nep-pol New Economics Papers
on Positive Political Economics
Issue of 2016‒04‒09
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Does education increase political participation? Evidence from Indonesia By Parinduri, Rasyad
  2. Primaries: the unifying force By Rafael Hortala-Vallve; Hannes Mueller
  3. Bureaucrats or Politicians? Political Parties and Antidumping in the US By Aquilante, Tommaso
  4. Dynamics of Political Systems By Buchheim, Lukas; Ulbricht, Robert
  5. Political Institutions and Federalism: A "Strong" Decentralization Theorem By Raul A. Ponce-Rodriguez; Charles R. Hankla; Jorge Martinez-Vazquez; Eunice Heredia-Ortiz
  6. "Measuring the extent and implications of corporate political connections in prewar Japan" By Tetsuji Okazak; Michiru Sawada
  7. The Political Economy of Services Trade Agreements By Fiorini, Matteo; Lebrand, Mathilde
  8. Domestic facilitators and impediments to EU democracy promotion in its Eastern neighbourhood: The cost-benefit balance of norm adoption By Buscaneanu, Sergiu
  9. Presidents and the U.S. Economy: An Econometric Exploration By Alan S. Blinder; Mark W. Watson
  10. Economic and Political Inequality: The Role of Political Mobilization By Amat, Francesc; Beramendi, Pablo
  11. Government Corruption and Foreign Direct Investment Under the Threat of Expropriation By Christopher Hajzler; Jonathan Rosborough
  12. Unbundling Political and Economic Rationality: a Non-Parametric Approach Tested on Spain By Salvador Bertomeu; Antonio Estache
  13. ‘Smart development’. An essay on a new political economy of the environment By Tausch, Arno

  1. By: Parinduri, Rasyad
    Abstract: I examine whether education increases voter turnout and makes better voters using an exogenous variation in education induced by an extension of Indonesia's school term length, which fits a fuzzy regression discontinuity design. The longer school year increases education, but I do not find evidence that education makes people more likely to vote in elections or changes whether they consider political candidates' religion, ethnicity, or gender important when they vote. If anything, education seems to make voters more likely to think candidates' development programs are important.
    Keywords: education, political participation, regression discontinuity design, Asia, Indonesia
    JEL: D72
    Date: 2016–03
  2. By: Rafael Hortala-Vallve; Hannes Mueller
    Abstract: We present a formal model of intra-party politics to explain candidate selection within political parties. We think of parties as heterogeneous groups of individuals who aim to implement a set of policies but who differ in their priorities. When party heterogeneity is too great, parties are in danger of splitting into smaller yet more homogeneous political groups. In this context we argue that primaries can have a unifying role if the party elite cannot commit to policy concessions. Our model shows how three factors interact to create incentives for the adoption of primary elections, namely (1) the alignment in the preferred policies of various factions within a party, (2) the relative weight of each of these factions and (3) the electoral system. We discuss the existing empirical literature and demonstrate how existing studies can be improved in light of our theoretical predictions to provide a new, structured perspective on the adoption of primary elections.
    Keywords: political parties; primaries; candidate selection
    JEL: D71 D72
    Date: 2015
  3. By: Aquilante, Tommaso
    Abstract: Antidumping (AD) is the most widely used contingent protection measure. In the United States, key decisions on AD are delegated to the International Trade Commission (ITC), an independent agency composed of six non-elected commissioners. Using a newly collected dataset, I study the determinants of all final ITC votes on AD during the 1980-2010 period. Contrary to the view that ITC commissioners are bureaucrats who simply follow technical rules, I find that their decisions crucially depend on which party has appointed them (the selection effect) and on the trade policy interests of key senators in that party (the pressure effect): whether (Democratic) Republican-appointed commissioners vote in favor of AD depends crucially on whether the petitioning industry is key (in terms of employment) in the states represented by leading (Democratic) Republican senators.
    Keywords: Antidumping policy, Political parties
    JEL: D72 F10 F13 F14 P16
    Date: 2015–11
  4. By: Buchheim, Lukas; Ulbricht, Robert
    Abstract: We develop a model of regime dynamics that embeds the principal transition scenarios examined by the literature. Political systems are a priori unrestricted and dynamics emerge through the combination and interaction of transition events over time. The model attributes a key role to beliefs held by political outsiders about the vulnerability of regimes, governing the likelihood and outcome of transitions. In equilibrium, transition likelihoods are declining in a regime's maturity,generating episodes of political stability alternating with rapid successions of revolts, counter revolts, and reforms. The stationary distribution of regimes is bimodal. The model dynamics match the data remarkably well.
    Keywords: Critical junctures; democratization; invariant distribution; iron law of oligarchy; regime dynamics; revolts
    JEL: D74 D78 P16
    Date: 2015–11–27
  5. By: Raul A. Ponce-Rodriguez (Department of Economics, Universidad Autonoma de Ciudad Juarez); Charles R. Hankla (Department of Political Science, Georgia State University); Jorge Martinez-Vazquez (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University Author-Workplace-Homepage:; Eunice Heredia-Ortiz (Developemtn Alternatives Inc., DAI)
    Abstract: In this article, we investigate how differences in the political institutions necessary for implementing decentralization reform may affect the efficiency and welfare properties of decentralization itself. We incorporate insights from political science and economics into a rigorous and formal extension of the influential “decentralization theorem” first developed by Oates in 1972. In our analysis, we go beyond Oates by producing a strong decentralization theorem that identifies the political conditions under which democratic decentralization dominates centralization even in the presence of interjurisdictional spillovers. More specifically, we find that beneficial outcomes for public service delivery will obtain when democratic decentralization (i.e. the creation of popularly elected sub-national governments) is combined with party centralization (i.e. the power of national party leaders to nominate candidates for sub-national office). We also find that the participation rules of primaries, whether closed or open, have important implications for the expected gains from decentralization. Most notably, we find that, when primaries are closed, even Oates’ convhaentional decentralization theorem does not hold. In summary, our theory shows that political institutions matter considerably in determining the welfare gains of decentralization outcomes.
    Date: 2016–03
  6. By: Tetsuji Okazak (Faculty of Economics, The University of Tokyo); Michiru Sawada (College of Economics, Nihon University)
    Abstract: This paper explores the extent of political connections of firms, and examines their implications on firm values, using firm-level data from prewar Japan. We collect the data of directors, their positions in the House of Representatives, stock prices and financial performance, on publicly traded companies in late 1920s and early 1930s Japan. It is found that almost 20% of the publicly traded companies had political connections through politician directors. Especially, firms in the regulated industries such as the electric power and railroad, were more likely to have political connections. Overall, there is no evidence that connections with politics added firm values. On the other hand, with respect to those firms that newly obtained political connections, we found that the stock returns improved from the pre-election period to the post-election period.
  7. By: Fiorini, Matteo; Lebrand, Mathilde
    Abstract: This paper studies the determinants of liberalization commitments in the context of trade in services used as intermediate inputs. Compared to goods, services inputs are mostly complementary to other factors of production and non-tradable. We build a theoretical trade policy framework in which (i) foreign investment as a way to contest a market for non-tradable services can be restricted by the government and (ii) the role of services as complementary inputs explains unilateral commitment to services trade liberalization. Commitment helps governments to avoid political pressures that would result in protectionist measures leading downstream producers to inefficiently reduce their production. In addition we provide new results on the influence of lobbying by both national firms and foreign multinationals. We discuss how the bargaining power of the government, the size of national services sectors and the difference in valuation between national and foreign contributions affect the willingness of the government to sign a services trade agreement.
    Keywords: Services Trade, Trade Agreements, FDI, Lobby
    JEL: D43 F13 F21 L80
    Date: 2016
  8. By: Buscaneanu, Sergiu
    Abstract: This paper argues that the balance between the size of EU incentives and the costs of democratic transformation has impeded democratic consolidation in Eastern ENP countries. Whereas the cost-benefit balance of norm adoption appears to be a relevant predictor of regime trajectories in this region, patterns of economic development do not match those of political regimes. Institutional design seems to fit better regime dynamics in Eastern ENP countries, but it is also possible that the nature of main political institutions depends on the regime. The road from institutions to the regime is a two-way road. Finally, the number of parties in power within executives does not say much about regime trajectories. The degree of a pro-European (Western) stance of the governing party or coalition must be incorporated into the analysis. To this end, a coalitional government that had a strong pro-EU identity proved to be a promising facilitator of external democracy promotion efforts.
    Keywords: cost-benefit balance,structures,institutions,actors,regimes,Eastern ENP countries
    Date: 2016
  9. By: Alan S. Blinder (Princeton University); Mark W. Watson (Princeton University)
    Abstract: The U.S. economy has grown faster—and scored higher on many other macroeconomic metrics-- hen the President of the United States is a Democrat rather than a Republican. For many measures, including real GDP growth (on which we concentrate), the performance gap is both large and statistically significant, despite the fact that postwar history includes only 16 complete presidential terms. This paper asks why. The answer is not found in technical time series matters (such as differential trends or mean reversion), nor in systematically more expansionary monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly from more benign oil shocks, superior TFP performance, a more favorable international environment, and perhaps more optimistic consumer expectations about the near-term future. Many other potential explanations are examined but fail to explain the partisan growth gap.
    Date: 2014–07
  10. By: Amat, Francesc (Universitat Pompeu Fabra); Beramendi, Pablo (Duke University)
    Abstract: This paper analyzes the relationship between economic and political inequality. Beyond the view that inequality reduces turnout we document a non-linear relationship between them. To explain these patterns we argue that parties' strategies to target and mobilize low income voters re ect the level of economic inequality and development. Under high inequality and low development, clientelism becomes the dominant form of political competition and turnout in- equality declines. As societies grow and inequality recedes, clientelism becomes suboptimal and parties turn to mobilize voters around programmatic o erings. As a result, turnout inequality increases. Empirically, we produce two analyses. First, we identify the relationship between political mobilization strategies, inequality and turnout by exploiting the randomized allocation of anti-fraud measures across Brazilian municipalities in the early 2000s. Second, we address the generalizability of our ndings by carrying out a cross-national multilevel analysis of the relationship between inequality, strategies for political mobilization, and turnout inequality.
    Keywords: JEL Classification:
    Date: 2016
  11. By: Christopher Hajzler; Jonathan Rosborough
    Abstract: Foreign investment is often constrained by two forms of political risk: expropriation and corruption. We examine the role of government corruption in foreign direct investment (FDI) when contracts are not fully transparent and investors face the threat of expropriation. Using a novel dataset on worldwide expropriations of FDI over the 1990–2014 period, we find a positive relationship between the extent of foreign investor protections and the likelihood of expropriation when a country’s government is perceived to be highly corrupt, but not otherwise. We then develop a theory of dynamic FDI contracts under imperfect enforcement and contract opacity in which expropriation is a result of illicit deals made with previous governments. In the model, a host-country government manages the FDI contract on behalf of the public, which does not directly observe government type (honest or corrupt). A corrupt type is able to extract rents by encouraging hidden investments in return for bribes. Opportunities for corrupt deals arise from the distortions in the optimal contract when the threat of expropriation is binding. Moreover, a higher likelihood of the government being corrupt increases the public’s temptation to expropriate FDI, magnifying investor risk. The model predicts that expropriation is more likely to occur when the share of government take is low and following allegations of bribes to public officials, and it suggests an alternative channel through which corruption reduces optimal foreign capital flows.
    Keywords: Development economics, Economic models, International topics
    JEL: F23 F21 F34
    Date: 2016
  12. By: Salvador Bertomeu; Antonio Estache
    Abstract: The paper suggests a method to distinguish between various possible motivations (e.g. political vs economic) underlying policy implementation such as public investments. The true motivation can be revealed by modelling each policy goal, as the focus of the optimization anchoring a data envelopment analysis of the efficiency of the observed implementation. The approach is tested on Spain's land transport infrastructure policy since it is argued by many observers to be driven more by political than economic concerns. The method clearly shows that investments have generally been more consistent with a political objective (the centralization of economic power) than with an economic objective (maximizing mobility).
    Date: 2016–03
  13. By: Tausch, Arno
    Abstract: In this book, we present a first empirical reflection on ‘smart development’, its measurement and its possible ‘drivers’ and ‘bottlenecks’. We first provide cross-national data, how much ecological footprint is used in the nations of the world system to ‘deliver’ a given amount of democracy, economic growth, gender equality, human development, research and development, and social cohesion. To this end, we first developed UNDP-type performance indicators from current standard international comparative, cross-national social science data on these six main dimensions of development and on the combined performance on the six dimensions (a UNDP type ‘human development index plus’). We then show the non-linear standard OLS regression trade-offs between ecological footprints per capita and their square on these six components of development and the overall super-UNDP development performance index, derived from them. The residuals from these regressions are our new measures of smart development: a maximum of democracy, economic growth, gender equality, human development, research and development, social cohesion, and their combination with a minimum of ecological footprint. Our estimates underline the enormous importance of the positive effects of received worker remittances on smart development.
    Keywords: C43 - Index Numbers and Aggregation Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth F22 - International Migration F-24 – Remittances
    JEL: C43 F22 F24 Q56
    Date: 2016–03–22

This nep-pol issue is ©2016 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.