nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒06‒20
27 papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Right Look: Conservative Politicians Look Better and Voters Reward It By Berggren, Niclas; Jordahl, Henrik; Poutvaara, Panu
  2. Electoral cycles in savings bank lending By Englmaier, Florian; Stowasser, Till
  3. Single-Issue Campaigns and Multidimensional Politics By Georgy Egorov
  4. The Generation Vote and Influential Media Power in Republic of Korea By Jeongeun Ahn
  5. Campaign Promises as an Imperfect Signal: How does an Extreme Candidate Win against a Moderate Candidate? By Yasushi Asako
  6. Measuring Political Budget Cycles: A Bayesian Semiparametric Assessment By Masahiro Tanaka
  7. Multicandidate Elections: Aggregate Uncertainty in the Laboratory By Laurent Bouton; Micael Castanheira; Aniol Llorente-Saguer
  8. The Political Economy of Public Income Volatility: With an Application to the Resource Curse By James A. Robinson; Ragnar Torvik; Theirry Verdier
  9. Political (In)Stability of Social Security Reform By Joanna Tyrowicz; Krzysztof Makarski
  10. The Political Economy of Social Security Funding: Why Social VAT Reform? By Hideki Konishi
  11. Ethnic divisions, political institutions and the duration of declines: A political economy theory of delayed recovery By Bluhm, Richard; Thomsson, Kaj
  12. Partisan Conflict and Private Investment By Marina Azzimonti
  13. Forecasting daily political opinion polls using the fractionally cointegrated VAR model By Morten Ørregaard Nielsen; Sergei S. Shibaev
  14. Democracy and Aristocracy in Ancient Athens: Deformation or Adaptation By Valerij Gouschin
  15. The Right Type of Legislator: A Theory of Taxation and Representation By Mattozzi, Andrea; Snowberg, Erik
  16. Culturally-biased voting in the Eurovision Song Contest: Do national contests differ? By Budzinski, Oliver; Pannicke, Julia
  17. The Political Economy of Trade and Labor Mobility in a Ricardian World By Sebastian Galiani; Gustavo Torrens
  18. Trade, Law and Order, and Political Liberties: Theory and Application to English Medieval Boroughs By Charles Angelucci; Simone Meraglia
  19. The Mortality Cost of Political Connections By Raymond Fisman; Yongxiang Wang
  20. The impact of political interference on Local Government Administration in Nigeria: Experience from Plateau State By Moses Emmanuel Dang
  21. Environmental Policy in a Federation with Special Interest Politics and Inter-governmental Grants By Divya Datt
  22. The effect of income on democracy revisited: A flexible distributional approach By Idzalika, Rajius; Kneib, Thomas; Martinez-Zarzoso, Inmaculada
  23. Competing For Loyalty: The Dynamics of Rallying Support By MATIAS IARYCZOWER; SANTIAGO OLIVEROS
  24. The Political Economy of European Integration By Enrico Spolaore
  25. Corrruption: The Determinants and Effects By Bak; G. Canberk BULU
  26. Simulating Russia’s Challenging Transition By Seth G. Benzell; Eugene Goryunov; Maria Kazakova; Laurence J. Kotlikoff; Guillermo LaGarda; Kristina Nesterova; Andrey Zubarev
  27. Delegation and public pressure in a threshold public goods game: theory and experimental evidence By Doruk Ä°riÅŸ; Jungmin Lee; Alessandro Tavoni

  1. By: Berggren, Niclas; Jordahl, Henrik; Poutvaara, Panu
    Abstract: Since good-looking politicians win more votes, a beauty advantage for politicians on the left or on the right is bound to have political consequences. We show that politicians on the right look more beautiful in Europe, the United States and Australia. Our explanation is that beautiful people earn more, which makes them less inclined to support redistribution. Accordingly, our model predicts that voters use beauty as a cue for conservatism when they do not know much about candidates and that politicians on the right benefit more from beauty in low-information elections. Evidence from real and experimental elections confirms both predictions.
    Keywords: Beauty; Elections; Political candidates; Appearance; Ideology; Parties
    JEL: D72 J45 J70
    Date: 2015–06–09
  2. By: Englmaier, Florian; Stowasser, Till
    Abstract: We provide evidence that German savings banks – where local politicians are by law involved in their management – systematically adjust lending policies in response to local electoral cycles. The different timing of county elections across states and the existence of a control group of cooperative banks – that are very similar to savings banks but lack their political connectedness – allow for clean identification of causal effects of county elections on savings banks’ lending. These effects are economically meaningful and robust to various specifications. Moreover, politically induced lending increases in incumbent party entrenchment and in the contestedness of upcoming elections.
    Keywords: Bank lending cycles; political business cycles; political connectedness; public banks; government ownership of firms
    JEL: G21 D72 D73
    Date: 2013–11–29
  3. By: Georgy Egorov
    Abstract: In most elections, voters care about several issues, but candidates may have to choose only a few to build their campaign on. The information that voters will get about the politician depends on this choice, and it is therefore a strategic one. In this paper, I study a model of elections where voters care about the candidates' competences (or positions) over two issues, e.g., economy and foreign policy, but each candidate may only credibly signal his competence or announce his position on at most one issue. Voters are assumed to get (weakly) better information if the candidates campaign on the same issue rather than on different ones. I show that the first mover will, in equilibrium, set the agenda for both himself and the opponent if campaigning on a different issue is uninformative, but otherwise the other candidate may actually be more likely to choose the other issue. The social (voters') welfare is a non-monotone function of the informativeness of different-issue campaigns, but in any case the voters are better off if candidates are free to pick an issue rather than if an issue is set by exogenous events or by voters. If the first mover is able to reconsider his choice in case the follower picked a different issue, then politicians who are very competent on both issues will switch. If voters have superior information on a politician's credentials on one of the issues, this politician is more likely to campaign on another issue. If voters care about one issue more than the other, the politicians are more likely to campaign on the more important issue. If politicians are able to advertise on both issues, at a cost, then the most competent and well-rounded will do so. This possibility makes voters better informed and better off, but has an ambiguous effect on politicians' utility. The model and the results may help understand endogenous selection of issues in political campaigns and the dynamics of these decisions.
    JEL: D72 D82
    Date: 2015–06
  4. By: Jeongeun Ahn (Ewha Womans University)
    Abstract: The ‘generation’ has had a great effect on general elections since 2002 in South Korea. It is important to generate ‘the generation vote’. The generation has made a ‘generation cleavage’ organize axis that consist of the left of axis called the young and progressive ‘2030(both 20s and 30s)’ and the right of axis called the old and conservative ‘5060(50s and 60s)’. In the meantime, the study of generation vote emphasized that one generation experienced a similar to political experience became one cohort group, having an identical voting behavior in election.After 2002, however, the newly rising 20s has brought generation cleavage to change a new cleavage paradigm since a presidential election in 2007. They have taken a stance midway between conservative and the progressive since 2007. They have gone as far as to turn conservative since 2012. The change of the 20’s generation vote is caused by ‘media literacy’. Media literacy is a competence of communication that enables people to analyze, evaluate, and create messages in a wide of variety media modes. The new rising 20s voters who have higher media literacy than other generations are able to approach a several of political information from a new viewpoint. Therefore, although the new rising 20s voter have different characteristics from other generations, they have shared their political tendency with other generations due to their higher degree of media literacy. In short, this paper would be centrally analyzed the change of the new rising 20s voters who have influence over changing the generation cleavage. Due to the media literacy, the differentiation of an intra-generational cohort such as the voting behavior of the 20s voters makes a new voter group that forms an alliance with other generations. So, It doesn't make the existing political generation cleavages such as 2030 vs. 5060, but the newly political generation cleavages such as 2030 vs. 2050.
    Keywords: generation vote, political voting behavior, media power
  5. By: Yasushi Asako (School of Political Science and Economics, Waseda University)
    Abstract: This study develops a political competition model in which campaign platforms are partially binding. A candidate who implements a policy that differs from his/her platform must pay a cost of betrayal, which increases with the size of the discrepancy. I also assume that voters are uncertain about candidatespolicy preferences. If voters believe that a candidate is likely to be extreme, there exists a semi-separating equilibrium: an extreme candidate imitates a moderate candidate, with some probability, and approaches the median policy with the remaining probability. Although an extreme candidate will implement a more extreme policy than will a moderate candidate, regardless of imitation or approach, partial pooling ensures that voters prefer an extreme candidate who does not pretend to be moderate over an uncertain candidate who announces an extreme platform. As a result, a moderate candidate never has a higher probability of winning than does an extreme candidate.
    Keywords: electoral competition, voting, campaign promise, signaling game
    JEL: C72 D72 D82
    Date: 2014–09
  6. By: Masahiro Tanaka (Graduate School of Economics, Waseda University)
    Abstract: In this paper, we estimate the effects of political variables, including the government’s popularity (approval rate) and term in office (tenure), on fiscal variables without any assumption of functional form, using a Bayesian semiparametric regression technique and US data. Our main findings are twofold. First, the effects of term in office are not statistically significant; that is, we find no evidence of either an unconditional or popularity-conditional political budget cycle. Second, the effects of the presidential approval rate on government consumption are U-shaped. This implies that the incumbent has an incentive to reduce government spending when the race for office is neck-and-neck, while the budget can be loosened when the incumbent is either certain to win or certain to lose the next election. The functional form of these effects is invariant throughout tenure. The estimation results indicate that incumbent politicians have an incentive to reduce federal government consumption to signal their competence to voters who are fiscally conservative, and that the political incentive to manipulate fiscal policy arises not only immediately before elections but also throughout the term of office.
    Date: 2015–01
  7. By: Laurent Bouton (Department of Economics, Georgetown University); Micael Castanheira; Aniol Llorente-Saguer (School of Economics and Finance, Queen Mary, University London)
    Abstract: The rational-voter model is often criticized on the grounds that two of its central predictions (the paradox of voting and Duverger's Law) are at odds with reality. Recent theoretical advances suggest that these empirically unsound predictions might be an artifact of an (arguably unrealistic) assumption: the absence of aggregate uncertainty about the distribution of preferences in the electorate. In this paper, we propose direct empirical evidence of the effect of aggregate uncertainty in multicandidate elections. Adopting a theory-based experimental approach, we explore whether aggregate uncertainty indeed favors the emergence of non-Duverger's law equilibria in plurality elections. Our experimental results support the main theoretical predictions: sincere voting is a predominant strategy under aggregate uncertainty, whereas without aggregate uncertainty, voters massively coordinate their votes behind one candidate, who wins almost surely.
    Keywords: Rational Voter Model, Multicandidate Elections, Plurality, Aggregate Uncertainty, Experiments
    JEL: C92 D70
    Date: 2015–04–16
  8. By: James A. Robinson; Ragnar Torvik; Theirry Verdier
    Abstract: We develop a model of the political consequences of public income volatility. As is standard, political incentives create inefficient policies, but we show that making income uncertain creates specific new effects. Future volatility reduces the benefit of being in power, making policy more efficient. Yet at the same time it also reduces the re-election probability of an incumbent and since some of the policy inefficiencies are concentrated in the future, this makes inefficient policy less costly. We show how this model can help think about the connection between volatility and economic growth and in the case where volatility comes from volatile natural resource prices, a characteristic of many developing countries, we show that volatility in itself is a source of inefficient resource extraction.
    Keywords: Income Volatility, Public Policy, Politics, Resource Extraction
    Date: 2015–03
  9. By: Joanna Tyrowicz (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland); Krzysztof Makarski (National Bank of Poland; Warsaw School of Economics)
    Abstract: In this paper we consider an economy populated by overlapping generations, who vote on abolishing the funded system and replacing it with the pay-as-you-go scheme (i.e. unprivatizing the pension system). We compare politically stable and politically unstable reforms and show that even if the funded system is overall welfare enhancing, the cohort distribution of benefits along the transition path turns unprivatizing social security politically favorable.
    Keywords: pension system reform, time inconsistency, welfare
    JEL: H55 D72 C68 E17 E27
    Date: 2015
  10. By: Hideki Konishi (School of Political Science and Economics, Waseda University)
    Abstract: Recently, taxation reforms entailing a “social” valued-added tax (VAT), i.e., a social security reform shifting funding from traditional wage-based taxation to consumption taxation, have been obtaining political support in some developed countries; e.g. Japan, France, Denmark, and Germany. This paper analyzes the political economy of social security funding in an overlapping-generations economy. In particular, we consider how population aging influences the choice of wage or consumption tax financing by focusing on their differential impact on inter- and intragenerational redistribution. Our results show that population aging may drastically alter the political equilibrium, in that if the population growth rate is higher than the interest rate, wage taxation is the only equilibrium choice, but if it is lower, multiple equilibria are likely to emerge, in which the introduction of consumption taxation emerges as an alternative equilibrium choice.
    Keywords: political economy of social security, consumption tax, structure-induced equilibrium
    JEL: D78 H55
    Date: 2014–04
  11. By: Bluhm, Richard; Thomsson, Kaj
    Abstract: This paper analyzes the duration of large economic declines and provides a theory of delayed recovery. First, we develop a formal political economy model that illustrates a simple mechanism of how weak constraints on the political executive can lead to longer declines in ethnically heterogeneous countries. The model shows how uncertain post-recovery incomes and a winner-take-all threshold effect create a commitment problem rendering a cooperative equilibrium inaccessible. Holding out can benefit groups by reducing the threshold effects in subsequent periods, thus limiting the remaining uncertainty. Placing strong constraints on the executive solves this commitment problem by reducing the uncertainty from the threshold effects, which brings about cooperation earlier on. Second, we then test several empirical predictions from the model using standard data on linguistic heterogeneity and more detailed data on ethnic power configurations. We find that the partial correlations are consistent with the proposed theory. The effect of executive constraints on the length of declines is very large in heterogeneous countries, but practically disappears in ethnically homogeneous societies. The adverse effect of heterogeneity is driven by the number of groups; increasing political concentration works in the opposite direction.
    Keywords: economic crises, delayed recovery, political economy
    JEL: E6 O43 J15
    Date: 2015–05
  12. By: Marina Azzimonti
    Abstract: American politics have been characterized by a high degree of partisan conflict in recent years. Combined with a divided government, this has led not only to significant Congressional gridlock, but also to spells of high fiscal policy uncertainty. The unusually slow recovery from the Great Recession during the same period suggests the possibility that the two phenomena may be related. In this paper, I investigate the hypothesis that political discord depresses private investment. To this end, I first present a reduced-form political economy model to illustrate how news about political disagreement affects investment through agents' expectations. I then construct a novel high-frequency indicator of partisan conflict consistent with the model. The index, computed monthly between 1981 and 2015, uses a semantic search methodology to measure the frequency of newspaper articles reporting lawmakers' disagreement about policy. Using a 2SLS approach, I estimate that a 10% increase in the partisan conflict index is associated with a 3.4% decline in aggregate private investment in the US.
    JEL: C11 C26 E02 E22 E32 E62 H3 P48
    Date: 2015–06
  13. By: Morten Ørregaard Nielsen (Queen's University and CREATES); Sergei S. Shibaev (Queen's University)
    Abstract: We examine forecasting performance of the recent fractionally cointegrated vector autoregressive (FCVAR) model. The model is applied to daily polling data of political support in the United Kingdom for 2010-2015. We compare with popular competing models and at various forecast horizons. Our findings show that the precision of forecasts generated by the FCVAR model is better than all multivariate and univariate models in the portfolio, and the four variants of the FCVAR model considered are generally ranked as the top four models in terms of forecast accuracy. Furthermore, the FCVAR model significantly outperforms the standard cointegrated VAR (CVAR) model at all forecast horizons and the relative forecast improvement is highest at longer forecast horizons, where the root mean squared forecast error of the FCVAR model is up to 20% lower than that of the CVAR benchmark model. In an empirical application to the prediction of vote shares in the 2015 UK general election, forecasts generated by the FCVAR model leading into the election appear to provide a more informative assessment of the current state of public opinion on electoral support than that suggested by the hung government prediction of the opinion poll. Specifically, the FCVAR model projects the correct direction for the realized vote shares in the election for both the Conservative and Labour parties.
    Keywords: forecasting, fractional cointegration, opinion poll data, vector autoregressive model
    Date: 2015–06
  14. By: Valerij Gouschin (National Research University Higher School of Economics)
    Abstract: The article analyzes the role of the aristocracy in democratic Athens, i.e. in the Vth Century B.C. What happened to the aristocracy in democratic Athens? Whether the aristocrats were able to adapt themselves to new social and political realities? It is suggested that there took place their division into democratic and aristocratic piliticians, a separation of democratically-oriented leaders (prostates tou demou), who managed to adapt to democratic instituions. The political actions of prostatai had features of demagogy. Thus we can assume that such a phenomenon as demagogy appeared much earlier than previously thought. The other part of aristocracy was not alien to demagogy as well. Suffice it to mention the efforts made by Thucydides son of Melesias, who created a political hybrid, of an aristocratic hetaireia which did not shun demagogic techniques
    Keywords: Athenian democracy, Vth Century B.C., demos, aristocracy, political leadership.
    JEL: Z
    Date: 2015
  15. By: Mattozzi, Andrea; Snowberg, Erik
    Abstract: Theories of taxation conclude that legislators' ability to target redistribution to their districts’ results in higher government spending and taxation. Yet, despite the fact that securing “pork” is an important part of a legislator's job in the U.S., but not in European countries, the U.S. has lower taxes. Our analysis adds a simple assumption to standard models to reconcile them with this fact. Our assumption - that those who are successful in the private sector will also tend to be successful in negotiating transfers for their district - allows our theory to match stylized facts about class representation in legislatures. The model can then be used to examine policies aimed at increasing descriptive representation in legislatures. We find that many of these policies have no, or negative, effects on descriptive representation, including: increasing the number of representatives, allowing parties to choose candidates, or giving parties some ability to discipline legislator's votes and screen candidates. On the other hand, two policies are found to be particularly effective for increasing descriptive representation: proportional representation and limiting competition between legislators.
    Keywords: Political Economy, Citizen Candidates, Taxation, Redistribution, Representation, Legislatures
    JEL: D02 D63 D72 D78 H10 H23
    Date: 2015
  16. By: Budzinski, Oliver; Pannicke, Julia
    Abstract: The economic literature on the Eurovision Song Contest (ESC) establishes empirical evidence for culturally-biased voting, more precisely also biases based on geographical closeness, political relations, ethnical and linguistic affinity. The Bundesvision Song Contest (BSC), a similar contest with principally the same rules but organized on the national level in Germany, offers a unique opportunity to compare international voting bias patterns to national voting bias patterns. Thus, this paper presents an innovative analysis by comparatively analyzing the ESC's historical data from 1998 to 2013 and the BSC's data from its beginning in 2005 until 2013 with the same econometric methodology. Our results show that voting biases do not only matter in international contests but also occur in similarly-organized national contests with roughly similar magnitude and quality - despite the cultural background of participants and voters being much more homogenous.
    Keywords: Eurovision Song Contest,Bundesvision Song Contest,culturally-biased voting,media economics,cultural economics
    JEL: L82 Z10
    Date: 2014
  17. By: Sebastian Galiani; Gustavo Torrens
    Abstract: We explore the political economy of trade and labor mobility in a Ricardian world. We combine a Ricardian economy with a simple international political economy model as a basis for the determination of trade and labor mobility policies. We show that free trade can induce partial convergence, divergence or even a reversal of fortune in terms of the well-being of workers in every country, while free trade and free labor mobility lead to full convergence. We also show that free trade and no labor mobility is a Nash equilibrium of the political game, but free trade and free labor mobility is not. Thus, in a Ricardian world, the lack of convergence in levels of well-being across countries can be attributed to an international political equilibrium that blocks free labor mobility. We verify our main results under several variants of a Ricardian economy, including different assumptions about the set of goods, preferences and the number of countries involved. We also study two extensions of our model in which free trade and at least partial labor mobility is a Nash equilibrium of the political game. One extension introduces increasing returns to scale while the other an extractive elite.
    JEL: F13 F22
    Date: 2015–06
  18. By: Charles Angelucci (Columbia Business School, Columbia University.); Simone Meraglia (Department of Economics, University of Exeter)
    Abstract: We argue that trade opportunities, combined with the provision of law and order, may lead to local political liberties. In our model, a ruler chooses the size of an administration that (i) provides law and order for a merchant to use and (ii) collects taxes. Larger gains from trade increase the demand for law and order, which requires a larger administration. However, a larger administration is more difficult to monitor and allow local officials to expropriate merchants. When the resulting inefficiencies are significant, the ruler delegates control of the administration to the better-informed merchant, even though this makes tax evasion more tempting. We then analyze the emergence of local political liberties in post-Norman Conquest England (1066-1307) using data on taxation, commerce, and the behavior of local officials. This period marks the beginning of England's transition away from feudalism. We nd that trade expansion coincides with widespread misbehavior by ocials and, in line with the predictions of our model, an increasing willingness by the king to grant boroughs of high commercial value the right to elect local officials.
    Keywords: Institutions, Law and Order, Bureaucracy, Trade, Medieval England.
    JEL: D02 D73 N43 P14 P16
    Date: 2015
  19. By: Raymond Fisman; Yongxiang Wang
    Abstract: We study the relationship between the political connections of Chinese firms and workplace fatalities. In our preferred specification we find that the worker death rate for connected companies is two to three times that of unconnected firms (depending on the sample employed), a pattern that holds for within-firm estimations. The connections-mortality relationship is attenuated in provinces where safety regulators' promotion is contingent on meeting safety targets. In the absence of fatalities, connected firms receive fewer reports of major violations for safety compliance, whereas in years of fatal accidents the rate of reported violations is identical. Moreover, fatal accidents produce negative returns at connected companies and are associated with the subsequent departure of well-connected executives. These results provide suggestive evidence that connections enable firms to avoid (potentially costly) compliance measures, rather than using connections to avoid regulatory response after accidents occur. Our findings emphasize the social costs of political connections, and suggest that appropriate regulatory incentives may be useful in mitigating these costs.
    JEL: D73 J81 P26
    Date: 2015–06
  20. By: Moses Emmanuel Dang (Plateau State University, Bokkos)
    Abstract: Politics and administration are closely related but distinct from each other. This study examined whether politics have positive and or negative impact on Local Government Administration generally, and in specific terms: Plateau State. An evaluation of the historical development of local government system before and after colonial rule in Nigeria was carried out and a critical analysis of the role this third tier of government plays in the socio-economic development of the grassroots. This study utilised existing literature, observation, interview and focus group discussion on the subject matter. It is therefore the opinion of this study that under normal circumstances, politics and administration are two sides of the same coin. They are inseparable and complement one another for the most part. Politics is about making policies while the policies are implemented by the administrators. Whereas the administrators provide advice to the politicians in the formulation of policies, it was observed that politicians intrude and interfere in the affairs of the local government administrators most often negatively thereby truncating the needed grassroots development in Nigeria.
    Keywords: Politics, Administration, Local Government, Development
  21. By: Divya Datt (Centre for International Trade and Development,Jawaharlal Nehru University; Centre for International Trade and Development,Jawaharlal Nehru University)
    Abstract: The paper explores the potential effect of intergovernmental grants (IGG) on sub-national (local) environmental policy in a federal structure. In the model, a politically-inclined local government receives campaign contributions from the polluters' lobby in return for lower pollution taxes. A benevolent federal government uses IGG as an incentive to reduce the resulting distortion in the local pollution tax. IGG are formulaic transfers that are conditional on pollution levels - lower pollution in a sub-national jurisdiction relative to others translates into a higher share of the grant and vice versa. In equilibrium, the grant effect reduces the distortion created in the pollution tax by the lobby effect, and may even lead to a higher than Pigouvian tax when the local government assigns a large enough weight on social welfare and/or when the grant is large enough. Further, IGG result in the tax levels of jurisdictions becoming interdependent in an interesting way. Environmental policies in two jurisdictions may become strategic complements or substitutes depending on their relative pollution levels. The possibility of strategic substi- tution implies that federal welfare may not increase even when environmental policy becomes stricter in one state.
    Date: 2015
  22. By: Idzalika, Rajius; Kneib, Thomas; Martinez-Zarzoso, Inmaculada
    Abstract: We reexamine the effect of economic development on the level of democracy based on the data sets of Acemoglu et al. (2008) with a novel regression specification utilizing a zero-one-inflated beta distribution for the response variable democracy. The zero-one-inflated beta distribution is more appropriate for continuous but bounded responses with non-zero probabilities for the boundaries of the support than the other frequently used distributions such as the normal. Contrary to the results of Acemoglu et al. (2008), some support of causality is found particularly when explaining the variance of the democracy variables. Since our analysis highlights that the distribution of democracy is bimodal, we approximate the modes using two separate samples of OECD and non-OECD countries. Our results indicate that there are differences not only in the mean but also in other features of the response distribution between the two groups. For instance, higher incomes are associated with higher democracy levels in the OECD sub-sample, however for non-OECD the association is insignificant.
    Keywords: income,democracy,beta distribution,bimodal,OECD
    JEL: O1 C16
    Date: 2015
    Abstract: We consider a class of dynamic collective action problems in which either a single principal or two competing principals vie for the support of members of a group. We focus on the dynamic problem that emerges when agents negotiate and commit their support to principals sequentially. A danger for the agents in this context is that a principal may be able to succeed by exploiting competition among members of the group. Would agents benefit from introducing competition between opposing principals? We show that when principals’ policies provide value to the agents, competition actually reduces agents’ welfare.
    Date: 2015–06–01
  24. By: Enrico Spolaore
    Abstract: This paper discusses the process of European institutional integration from a political-economy perspective, linking the long-standing political debate on the nature of the European project to the recent economic literature on political integration and disintegration. First, we introduce the fundamental trade-off between economies of scale associated with larger political unions and the costs from sharing public goods and policies among more heterogeneous populations, and examine the implications of the trade-off for European integration. Second, we describe the two main political theories of European integration - intergovernmentalism and functionalism - and argue that both theories capture important aspects of European integration, but that neither view provides a complete and realistic interpretation of the process. Finally, we critically discuss the actual process of European institutional integration and its limits, from its beginnings after World War II to the current crisis.
    JEL: F02 F15 F5 H41 H56 H77
    Date: 2015–06
  25. By: Bak (Aksaray University); G. Canberk BULU (Aksaray University)
    Abstract: This study aims to identify the determinants of corruption and its influence for 159 countries in the years between 2008-2012 by using Structural Equation Model. For this purpose, the model is constructed as the determinants of corruption in the period of t-1, the corruption in the period of t and the effects of corruption in the period of t+1. Model is analyzed in two structures. It is examined that determinants of corruption’s effects on the corruption in the first structure and the economic and political effects of the corruption in the second. According to the results, there is statistically a negative relationship between economic determinants and the level of corruption. Similarly there is a negative relationship between political determinants and the level of corruption. Moreover, there is a negative relationship between socio-cultural determinants and the level of corruption. It is observed in the second construction of the analysis that there is statistically a negative relationship between corruption and selected economic indicators. Similarly there is statistically a negative relationship between corruption and selected political indicators.
    Keywords: Corruption, Structural Equation Modelling, Economic Variables, Socio-culturel Variables, Political Variables
  26. By: Seth G. Benzell; Eugene Goryunov; Maria Kazakova; Laurence J. Kotlikoff; Guillermo LaGarda; Kristina Nesterova; Andrey Zubarev
    Abstract: This paper develops a large-scale, dynamic life-cycle model to simulate Russia’s demographic and fiscal transition under favorable and unfavorable fossil-fuel price regimes. The model includes Russia, the U.S., China, India, the EU, and Japan (Japan plus Korea). The model predicts dramatic increases in tax rates in the U.S., EU, India, and Russia. Indeed, the increases are so large as to question their political feasibility let alone their actual collection given the potential for tax avoidance and evasion.
    JEL: F0 F20 H0 H2 H3 J20
    Date: 2015–06
  27. By: Doruk Ä°riÅŸ; Jungmin Lee; Alessandro Tavoni
    Abstract: The provision of global public goods, such as climate change mitigation and managing fisheries to avoid overharvesting, requires the coordination of national contributions. The contributions are managed by elected governments who, in turn, are subject to public pressure on the matter. In an experimental setting, we randomly assign subjects into four teams, and ask them to elect a delegate by a secret vote. The elected delegates repeatedly play a one shot public goods game in which the aim is to avoid losses that can ensue if the sum of their contributions falls short of a threshold. Earnings are split evenly among the team members, including the delegate. We find that delegation causes a small reduction in the group contributions. Public pressure, in the form of teammates’ messages to their delegate, has a significant negative effect on contributions, even though the messages are designed to be payoff-inconsequential (i.e., cheap talk). The reason for the latter finding is that delegates tend to focus on the least ambitious suggestion. In other words, they focus on the lower of the two public good contributions preferred by their teammates. This finding is consistent with the prediction of our model.
    Date: 2015–03

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