nep-pol New Economics Papers
on Positive Political Economics
Issue of 2016‒04‒30
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Does education increase political participation? Evidence from Indonesia By Parinduri, Rasyad
  2. The political meaning and thrust of populist movements By Jost Halfmann
  3. Ethnic or nonethnic. What are the political parties in SubSaharan Africa. By TOMASZ BICHTA
  4. Fiscal Federalism and Tax Equalization: The potential for progressive local taxes By Debra Hevenstone; Ben Jann
  5. Institutional Endogeneity and Third-party Punishment in Social Dilemmas By Isabel Marcin; Pedro Robalo; Franziska Tausch
  6. The Political Economy of Food Price Policy: A Snythesis By Watson, Derrill D. II
  7. The impact of the elderly on inflation rates in developed countries By Tim Vlandas
  8. Socioeconomic transitions as common dynamic processes By Erich Gundlach; Martin Paldam
  9. Resource Discovery and the Politics of Fiscal Decentralization By Sambit Bhattacharyya; Louis Conradie; Rabah Arezki
  10. The Political and Economic Dynamics of Foreign Aid: A Case Study of United States and Chinese Aid to Sub-Sahara Africa By Kafayat Amusa; Nara Monkam; Nicola Viegi
  11. Protectionism is "Alive and Well"- Agriculture in the EU-Canada Trade Agreement By Kerr, William; Hobbs, Jill
  12. Which countries bid for the Olympic Games? Economic, political, and social factors and chances of winning By Wolfgang Maennig; Christopher Vierhaus

  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: Jost Halfmann (TU Dresden, Institute of Sociology)
    Abstract: Populist movements are abound in Europe: since the 1990s such movements and parties as Podemos in Spain, the Lega Nord in Italy, the UKIP in England or the Front National in France sprang up and attracted substantial numbers of voters and followers over time. Populist movemements and parties claim to speak for the people, they oppose elites in politics and economy and large associations and demand direct democracy. The thesis of the paper is that these movements and parties protest against the perceived erosion of the political status of the people as the legitimate constituent of democratic rule. According to populist views, political and social elites violate the obligation of the implicit contract between elites and the people to pursue the common good of the people in exchange for the people's loyalty to political rule. This loyalty appears to be challengd by perceived corruption, fatal governmental decisions and actions risking the wealth and the security of the nation, among which immigration politics rank highly. Immigration violates this contract because, as populists see it, only the people (that is: the legal and legitimate members of a constituency) should profit from the provisions of the state (welfare, safety, public order). The paper will illustrate this thesis by comparing selected populist movements and parties and reflect on the possible consequences of populism for representative democracy.
    Keywords: populism, protest, common good, immigration
    Abstract: The paper examines the issue of ethnicity in political parties and its implications for democracy in three African countries: Nigeria, Ghana and Namibia. It also examines the ways ethnic and nonethnic parties deal on political market in different countries. Ethnicity seems to be one of the most important factors that affects on political and social life in African countries. Moreover, since the colonialism and its ruthless and formal end, it is still present in daily life with double power. It is also a frequent element of political parties and their formation. Does it help or leads to conflicts? Is it necessary or avoidable? African politics seems to be accustomed to its ethnical affects and political organizations with ethnic factor are prevalenced all over the continent. It is not a rule however and we have some countries with the advantage of nonethnic parties. For sure the understanding of the ethnicity issue on the political scene allows for more insightful research of party development and dynamics on the continent.
    Keywords: Africa, political party, party structure, ethnicity
    JEL: D72 F54 D73
  4. By: Debra Hevenstone; Ben Jann
    Abstract: We construct an empirically informed computational model of fiscal federalism, testing whether horizontal or vertical equalization can solve the fiscal externality problem in an environment in which heterogeneous agents can move and vote. The model expands on the literature by considering the case of progressive local taxation. Although the consequences of progressive taxation under fiscal federalism are well understood, they have not been studied in a context with tax equalization, despite widespread implementation. The model also expands on the literature by comparing the standard median voter model with a realistic alternative voting mechanism. We find that fiscal federalism with progressive taxation naturally leads to segregation as well as inefficient and inequitable public goods provision while the alternative voting mechanism generates more efficient, though less equitable, public goods provision. Equalization policy, under both types of voting, is largely undermined by micro-actors' choices. For this reason, the model also does not find the anticipated effects of vertical equalization discouraging public goods spending among wealthy jurisdictions and horizontal encouraging it among poor jurisdictions. Finally, we identify two optimal scenarios, superior to both complete centralization and complete devolution. These scenarios are not only Pareto optimal, but also conform to a Rawlsian view of justice, offering the best possible outcome for the worst-off. Despite offering the best possible outcomes, both scenarios still entail significant economic segregation and inequitable public goods provision. Under the optimal scenarios agents shift the bulk of revenue collection to the federal government, with few jurisdictions maintaining a small local tax.
    Keywords: Fiscal Federalism, Equalization Grants, Computational Modeling, Tiebout Sorting, Theory of Justice, Multi-community model
    JEL: C63 D63 H21 H23 H3 H71
    Date: 2016–04–12
  5. By: Isabel Marcin (Max Planck Institute for Research on Collective Goods); Pedro Robalo (Max Planck Institute for Research on Collective Goods); Franziska Tausch (Max Planck Institute for Research on Collective Goods)
    Abstract: This paper studies experimentally how the endogeneity of sanctioning institutions affects the severity of punishment in social dilemmas. We allow individuals to vote on the introduction of third-party-administered sanctions, and compare situations in which the adoption of this institution is endogenously decided via majority voting to situations in which it is exogenously imposed by the experimenter. Our experimental design addresses the self-selection and signaling effects that arise when subjects can vote on the institutional setting. We find that punishment is significantly higher when the sanctioning institution is exogenous, which can be explained by a difference in the effectiveness of punishment. Subjects respond to punishment more strongly when the sanctioning institution is endogenously chosen. As a result, a given cooperation level can be reached through milder punishment when third-party sanctions are endogenous. However, overall efficiency does not differ across the two settings as the stricter punishment implemented in the exogenous one sustains high cooperation as subjects interact repeatedly.
    Keywords: Endogeneity, Third-party punishment, Voting, Institutions, Social dilemma, Public good
    JEL: C92 D02 D72 H41
    Date: 2016–04
  6. By: Watson, Derrill D. II
    Abstract: This paper identifies nine political economy factors that influenced governments’ policy choices during the most recent global food price crisis. While the most common policy stances may be explained by a simple, welfare-maximizing model, the variety of responses and the policy failures require more complex models. Policies are favored that maintain government legitimacy and produce private benefits for the best-connected stakeholders. Policy interventions were frequently ad hoc and delayed because of lack of market information, conflicts among government agencies in all governments, and extended deliberations among competing stakeholder groups. Widespread mutual mistrust between governments and the private sector was a major challenge. Governments’ unpredictable policy behavior and lack of transparency contributed to the hoarding, speculation and inefficient business transactions they condemned in the private sector, which further contributed to low transparency and instability. Breaking this vicious circle appears to be very important to improve food policy.
    Keywords: Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Political Economy,
    Date: 2015–06
  7. By: Tim Vlandas
    Abstract: What explains the cross-national variation in inflation rates in developed countries? Previous literature has emphasised the role of ideas and institutions, and to a lesser extent interest groups, while leaving the role of electoral politics comparatively unexplored. This paper seeks to redress this neglect by focusing on one case where electoral politics matters for inflation: the share of the population above 65 years old in a country. I argue that countries with a larger share of elderly have lower inflation because older people are both more inflation averse and politically powerful, forcing governments to pursue lower inflation. I test my argument in three steps. First, logistic regression analysis of survey data confirms older people are more inflation averse. Second, panel data regression analysis of party manifesto data reveals that European countries with more old people have more economically orthodox political parties. Third, time series cross-section regression analyses demonstrate that the share of the elderly is negatively correlated with inflation in both a sample of 21 advanced OECD economies and a larger sample of 175 countries. Ageing may therefore push governments to adopt a low inflation regime.
    Keywords: ageing, inflation, elderly, economic policy, electoral politics, OECD
    Date: 2016–03
  8. By: Erich Gundlach (Universität Hamburg, Germany); Martin Paldam (Department of Economics and Business Economics, Aarhus University, Denmark)
    Abstract: Long-run socioeconomic transitions can be observed as stylized facts across countries and over time. For instance, poor countries have more agriculture and less democracy than rich countries, and this pattern also holds within countries for transitions from a traditional to a modern society. It is shown that the agricultural and the democratic transitions can be partly explained as the outcome of dynamic processes that are shared among countries. We identify the effects of common dynamic processes with panel estimators that allow for heterogeneous country effects and possible cross-country spillovers. Common dynamic processes appear to be in line with alternative hypotheses on the causes of socioeconomic transitions.
    Keywords: Long-run development, agriculture, democracy, socioeconomic transitions, mean group estimators, technology heterogeneity, cross-section independence
    JEL: O1 P5 Q1
    Date: 2016–07–04
  9. By: Sambit Bhattacharyya (Department of Economics, University of Sussex); Louis Conradie (Department of Economics, University of Sussex); Rabah Arezki (Research Department, IMF)
    Abstract: If the central government is a revenue maximizing Leviathan then resource discovery and democratization should have a discernible impact on the degree of fiscal decentralization. We systematically explore this effect by exploiting exogenous variation in giant oil and mineral discoveries and permanent democratization. Using a global dataset of 77 countries over the period 1970 to 2012 we find that resource discovery has very little effect on revenue decentralization but induces expenditure centralization. Oil discovery appears to be the main driver of centralization and not minerals. Resource discovery leads to centralization in locations which have not experienced permanent democratization. Tax and intergovernmental transfers respond most to resource discovery shocks and democratization whereas own source revenue, property tax, educational expenditure, and health expenditure do not seem to be affected. Higher resource rent leads to more centralization and the effect is moderated by democratization.
    Keywords: Resource discovery; Resource rent; Democratization; Fiscal decentralization
    JEL: H41 H70 O11
    Date: 2016–03
  10. By: Kafayat Amusa (Department of Economics, University of Pretoria); Nara Monkam (African Tax Administration Forum (ATAF)); Nicola Viegi (Department of Economics, University of Pretoria)
    Abstract: The foreign aid arena as it pertains to the African continent has traditionally been dominated by the Organization of Economic Co-operation and Development (OECD) countries, however over the last three decades non-traditional donors such as the China, South Africa and Brazil have emerged in the donor field. The increasing importance of non-traditional donors has meant that the economic and political stronghold of Western and OECD countries in sub-Sahara African (SSA) has gradually ebbed, due to increased competition amongst donors on the continent. Specifically, as the economic and political reach of the United States (USA), the second largest bilateral donor to SSA has diminished, amongst the group of emerging donors, China has become the largest contributor of aid to SSA countries. There appears to be a political - economic dynamic that points to the existence of two competing reasons underpinning the foreign aid trend in SSA. Using a comparative approach, this study examines the determinants of aid allocation by China and the United States to SSA countries. The study finds that both donor motives and recipient need are factors in US and Chinese aid allocation to SSA. Additionally, the study finds di¤erences in US aid allocation determinants pre and post China’s entry into SSA’s aid …eld. Furthermore, evidence of income and population bias is observed for both donor countries.
    Keywords: foreign aid allocation, donor motives, recipient need, Sub-Saharan Africa
    JEL: F35
    Date: 2016–04
  11. By: Kerr, William; Hobbs, Jill
    Abstract: After six years of secret negotiations the agreed text of the trade agreement between the European Union and Canada was released in September 2014. The Comprehensive Economic and Trade Agreement (CETA) must still be ratified by the respective legislatures. Agricultural trade was expected to be a contentious issue in the negotiations with both Canada and the EU having sensitive areas where liberalization would be difficult. In Canada, the domestic policy for dairy and poultry -supply management- requires support from high trade barriers. In the EU, some SPS barriers are non-negotiable- GMOs and the use of growth hormones in beef production. The eventual bargain leaves these trade inhibiting measures largely intact. Some liberalization was achieved in other areas such as recognition of EU geographical indications in Canada, reduced barriers to sales of EU wine, increased market access for EU cheeses and expansion in EU TRQs for wheat, hormone free beef and pork.
    Keywords: Agri-food trade, Canada, EU, preferential agreement, protectionism, Agricultural and Food Policy, International Relations/Trade, F53, Q17,
    Date: 2015
  12. By: Wolfgang Maennig (Chair for Economic Policy, University of Hamburg); Christopher Vierhaus (Chair for Economic Policy, University of Hamburg)
    Abstract: This contribution analyzes 132 factors on their potential to discriminate countries bidding for hosting the Olympic Games from non-bidding countries. Our binary, clustered model using generalized estimating equations (GEE) shows that countries recording long-term economic growth and pursuing a liberalization and globalization policy will consider an Olympic bid. In addition, countries with an urban population above 10 million, with stable election results and an improvement in health standards as well as more attractive tourism destinations are more likely to bid for the Olympic Games. Finally, the bid decision is shaped by experience in hosting major sports events, a country and regional rotation, persistence and climatic conditions.
    Keywords: Olympic Summer Games, mega events, bidding, host city election, IOC, decision-making
    JEL: R58 L83
    Date: 2016–04–05

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