nep-pol New Economics Papers
on Positive Political Economics
Issue of 2016‒10‒09
nineteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. What makes voters turn out: The effects of polls and beliefs By Agranov, Marina; Goeree, Jacob K.; Romero, Julian; Yariv, Leeat
  2. Law, Politics and the Quality of Government in Africa By Asongu, Simplice; Nwachukwu, Jacinta
  3. A Political Economy to Examine Brexit By Li, Kui-Wai
  4. Does working abroad affect political opinions? Evidence from Moldova By Ruxanda Berlinschi
  5. Democratic reform and opposition to government expenditure : evidence from nineteenth-century Britain By Chapman, Jonathan
  6. The Politics of Partial Liberalization: Cronyism and Non-Tariff Protection in Mubarak's Egypt By Ferdinand Eibl; Adeel Malik
  7. Politically Feasibly Public Bailouts By Foarta, Octavia Dana
  8. Do political regime transitions in Africa Matter for Citizens’ Health Status By Díaz Serrano, Lluís; Sackey, Frank G.
  9. Market and Political Power Interactions in Greece: A Theory By Tryphon Kollintzas; Dimitris Papageorgiou; Vanghelis Vassilatos
  10. Domestic politics and the formation of international environmental agreements By Carmen Marchiori; Simon Dietz; Alessandro Tavoni
  11. Suffrage, Labour Markets and Coalitions in Colonial Virginia By Nikolova, Elena; Nikolova, Milena
  12. Friends in the Right Places: The Effect of Political Connections on Corporate Merger Activity By Stephen P. Ferris; Reza Houston; David Javakhadze
  13. Electoral Incentives and Firm Behavior: Evidence from U.S. Power Plant Pollution Abatement By Matthew Doyle; Corrado Di Maria; Ian Lange; Emiliya Lazarova
  14. Snap Judgments: Candidate Likeability or Productivity? By Casey, Katherine
  15. A Dynamic Process Model of Private Politics: Activist Targeting and Corporate Receptivity to Social Challenges By McDonnell, Mary-Hunter; King, Brayden; Soule, Sarah A.
  16. Redistributive Politics, Power Sharing and Fairness By Dario Debowizc; Alejandro Saporiti; Yizhi Wang
  17. Veto Players and Policy Entrepreneurship By Hirsch, Alexander V.; Shotts, Kenneth W.
  18. Who voted Leave? By Monica Langella; Alan Manning
  19. Political Bias of Corporate News in China: Role of Commercialization and Conglomeration Reforms (September) By Piotroski, Joseph D.; Wong, T. J.; Zhang, T.

  1. By: Agranov, Marina; Goeree, Jacob K.; Romero, Julian; Yariv, Leeat
    Abstract: We use laboratory experiments to test for one of the foundations of the rational voter paradigm - that voters respond to probabilities of being pivotal. We exploit a setup that entails stark theoretical effects of information concerning the preference distribution (as revealed through polls) on costly participation decisions. We find that voting propensity increases systematically with subjects' predictions of their preferred alternative's advantage. Consequently, pre-election polls do not exhibit the detrimental welfare effects that extant theoretical work predicts. They lead to more participation by the expected majority and generate more landslide elections.
    Keywords: Collective Choice,Polls,Strategic Voting
    JEL: C92 D02 D72
    Date: 2016
  2. By: Asongu, Simplice; Nwachukwu, Jacinta
    Abstract: This paper examines interconnections between law, politics and the quality of government in Africa. We investigate whether African democracies enjoy relatively better government quality compared to their counterparts with more autocratic inclinations. The empirical evidence is based on Instrumental variable Two-Stage-Least Squares and Fixed Effects with data from 38 African countries for the period 1994-2010. Political regimes of democracy, polity and autocracy are instrumented with income-levels, legal-origins, religious-dominations and press-freedom to account for government quality dynamics, of corruption-control, government-effectiveness, voice and accountability, political-stability, regulation quality and the rule of law. Findings show that democracy has an edge over autocracy while the latter and polity overlap. As a policy implication, democracy once initiated should be accelerated to edge the appeals of authoritarian regimes.
    Keywords: Law; Politics; Democracy; Government Policy; Development
    JEL: K00 O10 P16 P43 P50
    Date: 2016–01
  3. By: Li, Kui-Wai
    Abstract: This short article shows an political economy analysis on Brexit, pointing out the economic calculations the British voters could have considered. Brexit could be used as an instrument for the next general election. It is argued that Brexit could be an indication on the end of socialist policies and a return of the rightist policies.
    Keywords: Political economy, Brexit
    JEL: P1 P16
    Date: 2016–09–29
  4. By: Ruxanda Berlinschi
    Abstract: This paper investigates the effects of work experience abroad on political opinions using survey data from Moldova, a former soviet republic caught in an ideological battle between Russia and the West, with high emigration rates to both destinations. Contrarily to studies conducted in Africa or Latin America, we find no effect of past migration on democratic participation or on critical governance assessment. Likewise, no effect is found on domestic policy preferences. The one dimension strongly associated with migration experience is geopolitical preference, whereby return migrants from former Soviet countries are more likely to support closer ties with Russia, while return migrants from Western countries show higher support for EU integration, controlling for economic, demographic and ethnic confounding factors. For identification, we instrument individual migration with district level migrant networks. IV regressions show that only work experience in Western countries affects geopolitical preferences.
    Keywords: return migration, political opinions, Moldova, survey data
    Date: 2016
  5. By: Chapman, Jonathan
    Abstract: Several theories have argued that democratic reform will lead to higher government spending. However, these theories have generally focused on expenditure on redistribution rather than expenditure on public goods. This paper argues that poorer citizens may desire relatively low levels of public goods provision and so democratization may lead to lower government expenditure on items such as public infrastructure. This hypothesis is tested using a new panel dataset of town council infrastructure spending and revenue in nineteenth-century Britain. An 1894 national reform implementing a system of “one-household-one-vote” and the secret ballot is used as the treatment event in a difference-in-difference analysis. The results show that democratic reform slowed the growth of town council spending on public goods, including water supply and other public infrastructure. Further analysis suggests that government spending was highest when the balance of political power was held by the middle class, rather than the poor.
    Keywords: Democratization, Elites, Secret ballot, Infrastructure, Public goods
    Date: 2016
  6. By: Ferdinand Eibl; Adeel Malik
    Abstract: This paper provides one of the first systematic empirical assessments of the impact of political connections on trade protection. Based on a unique compilation of sector-level data on non-tariff measures (NTMs) and politically connected businessmen in Mubarak-era Egypt, we explore the within-sector variation in NTMs over time, and show that sectors populated by politically connected businessmen witnessed systematically higher incidence and density of non-tariff protection. Our results suggest that the presence of cronies is a strong predictor of the subsequent introduction of NTMs. Crony presence also shapes the density of NTMs as measured by the share of products subject to NTMs. Our results are derived from the robust empirical methods that simultaneously address temporal dependence, fixed effects and endogeneity concerns. To establish causality, we take advantage of the across the board cut in tariffs in the wake of the EU-Egypt free trade agreement in 2004-05 to show that sectors with crony activity were compensated significantly more by new NTMs than non-crony sectors.
    JEL: F13 F14 O24 O53 P26
    Date: 2016
  7. By: Foarta, Octavia Dana (Stanford University)
    Abstract: Two key features of the government bailout programs implemented in the 2008-2009 financial crisis were: first, the general opposition of voters to these programs and second, the implementation of a variety of interventions, ranging from targeted transfers meant to inject capital in particular institutions to untargeted transfers aimed at helping entire sectors. This paper argues that the observed shift in the balance between targeted and untargeted transfers emerges in a political economy environment, when voters posses less information than the government about the shocks hitting the economy, and when firms can lobby the government for socially inefficient transfers. The model shows that the optimal incentives voters can give to an elected politician can lead to persistent effects of government interventions, which triggers a shift towards more untargeted interventions following a crisis.
    Date: 2015–04
  8. By: Díaz Serrano, Lluís; Sackey, Frank G.
    Abstract: Africa’s quest to achieving improved health status and meeting the Millennium Development Goals targets cannot be effectively achieved without examining the quality of leadership, transitions and regimes and how they impact on the decisions and the policy effectiveness that bring about improved health and living standards of the citizenry. In this paper, we study the importance of regime transitions on government’s expenditure in health and on infant mortality, as a development indicator. A unique panel dataset comprising 44 sub-Saharan African countries spanning from 1970 t0 2010 containing information on political regime and leaders was used for the study. To account for the relevance of leader characteristics in regime transitions in our study we control for leader fixed-effects. The overall results are suggestive of a democratic advantage in the process of achieving effective health policy outcomes for promoting health, and hence the wellbeing of the citizens in contemporary sub-Saharan Africa in the long run. Keywords: Africa, health policy, public health, private health, child mortality, democracy, autocracy, political leaders. JEL Codes: I15, H51, O55
    Keywords: Àfrica -- Política sanitària, 338 - Situació econòmica. Política econòmica. Gestió, control i planificació de l'economia. Producció. Serveis. Turisme. Preus,
    Date: 2016
  9. By: Tryphon Kollintzas (Athens University of Economics and Business and CEPR); Dimitris Papageorgiou (Bank of Greece, Economic Analysis and Research Department); Vanghelis Vassilatos (Athens University of Economics and Business)
    Abstract: In recent years the growth pattern of Greece has been disturbed, as this country is suffering from a persisting economic crisis that goes beyond the usual business cycle. In this paper, we develop a neoclassical growthmodel of market and political power interactions that explains this crisis. The model incorporates the insiders-out siders labor market structure and the concept of an elite government. Outsiders form a group of workers that supply labor to a competitive private sector. And, insiders form a group of workers that enjoy market power in supplying labor to the public sector and influence the policy decisions of government, including those that affect the development and maintenance of public sector infrastructures. This leads to labor misallocation and inefficient fiscal policies. Despite the fact that expanding public sector output has a positive effect on growth, eventually this is counterbalanced by the labor misallocation and inefficient tax policy outcomes. Thus, the deep and sustained growth reversal occurring in Greece is explained as a consequence of the organizational structure of the labor market, that has important implications on the workings of the economic and political systems.
    Keywords: Insiders - Outsiders; Politicoeconomic Equilibrium; Taxation; Fiscal Policy; Growth; Greek Crisis
    JEL: P16 O43 J45 O52
    Date: 2016–01
  10. By: Carmen Marchiori; Simon Dietz; Alessandro Tavoni
    Abstract: We investigate the effect of domestic politics on international environmental policy by incorporating into a classic stage game of coalition formation the phenomenon of lobbying by special-interest groups. In doing so, we contribute to the theory of international environmental agreements, which has overwhelmingly assumed that governments make decisions based on a single set of public-interest motivations. Our results suggest that lobbying on emissions may affect the size of the stable coalition in counterintuitive ways. In particular, a powerful business lobby may increase the government's incentives to sign an agreement, by providing it with strong bargaining power with respect to that lobby at the emission stage. This would result in lower total emissions when the number of countries involved is not too large. We also show that things change radically when lobbying bears directly on the membership decisions, suggesting that both the object and timing of lobbying matter for the way in which membership decisions, emissions and welfare are affected.
    Keywords: game theory; international environmental agreements; lobbying; special interest groups; strategic cooperation
    JEL: C7 H41 K33 Q2 Q54
    Date: 2016–09–25
  11. By: Nikolova, Elena (Central European Labour Studies Institute); Nikolova, Milena (IZA)
    Abstract: We study Virginia's suffrage from the early 17th century until the American Revolution using an analytical narrative and econometric analysis of unique data on franchise restrictions. First, we hold that suffrage changes reflected labour market dynamics. Indeed, Virginia's liberal institutions initially served to attract indentured servants from England needed in the labourintensive tobacco farming but deteriorated once worker demand subsided and planters replaced white workers with slaves. Second, we argue that Virginia's suffrage was also the result of political bargaining influenced by shifting societal coalitions. We show that new politically influential coalitions of freemen and then of small and large slave-holding farmers, which emerged in the second half of the 17th and early 18th centuries, respectively. These coalitions were instrumental in reversing the earlier democratic institutions. Our main contribution stems from integrating the labour markets and bargaining/coalitions arguments, thus proving a novel theoretical and empirical explanation for institutional change.
    Keywords: democracy, suffrage, colonialism, bargaining, coalitions, Virginia
    JEL: D02 N31 N41 P16
    Date: 2016–09
  12. By: Stephen P. Ferris; Reza Houston; David Javakhadze
    Abstract: This study examines how the appointment of former politicians and regulators to boards of directors or management teams influences corporate acquisition activity and performance. We find that bidders with political connections are more likely to acquire targets and avoid regulatory delay or denial. The merger premium paid increases with political connectedness. The announcement period returns show that investors recognize that bids by politically connected acquirers are more likely to create firm value. Connected bidders make more bids and bid on larger targets. Connected acquirers also enjoy superior post-merger financial and operating performance. Published by Elsevier B.V.
    Keywords: Political connections, Mergers, Acquisitions, Antitrust law
    Date: 2016–08
  13. By: Matthew Doyle (Division of Economics and Business, Colorado School of Mines); Corrado Di Maria (School of Economics, University of East Anglia); Ian Lange (Division of Economics and Business, Colorado School of Mines); Emiliya Lazarova (School of Economics, University of East Anglia)
    Abstract: Researchers have utilized the fact that many states have term limits (as opposed to being eligible for re-election) for governors to determine how changes in electoral incentives alter state regulatory agency behavior. This paper asks whether these impacts spill over into private sector decision-making. Using data from gubernatorial elections in the U.S., we find strong evidence that power plants spend less in water pollution abatement if the governor of the state where the plant is located is a term-limited democrat. We show that this evidence is consistent with compliance cost minimization by power plants reacting to changes in the regulatory enforcement. Finally, we show that the decrease in spending has environmental impacts as it leads to increased pollution.
    Keywords: Political Economy, Electoral Incentives, Term Limits, Environmental Policy, Pollution Abatement, Compliance Costs, Power Plants, Water Pollution, Regression Discontinuity
    JEL: H32 H76 Q25 Q53 Q58
    Date: 2016–10
  14. By: Casey, Katherine (Stanford University)
    Abstract: Individuals draw inferences from thin slices of information--a glance at a photo, a twenty second audio clip--that have been shown to predict real world outcomes of interest in a variety of markets. This paper presents results from a series of lab-in-the-field experiments that elicit these inferences in political labor markets by asking voters to evaluate candidates based on short exposure to photos and video clips. Participants were registered voters in a low income, limited information environment, where ballot photos may be both the first and last visual impression many voters have of candidates. I find that these snap judgments predict election outcomes with accuracy greater than chance, reproducing results from leading studies of American elections in a markedly different empirical context. I then test whether these judgments predict differences in the professional qualifications of candidates and the performance of elected politicians. I find little evidence that snap judgments discriminate along measures of politician productivity.
    Date: 2015–11
  15. By: McDonnell, Mary-Hunter (Georgetown University); King, Brayden (Northwestern University); Soule, Sarah A. (Stanford University)
    Abstract: This project explores whether and how corporations become more receptive to social activist challenges over time. Drawing from social movement theory, we suggest a dynamic process through which contentious interactions lead to increased receptivity. We argue that when firms are chronically targeted by social activists, they respond defensively by adopting strategic management devices that help them better manage social issues and demonstrate their normative appropriateness. These defensive devices have the incidental effect of empowering independent monitors and increasing corporate accountability, which in turn increases a firm's receptivity to future activist challenges. We test our theory using a unique longitudinal dataset that tracks contentious attacks and the adoption of social management devices among a population of 300 large firms from 1993-2009.
    Date: 2015
  16. By: Dario Debowizc; Alejandro Saporiti; Yizhi Wang
    Date: 2016
  17. By: Hirsch, Alexander V. (CA Institute of Technology); Shotts, Kenneth W. (Stanford University)
    Abstract: Political institutions often use decision making procedures that create veto players--individuals or groups who, despite lacking direct decision making authority, nevertheless have the power to block policy change. In this paper we use the competitive policy development model of Hirsch and Shotts (2015) to examine how the presence of veto players effects outcomes when policies are developed endogenously. Consistent with spatial models of pivotal politics, veto players can induce gridlock, which is harmful to a centrist decisionmaker. But they can also have more subtle effects. Some of the effects are negative--for example, when the status quo is centrist, veto players dampen productive policy competition because of their resistance to change. But some of the effects are surprisingly positive. In particular, when the status quo benefits a veto player and there is a skilled policy entrepreneur who is highly motivated change it, the veto player forces the entrepreneur to develop a much higher quality proposal. This effect yields substantial benefits for a centrist decisionmaker. We also show that veto players can induce asymmetric patterns of policy development, with much greater activity by the faction that is more dissatisfied with the status quo.
    Date: 2015–10
  18. By: Monica Langella; Alan Manning
    Abstract: If EU immigration had remained at its 1991 level, the Leave vote share may have been considerably lower. That is one of the conclusions of CEP research by Monica Langella and Professor Alan Manning, which explores the effects of the demographic and industrial composition of local areas on the share of the Leave vote. Their study finds that while individual demographics were a key influence on the Leave vote, so too were characteristics of local areas. They conclude that politics, immigration and the decline of manufacturing all played a role in the referendum outcome.
    Keywords: Brexit, EU Referendum, immigration, demographics, UK politics, UK economy
    Date: 2016–10
  19. By: Piotroski, Joseph D. (Stanford University); Wong, T. J. (?); Zhang, T. (?)
    Date: 2015–09

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