nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒03‒05
twenty papers chosen by
Eugene Beaulieu
University of Calgary

  1. Does electoral strength affect politician's trade policy preferences? Evidence from Japan By Ito, Banri
  2. Debates: The Impact of Voter Knowledge Initiatives in Sierra Leone By Casey, Katherine E.; Glennerster, Rachel; Bidwell, Kelly
  3. Political influence in commercial and financial oil trading : the evidence from US firms By Kashcheeva, Mila; Tsui, Kevin K.
  4. Electoral Contributions and the Cost of Unpopularity By Thomas Bassetti; Filippo Pavesi
  5. Effects of the internet on participation : study of a public policy referendum in Brazil By Spada,Paolo; Mellon,Jonathan; Peixoto,Tiago Carneiro; Sjoberg,Fredrik Matias
  6. Old and Young Politicians By Alberto F. Alesina; Ugo Troiano; Traviss Cassidy
  7. Why Farm Support Persists: An Explanation Grounded in Congressional Political Economy By Freshwater, David; Leising, Jordan D.
  8. The UN Goldstone Report and Retraction: An Empirical Investigation By Arye L. Hillman; Niklas Potrafke
  9. 'Unfinished Business': Historic Complementarities, Political Competition and Ethnic Violence in Gujarat By Jha, Saumitra
  10. Collective Self Control By Lizzeri, Alessandro; Yariv, Leeat
  11. Cast a Ballot or Protest in the Street - Did our Grandfathers Do More of Both?: An Age-Period-Cohort Analysis in Political Participation By Romina Boarini; Marcos Díaz
  12. Capital account openness, political institutions and FDI in the MENA region: An empirical investigation By Gammoudi, Mouna; Cherif, Mondher
  13. Gandhi's Gift: Lessons for Peaceful Reform from India's Struggle for Democracy By Bhavnani, Rikhil R.; Jha, Saumitra
  14. How Modern Dictators Survive: Cooptation, Censorship, Propaganda, and Repression By Guriev, Sergei; Treisman, Daniel
  15. School Of Autocracy: Pensions And Labour Reforms Of The First Putin Administration By Ivan S. Grigoriev; Anna A. Dekalchuk
  16. General statutory minimum wage debate in Germany: Degrees of political intervention in collective bargaining autonomy By Kota Kitagawa; Arata Uemura
  17. Proposition 13: An Equilibrium Analysis By Ayse Imrohoroglu
  18. The Effect of Campaign Contributions on State Banking Regulation and Bank Expansion in U.S. By Aggey Semenov; Hector Perez Saiz
  19. Pork-Barrel Spending under Cournot Legislators and the Quantity Equation By Soldatos, Gerasimos T.
  20. Spillover Effects in a Federal Country with Vertical Tax Externalities By Lisa Grazzini; Alessandro Petretto

  1. By: Ito, Banri
    Abstract: This study examines the effect of electoral strength on politician's trade policy preferences using data of candidates running for the members of the House of Representatives in Japan. The results reveal that the electoral strength measured by the margin of vote affects candidates' trade policy preferences after controlling attributes of candidates and constituencies. Specifically, candidates who face a close race in election are more likely to be protectionist than those who are expected to be elected by a substantial majority, suggesting that electoral competitions deter politicians from supporting trade liberalization. This result is robust to the model with the margin of vote as an endogenous variable.
    Keywords: Trade policy; policy preferences; electoral competition
    JEL: D72 F13
    Date: 2015–03–02
  2. By: Casey, Katherine E. (Stanford University); Glennerster, Rachel (?); Bidwell, Kelly (?)
    Abstract: This project explores whether giving voters information about candidates and policy facilitates more informed voting and greater electoral accountability. In the information poor environment of Sierra Leone, we use a set of randomized experiments to estimate the impacts of structured debates between Parliamentary candidates on voter knowledge and behavior. We find evidence for strong positive impacts on general political knowledge, knowledge of candidate qualifications and policy stances; improved alignment between the policy preferences of voters and their selected candidate; greater voter openness to candidates from all parties; and increased vote shares for the candidate who performed the best during the debates. We further document an endogenous response by candidates, who increased their campaign effort in communities where videotapes of the debates were screened in public gatherings. A complementary series of treatment arms administered at the individual level unpacks the different types of information delivered by the debates, and finds evidence that voters respond to both candidate charisma and "hard facts" about policy stances and professional qualification.
    Date: 2014
  3. By: Kashcheeva, Mila; Tsui, Kevin K.
    Abstract: International politics affects oil trade. But do financial and commercial traders who participate in spot oil trading also respond to changes in international politics? We construct a firm-level dataset for all U.S. oil-importing companies over 1986-2008 to examine how these firms respond to increases in "political distance" between the U.S. and her trading partners, measured by divergence in their UN General Assembly voting patterns. Consistent with previous macro evidence, we first show that individual firms diversify their oil imports politically, even after controlling for unobserved firm heterogeneity. However, the political pattern of oil imports is not entirely driven by the concerns of hold-up risks, which exist when oil transactions via term contracts are associated with backward vertical FDI that is subject to expropriation. In particular, our results indicate that even financial and commercial traders significantly reduce their oil imports from U.S. political enemies. Interestingly, while these traders diversify their oil imports politically immediately after changes in international politics, other oil companies reduce their oil imports with a significant time lag. Our findings suggest that in designing regulations to avoid harmful repercussions on commodity and financial assets, policymakers need to understand the nature of political risk.
    Keywords: United States, Petroleum, International trade, Foreign investments, Energy policy, International politics, FDI-based imports, Hold-up risk, Energy security
    JEL: F13 F51 F59 Q34
    Date: 2015–02
  4. By: Thomas Bassetti (University of Padova); Filippo Pavesi (University of Padova)
    Abstract: When considering contributions to electoral campaigns in the U.S., the data reveals that total contributions within industries tend to vary signifi?cantly over time. To explain this evidence, we present a model in which interest groups fi?nance 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
  5. By: Spada,Paolo; Mellon,Jonathan; Peixoto,Tiago Carneiro; Sjoberg,Fredrik Matias
    Abstract: Does online voting mobilize citizens who otherwise would not participate? During the annual participatory budgeting vote in the southern state of Rio Grande do Sul in Brazil -- the world's largest -- Internet voters were asked whether they would have participated had there not been an online voting option (i-voting). The study documents an 8.2 percent increase in total turn-out with the introduction of i-voting. In support of the mobilization hypothesis, unique survey data show that i-voting is mainly used by new participants rather than just for convenience by those who were already mobilized. The study also finds that age, gender, income, education, and social media usage are significant predictors of being online-only voters. Technology appears more likely to engage people who are younger, male, of higher income and educational attainment, and more frequent social media users.
    Keywords: Technology Industry,Political Systems and Analysis,National Governance,ICT Policy and Strategies,Parliamentary Government
    Date: 2015–02–26
  6. By: Alberto F. Alesina; Ugo Troiano; Traviss Cassidy
    Abstract: We evaluate the effect of a politician’s age on political governance, reelection rates,and policies using data on Italian local governments. Our results suggest that younger politicians are more likely to behave strategically in response to election incentives: they increase spending and obtain more transfers from higher levels of government in preelection years. We argue that is a sign of stronger career concerns incentives. The results are robust to adopting three different identification strategies: fixed-effects regression, standard regression discontinuity design, and an augmented regression discontinuity design that controls for residual heterogeneity.
    JEL: C21 D78 H72 H77 J18
    Date: 2015–02
  7. By: Freshwater, David; Leising, Jordan D.
    Abstract: n 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: US farm policy, farm bill, political economy, policy continuity and change, Agricultural and Food Policy, Public Economics, N52, Q18, B52,
    Date: 2015–02–07
  8. By: Arye L. Hillman (Bar-Ilan University); Niklas Potrafke
    Abstract: The United Nations Goldstone Report criminalized self-defense against state sponsored or state-perpetrated terror. We use voting on the two UN General Assembly resolutions relating to the Goldstone Report to study whether support for the Goldstone principle of criminalization of self-defense against terror was influenced by countries’ political institutions. Our results, using two different measures of political institutions, reveal systematic differences in voting by democracies and autocracies: as an example, based on the Chief-in- Executive measure of political institutions, a country with the highest democracy score was some 55 percentage points less likely to vote in favor of the second of the two UN Goldstone resolutions and some 55 percentage points more likely to abstain than a country with the highest autocratic score. The differences between democracies and autocracies in willingness to initiate symmetric welfare are therefore also reflected in differences in sensitivities to loss of life and harm in asymmetric warfare, through broad support by democracies, but not by autocracies, for legitimacy of self-defense against state-supported or state-perpetrated terror. The Goldstone Report is unique among United Nations reports in having been eventually repudiated by its principal author.
    Keywords: State-sponsored terror; state-perpetrated terror; asymmetric warfare; United Nations; UNGA voting; international law; war crimes; human rights; democracy; autocracy; Israel; supreme values; expressive voting
    Date: 2014–11
  9. By: Jha, Saumitra (Stanford University)
    Abstract: I examine how the historical legacies of inter-ethnic complementarity and competition interact with contemporary electoral competition in shaping patterns of ethnic violence. Using local comparisons within Gujarat, a single Indian state known for both its non-violent local traditions and for widespread ethnic pogroms in 2002, I provide evidence that where political competition was focused upon towns where ethnic groups have historically competed, there was a rise in the propensity for ethnic rioting and increased electoral support for the incumbent party complicit in the violence. However, where political competition was focused in towns that historically enjoyed inter-ethnic complementarities, there were fewer ethnic riots, and these towns also voted against the incumbent. These historic legacies proved to be important predictors of the identity of the winner even in very close electoral races. I argue that these results reflect the role local inter-ethnic economic relations can play in altering the nature and the benefits of political campaigns that encourage ethnic violence.
    JEL: F10 N25 O18 Z12
    Date: 2014–02
  10. By: Lizzeri, Alessandro; Yariv, Leeat
    Abstract: Behavioral economics presents a "paternalistic" rationale for a benevolent government's intervention. We consider an economy where the only “distortion” is agents’ time inconsistency. We study the desirability of various forms of collective action, ones pertaining to costly commitment and ones pertaining to the timing of consumption, when government decisions respond to voters’ preferences via the political process. If only commitment decisions are centralized, commitment investment is more moderate than if all decisions are centralized. Commitment investment is minimal when only consumption is centralized. First-period welfare is highest under either full centralization or laissez faire, depending on the populations’ time-inconsistency distribution.
    Keywords: behavioral political economy; hyperbolic discounting; time inconsistency
    JEL: D04 D70 H1
    Date: 2015–03
  11. By: Romina Boarini; Marcos Díaz
    Abstract: Recent research suggests that younger generations are less likely to be engaged in formal political participation than older ones. However, there is little evidence on the trends for non-formal participation (e.g. signing petitions, demonstrations, etc.) This paper tries to fill a gap in this field by looking at the evolution of extra-parliamentary participation in politics through various measures of civic and political engagement, based on data from six waves of the European Social Survey. The paper confirms that younger generations in European countries participate less in politics through formal activities. A similar trend is observed for extra-parliamentary participation, although this trend is less clear-cut. The results also show that the financial crisis of 2007-2009 witnessed a halt in the downward trend of period effects in the various forms of political participation, followed by the increase of period effects on both formal and extra-parliamentary political participation in the subsequent years (2011-2012.)
    Date: 2015–02–26
  12. By: Gammoudi, Mouna; Cherif, Mondher
    Abstract: This paper examines how capital account liberalization (CAL) affects Foreign Direct Investment (FDI) inflows. The authors use the System Generalized-Method-of-Moments (GMM) estimator developed for the dynamic panel model for a sample of 17 Middle East and North Africa (MENA) countries from 1985 to 2009. Their findings reveal that the positive impact of CAL on FDI depends on the political stability in a host country. Furthermore, the results show that enhancing democratic institutions, enforcing property rights, reducing the risk of expropriation and religious tension seem to be some of the most promising policies to attract FDI to the region. The authors also find that foreign investors value the quality of institutions more than the level of corruption or bureaucratic quality in the location choice. Their results are robust to using different indicators of institutional quality. The findings are relevant for MENA countries given that many of them have engaged in a process of liberalization and have weak institutions.
    Keywords: capital account liberalization,foreign direct investment,institutional quality,GMM-system
    JEL: C23 D73 F21 F43
    Date: 2015
  13. By: Bhavnani, Rikhil R. (University of WI); Jha, Saumitra (Stanford University)
    Abstract: In this overview article, we summarize recent research in progress that examines the potential and limitations of non-violent civil disobedience through the lens of the evolution of an iconic success: India's struggle for democratic self-rule. We present a theoretical framework that highlights two key twin challenges faced by non-violent movements in ethnically diverse countries. The first is the challenge of mass mobilization across ethnic lines. The second challenge lies in overcoming the enhanced temptations faced by members of large mobilized groups to turn violent, whether to secure short-term gains from mob action or in response to manipulation by agents who stand to gain from political violence. We show how these challenges appear to match general patterns from cross-campaign data. Motivated by these patterns, we discuss how these challenges were overcome during the Indian Independence Struggle. We argue that the first challenge--that of forging a mass movement [was accomplished through the brokering of a deal that took advantage of external shocks] in this case, the Great Depression--to align the incentives of disparate ethnic and social groups towards mass mobilization in favour of democracy and land reform. The second key challenge--that of keeping the mass movement peaceful was accomplished through organizational innovations introduced by Mohandas Gandhi in his reforms of the constitution of the Congress movement in 1919-20. These organizational innovations took the Congress movement from one dominated by a rich elite to one organized on the principle of self-sacrifice, selecting future leaders who could then be trusted to maintain non-violent discipline in pursuit of the extension of broad rights and public policy objectives. We conclude by arguing that a key, but hitherto mostly neglected, aspect of 'Gandhi's Gift'--the example of non-violence applied to India's independence struggle-lies in understanding these organizational innovations.
    Date: 2014–03
  14. By: Guriev, Sergei; Treisman, Daniel
    Abstract: We develop an informational theory of dictatorship. Dictators survive not because of their use of force or ideology but because they convince the public--rightly or wrongly--that they are competent. Citizens do not observe the dictator's type but infer it from signals inherent in their living standards, state propaganda, and messages sent by an informed elite via independent media. If citizens conclude the dictator is incompetent, they overthrow him in a revolution. The dictator can invest in making convincing state propaganda, censoring independent media, co-opting the elite, or equipping police to repress attempted uprisings -- but he must finance such spending with taxes that depress the public's living standards. We show that incompetent dictators can survive as long as economic shocks are not too large. Moreover, their reputations for competence may grow over time. Censorship and co-optation of the elite are substitutes, but both are complements of propaganda. Repression of protests is a substitute for all the other techniques. In some equilibria the ruler uses propaganda and co-opts the elite; in others, propaganda is combined with censorship. The multiplicity of equilibria emerges due to coordination failure among members of the elite. We show that repression is used against ordinary citizens only as a last resort when the opportunities to survive through co-optation, censorship, and propaganda are exhausted. In the equilibrium with censorship, difficult economic times prompt higher relative spending on censorship and propaganda. The results illuminate tradeoffs faced by various recent dictatorships.
    Keywords: censorship; dictatorship; propaganda
    JEL: D72 P16
    Date: 2015–03
  15. By: Ivan S. Grigoriev (National Research University Higher School of Economics); Anna A. Dekalchuk (National Research University Higher School of Economics)
    Abstract: The early 2000s marked a surge in uncertainty in Russian politics caused by the succession crisis and the profound political turnover it triggered. This uncertainty could resolve in a number of ways, each leading to a different political development. We trace the actual way out of this uncertainty and suggest that the major factor to condition the further regime trajectory was the way reforms were conducted. The article questions the teleological approach that sees government as knowingly and purposefully building autocracy, and contributes to the tradition emphasizing the plurality of possible regime developments (Golosov 2011) and the role of contingency therein (Hale 2004) by providing a more systematic treatment of such contingency. We use insights from basic coordination game theory and cognitive institutionalism to show how local reform practices become accepted as a trusted way of interaction by political actors and stick with the regime in a path dependent manner. This intuition is substantiated with a case-study of pensions and labour reforms. Course of these reforms determined the major features of the Putin regime, such as building up a single party of power, crowding out the political market, opposition decay, and informal institutionalisation
    Keywords: autocratic learning; policy feedback; uncertainty; labour reform; pensions reform; Putin's Russia.
    JEL: H55 J58
    Date: 2015
  16. By: Kota Kitagawa; Arata Uemura
    Abstract: This article traces the pattern of conflict, collaboration, and compromise among trade unions, employers, political parties, executive branches, and economic research institutes in Germany, all of which have different stances regarding the introduction of a general statutory minimum wage there. This article examines the degree of political intervention in collective bargaining autonomy. First, it identifies the factors that bring about differences in stance. Second, it addresses the issue of actor independence—in particular, that of service trade unions—despite the placing of institutional factors, to establish a reference standard for the debate behind forming social movement alliances. Third, it examines the manner in which the policy’s economic legitimacy is earned. We conclude that the emergence of a statutory minimum wage in Germany reflects the dynamic mix of postwar political practices in its own context with the effects of modern neoliberal economic policies.
    Keywords: Minimum Wage, Collective Bargaining Autonomy, Germany, Coalition Agreement, Social Movement Unionism, Varieties of Capitalism
    JEL: J08 J58 K31
    Date: 2015–01
  17. By: Ayse Imrohoroglu (USC)
    Abstract: In 1978, California passed one of the most significant tax changes initiated by voters in the United States. Proposition 13, stipulated rolling back property assessments for tax purposes to 1975 market value levels, and restricted future property tax increases. In this paper, we study the implications of Proposition 13 on house prices, housing choices, turnover over the life cycle, and welfare of the households in an economy populated with overlapping generations of agents who derive utility from consumption of goods and housing. We find that Proposition 13 distorts housing choices by lowering turnover and smoothing housing consumption over the life cycle. We study the transition dynamics of moving from an economy featuring Proposition 13 to alternative revenue-neutral regimes with proportional real estate taxes. We find that different revenue-neutral regimes generate very different levels of support. While most middle-aged and older households prefer the status-quo with Proposition 13, younger agents may support the elimination of Propostion 13 as long as the reform does not lead to an increase in house prices.
    Date: 2014
  18. By: Aggey Semenov (University of Ottawa); Hector Perez Saiz (Bank of Canada)
    Abstract: We use a unique detailed database with individual state campaign contributions made by banks in U.S. from 1998 to 2010 to understand how these contributions influence the regulation of the banking industry in that state, and in particular the approval of bank mergers by the state banking regulatory authority. We find that banks tend to contribute more to candidates that play a key role in appointing the head of the state banking regulator. In addition, we find that, after controlling for size or other key bank level variables, banks that are involved in a merger in the near future are more likely to contribute to elected senators and the governor, who play key roles in appointing the head of the state bank regulator that approves mergers which involve state banks. Our results help to understand better the role that campaign contributions have in the shaping of bank regulation in U.S. and the bank market structure in the last two decades.
    Date: 2014
  19. By: Soldatos, Gerasimos T.
    Abstract: This note makes the following two points based on Cournot utility functions of the legislators and on the government budget constraint viewed from the perspective of the equation of exchange. Without logrolling, i.e. with different perceptions of the budget constraint, there can be such a legislature preference structure that can turn a pork-barrel project into welfare-enhancing public expenditure depending on economic circumstances. With logrolling, i.e. with agreement at least regarding the size of the budget, the “pork” may be taken out of the project regardless the economic conjuncture. These results are independent of the utility function used, while the use of the quantity equation serves only as the simplest macroeconomic framework in which the two general points herein may be made.
    Keywords: Pork-barrel spending, budget deficit, quantity equation, Cournot legislators, logrolling
    JEL: D72 E31 H61
    Date: 2014
  20. By: Lisa Grazzini (Università di Firenze); Alessandro Petretto (Università di Firenze)
    Abstract: We analyse how spillover effects may affect the choice of a federal tax rate in a federal country with vertical tax externalities. Our main result shows under which conditions the federal tax rate with spillover effects is lower or higher than the federal tax rate without spillover effects. The standard result on inefficiently high tax rates due to ver- tical tax externalities can be modi?fied by the reaction of the federal government to the horizontal externality due to spillover effects.
    Keywords: fiscal federalism, median voter, positive spillovers
    JEL: H71 H77 H41

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