nep-pol New Economics Papers
on Positive Political Economics
Issue of 2015‒11‒15
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Rent-Seeking in Public Procurement: Evidence from the Entry of Political Challengers at Electoral Thresholds By Jan Palguta
  2. Changing Social Preferences and Optimal Redistributive Taxation By Jang-Ting Guo; Alan Krause
  3. Budget, expenditures composition and political manipulation: Evidence from Portugal By Vítor Castro; Rodrigo Martins
  4. Systemic Opposition at Russia’S Gubernatorial Elections By Rostislav F. Turovsky
  5. Electoral Competition with Rationally Inattentive Voters By Filip Matejka; Guido Tabellini
  6. Paying for the Welfare State in the European Periphery By Sebastian Dellepiane-Avellaneda; Niamh Hardiman
  7. Voting with Endogenous Information Acquisition: Theory and Evidence By Sourav Bhattacharya; John Duffy; Sun-Tak Kim
  8. Voting with Evaluations: When Should We Sum? What Should We Sum? By Antonin Macé
  9. Victory in War and Defeat in Peace: Politics and Economics of Post-Conflict Sri Lanka By Prema-chandra Athukorala; Sisira Jayasuriya
  10. The Deterrent Effect of Voting Against Minarets: Identity Utility and Foreigners' Location Choice By Slotwinski, Michaela; Stutzer, Alois
  11. Voluntary Provision of Public Knowledge Goods: Group-Based Social Preferences and Coalition Formation By Tom Dedeurwaerdere; Paolo Melindi-Ghidi; Willem Sas

  1. By: Jan Palguta
    Abstract: This paper shows that political challengers affect rent-seeking in public procurement. I use data from municipal governments in the Czech Republic to construct new measures of political rent-seeking in procurement and test whether the entry of additional challengers into municipal legislatures affects the rent-seeking practices. Because the entry of challengers is endogenous to the performance of incumbents, I predict the challenger entry using quasirandom variation in the vote share of challengers near the threshold in proportional elections. I show that legislatures with additional challengers allocate fewer procurements to political donors, double price savings in procurement and use more competitive procurement auctions. The entry of extra challengers leads to greater economic benefits in legislatures with fewer political parties and in legislatures entered by local-level political movements. My findings highlight the role of local-level movements in enhancing political accountability and the value of monitoring the behavior of politicians.
    Keywords: procurement; rent-seeking; accountability; challengers; proportional elections;
    JEL: D72 H57 H72
    Date: 2015–09
  2. By: Jang-Ting Guo; Alan Krause
    Abstract: We examine a dynamic model of optimal nonlinear taxation of labor income and savings, in which there are two political parties: left-wing and right-wing. The parties differ only in their redistributive preferences, with the left-wing party having a stronger preference for redistribution. Our analysis explicitly considers the possibility that society's preference for redistribution may change, as reflected in its future voting behavior. The incumbent government respects the possibility that society's preference may change, and sets taxes to maximize expected social welfare. Our main result is that an incumbent left-wing (resp. right-wing) government will implement a regressive (resp. progressive) savings tax policy. The incumbent government implements this policy not out of self interest, but to accommodate the redistributive goals of the opposing party.
    Keywords: Nonlinear Taxation; Redistribution; Normative Taxation
    JEL: H21 H24
    Date: 2015–11
  3. By: Vítor Castro (Faculty of Economics, University of Coimbra, and Economic Policies Research Unit (NIPE)); Rodrigo Martins (Faculty of Economics, University of Coimbra and Group for Monetary and Fiscal Studies (GEMF))
    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
  4. By: Rostislav F. Turovsky (National Research University Higher School of Economics)
    Abstract: This study is based on descriptive analysis of systemic opposition in Russia and its regions. We focus on the procedure and results of gubernatorial elections held in 2012-2015 in 62 regions (twice in two of them). The author has analyzed statistical information on electoral participation and performance of the opposition at gubernatorial elections, along with numerous interviews with political actors and experts. This study presents a logical model of ruling elites’ and systemic opposition’s strategic behavior and interaction proved by cases studied by the author in Russia’s regions. The author gives the definition of systemic opposition and analyzes its relations with the federal and regional authorities. Of particular importance is the role of systemic opposition in the legitimating of gubernatorial elections. However, the study shows that the legitimating process fails due to low turnout and usually leads to electoral losses of systemic opposition. Gubernatorial elections give systemic opposition very limited opportunities (despite the fact of its first victory in 2015) but still integrate it into the system while leaving the systemic parties with more chances to get political positions in legislative bodies.
    Keywords: systemic opposition, gubernatorial elections, hybrid regime, sub-national authoritarianism
    JEL: D72
    Date: 2015
  5. By: Filip Matejka; Guido Tabellini
    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 avariety 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: electoral competition; limited inattention;
    JEL: D72 D83
    Date: 2015–11
  6. By: Sebastian Dellepiane-Avellaneda (School of Government and Public Policy, University of Strathclyde, Glasgow); Niamh Hardiman (School of Politics and International Relations and Geary Institute for Public Policy, University College Dublin)
    Abstract: This exploratory paper outlines an approach to the evolution of the tax state in four countries: Ireland, Spain, Portugal, and Greece. It is motivated by our interest in a cluster of countries that are all too often excluded from comparative studies in political economy. Both the volume and the composition of tax revenues in these four countries display somewhat different patterns from those of the wealthier European countries. Their systematic exclusion may distort comparative generalizations in important ways. We focus here on three analytical themes that merit further exploration. Each of them helps us challenge the conventional understanding of the dynamics of tax policy. The first is that of timing. These four countries were late welfare developers, which meant that the demands placed on the tax capacity of the state is at variance with trends elsewhere, with implications for the constraints and opportunities available to their governments. The second concerns the specific domestic political economy mechanisms involved in these countries’ tax choices, which can be opened out using perspectives drawn from fiscal sociology. The third theme concerns the international political economy, and suggests that the economic and financial vulnerability of countries on the ‘periphery’ may influence many aspects of their policy choices, including the size of their tax state and the composition of their revenues. This preliminary version of our work focuses on the experiences of Spain and Ireland; further work on Portugal and Greece will follow.
    Keywords: politics of taxation, European periphery, economic sociology, fiscal sociology, Spain, Ireland
    JEL: E62 H20 Z13 Z18
    Date: 2015–11–04
  7. By: Sourav Bhattacharya (Department of Economics, Royal Holloway, University of London); John Duffy (Department of Economics, University of California-Irvine); Sun-Tak Kim (Department of Economics, National Taiwan University)
    Abstract: The standard model of jury or committee voting, with costless, exogenously given and noisy but informative signals regarding the true state of the world, predicts that the efficiency of group decision-making increases unambiguously with the group size. However, once signal acquisition is made a costly and endogenous decision, there are important free-riding considerations that counterbalance the information aggregation effect. If the cost of acquiring information is fixed, then rational voters have disincentives to purchase information as the group size becomes larger since the impact of their vote becomes smaller. In this paper we investigate the extent to which human subjects recognize this trade-off between information aggregation and free-riding in a laboratory experiment where we vary the group size, the cost of information acquisition and the precision of signals. We find that in most of the settings we study, free-riding incentives are weak as there is a pronounced tendency for subjects to over-acquire information relative to equilibrium predictions and we offer several possible explanations for this finding.
    Keywords: Voting; Condorcet jury model; Information aggregation; Endogenous information acquisition; Experimental economics
    JEL: C72 D72 D81
    Date: 2015–11
  8. By: Antonin Macé (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université)
    Abstract: Most studies of the voting literature take place in the arrovian framework, in which voters rank the available alternatives, and where Arrow's impossibility theorem prevails. I consider a different informational basis for social decisions, by allowing individuals to evaluate alternatives rather than to rank them. Voters express their opinion by assigning to each alternative an evaluation from a given set. I focus on additive rules, which follow the utilitarian paradigm. If the evaluations are numbers, the elected alternative is the one with the highest sum of evaluations. I generalize this notion to any set of evaluations, taking into account the possibility of qualitative ones. I provide an axiomatization for each of the two main additive rules: "Range Voting" when the set of evaluations is [0, 1] and "Evaluative Voting" when the set of evaluations is finite.
    Keywords: Range Voting,Evaluative Voting,utilitarianism,measurement
    Date: 2015–10
  9. By: Prema-chandra Athukorala; Sisira Jayasuriya
    Abstract: This paper examines causes and implications of Sri Lanka’s political regime shift in February 2015, which has been widely hailed a victory for democracy, against the backdrop of the country’s political and economic development in the post-independence era. The regime shift vividly demonstrates that voters, given the chance, turn against leaders they perceive to be corrupt, nepotistic or needlessly divisive, even if they deliver handsome growth figures; there are limits to gaining political legitimacy in a multi-ethnic state simply by creating cleavages between majority and minority communities. For the first time, the minority communities in Sri Lanka appear to have felt themselves part of, and potentially an important influence on, the national political scene. It is, however, difficult at this stage to predict whether the regime change would usher in an era of ethnic harmony and robust economic growth. One hope is that war-weariness and discontents with the previous regime seem to have led to a greater willingness to accommodate diverse perspectives and demands within the political system.
    Keywords: Sri Lanka, ethnic conflict, regime change
    JEL: F13 O20 O38 O53
    Date: 2015
  10. By: Slotwinski, Michaela (University of Basel); Stutzer, Alois (University of Basel)
    Abstract: This paper uses the vote on the Swiss minaret initiative as a natural experiment to identify the causal effect of negative attitudes towards immigrants on foreigners' location choices and thus indirectly on their utility. Based on a regression discontinuity design with unknown discontinuity points and administrative data on the population of foreigners, we find that the probability of their moving to a municipality that unexpectedly expressed strong reservations decreases initially by about 60 percent. The effect levels off over a period of about 5 months. Consistent with a reduction in the identity utility for immigrants in general, the reaction is not confined to Muslims, whereby high-skilled foreigners seem to be most sensitive to the newly revealed reservations.
    Keywords: attitudes, foreigners, identity utility, location choice, RDD
    JEL: D83 J61 R23 Z13
    Date: 2015–11
  11. By: Tom Dedeurwaerdere (Université Catholique de Louvain and Fonds National de la Recherche Scientifique (FNRS)); Paolo Melindi-Ghidi (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université); Willem Sas (Center for Economic Studies - CES - KU Leuven - CES - KU Leuven)
    Abstract: In this paper we develop a private-collective model of voluntary public knowledge production, where group-based social preferences have an impact on coalition formation. Our theoretical model builds on the large empirical literature on voluntary production of pooled public knowledge goods, including source code in communities of software developers or data provided to open access data repositories. Our analysis shows under which conditions social preferences such as 'group belonging' or 'peer approval' influence stable coalition size, as such rationalising several stylized facts emerging from large scale surveys of Free/Libre/Open-Source software developers (David and Shapiro, 2008), previously unaccounted for. Furthermore, heterogeneity of social preferences is added to the model to study the formation of stable, but mixed coalitions.
    Keywords: public knowledge goods,coalition formation,private-collective model,group belonging,peer approval,open source software
    Date: 2015–11

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