nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒04‒02
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. So Closed: Political Selection in Proportional Systems By Galasso, Vincenzo; Nannicini, Tommaso
  2. Democracy With Group Identity By Arye L. Hillman; Kfir Metsuyanim; Niklas Potrafke
  3. The Impact of Political Economic Sensitivities on Trade Regimes among Politically Asymmetric Countries By Hye-Young Lee
  4. The strategic dis/advantage of voting early By Eddie Dekel; Michele Piccione
  5. Concerns about the Euro and Happiness in Germany during Times of Crisis By Adrian Chadi
  6. The Paradox of Grading Systems By Brams, Steven; Potthoff, Richard
  7. Making Democracy Work: Culture, Social Capital and Elections in China By Padró i Miquel, Gerard; Qian, Nancy; Xu, Yiqing; Yao, Yang
  8. The effects of remittances on support for democracy in Africa: Are remittances a curse or a blessing? By Konte M.
  9. Local Administration Systems and Local Democracy Perception By Hayriye Sagir; Hacer TuÄŸba Eroglu
  10. Domestic political competition and binding overhang in developing countries By James Lake; Maia K. Linask
  11. What determines the reforms of employment protection legislation? A global perspective By Michal Pilc

  1. By: Galasso, Vincenzo; Nannicini, Tommaso
    Abstract: We analyze political selection in a closed list proportional system where parties have strong gate-keeping power, which they use as an instrument to pursue votes. Parties face a trade-off between selecting loyal candidates or experts, who are highly valued by the voters and thus increase the probability of winning the election. Voters can be rational or behavioral. The former care about the quality mix of the elected candidates in the winning party, and hence about the ordering on the party list. The latter only concentrate on the quality type of the candidates in the top positions of the party list. Our theoretical model shows that, to persuade rational voters, parties optimally allocate loyalists to safe seats and experts to uncertain positions. Persuading behavioral voters instead requires to position the experts visibly on top of the electoral list. Our empirical analysis, which uses data from the 2013 National election in Italy---held under closed list proportional representation---and from independent pre-electoral polls, is overall supportive of voters' rational behavior. Loyalists (i.e., party officers or former members of Parliament who mostly voted along party lines) are overrepresented in safe positions, and, within both safe and uncertain positions, they are ranked higher in the list.
    Keywords: closed party lists; electoral rule; political selection
    JEL: D72 D78 P16
    Date: 2015–03
  2. By: Arye L. Hillman (Bar-Ilan University); Kfir Metsuyanim; Niklas Potrafke
    Abstract: Group-based identity undermines democracy by impeding democratic change of government. A substantial literature has therefore studied how to make democracy consistent with group identity. We contribute to this literature by introducing the role of group decisiveness into voting incentives and mobilization of voters. In the elections that we study, for the same populations, accounting for income and other influences, group identity increased voter turnout on average by some 8 percentage points in local elections and decreased voter turnout by some 20 percentage points in national elections. We empirically investigate the effect of group identity on voter turnout and also evaluate whether group identity resulted in budgetary imbalance or replacement of local government because of disfunctionality. Our general contribution is to show how democracy can persist with group identity, although democracy in such instances differs from usual political competition.
    Date: 2015–03
  3. By: Hye-Young Lee (Sungkyunkwan University)
    Abstract: This paper examines the impact of political economic sensitivities of the trade regime among politically asymmetric countries. Our concerns focus on the effects of firm’s lobbying activity in each country, not only tariff setting, but also on the trade regime's decision, especially considering the countries’ asymmetries in political economic sensitivities. We derive the following conclusion from our oligopolistic political economy model. If the country has a greater political bias, then the domestic government prefers to participate in unilateral trade regime or bilateral trade regimes. However, if the country’s political factor is insignificant, then the government prefers to carry out complete free trade. These results imply that Korea-China-Japan FTA negotiation could be accelerated when three countries’ political sensitivities are larger. Moreover, China, which has the greatest political sensitivity, would be more likely to participate in Korea-China-Japan FTA. We find that the sharp contrast between these results and the previous literature stems mainly from the asymmetries of political economic sensitivities when domestic governments determine the political tariff and trade regime.
    Keywords: Political Economic Sensitivities; Trade Regime; Lobbying; Strategic Trade Policy
    Date: 2014–12
  4. By: Eddie Dekel; Michele Piccione
    Abstract: Under sequential voting, voting late enables conditioning on which candidates are viable, while voting early can influence the field of candidates. But the latter effect can be harmful: shrinking the field increases not only the likelihood that future voters vote for one's favorite candidate, but also that they vote for an opponent. Specifically, if one's favorite candidate is significantly better than all others then early voting is disadvantageous and all equilibria are equivalent to simultaneous voting. Conversely, when some other candidate is almost as good then any Markov, symmetric, anonymous equilibrium involves sequential voting (and differs from simultaneous voting).
    JEL: D72
    Date: 2014–11
  5. By: Adrian Chadi (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: This empirical study investigates if people’s concerns about the euro currency affect their life satisfaction. A minority of very concerned individuals appear to be unhappy, which cannot be explained by personality or other observable factors typically affecting well-being. As a novelty, this investigation exploits exogenous variation in reported concerns by using the intensity of media coverage on the euro crisis with its extraordinary events throughout the year 2011 as an instrument. Results from the application of several empirical approaches confirm that there is an effect from being concerned about the euro on people’s satisfaction with life. The first potential explanation is that perceived economic insecurity works as a transmission channel, but this is not fully supported by the empirical evidence. A second explanation suggests that political beliefs and euro-skeptic attitudes are at play and may trigger unhappiness as a consequence of a perceived lack of representation in German politics. In line with this argument, a regional analysis links the variation in unhappiness among concerned citizens to the actual votes for Germany’s first major anti-euro party in the subsequent federal elections.
    Keywords: Life satisfaction, euro crisis, currency, concerns, political protest, sensitive information, media coverage, instrumental variable, SOEP
    JEL: D72 H11 I31
    Date: 2015–03
  6. By: Brams, Steven; Potthoff, Richard
    Abstract: We distinguish between (i) voting systems in which voters can rank candidates and (ii) those in which they can grade candidates, such as approval voting, in which voters can give two grades—approve (1) or not approve (0)—to candidates. While two grades rule out a discrepancy between the average-grade winners, who receive the highest average grade, and the superior-grade winners, who receive more superior grades in pairwise comparisons (akin to Condorcet winners), more than two grades allow it. We call this discrepancy between the two kinds of winners the paradox of grading systems, which we illustrate with several examples and whose probability we estimate for sincere and strategic voters through a Monte Carlo simulation. We discuss the tradeoff between (i) allowing more than two grades, but risking the paradox, and (ii) precluding the paradox, but restricting voters to two grades.
    Keywords: Voting; elections; ranking system; grading system; approval voting; Condorcet paradox
    JEL: C61 C70 D71 D78
    Date: 2015–03–26
  7. By: Padró i Miquel, Gerard; Qian, Nancy; Xu, Yiqing; Yao, Yang
    Abstract: This paper aims to show that culture is an important determinant of the effectiveness of formal democratic institutions, such as elections. We collect new data to document the presence of voluntary and social organizations and the history of electoral reforms in Chinese villages. We use the presence of village temples to proxy for culture, or more specifically, for social (civic) capital and show that their presence greatly enhances the increase in public goods due to the introduction of elections. These results support the view that social capital complements democratic institutions such as elections.
    Keywords: Civic Capital; History; Institutions; Public Goods; Trust
    JEL: H41 P16
    Date: 2015–03
  8. By: Konte M. (UNU-MERIT)
    Abstract: We examine the effect of remittances on the legitimacy of democracy in Africa, testing whether remittance recipients are less likely to support democracy than are non-recipients. We hypothesise that the effect of remittances on support for democracy varies across groups of individuals sharing similar but unobserved background characteristics. Using the Afrobarometer surveys, we try to find out whether the respondents fall into different hidden clusters in such a way that the effect of remittances on the degree of support for democracy depends on the cluster. Our results support that remittances may be a curse for the degree of endorsement and support for democracy depending on the cluster of individuals that we consider. The analysis of the probability of being in the remittance curse cluster indicates that the perception of national priorities plays an important role. Indeed, people who attest that freedom and rights are the main national priorities have a lower probability of belonging to the remittances curse cluster than individuals who choose national priorities that are oriented towards the economic conditions of their country.
    Keywords: Microeconomic Behavior: Underlying Principles; Remittances; Economywide Country Studies: Africa;
    JEL: D01 F24 O55
    Date: 2015
  9. By: Hayriye Sagir (SELCUK UNIVERSITY); Hacer TuÄŸba Eroglu (SELCUK UNIVERSITY)
    Abstract: Institutions which are subunits of a government or regional administration and authorized as defining limited number of public policies in relatively small area and implicating these policies are defined as public institutions and local administrations. The existence reasons of local administrations enforce some services which will be presented to public not by the government centre but by the public entities which are not included in centralized administration hierarchy and in centralized management organizations. There are two types of the term’ decentralisation’ which are governmental decentralisation and political decentralisation. If the authority transferred by centralized management is limited with legislation and to a certain degree with jurisdiction it is Political decentralisation which is special to federal states, if the authorities transferred by centralized management is limited only with enforcement it is governmental decentralisation. The first target to be reached in democracies is to make the public have rights in administration. The prior purpose in countries which has the tradition of democratic administration is to include the public in each step of administration and decision making. Public’s participation in administration process and public’s having rights in administration are easy is local administrations. In this direction, this study’s main subject will be local administration systems and the relation of systems with democratic administration.
    Keywords: Local Administration, Local Administration Systems, Local Democracy, Participation
    JEL: H70 H76 H79
    Date: 2014–10
  10. By: James Lake (Southern Methodist University); Maia K. Linask (University of Richmond)
    Abstract: Governments, especially in developing countries, routinely practice binding overhang (i.e. setting applied tariffs below their binding WTO commitments) and frequently move the applied tariff for a given product up and down over the business cycle. Indeed, counter to conventional wisdom, applied tariffs are pro-cyclical in developing countries. We explain this phenomenon using a dynamic theory of lobbying. The government is captured by import-competing industries (or exporters), whose applied tariff concessions in response to lobbying threats by exporters (import-competing industries) cause fluctuations in applied tariffs and, thus, binding overhang. Applied tariffs are pro-cyclical when the government is captured by import-competing industries because these industries concede lower tariffs to exporters during recessions given recessions lower the opportunity cost of lobbying and thereby generate a stronger lobbying threat.
    Keywords: Binding overhang, lobbying, tariff bindings, applied tariffs
    JEL: C73 D72 F13
    Date: 2015–02
  11. By: Michal Pilc (Poznañ University of Economics)
    Abstract: The aim of this research was to identify determinants of the employment protection legislation reforms in the global perspective. The study was based on the Labor Freedom index published by the Heritage Foundation, which allowed to include 179 countries in the research that were observed in the period 2003-2013. The conducted research has indicated that changes in GDP and the level of employment in industry may induce the introduction of labor reforms. The changes in the labor law also occurred to be correlated with the number of the nearly excluded from the labor market (the long-term unemployed and youth not in education, employment or training) and also with changes in the government expenditure. However, all these factors may lead to substantially various reform programs in particular countries due to the heterogeneous political pressure of the labor market interest groups and different governmental determination in introduction of the reforms.
    Keywords: political economics; employment protection legislation; labor law; labor market institutions; labor market policy
    JEL: D02 D78 J08 J32
    Date: 2015–03

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