nep-pol New Economics Papers
on Positive Political Economics
Issue of 2016‒06‒04
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Loyalty Vs Economic Performance: Evidence from Machine Politics in Russia’S Regions By Michael Rochlitz
  2. Democracy and redistribution By Santanu Gupta; Raghbendra Jha
  3. Environmental Concerns and Individual Trade Policy Preferences in Developing Countries By Daniel Rais
  4. The Political Economy of Energy Innovation By Shouro Dasgupta; Enrica De Cian; Elena Verdolini
  5. Dynamic Bargaining over Redistribution with Endogenous Distribution of Political Power By Saito, Yuta
  6. Local Government Proliferation, Diversity, and Conflict By Samuel Bazzi; Matthew Gudgeon
  7. Agricultural Protection, Domestic Policies, and International Political Economy: What is the Role of the State in Explaining Agricultural Protection? By Moon, Wanki; Pino, Gabriel; Asirvatham, Jebaraj
  8. The Political Economy of Embodied Technologies By Hochman, Gal; Zilberman, David
  9. The Effect of Labor Migration on the Diffusion of Democracy: Evidence from a Former Soviet Republic By Toman Barsbai; Hillel Rapoport; Andreas Steinmayr; Christoph Trebesch
  10. Economic and Class Voting in a Model of Redistribution with Social Concerns By Andrea Gallice; Edoardo Grillo
  11. The political connotation of international trade and globalisation: a common misunderstanding By Traverso, Silvio
  12. Political Economy of EMU. Rebuilding Systemic Trust in the Euro Area in Times of Crisis By Felix Roth
  13. Voters' preferences and electoral systems: The EuroVotePlus experiment in Italy By Luca, Bettarelli; Giovanna, Iannantuoni; Elena, Manzoni; Francesca, Rossi

  1. By: Michael Rochlitz (National Research University Higher School of Economics)
    Abstract: Electoral authoritarian regimes often rely on patron-client relationships and political machines to win elections. While a growing literature has focused on the reasons why authoritarian regimes might want to hold elections, the economic consequences associated with the need to win elections have been less intensely studied. In this paper, we argue that while holding elections might offer authoritarian regimes a range of informational and other advantages in the short and medium run, the long-term economic costs can be significant and potentially destabilizing. This effect is especially strong in transition economies, where outdated and inefficient economic structures might be kept alive for political reasons. The theory is tested with an original dataset of gubernatorial appointments from a leading electoral authoritarian regime, the Russian Federation. We find that by incentivizing regional governors to use their political machines to win elections for the regime, the Kremlin effectively punishes those governors that are successfully developing their regional economies, with the effect being especially strong in regions where a high percentage of the population lives in Soviet-era single company towns.
    Keywords: authoritarian elections, political machines, bureaucratic incentives, patronclient relationships, economic growth
    JEL: M51 O43 P31 P52
    Date: 2016
  2. By: Santanu Gupta; Raghbendra Jha
    Abstract: In a probabilistic voting model with three jurisdictions with residents with different income levels, we demonstrate that it is always optimal to distribute tax revenues as public good to only the residents of richest and median income jurisdictions. In this context, we compare the overall welfare of all citizens in a one bracket Tax Structure where the poor contribute to tax and does not receive public goods, to that in a progressive Two bracket or a Three bracket Tax Structure where the poor face no taxes but neither do they receive any public goods. In a situation where the government extracts a part of the tax revenues as political rents and maximizes expected payoff rather than the probability of re-election, there is a possibility of complete extraction which implies taxing away all private income with no allocation of public good, if electoral uncertainty be high.
    Keywords: median voter, local public good, reservation utility
    JEL: H41 H72
    Date: 2016
  3. By: Daniel Rais
    Abstract: Abstract Many political leaders of the Global South oppose linkages between trade liberalization and environmental protection. We examine whether citizens in developing countries share this position. Whereas a recent study finds that, in industrialized countries, environmental concerns are associated with protectionist sentiments, we hypothesize that citizens in poorer countries are likely to view the trade-environment nexus in a more positive light. We fielded a combination of surveys and conjoint experiments in Costa Rica, Nicaragua, and Vietnam to test this argument. The results show that citizens are concerned about negative environmental implications of trade. Yet, individuals with greener preferences are also more supportive of trade liberalization. Furthermore, and in contrast to prevailing government rhetoric, the majority of citizens support environmental clauses in trade agreements. These findings suggest that there might be room for more ambitious efforts to include environmental standards in international trade agreements.
    Date: 2015–05–15
  4. By: Shouro Dasgupta (Fondazione Eni Enrico Mattei (FEEM) and CMCC); Enrica De Cian (Fondazione Eni Enrico Mattei (FEEM) and CMCC); Elena Verdolini (Fondazione Eni Enrico Mattei (FEEM) and CMCC)
    Abstract: This paper empirically investigates the effects of environmental policy, institutions, political orientation, and lobbying on energy innovation and finds that they significantly affect the incentives to innovate and create cleaner energy efficient technologies. We conclude that political economy factors may act as barriers even in the presence of stringent environmental policy, implying that, to move towards a greener economy, countries should combine environmental policy with a general strengthening of institutional quality, consider the influence of government’s political orientation on environmental policies, and the implications of the size of energy intensive sectors in the economy.
    Keywords: Energy Innovation, Environmental Policy, Patents, Political Economy
    JEL: C23 D02 O30 Q58
    Date: 2016–05
  5. By: Saito, Yuta
    Abstract: This paper investigates a dynamic capital taxation (and redistribution) problem with an endogenous political power balance. It is shown that the current redistribution, which reduces the future inequality, decreases the future needs for redistribution if the bargaining power is (at least partly) endogenized.
    Keywords: Legislative bargaining; Wealth inequality; Redistribution; Capital taxation
    JEL: E60 E62 H20 H30
    Date: 2016
  6. By: Samuel Bazzi (Boston University & BREAD); Matthew Gudgeon (Boston University)
    Abstract: The creation of new local governments is a key feature of decentralization in developing countries. This process often causes substantial changes in contestable public resources and the local diversity of the electorate. We exploit the plausibly exogenous timing of new district creation in Indonesia to iden- tify the implications of these changes for violent conflict. Using new geospatial data on violence, we show that allowing for redistricting along group lines can reduce conflict. However, these reductions are undone and even reversed if the newly defined electorates are ethnically polarized, particularly in areas that receive an entirely new seat of government. We identify several mechanisms highlighting the violent contestation of political control.
    Keywords: Conflict, Polarization, Ethnic Diversity, Decentralization
    JEL: D72 D74 H41 H77 O13 Q34
  7. By: Moon, Wanki; Pino, Gabriel; Asirvatham, Jebaraj
    Abstract: The extant explanations of agricultural protection centers around domestic factors such as interest group politics within countries. Relatively little research effort has been paid to factors relating to conflictual international relations. The paper considers the state as a major decision-making unit and inter-state relations as an additional force shaping agricultural protectionism. The paper pursues two objectives: (i) developing a theory concerning states’ behavior in terms of protecting their agricultural sectors from foreign competition and promoting domestic agriculture; and (ii) developing empirical models to test the theory. The theory highlights inter-state conflicts and competition as a fundamental force driving agricultural protection that would be designed to promote domestic agricultural production capacity that would fit each state’s economic, political, and ecological conditions. The empirical models testing the theory would shed light on the role of the state’s desire to promote national food security in explaining agricultural protectionism in developed and developing countries.
    Keywords: Agricultural protection, state-centered political economy, international political economy, national food security, Agricultural and Food Policy, International Relations/Trade,
    Date: 2016–05–25
  8. By: Hochman, Gal; Zilberman, David
    Abstract: The presumption of this paper is that some governments value the environment, but others do not. Assuming political uncertainty and capital-intensive technologies, this circumstance yields a political economic process that emphasizes the effect of using current policy to influence future outcomes. The result of the analysis suggests that the optimal dynamic tax is larger than the Pigovian tax and that a standard results in more employment and output and yields higher adoption rates, thus achieving a predetermined pollution target with a lower political economic cost than a tax – with policy outcomes being more resilient to political change.
    Keywords: Embodied technologies, political uncertainty, standard, tax, environmental policy, Environmental Economics and Policy, Political Economy, Research and Development/Tech Change/Emerging Technologies, L5, O2, O3, Q2, Q3,
  9. By: Toman Barsbai (Kiel Institute for the World Economy - Kiel Institute for the World Economy); Hillel Rapoport (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Andreas Steinmayr (University of Munich); Christoph Trebesch (CESifo - Center for Economic Studies and Ifo for Economic Research - CESifo Group Munich, University of Munich)
    Abstract: Migration contributes to the circulation of goods, knowledge, and ideas. Using community and individual-level data from Moldova, we show that the emigration wave that started in the late 1990s strongly affected electoral outcomes and political preferences in Moldova during the following decade, eventually contributing to the fall of the last Communist government in Europe. Our results are suggestive of information transmission and cultural diffusion channels. Identification relies on the quasiexperimental context and on the differential effects arising from the fact that emigration was directed both to more democratic Western Europe and to less democratic Russia.
    Keywords: Emigration,political institutions,elections,social networks,information transmission,cultural diffusion
    Date: 2016–05
  10. By: Andrea Gallice; Edoardo Grillo
    Abstract: We investigate how concerns about social status may affect individuals?preferences for redistribution. In our model, agents are heterogeneous across two dimensions, productivity and social class, and an individual?s social status is de?ned as his relative standing in terms of a weighted average of these two components. The weight on each component depends positively on its standard deviation. Redistribution thus simultaneously affects labor supply and the weights that determine social status. As such, taxation not only redistributes resources from the rich to the poor but also becomes a way of preserving or modifying social status. Thus, individuals who have the same productivity but belong to different social classes support different tax rates. We characterize the equilibrium of the political game as the solution of a system of non-linear equations and identify the interclass coalition of voters who support the equilibrium tax rate.
    Keywords: economic voting, class voting, social status, voting, redistribution.
    JEL: D10 D63 H23
    Date: 2016
  11. By: Traverso, Silvio
    Abstract: Globalisation is often associated with a conservative political ideology and it usually finds the opposition of progressive political groups. The present essay contends this idea and tries to illustrate how the process is consistent with a progressive political philosophy. It also argues that the removal of this political bias would allow both the promoters of international trade and the progressive political organisations to be more effective in pursuing their own objectives.
    Keywords: Globalisation,Free trade
    Date: 2015
  12. By: Felix Roth
    Abstract: This paper revisits the existent empirical evidence of a decline in citizens’ systemic trust in times of crisis for a 12-country sample of the euro area (EA12) from 1999 to 2014. They affirm a pronounced decline in trust in the periphery countries of the EA12, leading to particular low levels in the national government and parliament in Spain and Greece. They discuss the consequences of this decline for the political economy of Economic and Monetary Union and corroborate the strong and negative association between unemployment and trust. They provide evidence of the increase in unemployment in Spain and examine policy measures at the national and EU level to tackle unemployment. They revisit the evidence of the enduring support for the euro and discuss its relevance to crisis management. They elaborate upon the question of how to restore systemic trust without and with treaty change.
    JEL: C23 D72 E24 E42 E65 F50 G01 J0 O4 O52 Z13
    Date: 2015–09
  13. By: Luca, Bettarelli; Giovanna, Iannantuoni; Elena, Manzoni; Francesca, Rossi
    Abstract: Motivated by the need of understanding voting behavior under different electoral rules, Laslier et al. (2015) have conducted an online experiment in several European countries during the three weeks before the 2014 elections for the European Parliament, the EuroVotePlus experiment. This paper focuses on the Italian data . We first show that the behavior of Italian respondents is consistent with the empirical findings at the European level. Then, we exploit the change from open list to closed list elections implemented in Italy in 1993 to investigate whether and how preferences over institutions are affected by experience. We find that respondents who voted using the open list system in Italy are more likely to prefer closed list systems, and that the effect is stronger the higher the number of open list elections that the respondents have faced.
    Keywords: European Parliament Election, Open list, Closed list, Voting rules
    JEL: D7 C9
    Date: 2016–05–19

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