nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒10‒10
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Sophisticated Electoral Accountability: A Political Psychology Agency Theory By ALESSANDRO BELMONTE
  2. Earmarking and the political support of fat taxes By Cremer, Helmuth; Goulão, Catarina; Roeder, Kerstin
  3. Riot Rewards? Study of BJP's Electoral Performance and Hindu Muslim Riots By Rohit Ticku
  4. Electoral incentives, term limits and the sustainability of peace By Paola Conconi; Nicolas Sahuguet; Maurizio Zanardi
  5. Beliefs, politics, and environmental policy By Antony Millner; Hélène Ollivier
  6. The Effect of Voting on Contributions in a Public Goods Game By le Sage, Sander; van der Heijden, Eline
  7. Competence versus Honesty : What Do Voters Care About ? By Fabio Galeotti; Daniel John Zizzo
  8. Solving Collective Action Poblems in a Political Economy Model of Social Polarization and Conflict By Ernesto Cardenas Prieto
  9. Public-Good Provision in Large Economies By Felix J. Bierbrauer; Martin F. Hellwig
  10. Intergenerational Correlations of Extreme Right-Wing Party Preferences and Attitudes toward Immigration By Avdeenko, Alexandra; Siedler, Thomas
  11. How Does Democratization Affect the Composition of Government Expenditure? By Kotera, Go; Okada, Keisuke
  12. Effect of consuming imported cultural goods on trading partners’ tolerance toward immigrants: The case of Japanese anime in Korea By Yamamura, Eiji; Shin, Inyong
  13. Non-Euclidean geometry and political economy How Jacques Rueff explained unemployment in England (1919-1931) By Adrien Lutz

    Abstract: I propose a political agency model where rent-maximizer rulers are constrainedby sophisticated principals/producers that use an awareness-management model à la Bènabou and Tirole. In the first part of the paper I empirically test the theoreticalnexus between education and political sophistication by comparing individualswith different education attainments within more than eighty countries and morethat twenty religious groups introduced to capture specic cultural variation inthe results. And elastic (inelastic) political beliefs for respondents with a tertiary(primary) degree according to the quality of political institutions. Motivatedby that, I model Political Psychology predictions by introducing heterogeneity onthe electoral side: producers are endowed with di fferent levels of education, thatincrease over time with human capital investments. I allow education to be boththe engine of growth and a determinant of political participation; in equilibrium,more educated societies are more able to punish politicians that, in turn, investmore in productive public goods such as infrastructure, roads or legal rules forcontracts enforcement. I prove the existence of multiple steady states featuring,respectively, a sophisticated society with congruent politicians in once, and a naivesociety ruled by dissonant politicians. Finally, I address inequality concerns andshow how, for intermediate values, inequality opposingly hits citizens and ruler andonly the latter is found to better or conversely, citizens are averse to inequality,contributing to explain, via sophisticated accountability, why most people dislikeliving in a society which is too unequal.Keywords: political economy, voting, signaling, sophistication, naivet e, human capital,economic growth, inequality.
    Keywords: political economy, voting, signaling, sophistication, naivete', human capital, economic growth, inequality
    JEL: H30 O43 D21 D72
    Date: 2015–07–01
  2. By: Cremer, Helmuth; Goulão, Catarina; Roeder, Kerstin
    Abstract: A fat and a healthy good provide immediate gratification, and cause health costs or benefits in the long run, which are misperceived. Additionally, the fat good (healthy good) increases (decreases) health care costs by increasing (decreasing) the probability of suffering from a chronic disease in the future. Individuals differ in income and in their degree of misperceptions concerning the health effects of the consumption of fat and of healthy goods. The level of the fat tax is determined through majority voting. Individuals vote according to their misperceived utility function. Consequently, excessive fat consumption is not due to a self-control problem but due to information deficiencies or cognitive inability to process information. A fraction of the fat tax proceeds is “earmarked” to reduce health insurance premiums while the remaining fraction finances a subsidy on the healthy good. This earmarking rule is determined at a constitutional stage to maximize utilitarian or Rawlsian welfare, anticipating the induced political equilibrium. We show that the fat tax in the political equilibrium is always lower than the utilitarian fat tax. This is no longer necessarily true with a Rawlsian objective. The determination of the optimal earmarking rule is quite complex. Even in the utilitarian case, it is not just used to boost political support for the fat tax. Instead, it may involve a tradeoff between the fat tax and the healthy good subsidy.
    Keywords: Obesity, Fat tax, Misperception, Voting, Earmarking
    JEL: D72 I12 I18
    Date: 2015–08
  3. By: Rohit Ticku (The Graduate Institute of International and Development Studies, Geneva)
    Abstract: Do incidents of ethnic polarization influence voter behavior? I address this question through the case study of India, the world’s largest functional democracy. Specifically, I test whether prior events of Hindu-Muslim riots electorally benefit Bharatiya Janta Party (BJP), a prominent Hindu nationalist party? The paper contributes to the literature by being the first to establish a causal relationship between Hindu-Muslim riots and BJP’s electoral performance. Results show that riots have a positive and significant effect on BJP’s vote share and are robust to our instrumentation strategy. The party vote share increases between 2.9 to 4.4 percent in response to different riot outcomes. Results seem to back the theory of electoral incentives i.e. parties representing elites among ethnic groups may have an incentive to instigate ethnic conflict to influence the marginal voter.
    Keywords: Ethnic conflict, Hindu Muslim riots, Electoral performance, Voter behavior, Bharatiya Janta Party (BJP).
    JEL: D72 D74
    Date: 2015–09–30
  4. By: Paola Conconi; Nicolas Sahuguet; Maurizio Zanardi
    Abstract: One of the few stylized facts in international relations is that democracies, unlike autocracies, almost never fight each other. We develop a theoretical model to examine the sustainability of international peace between democracies and autocracies, where the crucial difference between<br/>these two political regimes is whether or not policymakers are subject to periodic elections. We show that the fear of losing office can make it less tempting for democratic leaders to wage war against other countries. Crucially, this discipline effect can only be at work if incumbent leaders can be re-elected, suggesting that democracies with term limits should be more conflict prone,<br/>particularly when the executive is serving the last possible term. These results rationalize recent empirical findings on how term limits affect the propensity of democracies to engage in conflicts.
    Keywords: Interstate Conflicts, Democratic Peace, Elections, Term Limits
    JEL: C72 D72 F00
    Date: 2015
  5. By: Antony Millner; Hélène Ollivier
    Abstract: The public often perceives environmental problems differently from the experts who study them. The regulatory response to these problems also often does not coincide with experts’ recommendations. These two facts are mutually consistent – it is unlikely that regulations based on factual claims that are substantially different from voters’ opinions would be political feasible. Given that the public’s beliefs constrain policy choices, it is vital to understand how they come about, whether they will be biased, and how the inevitable heterogeneity in people’s beliefs filters through the political system to affect policy. We survey recent theoretical and empirical work on individual inference, social learning, and the supply of information by the media, and identify the potential for biased beliefs to arise. We then examine the interaction between beliefs and politics. We ask whether national elections and votes in legislatures can be expected to result in accurate collective decisions, how heterogeneous beliefs may induce strategic political actors to alter their policy choices, and how persuasion by experts and lobbies affects the information at policy-makers’ disposal. We conclude by suggesting that the relationship between beliefs and policy choices is a relatively neglected aspect of the theory of environmental regulation, and a fruitful area for further research.
    Date: 2015–08
  6. By: le Sage, Sander; van der Heijden, Eline (Tilburg University, Center For Economic Research)
    Abstract: This paper reports the results of a public good experiment with voting. The standard game in which subjects decide simultaneously on their contributions to a public good is extended by a second stage. In this stage, subjects can express agreement or disagreement with the contributions of their group members and the resulting payoff by voting yes or no. The treatment variable is the voting threshold, which specifies how many votes are at least needed to implement the outcome. We find that average contributions are higher with a voting system, but only if the required number of votes is sufficiently high. The higher average contribution level is mainly realized because subjects manage to avoid the typical pattern of declining contributions across periods. We argue that the higher and rather stable contributions observed under high threshold levels may be related to the fact that voting is seen as a legitimate instrument. Support for this claim is provided by results from a post-experimental questionnaire.
    Keywords: public goods; laboratory experiment; voting
    JEL: C92 H41 D72 D02
    Date: 2015
  7. By: Fabio Galeotti (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon Saint-Etienne, Ecully, F-69130, France; Université Lyon 2, Lyon, F-69007, France); Daniel John Zizzo (Newcastle University Business School and BENC, 5 Barrack Road, Newcastle upon Tyne, NE1 4SE, United Kingdom)
    Abstract: We set up an experiment to measure voter preferences trade-offs between competence and honesty. We measure the competence and honesty of candidates by asking them to work on a real effort task and decide whether to report truthfully or not the value of their work. In the first stage, the earnings are the result of the competence and honesty of one randomly selected participant. In the second stage, subjects can select who will determine their earnings based on the first stage’s competence and honesty of the alternative candidates. We find that most voters tend to have a bias towards caring about honesty even when this results in lower payoffs.
    Keywords: voting preferences, competence, honesty, election
    JEL: C72 C91 D72
    Date: 2015
  8. By: Ernesto Cardenas Prieto (Faculty of Economics and Management, Pontificia Universidad Javeriana Cali)
    Abstract: I use the concept of Stability Sets in order to analyze the probability of collective action taking place in a political-economy model characterizing a polarized society. In the model, society is composed of two social groups and I focus on how changes in the economic parameters of the model, underlying the political preferences of the groups, alter the probability for collective action to take place and move society from one equilibrium to the other of the two possible equilibria of the model.
    Keywords: Collective Action, Polarization, Social Conflict, Prices.
    JEL: D74 O12
    Date: 2015–07
  9. By: Felix J. Bierbrauer (University of Cologne, Chair for Public Economics CMR – Center for Macroeconomic Research); Martin F. Hellwig (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: In a large economy, a first-best provison rule for a public good is robustly implementable with budget balance because no one individual alone can affect the aggregate outcome. First-best outcomes can, however, be blocked by coalitions of agents acting in concert. With a requirement of immunity against robustly blocking coalitions, we find that, for a pubic good that come as a single indivisible unit, a monotonic social choice function cannot condition on preference intensities but only on the population shares of people favoring one outcome over another. Any such social choice function can be implemented by a simple voting mechanism. With more public-good provision levels, more complicated mechanisms are required, but they still involve the counting of votes rather than an assessment of benefits. Monotonicity and immunity against robust blocking thus provide a foundation for the use of voting mechanisms.
    Keywords: Mechanism Design, Public-good provision, Large Economy, Voting Mechanisms, Robust Incentive Compatibility, Immunity against Robustly Blocking Coalitions, Monotonic Social Choice Functions
    JEL: D82 H41 D70 D60
    Date: 2015–09
  10. By: Avdeenko, Alexandra (University of Mannheim); Siedler, Thomas (University of Hamburg)
    Abstract: This study analyzes the importance of parental socialization on the development of children's far right-wing preferences and attitudes towards immigration. Using longitudinal data from Germany, our intergenerational estimates suggest that the strongest and most important predictor for young people's right-wing extremism are parents' right-wing extremist attitudes. While intergenerational associations in attitudes towards immigration are equally high for sons and daughters, we find a positive intergenerational transmission of right-wing extremist party affinity for sons, but not for daughters. Compared to the intergenerational correlation of other party affinities, the high association between fathers' and sons' right-wing extremist attitudes is particularly striking.
    Keywords: political preferences, extremism, gender differences, longitudinal data, intergenerational links
    JEL: C23 D72 J62 P16
    Date: 2015–09
  11. By: Kotera, Go; Okada, Keisuke
    Abstract: This study examines the effects of democratization on the size and composition of government expenditure using the data of 125 countries between 1972 and 2010 at most. Specifically, we focus not only on the total expenditure but also on their composition and employ dichotomous indices of political regimes rather than score indices. Moreover, we construct instruments for democratization based on the democratization wave and conduct an instrumental variables estimation to address endogeneity problems. Our results show that while democratization does not have a significant impact on total expenditure, it increases expenditure on health and education and decreases expenditure on defense. Furthermore, considering the time-varying effect of democratization, defense expenditure starts decreasing immediately after a regime change and health expenditure increases in the medium and long run, while they do not significantly vary before a regime change. Thus, while focusing only on total expenditure does not uncover the effects of democratization, considering detailed categories of government expenditure enables us to understand how democratization changes governments' behaviors.
    Keywords: Democratization; Government behavior; Government expenditure
    JEL: H10 H50 P16
    Date: 2015–10–06
  12. By: Yamamura, Eiji; Shin, Inyong
    Abstract: there is political tension and conflict between countries. Because of this historical background, political conflict exists between Korea and Japan. This paper examines the effect of viewing Japanese anime (animation) on the attitudes of Koreans toward Japanese living in Korea. The major findings of the study show that the more frequently adult Koreans view Japanese anime, the more likely they are to accept Japanese as workplace colleagues and neighbors after controlling for endogeneity bias using instrumental variables. The findings of this paper imply that via the consumption of imported cultural goods, people are exposed to positive traits of the trading partner, and thus consumers have a stronger affinity with the export country. From this, we derive the policy implication that promoting trade of modern cultural goods is effective to increase mutual understanding between trade partners, reducing political tension between them.
    Keywords: Anime; Immigrants; Workplace; Neighbor; Trade; Externality; Cool Japan.
    JEL: D12 D74 F16 Z11 Z18
    Date: 2015–10–02
  13. By: Adrien Lutz (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France, Université Jean Monnet, Saint-Etienne, F-42000, France)
    Abstract: This paper provides new perspectives on the French liberal economist Jacques Rueff (1896-1978), especially as regards his early writings on unemployment. We aim to show that Rueff distinguishes the root causes of permanent unemployment in England (1919-1931) based upon an interesting reading of non-Euclidean geometry. Controversially, this enables him to locate the cause of unemployment in the stickiness of the wage/price ratio. Hence, arguing that reality remains inaccessible in itself, Rueff focuses on a succession of variables (price, wage, unemployment), supplemented by his concepts of rational ego and the reasoning machine, in order to approach this reality.
    Keywords: Rueff, unemployment, real wage
    JEL: B13 E24 N00
    Date: 2015

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