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

  1. Party Hacks and True Believers: The Effect of Party Affiliation on Political Preferences By Gould, Eric D; Klor, Esteban F
  2. Is happiness a predictor of election results? By George Ward
  3. The Citizen-Candidate Model with Imperfect Policy Control By R. Emre Aytimur; Aristotelis Boukouras; Robert Schwagerz
  4. Shared Mandates, Moral Hazard, and Political (Mis)alignment in a Decentralized Economy By Antonio Estache; Grégoire Garsous; Ronaldo Seroa da Motta
  5. Market Distortions and Political Rent: The Case of Fertilizer Price Divergence in Africa By Shimeles, Abebe; Gurara, Daniel Zerfu; Birhanu Tessema, Dawit
  6. The Value of Political Ties versus Market Credibility: Evidence from Corporate Scandals in China By T.J. Wong; Mingyi Hung; Fang Zhang
  7. Transnational capital and the political settlement of Ghana’s oil economy By Giles Mohan; Kojo Pumpuni Asante
  8. Investigating the political economy of social protection expansion in Africa at the intersection of transnational ideas and domestic politics By Lavers, Tom; Hickey, Sam
  9. Political Volatility and Capital Markets: Evidence from Transition By Christopher Hartwell
  10. The Political Economy of Hindu Nationalism: From V.D. Savarkar to Narendra Modi By Iwanek, Krzysztof
  11. Politico-Economic Determinants of Tort Reforms in Medical Malpractice By Ulrich Matter; Alois Stutzer
  12. Polyarchies, Competitive Oligarchies, or Inclusive Hegemonies? 23 Global Intergovernmental Organizations Compared By Dawisson Belém Lopes
  13. The political economy of (in)formal long term care transfers By De Donder, Philippe; Leroux, Marie-Louise
  14. Political risk guarantees and capital flows: The role of bilateral investment treaties By Mina, Wasseem
  15. The political economy of rationing health care in England and the US: the ‘accidental logics’ of political settlements By Gwyn Bevan; Lawrence D. Brown
  16. The social legitimacy of differently targeted benefits By Wim van Oorschot; Femke Roosma

  1. By: Gould, Eric D; Klor, Esteban F
    Abstract: This paper examines the effect of party affiliation on an individual’s political views. To do this, we exploit the party realignment that occurred in the U.S. due to abortion becoming a more prominent and highly partisan issue over time. We show that abortion was not a highly partisan issue in 1982, but a person’s abortion views in 1982 led many to switch parties over time as the two main parties diverged in their stances on this issue. We find that voting for a given political party in 1996, due to the individual’s initial views on abortion in 1982, has a substantial effect on a person’s political, social, and economic attitudes in 1997. These findings are stronger for highly partisan political issues, and are robust to controlling for a host of personal views and characteristics in 1982 and 1997. As individuals realigned their party affiliation in accordance with their initial abortion views, their other political views followed suit.
    Keywords: partisanship; political preferences
    JEL: D72
    Date: 2015–04
  2. By: George Ward
    Abstract: Is it in politicians’ interest to focus policy on subjective well-being (SWB)? Many governments and international organisations have recently begun to measure progress at least partly in terms of the population’s SWB or “happiness”. This paper investigates the extent to which citizens themselves judge national success in such terms. Using cross-country panel data, the analysis shows that the electoral fate of governing parties is associated not only with the state of the macroeconomy—as a substantial literature on ‘economic voting’ suggests—but also with the electorate’s wider well-being. A country’s aggregate level of SWB is able to account for more of the variance in government vote share than standard macroeconomic variables. This is consistent with a simple political agency model, and has implications for the incentives faced by politicians to act in the interests of voters.
    Keywords: Subjective well-being; political agency; elections
    JEL: I31
    Date: 2015–03
  3. By: R. Emre Aytimur; Aristotelis Boukouras; Robert Schwagerz
    Abstract: We present a modified citizen-candidate model where the implemented policy arises from a compromise between the government and an unelected external power. We show that the two-candidate equilibria of this model differ significantly from the original: however small the cost of candidacy, the distance between the candidates' policies, both ideal and implemented, remains strictly above a threshold. Moreover, there may be one-candidate equilibria in which the only candidate is not the one most preferred by the median voter. Both results point out that, even with negligible cost of entry, there are limits to strategic delegation.
    Keywords: elections, polarization, strategic delegation, bureaucracy, foreign influence
    JEL: D72 D78
    Date: 2015–04
  4. By: Antonio Estache; Grégoire Garsous; Ronaldo Seroa da Motta
    Abstract: This paper investigates the effects of political (mis)alignment on public service delivery when mandates are shared between state and local governments. We analyze sewage treatment policies in the state of São Paulo, Brazil. Relying on difference-in-differences estimations, we establish a causal relationship between political alignment and higher sewage treatment provision. Conceptually, we find that, with uncertain local commitment and weakly enforceable local obligations, shared mandates lead to a moral hazard issue implying service under-provision. Our results show that political alignment attenuates such moral hazard effects.
    Keywords: Transparency & Anticorruption, Public Utilities, Public Services, Municipal management, Wastewater treatment, Sewerage, Sanitation, Decentralization, Political alignment, Infrastructure provision, Water and sanitary services, Moral
    Date: 2015–03
  5. By: Shimeles, Abebe (African Development Bank); Gurara, Daniel Zerfu (African Development Bank); Birhanu Tessema, Dawit (African Development Bank)
    Abstract: We examine the fertilizer retail-import price gap in 14 African countries between 2002 and 2013. This price differential is large and remains persistent even after accounting for changes in the cost of domestic transportation. We hypothesize that these persistent deviations may be indicative of market power by importers/suppliers granted to them by governments that are prepared to bar competition in exchange for political rent. Our results show that the retail-import price differential is negatively correlated with government effectiveness. Quality of institutions both in terms of executing public policy and delivering services is, on average, likely to affect retail-import price gaps. Overall, our understanding of market imperfections is enhanced by a closer examination of the role of governance and regulation. The study illustrates this by establishing a link between retail-import price differentials and market efficiency and the quality of regulatory environment in Africa.
    Keywords: market distortions, political rent
    JEL: D43 O12
    Date: 2015–04
  6. By: T.J. Wong (Department of Accounting, The Chinese University of Hong Kong); Mingyi Hung (Department of Accounting, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Fang Zhang (Department of Accounting, Hong Kong Baptist University)
    Abstract: This paper compares the value of political ties and market credibility in China by examining the consequence of corporate scandals. We categorize Chinese corporate scandals by whether the scandal is primarily associated with the destruction of i) the firm’s political networks (political scandals), ii) the firm’s market credibility (market scandals), or iii) both (mixed scandals). Consistent with our hypothesis that scandals signaling the destruction of political ties are associated with greater losses in firm value than scandals signaling the destruction of market credibility, we find that the stock market reacts more negatively to political and mixed scandals than to market scandals. In addition, the greater negative market reactions associated with political and mixed scandals are primarily driven by firms that rely more on political networks. We also find that, compared to market scandals, political and mixed scandals lead to larger decreases in operating performance, greater reduction in loans from state-owned banks, and higher departure of political directors.
    Keywords: political economy, market credibility, corporate scandals, China
    JEL: G34 O17 P16 G32 G39
    Date: 2015–03
  7. By: Giles Mohan; Kojo Pumpuni Asante
    Abstract: Ghana’s recent status as an oil producer focuses attention on the relationship between domestic politics and transnational actors. While the political settlements literature is useful for focusing on how elite coalitions shape the governance of natural resources, it is not explicit about the role of transnational factors in shaping and enabling these coalitions. As such there is a tendency to downplay the significance of transnational-national interactions and national-local dynamics. This paper analyses the changing nature of the political settlement in Ghana pre- and post-oil and the role that transnational actors play in reshaping the coalitions which underpin and reproduce the overall settlement. We find that the discovery of oil has not radically altered the nature of Ghana’s political settlement, which remains of a competitive clientelist form within which institutional functioning and policy actors are heavily influenced by the need of political elites to secure success in increasingly tightly-fought elections. These tendencies and the ongoing structural inequalities between transnational capital and the sovereign state have resulted in oil licences being negotiated on terms favouring external actors. Through primary data collected from key informant interviews and case studies we show that power lies with the external actors albeit through the elite brokerage of contracts. Within these bargaining processes we see parts of the Ghanaian state acting strongly and effectively to serve both the interests of domestic elites and transnational capital. The combined effect of competitive clientelism and new sources of foreign capital is that structural issues and longer term planning decisions are largely deprioritised in favour of shorter-term gains.
    Date: 2015
  8. By: Lavers, Tom; Hickey, Sam
    Abstract: The growing literature on social protection in Africa has tended to focus on conceptual debates, policy design issues and impact evaluations. To date, there has been relatively little systematic analysis of the ways in which politics and political economy shape policy. This paper outlines a conceptual and methodological framework for investigating the politics of social protection, with a particular focus on explaining the variation in progress made by African countries in adopting and implementing social protection programmes. We propose that an adapted "political settlements" framework that incorporates insights from the literatures on the politics of welfare state development and discursive institutionalism can help frame elite commitment to social protection as an outcome of the interaction of domestic political economy and transnational ideas. This approach has the advantage of situating social protection within a broader policy context, as well as highlighting the influence of underlying power relations in society. Finally, the paper suggests a research methodology that can be employed to operationalise this approach, with a particular focus on process tracing and comparative case study research.
    Keywords: social protection, social policy, economic policy, political aspect, Africa, protection sociale, politique sociale, politique économique, aspect politique, Afrique, protección social, política social, política económica, aspecto político, Africa
    Date: 2015
  9. By: Christopher Hartwell (Department of International Management, Kozminski University; Institute for Emerging Market Studies, Hong Kong University of Science and Technology; Center for Social and Economic Research, Warsaw)
    Abstract: This paper looks at the effects of political volatility in transition economies to ascertain how nascent political institutions affect fledgling capital markets. Asymmetric (GJR) GARCH modeling of monthly data was taken for 21 transition economies on financial volatility, political volatility, and monetary policy to test the drivers of financial volatility in transition. The key implication from these results is that political stability needs to be tended to both in the formal realm and the informal realm in order to avoid potentially damaging financial volatility. The need for consistent political institutions remains in transition economies as much as in developed countries.
    Keywords: volatility, political institutions, transition, stock markets
    JEL: G20 O43 P30
    Date: 2015–03
  10. By: Iwanek, Krzysztof
    Abstract: In May 2014 Indias stock markets climbed to a record high, anticipating the victory of the Bharatiya Janata Party and its charismatic leader, Narendra Modi. However, the first economic decisions of Modis government did not incite a market revolution (though it has only been few months since its inception). This, however, is not surprising if one traces the Hindu nationalists?changing views on economy throughout the last decades. The main inspirations of BJPs ideology have been its mother-organization (RSS), and two earlier Hindu nationalist parties: Bharatiya Jana Sangh and Hindu Mahasabha (mostly through ideas of its leader, V.D. Savarkar). After briefly describing the views of all of these bodies, I will map out the main issues in the Hindu nationalist approach towards economy. Finally, I will try to show how the present government of Narendra Modi is trying to deal with these discrepancies.
    Keywords: political economy in India, Hindu nationalism, Hindutva, swadeshi; Bharatiya Janata Party, Rashtriya Swayamsevak Sangh
    JEL: M00
    Date: 2014–12–01
  11. By: Ulrich Matter; Alois Stutzer (University of Basel)
    Abstract: The U.S. tort system has experienced various reforms during the last three decades. While there is a broad literature on the consequences of these reforms, very little is known about their determinants. In this study, we investigate the politico-economic forces that were driving the reform process across U.S. states. We focus on five types of medical malpractice tort reform and apply semi-parametric proportional hazards models to assess the factors that are related to reform enactments. We find, first, that a higher fraction of Republicans in a state legislature as well as a Republican governor are the major drivers of medical malpractice tort reforms. Second, we find that a higher fraction of women in a state legislature is associated with reforms being deferred. This finding is corroborated by micro-evidence on female legislators’ voting behavior on medical malpractice tort reforms, and it is consistent with the notion that women are disproportionally aggrieved by such reforms.
    Keywords: Tort reform, tort law, medical malpractice, rent-seeking, legislatures, women in politics
    JEL: D72 K13
    Date: 2015
  12. By: Dawisson Belém Lopes (Universidade Federal de Minas Gerais)
    Abstract: In this paper, I assume that global intergovernmental organizations (GIGOs) function as “enablers” of interstate liberal politics by way of their multilateral institutional frame-works. To support this view, I recall and adapt the classical concept of “polyarchy,” coined in the early 1950s by Robert A. Dahl. It consists of a two-dimensional theoretical construct applicable for measuring the level of liberalization in modern political societies. It follows that the more actors who take part in politics, and the more that institutions allow political opposition, the more open a society (of states) is likely to be. I thus wish to assess and rate the level of “polyarchization” of 23 GIGOs that cover various issue areas and fit some specific criteria (for example, more than one hundred member states from at least three different continents). The methodology section includes a scorecard that I have specially developed to help achieve these research objectives.
    Keywords: Robert A. Dahl, polyarchy, international organizations, democracy, political theory, international relations
    Date: 2015–02
  13. By: De Donder, Philippe; Leroux, Marie-Louise
    Abstract: We develop a model where families consist of one parent and one child, with children differing in income and all agents having the same probability of becoming dependent when old. Young and old individuals vote over the size of a social long term care transfer program, which children complement with informal (time) or formal (money) help to their dependent parent. Dependent parents have an intrinsic preference over informal to monetary help. We first show that low (resp., high) income children provide informal (resp. formal) help, whose amount is decreasing (resp. increasing) with the child's income. The middle income class may give no family help at all, and its elderly members would be the main beneficiaries of the introduction of social LTC transfers. We then provide several reasons for the stylized fact that there are little social LTC transfers in most countries. First, social transfers are dominated by informal help when the intrinsic preference of dependent parents for informal help is large enough. Second, when the probability of becoming dependent is lower than one third, the children of autonomous parents are numerous enough to oppose democratically the introduction of social LTC transfers. Third, even when none of the first two conditions is satisfied, the majority voting equilibrium may entail no social transfers, especially if the probability of becoming dependent when old is not far above one third. This equilibrium may be local (meaning that it would be defeated by the introduction of a sufficiently large social program). This local majority equilibrium may be empirically relevant whenever new programs have to be introduced at a low scale before being eventually ramped up.
    Keywords: Majority Voting, local Condorcet winner, crowding out, intrinsic preference for informal help, tax reform.
    JEL: D91 H55 I13
    Date: 2015–04–18
  14. By: Mina, Wasseem
    Abstract: This paper examines the influence of political risk guarantees of bilateral investment treaties on debt and equity flows using panel data on middle income countries for the period 1984-2011. Adopting system GMM methodology, the paper empirically finds that ratified bilateral investment treaties with OECD countries have a combined positive influence on non-guaranteed debt flows and a direct positive influence on portfolio equity flows. The results highlight the importance of considering political risk guarantees in financial integration, regulation of financial markets and institutions, and capital liberalization.
    Keywords: political risk guarantees,bilateral investment treaties,capital flows,debt flows,equity flows
    JEL: F21 F34 G15 G18 K33
    Date: 2015
  15. By: Gwyn Bevan; Lawrence D. Brown
    Abstract: This article considers how the 'accidental logics' of political settlements for the English National Health Service (NHS) and the Medicare and Medicaid programmes in the United States have resulted in different institutional arrangements and different implicit social contracts for rationing, which we define to be the denial of health care that is beneficial but is deemed to be too costly. This article argues that rationing is designed into the English NHS and designed out of US Medicare; and compares rationing for the elderly in the United States and in England for acute care, care at the end of life, and chronic care.
    JEL: N0
    Date: 2014–07–01
  16. By: Wim van Oorschot; Femke Roosma
    Abstract: Against the background of a permanent process of welfare reform, in which a pivotal role is played by the socio-political debate on ‘who should get what and why’, this paper addresses the question about the social legitimacy of differently targeted welfare schemes. It aims to review what is known in the academic literature on the social legitimacy of particular types of programs and schemes that are targeted at specific needs and needy groups. The central questions addressed are 1) what factors - institutional, cultural or even evolutional - make that some forms and aims of welfare targeting are more, or less, supported by the public than others, and 2) how these factors can be interpreted and related to each other in a more general framework? The review shows that the field needs to develop further, which is why the paper concludes with a discussion of some venues for future research on the legitimacy of differently targeted benefits.
    Keywords: deservingness, welfare state, public opinion, welfare attitudes, social legitimacy
    JEL: I30
    Date: 2015–04

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