

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