nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒10‒25
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Going to Extremes: Politics after Financial Crises, 1870-2014 By Funke, Manuel; Schularick, Moritz; Trebesch, Christoph
  2. Manufacturing extremism: political consequences of profit-seeking media By Siddhartha Bandyopadhyay; Kalyan Chatterjee; Jaideep Roy
  3. A Comparative Analysis of Political Competition and Local Provision of Public Goods: Brazil, Colombia and Mexico(1991-2010) By Rojas Rivera, Angela Milena; Molina Guerra, Carlos A.
  4. Should Different People Have Different Governments? By Giacomo Ponzetto; Amedeo Piolatto; Federico Boffa
  5. Local Television, Citizen Knowledge and Political Accountability: Evidence from the U.S. Senate By Nordin, Mattias
  6. Electoral Competition with Rationally Inattentive Voters By Matejka, Filip; Tabellini, Guido
  7. The Subversive Nature of Inequality: Subjective Inequality Perceptions and Attitudes to Social Inequality By Kuhn, Andreas
  8. Meaningful Learning in Weighted Voting Games: An Experiment By Eric Guerci; Nobuyuki Hanaki; Naoki Watanabe
  9. The Political Economy of the Top 1% in an Age of Turbulence: Chile 1913-1973 By Javier Rodríguez Weber

  1. By: Funke, Manuel; Schularick, Moritz; Trebesch, Christoph
    Abstract: Partisan conflict and policy uncertainty are frequently invoked as factors contributing to slow post-crisis recoveries. Recent events in Europe provide ample evidence that the political aftershocks of financial crises can be severe. In this paper we study the political fall-out from systemic financial crises over the past 140 years. We construct a new long-run dataset covering 20 advanced economies and more than 800 general elections. Our key finding is that policy uncertainty rises strongly after financial crises as government majorities shrink and polarization rises. After a crisis, voters seem to be particularly attracted to the political rhetoric of the extreme right, which often attributes blame to minorities or foreigners. On average, far-right parties increase their vote share by 30% after a financial crisis. Importantly, we do not observe similar political dynamics in normal recessions or after severe macroeconomic shocks that are not financial in nature.
    Keywords: economic voting; financial crises; polarization; policy uncertainty
    JEL: D72 E44 G01
    Date: 2015–10
  2. By: Siddhartha Bandyopadhyay; Kalyan Chatterjee; Jaideep Roy
    Abstract: We analyze the consequences of a monopolistic, non-partisan, profit maximizing media on policy divergence. The media undertakes costly coverage that may reveal the quality of an office-seeking political challenger only if quality-conscious voters pay for an access fee. Voters are ideologically homogenous and the incumbent politician is a populist with known quality. We show that while media absence implies a populist challenger, media presence yields platform extremism: it creates demand for informatin about quality and provides incentives to the media to invest in coverage that are exploited by high-quality challengers to signal strength.
    Keywords: Unobserved quality, Political challenger, Demand for electoral news, Media
    JEL: C72 D72 D82
    Date: 2015–10
  3. By: Rojas Rivera, Angela Milena; Molina Guerra, Carlos A.
    Abstract: Abstract: We explore the effect of political competition on the local provision of public goods in three countries: Brazil, Colombia and Mexico from 1991 to 2010 using municipal data. These countries share characteristics that make a comparative analysis useful in understanding the role of governance structures, which include the degree of fiscal and political decentralization. Based on a multidimensional approach of political competition and bringing to the fore the role of congressional elections, we establish the effect of several measures of political competition based on lower chamber elections on indicators of primary education, sanitation and infant mortality. We find that Brazil displays the highest elasticity with expected signs in several public goods to most measures of political competition, while Mexico shows strong connection of political competition indicators to all public goods but negative effects of voter turnout and electoral volatility; Colombia is the least responsive except for infant mortality. These differences are attributed to influences stemming from local accountability and party discipline. Resumen: En esta investigación exploramos el efecto de la competencia política sobre la provisión local de bienes públicos en tres países: Brasil, Colombia y México para el período 1991-2010 usando datos municipales. Estos tres países comparten características que hacen el análisis comparativo especialmente útil en la comprensión del papel jugado por las estructuras de gobierno, las cuales incluyen el grado de descentralización económica y política. Basado en un enfoque multidimensional de la competencia política y destacando el papel de las elecciones de congreso, establecemos el efecto que ejercen diversas medidas de competencia política, basadas en las elecciones de cámara de representantes, sobre indicadores de educación primaria, sanidad y mortalidad infantil. Encontramos que Brasil exhibe la elasticidad más alta y con signos esperados en la provisión de los bienes públicos ante la mayoría de medidas de competencia política, mientras que Méjico muestra una fuerte conexión entre estas medidas y todos los bienes públicos aunque con efectos negativos de la tasa de participación y volatilidad electoral. Colombia es el país que más baja respuesta presenta, excepto por mortalidad infantil. Atribuimos estas diferencias a las influencias provenientes de la rendición de cuentas y la disciplina de los partidos.
    Keywords: Political Competition, Political Responsiveness, Government Effectiveness, Government quality, Democratic Governance, Local Governance, Local Public Goods, Comparative Analysis, Brazil, Colombia, Mexico
    JEL: D72 H41 H75
    Date: 2015–09–01
  4. By: Giacomo Ponzetto (CREI, U. Pompeu Fabra, & Barcelona GSE); Amedeo Piolatto (Barcelona Economics Institute (IEB)); Federico Boffa (Free University of Bolzano)
    Abstract: This paper studies fiscal federalism when regions differ in voters' ability to monitor public officials. We develop a model of political agency in which rent-seeking politicians provide public goods to win support from heterogeneously informed voters. In equilibrium, voter information increases government accountability but displays decreasing returns. Therefore, political centralization reduces aggregate rent extraction when voter information varies across regions. It increases welfare as long as the central government is required to provide public goods uniformly across regions. The need for uniformity implies an endogenous trade off between reducing rents through centralization and matching idiosyncratic preferences through decentralization. We find that a federal structure with overlapping levels of government can be optimal only if regional differences in accountability are sufficiently large. The model predicts that less informed regions should reap greater benefits when the central government sets a uniform policy. Consistent with our theory, we present empirical evidence that less informed states enjoyed faster declines in pollution after the 1970 Clean Air Act centralized environmental policy at the federal level.
    Date: 2015
  5. By: Nordin, Mattias (Department of Economics)
    Abstract: I investigate the causal eect of access to relevant local television on i) U.S. citizens' knowledge of their senators' actions in the Senate and ii) whether citizens hold their senators accountable for these actions. To do so, I utilize the mismatch between the local television markets and the states. This mismatch causes citizens living in counties where local television stations are based in their own state (in-state counties) to have greater access to relevant news about their senators, compared to citizens living in coun- ties served by local television based in a neighboring state (out-of-state counties). Using survey data from the 2006 Cooperative Congressional Election Study, I find that the biased coverage of local television news leads to citizens in in-state counties, compared to out-of-state counties, to be more informed about their senators' roll-call votes, as well as more likely to hold opinions about these senators. However, I do not find that the increased knowledge aects the likelihood that citizens evaluate their senators based on the roll-call votes. This result suggests that passively acquired information through local television is not sucient for individuals to hold their senators accountable for their actions in the Senate.
    Keywords: Local television; political information; natural experiment; roll-call votes
    JEL: D72 D80 H50
    Date: 2015–10–09
  6. By: Matejka, Filip; Tabellini, Guido
    Abstract: This paper studies how voters optimally allocate costly attention in a model of probabilistic voting. The equilibrium solves a modified social planning problem that reflects voters’ choice of attention. Voters are more attentive when their stakes are higher, when their cost of information is lower and prior uncertainty is higher. We explore the implications of this in a variety of applications. In equilibrium, extremist voters are more influential and public goods are under-provided. The analysis also yields predictions about the equilibrium pattern of information, and about policy divergence by two opportunistic candidates. Endogenous attention can lead to multiple equilibria, explaining how poor voters in developing countries can be politically empowered by welfare programs.
    Keywords: behavioural political economy; electoral competition; rational inattention; salience
    JEL: H00 P16
    Date: 2015–10
  7. By: Kuhn, Andreas (Swiss Federal Institute for Vocational Education and Training)
    Abstract: This paper shows that higher levels of perceived wage inequality are associated with a weaker (stronger) belief into meritocratic (non-meritocratic) principles as being important in determining individual wages. This finding is robust to the use of an instrumental-variable estimation strategy which takes the potential issue of reverse causality into account, and it is further corroborated using various complementary measures of individuals' perception of the chances and risks associated with an unequal distribution of economic resources, such as their perception of the chances of upward mobility. I finally show that those individuals perceiving a high level of wage inequality also tend to be more supportive of redistributive policies and progressive taxation, and that they tend to favor the political left, suggesting a feedback effect of inequality perceptions into the political-economic sphere. Taken together, these findings suggest that high levels of perceived wage inequality have the potential to undermine the legitimacy of market outcomes.
    Keywords: inequality perceptions, attitudes to social inequality, support of redistribution, legitimacy of market outcomes, beliefs about the causes of economic success, political preferences
    JEL: D31 D63 J31
    Date: 2015–10
  8. By: Eric Guerci (Université Nice Sophia Antipolis; GREDEG-CNRS); Nobuyuki Hanaki (Université Nice Sophia Antipolis; GREDEG-CNRS; IUF); Naoki Watanabe (University of Tsukuba, Japan)
    Abstract: By employing binary committee choice problems, this paper investigates how varying or eliminating feedback about payoffs affects: (1) subjects' learning about the underlying relationship between their nominal voting weights and their expected payoffs in weighted voting games; and (2) the transfer of acquired learning from one committee choice problem to a similar but different problem. In the experiment, subjects choose to join one of two committees (weighted voting games) and obtain a payoff stochastically determined by a voting theory. We found that: (i) subjects learned to choose the committee that generates a higher expected payoff even without feedback about the payoffs they received; and (ii) there was statistically significant evidence of ``meaningful learning'' (transfer of learning) only for the treatment with no payoff-related feedback. This finding calls for re-thinking existing models of learning to incorporate some type of introspection.
    Keywords: Learning, voting game, experiment, two-armed bandit problem
    JEL: C79 C92 D72 D83
    Date: 2015–10
  9. By: Javier Rodríguez Weber (Programa de Historia Económica y Social, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: Until recently, most studies on income inequality were very limited in their aim and scope: the period under study was restricted to the recent decades and income inequality was seen as a pure outcome of market forces. Nevertheless, things are changing. This paper is part of the growing literature which aims to study the political economy of income inequality in the long run. Using a new set of estimates on income inequality in Chile, the main task of this paper is to build a historical argumentation which focuses on the vicissitudes of the political economy of the income share of the top 1% between 1913 and 1973, an age of economic and political turbulence.
    Keywords: Inequality, Top 1%, Chile, Political Economy, Institutions
    JEL: D31 O15 N36
    Date: 2015–09

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