nep-pol New Economics Papers
on Positive Political Economics
Issue of 2016‒08‒07
eight papers chosen by
Eugene Beaulieu
University of Calgary

  1. “Attitudes to Leadership and Voting: Finding the Efficient Frontier” By Davis, Brent
  2. Electoral Cycles in Public Expenditures: Evidence from Czech Local Governments By Lenka Stastna
  3. Priming Ideology: Why Presidential Elections Affect U.S. Judges By Chen, Daniel L.
  4. Political determinants of fiscal transparency: a panel data empirical investigation By Cicatiello, Lorenzo; De Simone, Elina; Gaeta, Giuseppe Lucio
  5. Switch towards tax centralization in Italy: a wake up for the local political budget cycle By Massimiliano Ferraresi; Umberto Galmarini; Leonzio Rizzo; Alberto Zanardi
  6. Rethinking the paradox of redistribution: how private insurance and means testing can lead to universalizing reform By Margarita Gelepithis
  7. Political Turnover, Ownership, and Corporate Investment By Cao, Jerry; Julio, Brandon; Leng, Tiecheng; Zhou, Sili
  8. Local self-government in the North Caucasus: alterations in regional legislation as risk triggers By Kazenin Konstantin

  1. By: Davis, Brent
    Abstract: Winning elections is essentially a matter of translating the attitudes of voters into votes. Although this proposition may sound simple, the reality is considerably more challenging. Despite vast scholarship over many years we know very little, if anything, about the efficiency with which the inputs (voter attitudes) to the political process are converted into outputs (vote support). Data Envelopment Analysis (DEA) provides a statistical method to measure the efficiency with which inputs are converted into outputs. The results of the DEA analysis and associated modelling find marked differences in the political efficiency of recent Australian political leaders.
    Keywords: campaigns; election; politimetric modelling; Data Envelopment Analysis; voter behaviour; political marketing; Australian elections
    JEL: C1 C13 C5 C51 C53 C54 H1 H11 K0
    Date: 2016–08
  2. By: Lenka Stastna (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: This paper analyzes local political cycle in Czech municipalities over the period between 1997 and 2013. We apply the system GMM and the difference GMM estimators to identify distortion in current and capital expenditures per capita in electoral and pre-electoral years, while focusing on various spending groups (infrastructure, leisure, housing, education, etc.). We also test specific effects of local governments' characteristics (partisanship, strength, experience). In general, municipalities increase capital spending (primarily on infrastructure, housing, leisure activities) and decrease current spending (administration) before elections. Rightist governments target leisure activities and save more on administration, whereas leftist governments target current spending on social services. Stronger governments and those with newly elected mayors have lower incentive to create an electoral cycle. Voters' involvement in local policies and also success of ruling local (and parliamentary) parties in nat ional parliamentary elections diminish local electoral cycles.
    Keywords: political cycle, local government expenditures, municipalities
    JEL: H72 D72 R50
    Date: 2015–12
  3. By: Chen, Daniel L.
    Abstract: U.S. Presidential elections polarize U.S. Courts of Appeals judges, doubling their dissents, partisan voting, and lawmaking along partisan lines and increasing their reversal of District Court decisions (Berdejo and Chen 2016). Dissents are elevated for ten months before the Presidential elections. I develop a theoretical model showing that the salience of partisan identities drives these behavioral patterns. The polarizing effects are larger in close elections, non-existent in landslide elections, and reversed in wartime elections. I link judges to their states of residence and exploit variation in the timing and importance of a state during the electoral season. Dissents are elevated in swing states and in states that count heavily to winning the election, when these states are competitive. U.S. Senate elections, the timing of which also varies by state, further elevate dissents. I link administrative data on case progression and frequency of campaign advertisements in judges’ states of residence to proxy for a state’s importance during Presidential primaries. Dissents occur shortly before publication, increase with monthly increases in campaign ads, and appear for cases whose legal topic, economic activity, is most heavily covered by campaign ads. Finally, I link the cases to their potential resolution in the Supreme Court. Dissents before elections appear on more marginal cases that cite discretionary miscellaneous issues and procedural (rather than substantive) arguments, which the Supreme Court appears to recognize and only partly remedy. The behavioral changes of unelected Courts of Appeals judges are larger than the behavioral changes of elected judges running for re-election.
    Keywords: Judicial Decision-Making, Group Decision-Making, Moral Decision-Making, Salience
    JEL: D7 K00 Z1
    Date: 2016–07
  4. By: Cicatiello, Lorenzo; De Simone, Elina; Gaeta, Giuseppe Lucio
    Abstract: This paper contributes to the literature on the determinants of fiscal transparency by empirically identifying its political determinants in democratic countries. Our static and dynamic panel data analysis highlights that government control over parliaments and political competition influence the level of fiscal transparency, while the effect of government ideology is only partially confirmed. These results extend the existing literature which is based on cross-country analyses.
    Keywords: Fiscal transparency; panel data; political determinants
    JEL: H6 P5
    Date: 2016
  5. By: Massimiliano Ferraresi (Università di Ferrara); Umberto Galmarini (Università dell'Insubria e IEB); Leonzio Rizzo (Università di Ferrara e IEB); Alberto Zanardi (Ufficio Parlamentare di Bilancio)
    Abstract: The abolition of the municipal property tax on owner-occupied dwellings accomplished in Italy in 2008 offers a quasi-natural experiment that allows for the identification of the presence of political budget cycles - the incentives for municipalities close to elections to manipulate policy outcome decisions. Our empirical analysis shows that the reform impacted on municipalities that in 2008 were in their pre-electoral year, by expanding the size of their budget in the form of an increase of current expenditure and fees and charges, but this did not occurred in municipalities that experienced their pre-electoral year before 2008.
    Keywords: political budget cycle, transfers, federal budget, property tax, fiscal reform, local elections
    JEL: C23 H71 H72
  6. By: Margarita Gelepithis
    Abstract: Market-heavy welfare systems, in which low or moderate state benefits are topped up by private welfare arrangements, are expected to undermine political support for the extension of social rights and perpetuate benefit fragmentation over time. And where low state benefits are means-tested, political support is expected to be particularly prone to erosion. In this paper I develop the argument that the combination of private pension insurance and means-testing does not always perpetuate fragmentation. Rather, it structures the policy preferences of pension industry representatives and right-of-centre parties such that these actors push for reforms to make the state pension more universal. I make my argument by examining the reform history of nine market-heavy pension systems in the three decades since 1980. A fuzzy- set Qualitative Comparative Analysis (fsQCA) maps the conditions under which universalizing reforms have occurred, and two case studies link institutional conditions to reform outcomes via the policy preferences of key political actors.
    Keywords: universalism, dualization, means-testing, private insurance, pension reform
    Date: 2016–07
  7. By: Cao, Jerry (Singapore Management University); Julio, Brandon (University of Oregon); Leng, Tiecheng (Singapore Management University); Zhou, Sili (Singapore Management University)
    Abstract: We examine the impact of political influence and ownership on corporate investment by exploiting the unique way provincial leaders are selected and promoted in China. The tournament-style promotion system creates incentives for new provincial governors to exert their influence over capital allocation, particularly during the early years of their term. Using a neighboring-province difference-in-differences estimation approach, we find that there is a divergence in investment rates between state owned enterprises (SOEs) and non-state owned enterprises (non-SOEs) following political turnover. SOEs experience an abnormal increase in investment by 6.0% in the year following the turnover, consistent with the incentives of a new governor to stimulate investment. In contrast, investment rates for non-SOEs decline significantly post-turnover, suggesting that the political influence exerted over SOEs crowds out private investment. The effects of political turnover on investment are mainly driven by normal turnovers, and turnovers with less-educated or local-born successors. Finally, we provide evidence that the political incentives around the turnover of provincial governors represent a misallocation of capital as measures of investment efficiency decline post-turnover.
    Keywords: Corporate investment, Political turnover, China, SOE, Political uncertainty, Grabbing-hand, Crowding out, Investment efficiency
    JEL: G30 G31 G38
    Date: 2016–07–08
  8. By: Kazenin Konstantin (Gaidar Institute for Economic Policy)
    Abstract: One of the vectors of change in the North Caucasus in 2015 was the abolition of direct popular vote in the elections of heads of municipal formations. Very few of the municipal districts, urban districts, urban-type and rural settlements across the North Caucasus are still applying the system of forming the bodies of local self-government (LSG) that envisages that the head of a given administrative entity should be elected by direct popular vote. The most drastic changes in this respect occurred in 2015 in the Republic of Dagestan, where new legislation was adopted whereby a uniform method for forming the bodies of LSG was introduced for the entire region, when only the deputies of rural settlement and urban district assemblies are elected directly by popular vote. That region can serve as an illustration of how the ‘rolling back’ of direct popular elections to LSG is fraught with significant risks, and so cannot be regarded as a stabilizing factor.
    Keywords: Russian economy, North Caucasus
    JEL: H11 H70 H77
    Date: 2016

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