nep-pol New Economics Papers
on Positive Political Economics
Issue of 2016‒03‒17
seventeen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Do Natural Resources Influence Who Comes to Power, and How? By Carreri, Maria; Dube, Oeindrila
  2. Dynamics of Political Budget Cycle. By Manjhi, Ganesh; Mehra, Meeta Keswani
  3. The peril of parliamentarism? : executive–legislative relations and the transition to democracy from electoral authoritarian rule By Higashijima, Masaaki; Kasuya, Yuko
  4. Adaptation and Influence: The Schumpeterian Perspective on Business-Politics Relations By Thomas Paster
  5. Violence and political outcomes in Ukraine: Evidence from Sloviansk and Kramatorsk By Tom Coupe; Maksym Obrizan
  6. Globalization and political structure By Gino Gancia; Giacomo A. M. Ponzetto; Jaume Ventura
  7. Optimal voting mechanisms with costly participation and abstention By Grüner, Hans Peter; Tröger, Thomas
  8. "Westernizations” from Peter I to Meiji: War, Political Competition, and Reform By Igor Fedyukin
  9. Effects of Welfare Reform on Women's Voting Participation By Dave, Dhaval M.; Corman, Hope; Reichman, Nancy E.
  10. Yardstick Competition and Tax Competition -Intergovernmental Relations and Efficiency of Public Goods- By Yasuyuki Nishigaki; Hideya Kato
  11. Human Capital, Public Debt, and Economic Growth: A Political Economy Analysis By Tetsuo Ono; Yuki Uchida
  12. An Empirical Study of the Determinants of Green Party Voting By Ingmar Schumacher
  13. The Political Economy of Deregulation Policy in the Downstream Sector of the Petroleum Industry in Nigeria (1999-2015) By Kenneth Nweke; Vincent Nyewusira
  14. Overlobbying and Pareto-improving Agenda Constraint By Arnaud Dellis; Mandar Oak
  15. McCarthyism and the Mathematization of Economics By E. Roy Weintraub
  16. Small-world conservatives and rigid liberals : attitudes towards sharing in self-proclaimed left and right By Thomsson K.M.; Vostroknutov A.
  17. The “Voracity” and “Craving” Effects of Export Booms and Busts on Firm Bribery: Evidence from a Multi-level Empirical Analysis By Joël CARIOLLE

  1. By: Carreri, Maria; Dube, Oeindrila
    Abstract: Do natural resources impair institutional outcomes? Existing work studies how natural resources influence the behavior of leaders in power. We study how they influence leaders' rise to power. Our analysis focuses on oil price shocks and local democracy in Colombia, a country mired in civil conflict. We find that when the price of oil rises, legislators affiliated with right-wing paramilitary groups win office more in oil-producing municipalities. Consistent with the use of force to gain power, positive price shocks also induce an increase in paramilitary violence, and reduce electoral competition: fewer candidates run for office, and winners are elected with a wider vote margin. Ultimately, fewer centrist legislators are elected to office, and there is diminished representation at the center. Our findings highlight how natural resources undermine democracy by distorting elections, and suggest that conflict leaves the political sector vulnerable to the resource curse.
    Keywords: conflict; democracy; elections; leaders; Natural resources
    JEL: D72 H11 H70 O12 O13 Q34
    Date: 2016–02
  2. By: Manjhi, Ganesh (Gargi College, Delhi University); Mehra, Meeta Keswani (Centre for International Trade and Development, Jawaharlal Nehru University)
    Abstract: Using the method of optimal control, when an incumbent politician derives utility from voting support and dis-utility from budgetary deficit, the equilibrium time paths of both voting support and budgetary deficit are characterized in a finite time horizon under complete information. The incumbent politician may be an opportunist, in that she/ he is interested in garnering votes for herself/ himself, and manipulates budgetary deficit to achieve this, or else she/ he may be partisan, that is, characterized by heterogeneous preferences, reflecting preferences for specific economic policies. The citizen-voters vote for the opportunist as well as the partisan incumbent. However, they reject the same when there is a sufficiently strong anti-incumbency in the opportunist case. The level of voting support obtained in case of both opportunist and partisan is found to be positive and rising over time, but running the budgetary deficit will be costlier for the economy in the former case than the latter. That is, per unit votes garnered by raising the budgetary deficit as compared to the benchmark deficit are lower when the incumbent is an opportunist than when she/ he is partisan.
    Keywords: Opportunist Incumbent ; Partisan Incumbent ; Citizen Voters ; Budgetary Deficit ; Political Economy ; Political Budget Cycles ; Fiscal Policy ; Anti-incumbency
    JEL: D72 P16 P35
    Date: 2016–02
  3. By: Higashijima, Masaaki; Kasuya, Yuko
    Abstract: Why do some electoral authoritarian regimes survive for decades while others become democracies? This article explores the impact of constitutional structures on democratic transitions from electoral authoritarianism. We argue that under electoral authoritarian regimes, parliamentary systems permit dictators to survive longer than they do in presidential systems. This is because parliamentary systems incentivize autocrats and ruling elites to engage in power sharing and thus institutionalize party organizations, and indirectly allow electoral manipulation to achieve an overwhelming victory at the ballot box, through practices such as gerrymandering and malapportionment. We test our hypothesis using a combination of cross-national statistical analysis and comparative case studies of Malaysia and the Philippines. Employing a cross-national dataset of 170 countries between 1946 and 2008, dynamic probit models provide supporting evidence that electoral authoritarianism within parliamentary systems is less likely to lead a country to democracy than within presidential systems. The results are robust to a battery of sensitivity tests, including instrumental variable estimation and additional controls. Two carefully selected case studies have been chosen for comparative analysis—Malaysia’s Barisan National (National Front) regime (1957 to present) and the Philippines's electoral authoritarian regime (1978 to 1986)—which elucidate causal mechanisms in the theory.
    Keywords: Democratization, Electoral Authoritarianism, Presidentialism vs. Parliamentarism, Southeast Asia, Political Institutions
    Date: 2016
  4. By: Thomas Paster
    Abstract: This paper introduces Schumpeter’s views on the relationship between business and politics and argues that we can discern a distinct Schumpeterian perspective of business-politics relations. Schumpeter’s views about the pivotal role of entrepreneurs in economic development attracted substantial interest in economic sociology and in political economy. His views about the role of entrepreneurs in politics have so far however hardly been studied. The paper identifies the following four aspects as central to Schumpeter’s perspective of business-politics relations: (a) entrepreneurs and corporations drive economic change, (b) entrepreneurs and corporations are ineffective in defending their political interests and vulnerable to hostile movements, (c) the resulting divergence of the economic and the political impact of entrepreneurs and corporations makes capitalism socio-politically instable, and (d) the relationship of entrepreneurs and corporations to political institutions and public policies is primarily adaptive, rather than causative. The paper proposes a two-dimensional typology of business-politics relations that combines the Schumpeterian focus on adaptation with the Marxian focus on influence. These two dimensions - adaptation and influence - result in four ideal types: business-dominated social compromise, imposed social compromise, business dominance, and political confrontation. Examples from German welfare state history illustrate these four types. The paper suggests that the Schumpeterian and the Marxian perspective, while in contrast to each other, may be complementary and each perspective valid under different socio-political conditions.
    Keywords: business and politics, Joseph A. Schumpeter, welfare state politics, political economy of entrepreneurship, history of economic ideas.
    JEL: P12 P16 H50 H70 J58
    Date: 2016
  5. By: Tom Coupe (Kyiv School of Economics); Maksym Obrizan (Kyiv School of Economics and Visiting Researcher, University of Duisburg-Essen and CINCH)
    Abstract: In this paper, we study the effects of violence on political outcomes using a survey of respondents in Sloviansk and Kramatorsk – two cities that were affected heavily by the conflict in Eastern Ukraine. We show that experiencing physical damage goes together with lower turnout, a higher probability of considering elections irrelevant and a lower probability of knowing one’s local representatives. We also find that property damage is associated with greater support for pro-Western parties, lower support for keeping Donbas in Ukraine and lower support for compromise as a way to stop the conflict. Our paper thus shows the importance of investigating the impact of different kinds of victimization, as different degrees of victimization can have different, sometimes even conflicting outcomes. Our paper also suggests that one of the more optimistic conclusions of previous studies, that victimization can increase political participation, does not necessarily carry over to Ukraine, which illustrates the importance of country and context-specific studies.
    Date: 2016–02
  6. By: Gino Gancia; Giacomo A. M. Ponzetto; Jaume Ventura
    Abstract: The first wave of globalization (1830-1914) was accompanied by a decline in the number of countries from 125 to 54. The second wave of globalization (1950-present) has led instead to an increase in the number of countries to a record high of more than 190. This paper develops a theoretical framework to study the interaction between globalization and political structure. We show that political structure adapts to expanding trade opportunities in a non-monotonic way. Borders hamper trade. In its early stages, the political response to globalization consists of removing borders by increasing country size. In its later stages, however, the political response to globalization is to remove borders by creating economic unions, and this leads to a reduction in country size.
    Keywords: Globalization, political structure, size of countries, international unions.
    JEL: D71 F15 F55 H77 O57
    Date: 2016–02
  7. By: Grüner, Hans Peter; Tröger, Thomas
    Abstract: How should a society choose between two social alternatives when valuations are private, monetary transfers are not feasible, and participation in the decision process is costly? We show that it is always socially optimal to use a linear voting rule: votes get alternative-dependent weights, and a default obtains if the weighted sum of votes stays below some threshold. A participation or approval quorum rule can be optimal only if one side of the electorate abstains. In the case of small participation costs, we characterize the equilibria of linear voting rules and solve for welfare-maximizing rules. Voluntary voting always dominates compulsory voting. If (and only if) the heterogeneity of preference intensities across the electorate is small, in the optimum essentially only one side of the electorate participates.
    Date: 2016–02
  8. By: Igor Fedyukin (National Research University Higher School of Economics)
    Abstract: Radical “Westernizing” transformations in extra-European countries, from Peter I’s Russia to Meiji Japan, are traditionally presented as a response to threats from the more militarily and technologically advanced European powers. This corresponds to the general tendency to view war as the driving force behind early modern state-building. Yet, how exactly did such transformations become possible? How were the rulers able to pursue policies that threaten large sections of their own military elites, from strel’tsy and mamluks to janissaries and samurais? And why did some of the extra-European states failed to ‘Westernize” in response to external threats, while others rapidly Westernized when the threats was ephemeral, at best? This article seeks to complicate this “bellicist” narrative of Westernizing transformations by shifting the focus of analysis to the rulers’ quest for political survival. It argues that when the domestic balance of power is stable, incumbent rulers tend not to embark on reform, even in the face of external military threats. Conversely, such reforms tend to occur when the domestic balance of power is disrupted to such a degree as to lead to the emergence of challengers, who launch “Westernization” as they seek to expand their power base and undermine that of their rivals. Factional political struggles accompanying such transformations are interpreted here not as a conservative reaction against reforms, but as a process that precedes and enables reforms by facilitating the creation of an alternative ruling coalition
    Keywords: Reforms, Eurasia, Early Modern, Peter I, Westernization, War, Elites
    JEL: Z
    Date: 2016
  9. By: Dave, Dhaval M. (Bentley University); Corman, Hope (Rider University); Reichman, Nancy E. (Rutgers University)
    Abstract: Voting is an important form of civic participation in democratic societies but a fundamental right that many citizens do not exercise. This study investigates the effects of welfare reform in the U.S. in the 1990s on voting of low income women. Using the November Current Population Surveys with the added Voting and Registration Supplement for the years 1990 through 2004 and exploiting changes in welfare policy across states and over time, we estimate the causal effects of welfare reform on women's voting registration and voting participation during the period during which welfare reform unfolded. We find robust evidence that welfare reform increased the likelihood of voting by about 4 percentage points, which translates to about a 10% increase relative to the baseline mean. The effects were largely confined to Presidential elections, were stronger in Democratic than Republican states, were stronger in states with stronger work incentive policies, and appeared to operate through employment, education, and income.
    Keywords: employment, voting, welfare reform, income, civic participation, education, difference-in-differences
    JEL: H0 I2 J2 J3
    Date: 2016–02
  10. By: Yasuyuki Nishigaki (Ryukoku University); Hideya Kato (Ryukoku University)
    Abstract: Several branches of the literature focus on the advantages of the provision of public goods by a local government. Tiebout (1956) indicated that “voting with feet†leads to the optimal provision of local public goods if residents can emigrate from one municipality to another to maximize utility. Due to the free mobility of residents, local governments exhibit an inter-related performance in a competitive environment and are disciplined to achieve efficient provision of public goods, although rather unrealistic conditions, including perfect information and “free mobility†of residents, are pre-requested.The theory of local yardstick competition, in the principal–agent setting with asymmetric information, states that the comparison of the public service level and tax rates of a government with that of nearby localities can provide a useful instrument to assess a government’s performance. By comparing the performance of similar jurisdictions, voters can elect good politicians and send non-performers packing. Due to such a yardstick comparison of residents, local governors are disciplined to exert maximum efforts toward supplying public goods (Besley and Case 1996, Besley and Smart 2007), although they fail in the optimal provision of public goods (Nishigaki et al. 2015).Furthermore, a political inter-relation among neighboring jurisdictions causes interdependence in policy decisions and mimicking of policy variables or tax rates in the yardstick competition. This interdependence of policy or tax rates caused by informational externality is frequently used as evidence of yardstick competition in empirical studies (Besley and Case 1996, Revelli 2006, Nishigaki et al. 2014).Tax competition among local governments, on the other hand, addresses interaction due to inter-jurisdictional mobility of the tax base. By using a competitive two-region model, studies have indicated that an unfavorable externality of loss in the tax base causes strategic behavior in tax setting and an undersupply of public goods arises as a result of intergovernmental competition (Wildersin 1988, Brueckner and Saavedra 2001). These studies have also indicated that even competition among benevolent governments with full information leads to unfavorable results.By introducing the production of private and public goods using the inter-regionally mobile factor of capital stock, this paper investigates tax competition in a yardstick competition model. The harmful effects of under-provision of public goods caused by tax competition and political competition are synthesized in the yardstick equilibrium. Furthermore, it is indicated that the externality caused by the loss in capital stock is internalized through the informational externality of the yardstick comparison.
    Keywords: Local Public Goods; Asymmetric Information; Intergovernmental Externality; Yardstick Competition; Tax Competition
    JEL: D72 H41 H71
  11. By: Tetsuo Ono (Graduate School of Economics, Osaka University); Yuki Uchida (Graduate School of Economics, Osaka University)
    Abstract: This study considers public education policy and its impact on growth and wel- fare across generations. In particular, the study compares two fiscal perspectives| tax finance and debt finance|and shows that in a competitive equilibrium context, the growth and utility in the debt-finance case could be higher than those in the tax-finance case in the long run. However, the result is reversed when the policy is shaped by politics. Voters choose debt finance, despite its worse performance, in each period because a current generation can pass the cost of debt repayment to future generations.
    Keywords: Economic growth, Human capital, Public debt, Political equilib- rium
    JEL: D70 E24 H63
    Date: 2016–01
  12. By: Ingmar Schumacher
    Date: 2016–02–18
  13. By: Kenneth Nweke (Senior Lecturer, Dept. of Political Science, Faculty of Social Sciences, Ignatius Ajuru University of Education); Vincent Nyewusira (Ignatius Ajuru University of Education)
    Abstract: Successive governments in Nigeria since 1999 have faced the challenge of whether or not to adopt deregulation policy in the downstream sector of the petroleum industry. In fact, the decision of whether or not to adopt deregulation policy as a panacea for remedying the perennial fuel scarcity and arbitrary price increases in petroleum products has been an albatross around successive governments in Nigeria. This paper interrogates the political economy of deregulation policy in the downstream sector of the petroleum industry in Nigeria since the enthronement of democratic rule in 1999, hence contends that the subsidy regime of successive governments has not addressed the perennial scarcity and arbitrary price increases of petroleum products in the country. The paper maintains that the fuel subsidy regime has been an epitome of corruption as it has failed to address the original intentions of its founding fathers. It is the view of this paper, therefore, that a complete deregulation policy in the downstream sector that will ensure government’s outright removal of fuel subsidy, remains the only antidote to addressing the perennial scarcity and arbitrary price increases of petroleum products by ambitious petroleum marketers in Nigeria. It is by so doing that market forces shall become the major determinants of the prices and distribution of petroleum products for the teeming consumers in Nigeria. The paper concludes that savings that would accrue from fuel subsidy removal could be channelled into addressing the ailing infrastructure and human capital in the country.
    Keywords: Political economy, deregulation policy, down stream sector & petroleum industry
    JEL: A30
  14. By: Arnaud Dellis (University of Quebec in Montreal); Mandar Oak (School of Economics, University of Adelaide)
    Abstract: We develop a model of informational lobbying in which a policymaker must decide which issues to reform, but is uninformed about which issues he would be better off reforming. On each issue there is an informed interest group that always favors the adoption of reform, and which can lobby the policymaker by offering to provide verifiable information about the state of the world for its issue. A key feature of our model is that the policymaker faces time/resource constraints which may restrict both 1) his ability to grant access to and verify the information of all lobbying interest groups and 2) his ability to reform all issues. We show that when the policymaker can reform all issues, the act of lobbying by an interest group signals information only imperfectly. In particular, an interest group may want to lobby the policymaker even when it does not possess favorable information in the hope that the policymaker is unable to verify its information but still takes the act of lobbying as a signal that the state is favorable to reform. We call such lobbying behavior 'overlobbying'. We then show that a restriction on the number of issues on which reforms can be implemented, viz. an agenda constraint, can improve information transmission by eliminating overlobbying. Importantly, we identify circumstances in which an agenda constraint improves the ex ante welfare of the policymaker and of each interest group, leading to a Pareto improvement.
    Keywords: Lobbying; information; access; agenda constraint; Pareto improvement
    Date: 2016–02
  15. By: E. Roy Weintraub
    Abstract: Historians of the social sciences and historians of economics have come to agree that, in the United States, the 1940s transformation of economics from political economy to economic science was associated with economists’ engagements with other disciplines—e.g. mathematics, statistics, operations research, physics, engineering, cybernetics—during and immediately after World War II. More controversially, some historians have also argued that the transformation was accelerated by economists’ desires to be safe, to seek the protective coloration of mathematics and statistics, during the McCarthy period. This paper argues that that particular claim 1) is generally accepted, but 2) is unsupported by good evidence, and 3) what evidence there is suggests that the claim is false.
    Keywords: Cold War, McCarthyism, mathematical economics, mathematization of economics, history of philosophy, RAND, Cowles Commission, Paul Lazarsfeld
    JEL: B2 B4 B5 C02 C10
    Date: 2016
  16. By: Thomsson K.M.; Vostroknutov A. (GSBE)
    Abstract: We experimentally explore the way political preferences shape giving behavior. We find no difference in average giving between the Left and the Right in a Dictator game environment. However, we find the reasons for giving to be different. Right-leaning individuals give according to a norm-dependent utility that takes into account the beliefs of the receiver. The behavior of left-leaning individuals is not shaped by such an interaction between norms and beliefs. We conclude that right-wingers choose in accordance with a small world view, where giving is shaped by social interaction, while left-wingers appear rigid in their reaction to social context.
    Keywords: Design of Experiments: Laboratory, Individual; Design of Experiments: Laboratory, Group Behavior; Behavioral Economics: Underlying Principles; Altruism; Philanthropy;
    JEL: C91 C92 D03 D64
    Date: 2016
  17. By: Joël CARIOLLE (Ferdi)
    Abstract: The evidence of a “voracity effect” of temporary windfalls on corruption in weak institutional contexts has been widely documented. However, the reverse hypothesis of a “craving effect” on corruption stimulated by resource shortages has theoretical foundations but less empirical support. This paper aims to reconcile these two seemingly competing hypotheses within a unified analytical and empirical framework. Exploiting data on 19,712 bribe reports and other characteristics of firms located in 36 developing countries, and addressing endogeneity biases caused by intra-class correlation, multi-level estimations of the effect of aggregate export booms and busts on firm-level bribery are conducted. A robust positive effect of both export booms and busts on firms’ bribery is found, when financial and democratic institutions are failing. Conversely, a robust negative effect of booms and busts is evidenced when institutions are better off. Therefore, this paper gives additional evidence on the importance of institutional safeguards against corrupt practices in times of abundance, and new evidence on their importance in times of shortage.
    Date: 2016–02

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