nep-pol New Economics Papers
on Positive Political Economics
Issue of 2016‒07‒23
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Render Unto Caesar: Taxes, Charity, and Political Islam By Maleke Fourati; Gabriele Gratton; Pauline Grosjean
  2. The determinants of pro-environmental concerns of political parties during electoral periods By Constantin-Marius Apostoaie
  3. Global Samaritans? Donor Election Cycles and the Allocation of Humanitarian Aid By Kurt Annen; Scott Strickland
  4. Electoral Credit Supply Cycles Among German Savings Banks By Gropp, Reint E.; Saadi, Vahid
  5. Inequality, Privatization and Democratic Institutions in Developing Countries By Lidia Ceriani; Simona Scabrosetti; Francesco Scervini
  6. Do Government Audits Reduce Corruption? Estimating the Impacts of Exposing Corrupt Politicians By Eric Avis; Claudio Ferraz; Frederico Finan
  7. The Political Determinants of Government Bond Holdings By Eichler, Stefan; Plaga, Timo
  8. Condorcet domains, median graphs and the single-crossing property By Puppe, Clemens; Slinko, Arkadii
  9. Reconsideration of Rights to Vote By Eda Karademir; Alper Karademir
  10. Political Economy of Tax Reforms – Workshop proceedings By Savina Princen
  11. A Methodology for Determining the Impact of the Political Environment on Marketing and Tourism By Neviana Krasteva
  12. Regional Banking Instability and FOMC Voting By Eichler, Stefan; Lähner, Tom; Noth, Felix

  1. By: Maleke Fourati (School of Economics, UNSW Business School, UNSW Australia); Gabriele Gratton (School of Economics, UNSW Business School, UNSW Australia); Pauline Grosjean (School of Economics, UNSW Business School, UNSW Australia)
    Abstract: Data from the first post-Arab Spring elections reveal that support for Islamic parties came from richer districts and individuals. We show that standard public finance arguments help explain the voting pattern in these elections and others in the Muslim world. Our model predicts that a voter’s probability to vote for a religious party (i) increases in income for the poorest voters, but possibly decreases in income for the richest; (ii) is greater for voters in richer districts; and (iii) increases with the voter’s religiosity. We test these predictions on original micro-level data in a nationally representative sample of 600 individuals in 30 districts in Tunisia. Our empirical results align with our predictions and suggest that belonging to the middle class and living in a richer district together affect voting decisions more than being a religious voter. We also test for other possible factors affecting voting decisions, such as education, or attitudes towards corruption or towards the West. Finally, we document similar patterns in other key elections in the Muslim world.
    Keywords: Religion, religious parties, political preferences, democratic politics, charitable organizations
    JEL: D72 Z12
    Date: 2016–07
  2. By: Constantin-Marius Apostoaie (Integrated Center for Studies in Environmental Science for the Northeast Region, Alexandru Ioan Cuza University of Iasi)
    Abstract: The electoral process in a democratic country has a significant impact on its economy. Researchers even speak about the emergence of a new concept of "election-year economics" in economic policies, especially for countries with young democracies. Nevertheless, the implications of political factors in the electoral periods don’t resume to the economic aspects of the society; they make themselves noticed also on other non-economic issues such as: environmental protection, quality of life etc. If prior to the election period, the focus of the political parties and also of the general public is mainly on primary policies (including fiscal policies, budgetary or exchange rate policies), other secondary policies fade in the picture, among which we include the environmental policy. Nevertheless, during political campaigns prior to elections, some parties and their affiliated politicians may display a kind of pro-environmental behaviour only to convince some of the voters to cast them a ballot. If the specialized literature has looked well enough into the determinants of citizens’ pro-environmental behavior, this is not the case of the drivers that push political parties towards adopting environmental attitudes. The lack of knowledge in this regard is even more pronounced when dealing with Eastern European countries that were, in many cases, excluded from the research (given the inconsistency in and lack of data). The methodological approach consists in a regression analysis between the political parties’ tendencies towards environmental decisions and actions, on the one hand, and various economic, social and environmental conditions. Using the data provided by the Manifesto Project Dataset (CMP), the websites and platforms of the Romanian political parties and the input from interviews with politicians as well as ENGO specialists, covering the period 1990-2015, the paper investigates the “greening†of Romanian political parties prior to national election periods and the determinant factors in this regard. The preliminary results suggest that political parties’ environmental concern is strongly correlated with their political ideology, but also reveal some specific features that describe Romania’s young democratic system. The paper contributes to the existing literature by filling a gap related to the investigated subject (political parties’ environmental policy offer) and to the geographical coverage. Acknowledgement: This work is financially supported through the UAIC Grant for Young Researchers competition of the Alexandru Ioan Cuza University of Iaşi, Romania (Grant registration number: GI-2015-24).
    Keywords: environment, environmental policy, political parties, electoral periods, electoral cycle, political ideology, political greening
    JEL: Q58 D78 H79
  3. By: Kurt Annen (Department of Economics and Finance, University of Guelph); Scott Strickland (Ministry of Community and Social Services, Government of Ontario)
    Abstract: This paper finds a large causal donor election cycle effect in humanitarian aid allocations: On average, humanitarian aid increases by 54% in the year before elections. Our identifcation strategy consists of focusing on donors with fixed election dates, making elections clearly exogenous. Furthermore, we find large interaction effects with natural and human disasters. This evidence is consistent with our theory that incumbent governments responding to humanitarian disasters can increase voter support for their party and insure against the political fall-out of not being seen as representatives of a country with global interests and influence. However, it is important to stress that despite our findings, human and natural disasters explain a substantially larger share of the overall variation in humanitarian aid observed in the data.
    Keywords: Humanitarian aid, election cycles, aid allocation
    JEL: F35 D72 H5 O19
    Date: 2016
  4. By: Gropp, Reint E.; Saadi, Vahid
    Abstract: In this note we document political lending cycles for German savings banks. We find that savings banks on average increase supply of commercial loans by €7.6 million in the year of a local election in their respective county or municipality (Kommunalwahl). For all savings banks combined this amounts to €3.4 billion (0.4% of total credit supply in Germany in a complete electoral cycle) more credit in election years. Credit growth at savings banks increases by 0.7 percentage points, which corresponds to a 40% increase relative to non-election years. Consistent with this result, we also find that the performance of the savings banks follows the same electoral cycle. The loans that the savings banks generate during election years perform worse in the first three years of maturity and loan losses tend to be realized in the middle of the election cycle.
    Keywords: German savings banks,municipality
    Date: 2015
  5. By: Lidia Ceriani (The World Bank); Simona Scabrosetti (Università di Pavia e DONDENA); Francesco Scervini (School of Advanced Studies IUSS Pavia)
    Abstract: We study the distributional impact of privatization in the light of the democrati- zation process in developing countries which have recently experienced economic and political transitions. Using an unbalanced panel of 80 countries in the period 1988-2008, we find that privatization is negatively and significantly correlated with inequality when democratic institutions are well consolidated, and positively when they are not. Our evidence suggests an interesting policy implication for developing countries: only after having established mature representative political institutions, privatization appears to be related to a reduction in income inequality.
    Keywords: Inequality, Democracy, Privatization, Developing countries
    JEL: D30 O15 P5
  6. By: Eric Avis (UC Berkeley); Claudio Ferraz (Department of Economics, PUC-Rio); Frederico Finan (UC Berkeley)
    Abstract: Political corruption is considered a major impediment to economic development, and yet it remains pervasive throughout the world. This paper examines the extent to which government audits of public resources can reduce corruption by enhancing political and judiciary accountability. We do so in the context of Brazil’s anti-corruption program, which randomly audits municipalities for their use of federal funds. We find that being audited in the past reduces future corruption by 8 percent, while also increasing the likelihood of experiencing a subsequent legal action by 20 percent. We interpret these reduced-form findings through a political agency model, which we structurally estimate. Based on our estimated model, the reduction in corruption comes mostly from the audits increasing the perceived threat of the non-electoral costs of engaging in corruption. Creation-Date: 2016-07
  7. By: Eichler, Stefan; Plaga, Timo
    Abstract: This paper analyzes the link between political factors and sovereign bond holdings of US investors in 60 countries over the 2003-2013 period. We find that, in general, US investors hold more bonds in countries with few political constraints on the government. Moreover, US investors respond to increased uncertainty around major elections by reducing government bond holdings. These effects are particularly significant in democratic regimes and countries with sound institutions, which enable effective implementation of fiscal consolidation measures or economic reforms.
    Keywords: government bond portfolio,political factors,Treasury International Capital data,PPML
    JEL: G11 G15 G18 H11 H63
    Date: 2016
  8. By: Puppe, Clemens; Slinko, Arkadii
    Abstract: Condorcet domains are sets of linear orders with the property that, whenever the preferences of all voters of a society belong to this set, their majority relation has no cycles. We observe that, without loss of generality, every such domain can be assumed to be closed in the sense that it contains the majority relation of every profile with an odd number of voters whose preferences belong to this domain. We show that every closed Condorcet domain can be endowed with the structure of a median graph and that, conversely, every median graph is associated with a closed Condorcet domain (in general, not uniquely). Condorcet domains that have linear graphs (chains) associated with them are exactly the preference domains with the classical single-crossing property. As a corollary, we obtain that a domain with the so-called 'representative voter property' is either a single-crossing domain or a very special domain containing exactly four different preference orders whose associated median graph is a 4-cycle. Maximality of a Condorcet domain imposes additional restrictions on the associated median graph. We prove that among all trees only (some) chains can be associated graphs of maximal Condorcet domains, and we characterize those single-crossing domains which are maximal Condorcet domains. Finally, using the characterization of Nehring and Puppe [2007] of monotone Arrovian aggregation, our analysis yields a rich class of strategy-proof social choice functions on any closed Condorcet domain.
    Keywords: social choice,Condorcet domains,acyclic sets of linear orders,median graphs,single-crossing property,distributive lattice,Arrovian aggregation,strategy-proofness,intermediate preferences
    JEL: D71 C72
    Date: 2016
  9. By: Eda Karademir (Erzurum Technical University, Department of Philosophy); Alper Karademir (Aksaray University, Department of Politics and Public Administration)
    Abstract: This paper aims to elucidate how the weight of vote may be allocated in the current democratic systems to properly administrate a society on the basis of justice rather than simple equality that is today well accepted internationally. Towards this objective, the notion of current democracy will be briefly clarified within its historical origin. In this sense, the pros and cons of the current democracy approach will be examined to see its problematic issues. This examination will indicate that today’s democracy is incapable of creating an efficient representation in the political area due to the methodology of voting system that is unjustly one person to one vote. The content of ‘’weighted voting’’ system will be investigated suggested by John Stuart Mill whose claim would be better solution for the problems of today’s democracy. Mill’s ‘’weighted voting’’ looks fairer and more effective in the implementation of proportional equality that includes absolute equality. While the conception of contemporary democracy takes mainly the term of ‘absolute equality’, Mill’s approach accepts the term of ‘proportional equality’ that is the cornerstone to promote justice, which I also concern with the highest priority, both in theory and in practice. Mill’s approach argues for “equality of equal’s†and “inequality of unequal’s†shaped in social life dependent on individuals’ own preferences, since this hierarchical structure is not natural or permanent but temporary and transitional in a community, besides equality of opportunity does exist for every persons without exclusion of anyone. Although it may seem to be against the principles of today’s empirical democracy, in fact his proposal may be considered as progressive. This progressive approach can develop both individuals and society and reveal better administrative. Then, this work will search for moral justification in order to demonstrate its fairness and qualifications to elect the best possible representative. Consequently, this work will end with two conclusions. Firstly, current democratic voting system might create injustice in treating unequal as equal due to equal voting although the main aim is to promote fair representation. The second is a normative one that the best possible democratic system might adopt the principle of multiple votes that treats not only unequal as unequal but also equal as equal. Both phenomenological and analytical manners are utilised as methodology. The coherence of concepts is debated in itself within the necessity of ‘justice’.
    Keywords: Democracy, Political participation, ‘’the principle of multiple votes’’, Mill’s political philosophy
  10. By: Savina Princen
    Abstract: In the context of tax policy challenges in many EU Member States, the 2015 ECFIN taxation workshop addressed the political economy obstacles substantial tax reforms face and possible avenues to successful reform implementation. It presented concrete examples of tax reforms in Italy and Greece, discussed the political economy dimensions of specific tax areas and looked into issues related to tax fraud and tax coordination. The workshop hosted Commissioner Moscovici for the keynote address.
    JEL: H21 H23 H24 H25 H26 P48
    Date: 2016–03
  11. By: Neviana Krasteva (International Business School, Botevgrad)
    Abstract: A method for the quantitative measurement of the political environment is developed, allowing for a reasonably accurate evaluation of the risk factors and their impact on the competitiveness of the companies in view. The quantitative part of the analysis is based on expert evaluations. The model is an adaptation of the foundation laid by Michael Porter – which is a classification of the factors of international competitiveness; for the purposes of the analysis the determinants of national competitiveness are decomposed into separate components-turned-variables (as per Shafael).From the derived results, a reasonably clear picture can be drawn about the true condition of the political factors and their impact. On that basis, conclusions can be drawn about the intensity of impact of each outside factor for the period of analysis. Revealed are those factors and determinants of the political environment which are conducive to business and competitiveness, and those who are not. Comparison between different companies in tourism becomes possible.A case study which is offered is the impact of the recent international events in and around Russia on the Spanish tourism market.
    Keywords: political environment, risk factors
    JEL: M31
  12. By: Eichler, Stefan; Lähner, Tom; Noth, Felix
    Abstract: This study analyzes if regionally affiliated Federal Open Market Committee (FOMC) members take their districts' regional banking sector instability into account when they vote. Considering the period from 1978 to 2010, we find that a deterioration in a district's bank health increases the probability that this district's representative in the FOMC votes to ease interest rates. According to member-specific characteristics, the effect of regional banking sector instability on FOMC voting behavior is most pronounced for Bank presidents (as opposed to governors) and FOMC members who have career backgrounds in the financial industry or who represent a district with a large banking sector.
    Keywords: FOMC voting,regional banking sector instability,lobbying
    JEL: E43 E52 E58 G21
    Date: 2016

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