nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒08‒01
four papers chosen by
Eugene Beaulieu
University of Calgary

  1. Partisan Alignment and Political Corruption. Theory and Evidence from Spain Job Market Paper By Miguel Ángel Borrella Mas
  2. Negative Voters: Electoral Competition with Loss-Aversion By Ben Lockwood; James Rockey
  3. The Political Economy of Public Income Volatility: With an Application to the Resource Curse By Robinson, James A; Torvik, Ragnar; Verdier, Thierry
  4. The democratic transition By Fabrice Murtin; null null

  1. By: Miguel Ángel Borrella Mas (Dpto. Fundamentos del Análisis Económico)
    Abstract: I study the effect of partisan alignment between local and regional governments on political corruption. I estimate the effect by using rich panel data on three consecutive municipal and regional elections in Spain and also on corrupt practices carried out by local politicians. I find significantly more corruption in aligned municipalities. Partisan alignment increases corruption by 2.2 percentage points with respect to the 5.7% mean level of non-aligned municipalities. This effect is more pronounced among municipalities with i) more than 10,000 inhabitants, ii) a budget size above the mean level, iii) local and regional elections held on the same day and the regional government ruling the Autonomous Community with absolute majority and iv) the main right-wing party in the country ruling both government layers. The empirical results are consistent with a simple model of electoral accountability in which politicians in office have to decide between pleasing voters and extracting rents for their own benefit conditional on alignment. Specifically, the model highlights that corruption is an increasing function of the benefits of being aligned and the budget size, with a complementary response due to the interaction between both effects.
    Keywords: corruption, elections, partisan alignment, political career concerns, political economy, Spain
    JEL: D72 D73 H77 P16
    Date: 2015–06
  2. By: Ben Lockwood; James Rockey
    Abstract: This paper studies how voter loss-aversion affects electoral competition in a Downsian setting. Assuming that voters’ reference point is the status quo, we show that loss-aversion has a number of effects. First, there is policy rigidity both parties choose platforms equal to the status quo, regardless of other parameters. Second, that there is a moderation effect when there is policy rigidity, the equilibrium policy outcome is closer to the moderate voters’ ideal point than in the absence of loss-aversion. In a dynamic extension of the model, we consider how parties strategically manipulate the status quo to their advantage, and we find that this increases policy rigidity. Finally, we show that with loss-aversion, incumbents adjust less than challengers to changes in voter preferences. The underlying force is that the status quo works to the advantage of the incumbent. This prediction of asymmetric adjustment is new, and we test it using elections to US state legislatures. The results are as predicted: incumbent parties respond less to shocks in the preferences of the median voter.
    Keywords: electoral competition, loss-aversion, incumbency advantage, platform rigidity
    JEL: D72 D81
    Date: 2015–07
  3. By: Robinson, James A; Torvik, Ragnar; Verdier, Thierry
    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; politics; public policy; resource extraction
    JEL: D72 D78 Q2
    Date: 2015–07
  4. By: Fabrice Murtin (Departement d'Economie de Sciences Po); null null (Anderson School of Management)
    Abstract: Over the last two centuries, many countries experienced regime transitions toward democracy. We document this democratic transition over a long time horizon. We use historical time series of income, education and democracy levels from 1870 to 2000 to explore the economic factors associated with rising levels of democracy. We find that primary schooling, and to a weaker extent per capita income levels, are strong determinants of the quality of political institutions. We find little evidence of causality running the other way, from democracy to income or education.
    Keywords: Democracy; Modernization; Human Capital; GMM
    JEL: I25 N30 N40 O43
    Date: 2014–06

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