nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒05‒22
eight papers chosen by
Eugene Beaulieu
University of Calgary

  1. Suspiciously timed trade disputes By Paola Conconi; David R. DeRemer; Georg Kirchsteiger; Lorenzo Trimarchi; Maurizio Zanardi
  2. Politics in the Courtroom: Political Ideology and Jury Decision Making By Shamena Anwar; Patrick Bayer; Randi Hjalmarsson
  3. How asymmetric funding of parties can lead to political polarization By Köppl Turyna, Monika
  4. Democracy, cognitive skill, and top 1% income share in the 21st century By Yamamura, Eiji
  5. Drug Prices, Rents, and Votes in the German Health Care Market: An Application of the Peltzman Model By Anne Maria Busch
  6. On the Historical Roots of Women’s Empowerment across Italian Provinces: Religion or Family Culture? By Monica Bozzano
  7. Drug Prices and Pressure Group Activities in the German Health Care Market: An Application of the Becker Model By Anne Maria Busch
  8. The Causal Impact of Migration on US Trade: Evidence from a Natural Experiment By Steingress, Walter

  1. By: Paola Conconi; David R. DeRemer; Georg Kirchsteiger; Lorenzo Trimarchi; Maurizio Zanardi
    Abstract: This paper shows that electoral incentives affect the occurrence of trade disputes. Focusing on WTO disputes filed by the United States during the 1995-2012 period, we show that U.S. presidents are more likely to initiate a dispute in the year preceding their re-election date. Moreover, disputes led by the U.S. tend to target industries that are important to swing states in the presidential election. To explain these regularities, we develop a theoretical model in which an incumbent can file a trade dispute to appeal to voters motivated by reciprocity. The incumbent's ability to initiate a dispute during the re-election campaign provides an advantage over the challenger, who cannot commit to file the dispute if elected. If voters' ideological preferences are not too strong in favor of either candidate, the incumbent will le a trade dispute to increase his re-election chances.
    Keywords: trade disputes, elections, reciprocity
    JEL: F13 D72 D78 D63
    Date: 2015
  2. By: Shamena Anwar; Patrick Bayer; Randi Hjalmarsson
    Abstract: This paper uses data from the Gothenburg District Court in Sweden and a research design that exploits the random assignment of politically appointed jurors (termed nämndemän) to make three contributions to the literature on jury decision-making: (i) an assessment of whether systematic biases exist in the Swedish nämndemän system, (ii) causal evidence on the impact of juror political party on verdicts, and (iii) an empirical examination of the role of peer effects in jury decision-making. The results reveal a number of systematic biases: convictions for young defendants and those with distinctly Arabic sounding names increase substantially when they are randomly assigned jurors from the far-right (nationalist) Swedish Democrat party, while convictions in cases with a female victim increase markedly when they are assigned jurors from the far-left (feminist) Vänster party. The results also indicate the presence of peer effects, with jurors from both the far-left and far-right parties drawing the votes of their more centrist peers towards their positions. Peer effects take the form of both sway effects, where jurors influence the opinions of their closest peers in a way that can impact trial outcomes, and dissent aversion, where jurors switch non-pivotal votes so that the decision is unanimous.
    JEL: K0 K14 K4
    Date: 2015–05
  3. By: Köppl Turyna, Monika
    Abstract: This work analyzes the impact of asymmetric financial constraints on the platforms of parties using a formal model of elections. Main results show that when a party faces a tight financial constraint the platform chosen in equilibrium is further away from its ideal point compared to the case when the campaign expenses are not limited. Moreover, we have shown that the platform of the party which is facing a tighter financial constraint is further away from its ideal point than of the opponent. These results show the theoretical foundations for the empirical observations made, about the impact of public funding of parties on their platforms.
    Keywords: campaign finance, polarization, endogenous valence, public funding
    JEL: D72 D78
    Date: 2015–04–01
  4. By: Yamamura, Eiji
    Abstract: Studies to date have shown that income concentration for the top 1% income share, the super-rich, has increased conspicuously in the 21st century. However, there is insufficient knowledge on how political factors and types of human capital influence income concentration. Using cross-country data from this century, I provide empirical evidence that shows that democracy and cognitive skill are negatively correlated to the top 1% income share.
    Keywords: Democracy; Cognitive skill; Top 1% income share
    JEL: I24 P16
    Date: 2015–04–22
  5. By: Anne Maria Busch (Leuphana University Lueneburg, Germany)
    Abstract: Using the health care reform of 2004 as an experience, the reaction of consumers (insured persons) and producers (pharmaceutical industry) based on electoral behavior and relating to drug prices and copayments imposed on drugs is analyzed. The changes in prices and medications after this reform make it to a natural choice. For the analysis, the interest group model by Peltzman (1976) is applied to the German health care market. The vote-maximizing government has to find the optimal combination of rent and price of regulation. As a result, the vote-maximizing outcome is determined by a price level which reflects the interests of consumers as well as the pharmaceutical industry. The analysis of the reaction of consumers related to the co-payment rules of 2004 leads to the hypothesis that the regulator, and finally the pharmaceutical industry, sets drug prices in a way that they are ranging from 5 to 50 Euro. Prices between 50 and 100 Euro are possible as well, reflecting a balance of power facing the pharmaceutical industry. Producers who had accepted the 1989 reference price had an incentive to increase their price while lowering their sales volume.
    Keywords: German health care market, interest groups, political pressure, lobbyism
    JEL: D72 D78 I39
    Date: 2015–05
  6. By: Monica Bozzano
    Abstract: In most developed countries the gender gap is nearly closing in the health and educational spheres while there is still sizeable gender inequality in the economic and political dimensions. Why do women’s economic decision-making and political empowerment vary so widely? What are the main potential determinants of such variations? In this paper we explore the association between two specific facets of women’s empowerment, the percentage of women holding office in local political bodies and the percentage of women in high-ranking jobs, with the cultural environment in which women make their career decisions. Our hypothesis is that culture, in particular those values embodied by religious culture, plays a central role in shaping norms and beliefs about the role and involvement of women in society. Moreover we suggest that these cultural norms are inherited from the past and therefore have a high degree of inertia. Over a cross section of Italian provincial data, both OLS and IV results indicate that our measures of women’s empowerment are strongly associated with religious culture, as proxied by religious marriages. These results are robust and consistent across specifications
    Keywords: women’s empowerment, politics, glass ceiling, religion, family culture, historical determinants
    JEL: J16 J7 N30 R1 Z10 Z12
    Date: 2015–04
  7. By: Anne Maria Busch (Leuphana University Lueneburg, Germany)
    Abstract: This article analyzes the shifts of power relation and influence between pharmaceutical industry (producers), pharmacies, and social health insurers (SHI) in Germany based on drug prices. Since the health care reform of 2004, these interest groups have negotiated fees and discounts among each other without any intervention from the government. These negotiations and resulting amendments to the original law express the shift of power of the involved groups, which can be explained with the Becker (1983) model. As a result, a trend becomes apparent, which shows a slight increase in political pressure on the part of SHI and a big decrease of political pressure on the part of pharmacies and producers. This reflects the cost control trend in combination with the empowerment incentives for SHI. The last years have shown increased competition between the interest groups, resulting in more balanced power relations. Nevertheless, the most powerful group is still the producer group and the influence of SHI is still very low.
    Keywords: interest groups, political pressure, health care market, regulation
    JEL: D78 I39 D72 I18
    Date: 2015–05
  8. By: Steingress, Walter (Banque de France)
    Abstract: Immigrants can increase international trade by shifting preferences towards the goods of their country of origin and by reducing bilateral transaction costs. Using geographical variations across US states for the period 1970 to 2005, we quantify the impact of immigrants on intermediate goods imports. We address endogeneity and reverse causality – which arises if migration from a country of origin to a US state is driven by trade opportunities between the two locations – by exploiting the exogenous allocation of refugees within the US refugee resettlement program. Our results are robust to an alternative identification strategy, based on the large influx of Central American immigrants to the United States after hurricane Mitch. We find that a 10 percent increase in recent immigrants to a given US state raises intermediate imports from those immigrants' country of origin by 1.5 percent.
    Keywords: international trade, international migration, political refugees, hurricane Mitch
    JEL: F14 F22 J61
    Date: 2015–05

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