nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒05‒09
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Greening Up or Not? The Determinants Political Parties’ Environmental Concern: An Empirical Analysis Based on European Data (1970-2008) By Benjamin Michallet; Giuseppe Lucio Gaeta; François Facchini
  2. Voting with public information By Shuo Liu
  3. Suspiciously Timed Trade Disputes By Paola Conconi; David De Remer; Georg Kirchsteiger; Lorenzo Trimarchi; Maurizio Zanardi
  4. Radio and the rise of the Nazis in prewar Germany By Adena, Maja; Enikolopov, Ruben; Petrova, Maria; Santarosa, Veronica; Zhuravskaya, Ekaterina
  5. On the Effect of State fragility on Corruption By Simplice Asongu
  6. Biting the Hand that Feeds: Reconsidering Partisanship in an Age of Permanent Austerity By Abel Bojar
  7. Agglomeration Economies, Taxable Rents, And Government Capture: Evidence From A Place-Based Policy By Brülhart, Marius; Simpson, Helen
  8. How Modern Dictators Survive: An Informational Theory of the New Authoritarianism By Sergei Guriev; Daniel Treisman
  9. A political economy of China's export restrictions on rare earth elements By Pothen, Frank; Fink, Kilian
  10. Politicians' promotion incentives and bank risk exposure in China By Wang, Li; Menkhoff, Lukas; Schröder, Michael; Xu, Xian
  11. The political economy of the distributional character of the Greek taxation system (1995–2008) By Ioannidis, Yiorgos
  12. Government Connections and Financial Constraints: Evidence from a Large Representative Sample of Chinese Firms By Cull, Robert; Li, Wei; Sun, Bo; Xu, Lixin Colin
  13. George Orwell as a Public Choice Economist By Makovi, Michael

  1. By: Benjamin Michallet (University Paris I Panthéon-Sorbonne/Paris School of Economics, Paris (France)); Giuseppe Lucio Gaeta (University of Naples, L’Orientale, Naples (Italy)); François Facchini (University of Paris 11 (RITM), Paris (France))
    Abstract: Why do parties offer environmental policies in their political programs? While a number of papers examine the determinants of citizens’ pro-environmental behaviour, we know little about the extent to which political parties adjust their platform towards environmentalism. We investigate this process through data provided by the Manifesto Project Dataset (CMP) for 20 European countries over the period 1970-2008. Following the literature on public concern towards environment, we examine economic, environmental and political determinants. Our findings provide evidence that political parties’ environmental concern is strongly correlated with their political ideology and with country-level economic conditions.
    Keywords: Environmental Concern, Environmental Attitudes, Political Parties, Electoral Manifestos
    JEL: Q58 D78 Z13
    Date: 2015–03
  2. By: Shuo Liu
    Abstract: We study the effect of public information on collective decision-making in a committee with members of both common and conflicting interests. We show that the set of preferences that allow for the existence of an informative voting equilibrium can be heavily restricted by the presence of a public signal, regardless of the size of the committee and the choice of the voting threshold value. What’s worse, the presence of the public information introduces an inefficient equilibrium which robustly exists across different voting rules. To mitigate the harmful effect of the public information, we propose to use a class of more flexible voting rules, whose threshold values de- pend on both the precision and the realization of the public signal, that may restore the informative voting equilibrium. In particular, in a standard setting with common interest agents, the contingent voting rule that we construct not only always restores the informative voting equilibrium but also achieves full informational efficiency.
    Keywords: Strategic voting, collective decision-making, public information, committee design, optimal voting rule
    JEL: D72 D82
    Date: 2015–04
  3. By: Paola Conconi; David De Remer; Georg Kirchsteiger; Lorenzo Trimarchi; Maurizio Zanardi
    Keywords: trade disputes; elections; reciprocity
    JEL: F13 D72 D78 D63
    Date: 2015–05
  4. By: Adena, Maja; Enikolopov, Ruben; Petrova, Maria; Santarosa, Veronica; Zhuravskaya, Ekaterina
    Abstract: How do the media affect public support for democratic institutions in a fragile democracy? What role do they play in a dictatorial regime? We study these questions in the context of Germany of the 1920s and 1930s. During the democratic period, when the Weimar government introduced progovernment political news, the growth of Nazi popularity slowed down in areas with access to radio. This effect was reversed during the campaign for the last competitive election as a result of the pro- Nazi radio broadcast following Hitler's appointment as German chancellor. During the consolidation of dictatorship, radio propaganda helped the Nazis to enroll new party members. After the Nazis established their rule, radio propaganda incited anti-Semitic acts and denunciations of Jews to authorities by ordinary Germans. The effect of anti-Semitic propaganda varied depending on the listeners' predispositions toward the message. Nazi radio was most effective in places where anti- Semitism was historically high and had a negative effect in places with historically low anti-Semitism.
    Abstract: Inwieweit können die Medien zum Schutz oder zur Untergrabung ungefestigter Demokratien beitragen? Und inwieweit können sie Unterstützung für die Politik des Diktators generieren? Wir analysieren diese Fragen im Kontext des Radios in der Weimarer Republik und dem frühen NSRegime. In der Zeit zwischen 1929 und 1932, in der das Rundfunkprogramm pro-demokratisch ausgerichtet war, hatte das Radio einen signifikant negativen Einfluss auf die Wahlergebnisse der NSDAP. Dieser Effekt wurde bereits 5 Wochen nach der Ernennung Hitlers zum Kanzler und der Kontrollübernahme über das Rundfunkprogramm umgekehrt. Nachdem die Nazis ihre Macht konsolidiert hatten, trug die Rundfunkpropaganda messbar zu vermehrten Parteieintritten und zur Zustimmung der Bevölkerung bei der Denunziation von Juden und zu anderen Formen des offenen Antisemitismus bei. Dennoch war der Einfluss der NS-Propaganda nicht uniform. Je nach Voreingenommenheit der Zuhörer konnte die Propaganda sehr effektiv oder aber kontraproduktiv sein. Das NS-Radio war am effektivsten in Orten mit historisch hohem Antisemitismus und hatte einen negativen Effekt auf die Unterstützung der antisemitischen Politik in Orten mit historisch niedrigem Antisemitismus.
    Keywords: Anti-semitism,dictatorship,media,Nazis,propaganda,unconsolidated democracy
    JEL: D72 L82 N74
    Date: 2015
  5. By: Simplice Asongu (Yaoundé/Cameroun)
    Abstract: The Kodila-Tedika & Bolito-Losembe (2014, ADR) finding on no evidence of causality flowing from State fragility to classical corruption or extreme corruption could have an important influence on academic and policy debates. Using updated data (1996-2010) from 53 African countries, we provide evidence of a positive (negative) nexus between political stability/no violence and corruption-control (corruption). As a policy implication, the finding of the underlying paper maybe more expositional than factual and should be treated with caution.
    Keywords: Fragility; Corruption; Conflicts; Africa
    JEL: F52 K42 O17 O55 P16
    Date: 2014–04
  6. By: Abel Bojar
    Abstract: The New Politics of the welfare state suggests that periods of welfare retrenchment present policy-makers with a qualitatively different set of challenges and electoral incentives compared to periods of welfare expansion. An unresolved puzzle for this literature is the relative electoral success of retrenching governments in recent decades, as evidenced by various studies on fiscal consolidations. This article points to the importance of partisan biases as the main explanatory factor. I argue that partisan biases in the electorate create incentives for incumbent governments to depart from their representative function and push the burden of retrenchment on the very constituencies that they owe their electoral mandate to (”Nixon-goes-to-China”). After offering a simple model on the logic of partisan biases, the article proceeds by testing the unexpected partisan hypotheses that the model generates. My findings from a cross-section-time-series analysis in a set of 25 OECD countries provide corroborative evidence on this Nixon-goes-to-China logic of welfare retrenchment: governments systematically inflict pain on their core constituencies. Some of the losses that the core constituencies suffer during austerity, however, are recouped during fiscal expansions when traditional partisan patterns take hold.
    Keywords: welfare retrenchment, social spending, austerity, partisanship, Nixon-goes-to-China, representation
    Date: 2015–04
  7. By: Brülhart, Marius; Simpson, Helen
    Abstract: We study how industry-level agglomeration economies affect government policy. Using administrative data on firm subsidies in economically lagging regions of Great Britain, we test two alternative hypotheses. Economic geography models imply that firms at an industry’s core can sustain higher tax burdens or require lower subsidies than firms in more remote locations. Conversely, political economy models predict firms at the industry’s core to be more successful at lobbying government, particularly at the sub-national level, thus obtaining more favourable fiscal treatment. We find that local government agencies structure subsidy offers to favour pre-existing employment in locally agglomerated industries, behaviour more in line with theories of policy capture than with economic geography models.
    Keywords: agglomeration; policy capture; regional grants; taxation
    JEL: H25 H32 R12
    Date: 2015–05
  8. By: Sergei Guriev; Daniel Treisman
    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 that 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 at the expense of 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—even if living standards fall. Censorship and co-optation of the elite are substitutes, but both are complements of propaganda. Due to coordination failure among members of the elite, multiple equilibria emerge. In some equilibria the ruler uses propaganda and co-opts the elite; in others, propaganda is combined with censorship. 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.
    JEL: H5 P16
    Date: 2015–04
  9. By: Pothen, Frank; Fink, Kilian
    Abstract: We investigate why governments restrict exports of exotic raw materials taking rare earth elements as a case study. Trade restrictions on exotic materials do not have immediate macroeconomic effects. Relocating rare earth intensive industries is found to be the main reason behind China's export barriers. They are part of a more extensive strategy aiming at creating comparative advantages in these sectors and at overcoming path dependencies. Moreover, export barriers serve as a second-best instrument to reduce pollution and to slow down the depletion of exhaustible resources. Growing domestic rare earth consumption renders those increasingly ineffective. Rising reliance on mine-site regulation indicates that this fact is taken into account. Rare earth extraction is dominated by a few large companies; the demand side is dispersed. That speaks against successful lobbying for export restrictions. It appears as if the export barriers are set up to compensate mining firms.
    Keywords: Rare Earths,Export Restrictions,Political Economy
    JEL: Q37 Q38 D78 P26
    Date: 2015
  10. By: Wang, Li; Menkhoff, Lukas; Schröder, Michael; Xu, Xian
    Abstract: This paper shows that politicians' pressure to climb the career ladder increases bank risk exposure in their region. Chinese local politicians are set growth targets in their region that are relative to each other. Growth is stimulated by debt-financed programs which are mainly financed via bank loans. The stronger the performance incentive the riskier the respective local bank exposure becomes. This effect holds primarily for local banks which are under a certain degree of control of local politicians and it has increased with the release of recent stimulus packages requiring local co-financing.
    Keywords: Bank Lending,Bank Risk Exposure,Local Politicians,Promotion Incentives
    JEL: G21 G23 H74
    Date: 2015
  11. By: Ioannidis, Yiorgos
    Abstract: The period between 1995 and 2008 is one of the fundamental transformations in the Greek economy. In that sense, we would expect an equally drastic change to have taken place in the structure of the taxation system. Nevertheless, no such change occurred. The explanation of this seeming paradox should be sought in the peculiar distributive (as opposed to redistributive) character of the Greek taxation system. The aim of this paper is to provide evidence for this phenomenon from a political economy perspective. The first section examines the general trends of taxation in Greece during the period 1995–2008 and the structure of personal income taxation. The second section delineates the basic features of the reform in income taxation and land taxation effected by the conservative government; lastly, the third part provides some critical commentary on the data as well as an interpretive context for the peculiar features of the Greek taxation system
    Keywords: Greece; taxation; political economy
    JEL: H00 H20 H24 H26
    Date: 2015
  12. By: Cull, Robert; Li, Wei; Sun, Bo (Board of Governors of the Federal Reserve System (U.S.)); Xu, Lixin Colin (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: We examine the role of firms' government connections, defined by government intervention in CEO appointment and the status of state ownership, in determining the severity of financial constraints faced by Chinese firms. We demonstrate that government connections are associated with substantially less severe financial constraints (i.e., less reliance on internal cash flows to fund investment), and that the sensitivity of investment to internal cash flows is higher for firms that report greater obstacles to obtaining external funds. We also find that those large non-state firms with weak government connections, likely the engine for innovation in the coming years in China, are especially financially constrained, due perhaps to the formidable hold that their state rivals have on financial resources after the 'grabbing-the-big-and-letting-go-the-small' privatization program in China. Our empirical results suggest that government connections play an important role in explaining Chinese firms' financing conditions, and provide further evidence on the nature of the misallocation of credit by China's dominant state-owned banks.
    Keywords: Financial constraints; investment; political connections; firm size; China; capital allocation; invest cash flow sensitivity
    JEL: G18 G21 G28 G38 O16
    Date: 2015–01–21
  13. By: Makovi, Michael
    Abstract: George Orwell is famous for his two final fictions, Animal Farm and Nineteen Eighty-Four. These two works are sometimes understood to defend capitalism against socialism. But as Orwell was a committed socialist, this could not have been his intention. Orwell's criticisms were directed not against socialism per se but against the Soviet Union and similarly totalitarian regimes. Instead, these fictions were intended as Public Choice-style investigations into which political systems furnished suitable incentive structures to prevent the abuse of power. This is demonstrated through a study of Orwell's non-fiction works, where his opinions and intentions are more explicit.
    Keywords: Orwell, Public Choice, socialism, totalitarianism, Neoconservatism
    JEL: B24 B31 D72 P20 P30 Z11
    Date: 2015–05–05

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