nep-pol New Economics Papers
on Positive Political Economics
Issue of 2016‒08‒28
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. How Do Voters Matter? Evidence from US Congressional Redistricting By Daniel B. Jones; Randall Walsh
  2. Electoral Contributions and the Cost of Unpopularity By Thomas Bassetti; Filippo Pavesi
  3. Oil Discovery, Political Institutions and Economic Diversification By Nouf Alsharif; Sambit Bhattacharya
  4. Gender and Redistribution: Experimental Evidence By Thomas Buser; Louis Putterman; Joël van der Weele
  5. An algorithmic approach to one-round electoral systems By Gutiérrez, José Manuel; Müller, Wolfgang C.
  6. Local Government Proliferation, Diversity, and Conflict By Samuel Bazzi; Matthew Gudgeon
  7. Sorting in Iterated Incumbency Contests By Samuel Häfner; Georg Nöldeke
  8. Gainers and Losers of Political Instability: Evidence from the Anti-Japanese Demonstration in China By Zijun Luo; Yonghong Zhou
  9. The emergence of patronage state in Central Europe. The case of FDI-related policies in Hungary By Miklos Szanyi
  10. Aspirations and the Political Economy of Inequality By Besley, Timothy J.
  11. Women's Enfranchisement and Children's Education: The Long-Run Impact of the U.S. Suffrage Movement By Kose, Esra; Kuka, Elira; Shenhav, Na'ama
  12. Political Foundations of the Lender of Last Resort: A Global Historical Narrative By Calomiris, Charles; Flandreau, Marc; Laeven, Luc

  1. By: Daniel B. Jones; Randall Walsh
    Abstract: How does the partisan composition of an electorate impact the policies adopted by an elected representative? We take advantage of variation in the partisan composition of Congressional districts stemming from Census-initiated redistricting in the 1990’s, 2000’s, and 2010’s. Using this variation, we examine how an increase in Democrat share within a district impacts the district representative’s roll call voting. We find that an increase in Democrat share within a district causes more leftist roll call voting. This occurs because a Democrat is more likely to hold the seat, but also because – in contrast to existing empirical work – partisan composition has a direct effect on the roll call voting of individual representatives. This is true of both Democrats and Republicans. It is also true regardless of the nature of the redistricting (e.g., whether the redistricting was generated by a partisan or non-partisan process).
    JEL: D72 H0
    Date: 2016–08
  2. By: Thomas Bassetti (University of Padova); Filippo Pavesi (Department of Economics (University of Verona))
    Abstract: When considering electoral campaigns, those candidates that receive contributions from relatively unpopular industries should be regarded less favorably by voters that have information on the sources of funding. To offset this unpopularity effect, politicians may either demand more money for campaign advertising from these industries in order to persuade less informed voters, or shy away from unpopular contributors to avoid losing the support of the informed. Our model predicts that the first effect dominates, and that interest groups related to industries that experience a rise (decline) in unpopularity will increase (decrease) the amount of resources devoted to campaign financing. By using a set of alternative identification strategies to assess the impact of unpopularity on contributions for U.S. House elections, we provide robust evidence in favor of our predictions.
    Keywords: Campaign Finance, Interest Groups, Elections, Popularity
    JEL: D72 P16
    Date: 2016–08
  3. By: Nouf Alsharif; Sambit Bhattacharya
    Abstract: Classical theory predicts that petroleum rich countries would specialise in petroleum products. Yet diversification is touted as a desirable policy objective for petroleum rich nations because it reduces exposure to volatility. Given such theoretical ambiguity, it is important to understand the empirical relationship between petroleum and diversification. In this paper, we test the effect of giant oil discoveries on diversification using a panel dataset covering up to 136 countries and the period 1962 to 2012. After controlling for country and year fixed effects, we find evidence of non-oil export concentration 8 years after a discovery. However, we do not observe any effect on the structure of employment in the non-resource and manufacturing sectors. It appears that democratic political institutions moderate the export concentration effect of petroleum discovery. Countries with weak political institutions experience employment concentration in the non-tradable sector post discovery.
    Keywords: Oil Discovery; Political Institutions; Structural Change; Export Diversification
    JEL: D72 O11
    Date: 2016
  4. By: Thomas Buser (University of Amsterdam, The Netherlands); Louis Putterman (Brown University, United States); Joël van der Weele (University of Amsterdam, The Netherlands)
    Abstract: Gender differences in voting patterns and political attitudes towards redistribution are well-documented. The experimental gender literature suggests several plausible behavioral explanations behind these differences, relating to gender differences in confidence concerning future relative income position, risk aversion, and social preferences. We use data from lab experiments on preferences for redistribution conducted in the U.S. and several European countries to disentangle these potential mechanisms. We find that when choosing to redistribute income as a disinterested observer, women choose higher tax rates than men when initial income depends on performance in a task but not when it is randomly allocated. In a veil of ignorance condition with uncertainty about the income position of the decision maker, this effect is even stronger, leading to a 10ppt gender difference in average chosen tax rates in the performance conditions. We find that this gender difference is mainly due to men being more (over)confident about their task performance and the resulting income position, with gender differences in risk aversion and social preferences playing a minor role.
    Keywords: gender; redistribution; overconfidence; risk attitudes; voting; taxation
    JEL: C91 J16 H24 D31
    Date: 2016–08–23
  5. By: Gutiérrez, José Manuel; Müller, Wolfgang C.
    Abstract: A family of algorithms provides a formalization of how the basic one-round electoral systems – highest average and largest remainders, single transferable vote and single non-transferable vote systems – proceed in transforming votes into seats. In this way, the basic one-round electoral systems are parametrized with the four parameters n (size of the constituency), m (size of the nomination lists), ck (a factor providing the electoral formula) and l (signed election threshold). The parametrization reveals that the most important electoral systems have a common basic structure.
    Keywords: electoral system; algorithm; parametrization
    JEL: D72
    Date: 2016–08–26
  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
    Date: 2016–03
  7. By: Samuel Häfner; Georg Nöldeke (University of Basel)
    Abstract: This paper analyzes iterated incumbency contests with heterogeneous valuations in a large population setting. Incumbents repeatedly face di erent challengers, holding on to their positions until defeated in a contest. Defeated incumbents turn into challengers until they win a contest against an incumbent, thereby regaining an incumbency position. We consider steady-state equilibria of this process and study how and to which extend individuals sort into the incumbency positions depending on their valuations. In particular, we identify sucient conditions for positive sorting, meaning that the share of individuals with a given valuation holding an incumbency position is increasing in the valuation, and provide an example to show that negative rather than positive sorting may arise in equilibrium. Further results show how incumbency rents and sorting are a ected by the frequency at which incumbency is contested and the scarcity of the incumbency positions.
    Keywords: Contests, Sorting, Incumbency Rents, Steady-State Equilibrium
    JEL: C72 D72 D74
    Date: 2016
  8. By: Zijun Luo (Department of Economics and International Business, Sam Houston State University); Yonghong Zhou (Department of Economics, Jinan University, P.R. China)
    Abstract: This paper quantifies the Chinese consumers’ boycott of Japanese cars that immediately followed the anti-Japanese demonstration in September 2012.We decompose the total boycott effect into cancel effect and transfer effect. We find that the temporary cancellation of orders by potential buyers accounts for more than 90% of the total decline in Japanese car sales. Such results indicate that Japanese car makers lost these customers only for the short-run. European, Korean, American, and Chinese cars became the dominant substitutes for lost Japanese sales; Chinese brands benefited the least. This paper provides evidence of both negative and positive impacts of political conflicts for different market participants and includes analysis of welfare implications.
    Keywords: China; Japan; Boycott; Automobile; Political Conflict
    JEL: O11 F51 L62
    Date: 2016–08
  9. By: Miklos Szanyi (Institute of World Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: Despite of profound development success of Central European economies of the past 25 years Hungarian and Polish governments have started openly query the applicability of various elements of the “competition state”. They took measures to curtail the activity of multinational firms that have played important role in the successful modernization process of the region. The paper makes an attempt to explain the rationale of this policy using political economy approach. It defines economic policy changes as shifts in the power relations of national elites. It is highlighted that the selective advantage and punishment measures taken are labelled economic patriotism. Yet, economic patriotism is interpreted in this paper as the application of covert discrimination policies applied for the benefit of spatially defined interest groups. The discussed policies are targeted rather at closely defined companies. They are therefore not regarded as tools of economic patriotism but rather of state clientism, or a departure from competition state towards patronage state.
    Keywords: multinational companies, economic patriotism, elites, patronage state
    JEL: D72 H82 P16 P31
    Date: 2016–08
  10. By: Besley, Timothy J.
    Abstract: In standard approaches to the political economy of inequality, the income distribution and the preferences of households are taken as fixed when studying how incomes are determined within and between nations. This paper makes the income distribution endogenous by supposing that aspirational parents can socialize children into having aspirational preferences which are modeled as a reference point in income space. The model looks at the endogenous determination of the level of income, income inequality and income redistribution where the proportion of aspirational individuals evolves endogenously according to payoffs along the equilibrium path. The paper discusses implications of the model for intergenerational mobility. It also shows how the income generation process is critical for the dynamics and welfare conclusions. Finally, it looks at some evidence from the World Values Survey in light of the theory.
    JEL: A13 D11 D63 I13
    Date: 2016–08
  11. By: Kose, Esra (University of California, Davis); Kuka, Elira (Southern Methodist University); Shenhav, Na'ama (Dartmouth College)
    Abstract: While a growing literature has shown that empowering women leads to increased short-term investments in children, little is known about its long-term effects. We investigate the effect of women's political empowerment on children's human capital accumulation by exploiting plausibly exogenous variation in U.S. state and federal suffrage laws. We estimate that exposure to women's suffrage during childhood leads to large increases in educational attainment for children from economically disadvantaged backgrounds, in particular blacks and Southern whites. An investigation into the mechanisms behind these effects suggests that the educational gains are plausibly driven by the rise in public expenditures following suffrage.
    Keywords: women empowerment, suffrage, education
    JEL: I21 N32
    Date: 2016–08
  12. By: Calomiris, Charles; Flandreau, Marc; Laeven, Luc
    Abstract: This paper offers a historical perspective on the evolution of central banks as lenders of last resort (LOLR). Countries differ in the statutory powers of the LOLR, which is the outcome of a political bargain. Collateralized LOLR lending as envisioned by Bagehot (1873) requires five key legal and institutional preconditions, all of which required political agreement. LOLR mechanisms evolved to include more than collateralized lending. LOLRs established prior to World War II, with few exceptions, followed policies that can be broadly characterized as implementing "Bagehot's Principles" : seeking to preserve systemic financial stability rather than preventing the failure of particular banks, and limiting the amount of risk absorbed by the LOLR as much as possible when providing financial assistance. After World War II, and especially after the 1970s, generous deposit insurance and ad hoc bank bailouts became the norm. The focus of bank safety net policy changed from targeting systemic stability to preventing depositor loss and the failure of banks. Statutory powers of central banks do not change much over time, or correlate with country characteristics, instead reflecting idiosyncratic political histories.
    Keywords: bank runs; central banks; economic history; Financial crises; lender of last resort
    Date: 2016–08

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