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

  1. The Impact of Political Competition on Economic Growth: Evidence from Municipalities in South Africa By Nonso Obikili
  2. The Political Legacy of Entertainment TV By Ruben Durante; Paolo Pinotti; Andrea Tesei
  3. Political Advertising and Voting Intention: Evidence from Exogenous Variation in Ads Viewership By Ruben Durante; Emilio Gutierrez
  4. Budget, expenditures composition and political manipulation: Evidence from Portugal By Vítor Castro; Rodrigo Martins
  5. Politics 2.0: the Multifaceted Effect of Broadband Internet on Political Participation By Filipe R. Campante; Ruben Durante; Francesco Sobbrio
  6. Revenue decentralization, central oversight and the political budget cycle: Evidence from Israel By Baskaran, Thushyanthan; Blesse, Sebastian; Brender, Adi; Reingewertz, Yaniv
  7. Trial and Error? Reelection Concerns and Policy Experimentation during the U.S. Welfare Reform By Bernecker, Andreas; Boyer, Pierre C.; Gathmann, Christina
  8. Women voters and trade protectionism in the interwar years By de Bromhead, Alan
  9. “Political connections, corruption, and privatization of public services: Evidence from contracting out water services in Spain” By Germà Bel; Francisco González-Gómez; Andrés J. Picazo-Tadeo
  10. Attack When the World is Not Watching? International Media and the Israeli-Palestinian Conflict By Ruben Durante; Ekaterina Zhuravskaya
  11. Market-Based Lobbying: Evidence from Advertising Spending in Italy By Stefano DellaVigna; Ruben Durante; Eliana La Ferrara; Brian Knight
  12. How Natural Disasters Can Affect Environmental Concerns, Risk Aversion, and Even Politics: Evidence from Fukushima and Three European Countries By Jan Goebel; Christian Krekel; Tim Tiefenbach; Nicolas R. Ziebarth
  13. A Case for Standard Theory? By Christoph Kuzmics; Daniel Rodenburger

  1. By: Nonso Obikili
    Abstract: This paper examines the impact of political competition on economic growth. Using results from the 1994 and 1999 elections I show that municipalities with a decisive vote either for or against the dominant national party have grown faster than municipalities with more voter competition amongst various political parties. I show that in democracies, governments with more freedom to make decisions and less threat from opposition political parties are associated with faster economic growth and improvement in supply of some public goods.
    Keywords: Political Competition, economic growth, Democracy, Voting Behaviour
    JEL: P16 O47 D72
    Date: 2015
  2. By: Ruben Durante (Sciences Po); Paolo Pinotti (Università Bocconi); Andrea Tesei (Queen Mary University of London)
    Abstract: We investigate the political impact of entertainment television in Italy over the past thirty years by exploiting the staggered introduction of Silvio Berlusconi's commercial TV network, Mediaset, in the early 1980s. We find that individuals in municipalities that had access to Mediaset prior to 1985 - when the network only featured light entertainment programs - were significantly more likely to vote for Berlusconi's party in 1994, when he first ran for office. This effect persists for almost two decades and five elections, and is especially pronounced for heavy TV viewers, namely the very young and the old. We relate the extreme persistence of the effect to the relative incidence of these age groups in the voting population, and explore different mechanisms through which early exposure to entertainment content may have influenced their political attitudes.
    Keywords: Television; Entertainment; Voting; Political participation
    JEL: L82 D72 Z13
    Date: 2015–04
  3. By: Ruben Durante (Département d'économie); Emilio Gutierrez (Instituto Tecnológico Autónomo de México (ITAM))
    Abstract: Mexico’s campaign law assigns TV and radio ads to parties according to their vote share in the previous election, and mandates the time of the day at which ads are aired to be determined randomly. We exploit this arguably exogenous variation in viewers’ exposure to political ads by different parties and longitudinal electoral survey data to estimate the effect of ads on voting intentions during Mexico’s 2012 presidential campaign. We find that political ads on both radio and TV have a positive, significant and sizeable effect on voting intentions. This effect is short-lived (about two weeks), and is stronger in the early weeks of the campaign. Ads tend to have no significant impact on voters’ knowledge of candidates’ political message, and to be more effective at convincing individuals that are more educated, and those who voted for the party in the past. Taken together these findings suggests that ads do not influence voters by conveying new information but that other mechanisms of persuasion, cantered around ads’ non-informative content, may be at work.
    Date: 2014–07
  4. By: Vítor Castro (Faculty of Economics, University of Coimbra, and NIPE, Portugal); Rodrigo Martins
    Abstract: This paper examines the presence of political cycles in Portuguese governments’ expenditures. The empirical analysis is done using monthly data for the main categories of government expenditures. The results indicate that Portuguese governments act opportunistically regarding the budget surplus and that they also favour capital instead of current spending near elections. Furthermore, right-wing governments tend to be more prone to expenditures’ reduction and deficits after the elections. A disaggregated analysis for the main components of government expenditures corroborates the previous findings and shows other relevant patterns of political manipulations.
    Keywords: Political budget cycles; Expenditure composition; Portugal; Elections; Fiscal policy.
    JEL: H72 D72 D78
    Date: 2015–06
  5. By: Filipe R. Campante (Harvard University); Ruben Durante (Département d'économie); Francesco Sobbrio (Catholic University of Milan)
    Abstract: We investigate the causal impact of broadband Internet on political participation using data from Italy. We show that this impact varies across different forms of political engagement and over time. Initially, broadband had a negative effect on turnout in national elections, driven by increased abstention of ideologically extreme voters. Meanwhile, however, broadband fostered other forms of online and offline participation. Over time, the negative effect was reverted due to the emergence of new political entrepreneurs who used the Internet to convert the initial “exit” back into “voice”. Overall, these nuanced effects underscore the general equilibrium dynamic induced by the Internet.
    JEL: D72 L82 L86
    Date: 2013–12
  6. By: Baskaran, Thushyanthan; Blesse, Sebastian; Brender, Adi; Reingewertz, Yaniv
    Abstract: This paper examines whether revenue decentralization and direct external financial supervision affect the incidence and strength of political budget cycles, using a panel of Israeli municipalities during the period 1999-2009. We find that high dependence on central government transfers - as reflected in a low share of locally raised revenues in the municipality´s budget - exacerbates political budget cycles, while tight monitoring - exercised through central government appointment of external accountants to debt accumulating municipalities - eliminates them. These results suggest that political budget cycles can result from fiscal institutions that create soft budget constraints: that is, where incumbents and rational voters can expect that the costs of pre-election expansions will be partly covered later by the central government.
    Keywords: political budget cycles,soft budget constraint,local governments,decentralization
    JEL: D72 H72 H74 E62
    Date: 2015
  7. By: Bernecker, Andreas (University of Mannheim); Boyer, Pierre C. (University of Mannheim); Gathmann, Christina (Heidelberg University)
    Abstract: We study the political economy of policy innovations during the U.S. welfare reform in 1996. Specifically, we investigate how reputation concerns among governors influence the decision to experiment with welfare policies. In line with a political agency model, our empirical results suggest that governors with high reputation among the electorate are less likely to experiment with welfare policies than governors with low reputation. Yet, governors with high reputation who are less concerned about reelection actually experiment more than governors striving for reelection. Overall, our findings imply that reelection concerns may inhibit innovation in the public sector.
    Keywords: policy innovation, reputation concerns, U.S. welfare reform, experimentation, reelection concerns
    JEL: I38 H11 H77 D78 D83
    Date: 2015–06
  8. By: de Bromhead, Alan
    Abstract: This paper examines the lessons of the interwar period to place current concerns regarding a return to protectionism in historical context, highlighting the unique and one-time changes in voting rights that took place during the period and their relationship with trade policy. A particularly novel finding is the impact of women voters on the politics of protectionism. Public opinion survey evidence from the interwar years indicates that women were more likely to hold protectionist attitudes than men, while panel data analysis of average tariff rates during the interwar period shows that when women were entitled to vote tariffs were, on average, higher. This result is supported by an instrumental variables approach using Protestantism as an instrument for female voting rights.
    Keywords: political economy,suffrage,international trade,gender differences
    JEL: N40 N70 F50
    Date: 2015
  9. By: Germà Bel (Faculty of Economics, University of Barcelona); Francisco González-Gómez (Faculty of Economics, University of Granada); Andrés J. Picazo-Tadeo (Faculty of Economics, University of Valencia)
    Abstract: Political corruption is a type of market failure. One area of public policy where corruption is relatively common is the contracting out of public services. Private firms can improve their chances of obtaining contracts by bribing politicians or public servants and funding political parties. In the same vein, firms can gain access to policy makers by hiring influential former politicians –a practice commonly referred to as revolving-doors. In Spain, a number of corruption cases, involving all the major political parties, are presently under judicial investigation. Some of these cases involve water contracts. Also, there is evidence showing that private firms have been funding political parties as well as hiring former politicians for top positions. In this paper, we use information from 892 privatizations of water services in Spanish municipalities between 1984 and 2014 and logistic multinomial regression techniques to study the association between specific firms securing contracts and the political parties ruling the municipalities. We find evidence of a systematic association between the Popular Party (Partido Popular or PP) and the firm, Aqualia, part of the large Spanish holding company, Fomento de Construcciones y Contratas (FCC), which is known to have funded the PP. Furthermore, former PP politicians have been appointed to top positions in the FCC board of directors.
    Keywords: Corruption; political connections; privatization; contracting out; urban water services; Spain JEL classification: D73; L33; L95
    Date: 2015–06
  10. By: Ruben Durante (Sciences Po); Ekaterina Zhuravskaya (Paris School of Economics, Université Paris I and CEPII)
    Abstract: Governments often take unpopular measures. To minimize the political cost of such measures policy makers may strategically time them to coincide with other newsworthy events, which distract the media and the public. We test this hypothesis using data on the recurrent Israeli-Palestinian conflict. Combining daily data on attacks on both sides of the conflict with data on the content of evening news for top U.S. TV networks, we show that Israeli attacks are more likely to be carried out when the U.S. news are expected to be dominated by important (non-Israel-related) events on the following day. In contrast, we find no evidence of strategic timing for Palestinian attacks. The timing of Israeli attacks minimizes the next-day news coverage which, as confirmed by comprehensive video content analysis, is especially charged with negative emotional content. We also find that: i) strategic timing is applied to retaliation only in periods of less intense fighting, when the urgency of retaliation is lower; ii) strategic timing is present only for the Israeli attacks that bear risk of civilians being affected; and iii) Israeli attacks are timed to newsworthy events that are predictable.
    Keywords: Conflict; Media; News Pressure; Strategic Timing; Israel; Palestine
    JEL: D74 L82 N4 D72
    Date: 2015–03
  11. By: Stefano DellaVigna (University of California, Berkeley); Ruben Durante (Département d'économie); Eliana La Ferrara; Brian Knight (Department of Economics (Brown University))
    Abstract: We analyze a novel lobbying channel: firms attempting to influence businessmen- politicians through business proxies. In particular, when a politician controls a business, firms shift their spending towards the politician's business in the hopes of securing favorable regulation. We investigate this channel in Italy where government officials are not required to divest business holdings. We examine the evolution of advertising spending by firms between 1993 and 2009, a period in which Silvio Berlusconi was prime minister three separate times, while maintaining control of Italy's major private television network, Mediaset. We develop a theoretical model of this channel and, in the context of this model, hypothesize that firms shift their advertising budget towards Mediaset when Berlusconi is in power and that this shift is particularly pronounced for regulated rms. Consistent with these hypotheses, we document a significant pro Mediaset bias in the allocation of advertising spending during Berlusconi's political tenure, and this pattern is especially pronounced for companies operating in more regulated sectors. Using these estimates, we estimate that Mediaset profits increased by one billion euros during this period and that regulated firms anticipated sizeable returns, stressing the economic importance of this lobbying channel. These findings provide an additional rationale for rules on conflict of interest.
    Date: 2014
  12. By: Jan Goebel; Christian Krekel; Tim Tiefenbach; Nicolas R. Ziebarth
    Abstract: We study the impact of the Fukushima disaster on environmental concerns, well-being, risk aversion, and political preferences in Germany, Switzerland, and the UK. In these countries, overall life satisfaction did not significantly decrease, but the disaster significantly increased environmental concerns among Germans. One underlying mechanism likely operated through the perceived risk of a similar meltdown of domestic reactors. After Fukushima, more Germans considered themselves as “very risk averse”. However, drastic German policy action shut down the oldest reactors, implemented the phaseout of the remaining ones, and proclaimed the transition to renewables. This shift in energy policy contributed to the subsequent decrease in environmental concerns, particularly among women, Green party supporters, and people living in close distance to the oldest reactors. In Germany, political support for the Greens increased significantly, whereas in Switzerland and the UK, this increase was limited to people living close to reactors.
    Keywords: Fukushima, nuclear phase-out, environmental concerns, well-being, risk aversion, Green party
    JEL: I18 I31 Q54
    Date: 2015
  13. By: Christoph Kuzmics (Center for Mathematical Economics, Bielefeld University); Daniel Rodenburger (University of Jena)
    Abstract: Using data from an experiment by Forsythe, Myerson, Rietz, and Weber (1993), designed for a different purpose, we test the "standard theory" that players have preferences only over their own mentary payoffs and that play will be in (evolutionary stable) equilibrium. In the experiment each subject is recurrently (24 times) randomly matched with ever changing opponents to play a 14 player game. We find that assuming risk-neutrality for all players leads to a predicted evolutionary stable equilibrium that, while it can be rejected at the 5% level of significance, is nevertheless remarkably close to "explaining" the data. Moreover, when we assume that players are risk-averse and we calibrate their risk-aversion in one treatment with a simple game, this theory cannot be rejected at the 5% level of significance for another treatment with a more complicated game, despite the fact that we have close to 400 data points.
    Keywords: opinion polls, elections, voting, testing, Nash equilibrium, attainable equilibrium, symmetries
    JEL: C72 D72
    Date: 2015–06

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