nep-pol New Economics Papers
on Positive Political Economics
Issue of 2016‒10‒23
fifteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Strategic Voting in Multi-Winner Elections with Approval Balloting: A Theory for Large Electorates By Jean-François Laslier; Karine Van Der Straeten
  2. Who Runs? Honesty and Self-Selection into Politics By Fehrler, Sebastian; Fischbacher, Urs; Schneider, Maik T.
  3. The political economy of interregional competition for firms By Daniel Hopp; Michael Kriebel
  4. Forecasting United States Presidential election 2016 using multiple regression models By Sinha, Pankaj; Nagarnaik, Ankit; Raj, Kislay; Suman, Vineeta
  5. Is the Threat of Foreign Aid Withdrawal an Effective Deterrent to Political Oppression? Evidence from 53 African Countries By Asongu, Simplice; Nwachukwu, Jacinta
  6. Democracy for Polarized Committees: The Tale of Blotto's Lieutenants By Alessandra Casella; Jean-François Laslier; Antonin Macé
  7. Majority Judgment vs Majority Rule By Michel Balinski; Rida Laraki
  8. Age Gap in Voter Turnout and Size of Government Debt By Ryo Arawatari; Tetsuo Ono
  9. Forecasting 2016 US Presidential Elections Using Factor Analysis and Regression Model By Sinha, Pankaj; Srinivas, Sandeep; Paul, Anik; Chaudhari, Gunjan
  10. Procedural Justice and Political Risk By Salil Benegal; Mikhael Shor
  11. Regime switches under policy uncertainty in monetary unions By Canofari Paolo; Di Bartolomeo Giovanni
  12. Why Not Taxation and Representation? A Note on the American Revolution By Sebastian Galiani; Gustavo Torrens
  13. Turning Out for Redistribution: The Effect of Voter Turnout on Top Marginal Tax Rates By Sabet, Navid
  14. Influencing Connected Legislators By Marco Battaglini; Eleonora Patacchini
  15. An Index of Global Economic Policy Uncertainty By Steven J. Davis

  1. By: Jean-François Laslier (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), PSE - Paris School of Economics); Karine Van Der Straeten (TSE - Toulouse School of Economics - Toulouse School of Economics, Institute advanced for advanced studies in Toulouse - Institute advanced for advanced studies in Toulouse)
    Abstract: We propose a theory of strategic voting in multi-winner elections with approval balloting: A fixed number M of candidates are to be elected; each voter votes for as many candidates as she wants; the M candidates with the most votes are elected. We assume that voter preferences are separable and that there exists a tiny probability that any vote might be misrecorded. Best responses involve voting by pairwise comparisons. Two candidates play a critical role: the weakest expected winner and the strongest expected loser. Expected winners are approved if and only if they are preferred to the strongest expected loser and expected losers are approved if and only if they are preferred to the weakest expected winner. At equilibrium, if any, a candidate is elected if and only if he is approved by at least half of the voters. With single-peaked preferences, an equilibrium always exists, in which the first M candidates according to the majority tournament relation are elected. The theory is tested on individual data from the 2011 Regional Government election in Zurich.
    Keywords: Approval Voting,Elections,Voting behavior
    Date: 2016–04
  2. By: Fehrler, Sebastian (University of Konstanz); Fischbacher, Urs (University of Konstanz); Schneider, Maik T. (University of Bath)
    Abstract: We examine the incentives to self-select into politics and how they depend on the transparency of the entry process. To this end, we set up a two-stage political competition model and test its key mechanisms in the lab. At the entry stage, potential candidates compete in a contest to become their party's nominee. At the election stage, the nominated candidates campaign by making non-binding promises to voters. Confirming the model's key predictions, we find in the experiment that dishonest people over-proportionally self-select into the political race; and that this adverse selection effect can be prevented if the entry stage is made transparent to voters.
    Keywords: candidates, elections, campaigns, primaries, contest, voting, political economy, experiment, lying aversion, self-selection, cheap talk
    JEL: C92 D71 D83
    Date: 2016–10
  3. By: Daniel Hopp; Michael Kriebel
    Abstract: This paper studies interregional competition for firms when the bidding is decided upon majority voting. We model the competition as an auction under full information between two asymmetric regions inhabited by low- and high-skilled individuals. We derive two results: First, the location decision is inefficient in most cases, especially when the median voter is high-skilled. Second, winning the auction is harmful for the region if the political process and a strong competition lead to subsidies which exceed the surplus created by a firm's location. This implies that restricting interregional competition for firms, e.g. regulating subsidies, may enhance welfare. Furthermore, our model shows that countries with high redistributive taxes and a low-skilled majority have an advantage to attract foreign firms.
    Keywords: median voter, political economy, subsidy competition, spillover
    JEL: H23 H25 H31 P16 R11
    Date: 2016–10
  4. By: Sinha, Pankaj; Nagarnaik, Ankit; Raj, Kislay; Suman, Vineeta
    Abstract: The paper analyses economic and non-economic factors in order to develop a forecasting model for 2016 US Presidential election and predict it. The discussions on forthcoming US Presidential election mention that campaign fund amount and unemployment will be a deciding factor in the election, but our research indicates that campaign fund amount and unemployment are not significant factors for predicting the vote share of the incumbent party. But in case of non–incumbent major opposition party (challenger party) campaign fund amount does play a role. Apart from unemployment other economic factors such as inflation, exchange rate, interest rate, deficit/surplus, gold prices are also found to be insignificant. Growth of economy is found to be significant factor for non-incumbent major opposition party and not for incumbent party. The study also finds that non-economic factors such as June Gallup rating, Gallup index, average Gallup, power of period factor, military intervention, president running, percentage of white voters and youth voters voting for the party are significant factors for forecasting the vote share of either incumbent party or non-incumbent major opposition party/challenger party. The proposed models forecasts with 95% confidence interval that Democratic party is likely to get vote share of 48.11% with a standard error of ±2.18% and the non-incumbent Republican party is likely to get vote share of 40.26% with a standard error ±2.35%.
    Keywords: Regression model,US Presidential election,economic and non-economic variables,
    JEL: C2 C22 C4 C5
    Date: 2016–07–28
  5. By: Asongu, Simplice; Nwachukwu, Jacinta
    Abstract: This study complements existing literature on the aid-institutions nexus by focusing on political rights, aid volatilities and the post-Berlin Wall period. The findings show that while foreign aid does not have a significant effect on political rights, foreign aid volatilities do mitigate democracy in recipient countries. Such volatilities could be used by populist parties to promote a neocolonial agenda, instill nationalistic sentiments and consolidate their grip on power. This is especially the case when donors are asking for standards that majority of the population do not want and political leaders are unwilling to implement them. The empirical evidence is based on 53 African countries for the period 1996-2010. As a main policy implication, creating uncertainties in foreign aid for political rights enhancement in African countries may achieve the opposite results. Other implications are discussed including the need for an ‘After Washington consensus’.
    Keywords: Uncertainty; Foreign aid; Political Rights; Development; Africa
    JEL: C53 F35 F47 O11 O55
    Date: 2016–01
  6. By: Alessandra Casella (CEPR - Center for Economic Policy Research - CEPR, Columbia University [New York], NBER - National Bureau of Economic Research - National Bureau of Economic Research); Jean-François Laslier (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), PSE - Paris School of Economics); Antonin Macé (AMSE - Aix-Marseille School of Economics - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - EHESS - École des hautes études en sciences sociales)
    Abstract: In a polarized committee, majority voting disenfranchises the minority. By allowing voters to spend freely a fixed budget of votes over multiple issues, Storable Votes restores some minority power. We study a model of Storable Votes that highlights the hide-and-seek nature of the strategic game. With communication, the game replicates a classic Colonel Blotto game with asymmetric forces. We call the game without communication a decentralized Blotto game. We characterize theoretical results for this case and test both versions of the game in the laboratory. We find that, despite subjects deviating from equilibrium strategies, the minority wins as frequently as theory predicts. Because subjects understand the logic of the game – minority voters must concentrate votes unpredictably – the exact choices are of secondary importance. The result is an endorsement of the robustness of the voting rule.
    Keywords: committees,Storable Votes,polarization,Colonel Blotto,tyranny of the majority
    Date: 2016–03
  7. By: Michel Balinski (CNRS - Centre National de la Recherche Scientifique, Ecole Polytechnique [Palaiseau] - Ecole Polytechnique); Rida Laraki (Université Paris IX - Paris Dauphine, LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris IX - Paris Dauphine - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique, Ecole Polytechnique [Palaiseau] - Ecole Polytechnique)
    Abstract: The validity of majority rule in an election with but two candidates—and so also of Condorcet consistency—is challenged. Axioms based on measures—paralleling those of K. O. May characterizing majority rule for two candidates based on comparisons—lead to another method that is unique in agreeing with the majority rule on pairs of “polarized” candidates. The method—majority judgment—meets R. A. Dahl’s requirement that an apathetic majority does not always defeat an intense minority. It is a practical method that accommodates any number of candidates, avoids both the Condorcet and Arrow paradoxes, and best resists strategic manipulation.
    Keywords: measuring, ranking, electing, majority rule, Condorcet consistency, tyranny of majority, intensity problem, majority-gauge, strategy-proofness, polarization
    Date: 2016–03–29
  8. By: Ryo Arawatari (Graduate School of Economics, Nagoya University); Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: We consider a cross-country difference of age gap in voter turnout and its im- pact on fiscal policymaking in a multi-country, overlapping-generations model. We present con ict over fiscal policy between successive generations (i.e., the young and elderly). We show that higher turnout of the elderly in voting may have a non- monotone effect on the size of government debt, depending on voters' inter-temporal elasticity of substitution of public expenditure.
    Keywords: fiscal policy; voter turnout; public debt; probabilistic voting; small open economies.
    JEL: D70 E62 H63
    Date: 2016–10
  9. By: Sinha, Pankaj; Srinivas, Sandeep; Paul, Anik; Chaudhari, Gunjan
    Abstract: The paper categorizes factors responsible for forecasting the outcome of U.S. presidential election 2016 using factor analysis, which groups the various economic and non-economic parameters based on the correlation among them. The major economic factor significant in 2016 US presidential election is the growth of the economy, and the ‘anti-incumbency factor that signifies how long the incumbent party has been controlling the White House is found to be an important non-economic factor likely to play a dominant role in the election. The dependent variables considered are the vote shares of the nominees of the incumbent and the non-incumbent majority party candidates. The forecast is calculated by running a regression of the significant factors, obtained through factor analysis technique, on the incumbent party vote share as well as on the non-incumbent party vote share. The proposed models forecast the vote share of Democrat candidate Mrs. Hillary Clinton to be 45.59% with a standard error of ±2.32% and that of Republican candidate Mr. Donald Trump to be 39.51% with a standard error of ±3.87%. Hence, the models built in the paper signal a comfortable margin of victory for the Presidential nominee of the incumbent party, Hillary Clinton. The study re-establishes the notion that the non-economic factors have a greater influence on the outcomes of election as compared to the economic factors, as some of the important economic factors such as inflation and unemployment rate failed to establish their significance.
    Keywords: Factor Analysis, 2016 U.S. Presidential Election, Forecasting, Economic and Non-economic variables
    JEL: C13 C18 C19 C3 C32 C4 C40
    Date: 2016–07–25
  10. By: Salil Benegal (University of Connecticut); Mikhael Shor (University of Connecticut)
    Abstract: We examine how ideological affiliations affect individuals’ perceptions of fairness in scenarios where they control an allocation of money for themselves and another, unknown person. Are notions of equity guided by the fairness of distribution, or is the overall outcome less important than having democratic procedures that allow individuals a voice in the allocation process? We design an experimental bargaining game in which subjects have the ability to allocate both money and power between themselves and another unknown individual. We find that liberals are more likely to enact fair outcomes, but conservatives are more likely to share decision-making rights while being less financially generous. However, we find that the tendency to select one form of fairness over another is not only driven by the type of ideology, but also by perceived spatial distance from others’ ideology: respondents with the greatest perceived ideological distance from others were significantly less likely to concede power and preferred to dictate allocations. JEL Classification: Key words:
    Date: 2016–10
  11. By: Canofari Paolo; Di Bartolomeo Giovanni
    Abstract: This paper analyzes the effects of policy uncertainty on the stability of a monetary union. Focusing on peripheral countries, we study how uncertainty over the consequences of a possible exit affects regime switches. Applying game theory and a cost-benefit analysis, we model a regime switch as the endogenous result of a two-stage policy game. We find that the effects of uncertainty are not trivial. Unilateral exits are less probable, but contagion is more likely to be observed. Our results are driven by two opposite forces: a traditional conservative effect induced by policy uncertainty in a single policymaker framework, which calls for more stability, and a strategic effect arising from the strategic interaction, which may undermine the monetary union’s foundation and strengthen incentives for contagion.
    Keywords: currency crisis, common currency, contagion, multiplicative uncertainty, policy game
    Date: 2016–11
  12. By: Sebastian Galiani; Gustavo Torrens
    Abstract: Why did the most prosperous colonies in the British Empire mount a rebellion? Even more puzzling, why didn't the British agree to have American representation in Parliament and quickly settle the dispute peacefully? At first glance, it would appear that a deal could have been reached to share the costs of the global public goods provided by the Empire in exchange for political power and representation for the colonies. (At least, this was the view of men of the time such as Lord Chapman, Thomas Pownall and Adam Smith.) We argue, however, that the incumbent government in Great Britain, controlled by the landed gentry, feared that allowing Americans to be represented in Parliament would undermine the position of the dominant coalition, strengthen the incipient democratic movement, and intensify social pressures for the reform of a political system based on land ownership. Since American elites could not credibly commit to refuse to form a coalition with the British opposition, the only realistic options were to maintain the original colonial status or fight a full-scale war of independence.
    JEL: D74 N41
    Date: 2016–10
  13. By: Sabet, Navid
    Abstract: This paper documents the impact of voter turnout on top marginal tax rates in the 34 OECD countries for the period between 1974 and 2014. Across a number of specifications, I find that increases in voter turnout have a positive and statistically significant effect on top tax rates. This finding is broadly consistent with the median voter theorem that posits government redistribution to be a function of the income of the median voter. Because turnout has fallen drastically in the decades leading to 2014, and because the decrease is strongly correlated with income, the pivotal voter is no longer the one whose income lies near the median of the overall income distribution but instead the one whose income is at the median of a much richer subset of the distribution. Using ordinary least squares estimation as well as panel data methods, I find that increases in turnout are associated with higher rates of income tax for top earners. An instrumental variables approach confirms my hypothesis, though the estimates are less precisely estimated.
    Keywords: voter turnout; income tax; redistribution; government policy
    JEL: H24 I38 P16
    Date: 2016–09
  14. By: Marco Battaglini; Eleonora Patacchini
    Abstract: This paper studies how interest groups allocate campaign contributions when congressmen are connected by social ties. We establish conditions for the existence of a unique Nash equilibrium in pure strategies for the contribution game and characterize the associated allocation of the interest groups' moneys. While the allocations are generally complex functions of the environment (the voting function, the legislators' preferences and the social network topology), they are simple, monotonically increasing functions of the respective legislators' Bonacich centralities when the legislators are office motivated or the number of legislators is large. Using data on the 109th-113th Congresses and on congressmen's alumni connections, we estimate the model and find evidence supporting its predictions.
    JEL: D72 D78
    Date: 2016–10
  15. By: Steven J. Davis
    Abstract: Building on Baker, Bloom and Davis (2016), I construct a monthly index of Global Economic Policy Uncertainty (GEPU) from January 1997. The GEPU Index is a GDP-weighted average of national EPU indices for 16 countries that account for two-thirds of global output. Each national EPU index reflects the relative frequency of own-country newspaper articles that contain a trio of terms pertaining to the economy, uncertainty and policy-related matters. The GEPU Index rises sharply in reaction to the Asian Financial Crisis, the 9/11 terrorist attacks, the U.S.-led invasion of Iraq in 2003, the Global Financial Crisis in 2008-09, the European immigration crisis, concerns about the Chinese economy in late 2015, and the Brexit referendum in June 2016. It fluctuates around consistently high levels from mid 2011 to early 2013, a period characterized by recurring sovereign debt and banking crises in the Eurozone, intense partisan battles over fiscal and healthcare policies in the United States, and a generational leadership transition in China. The average value of the GEPU Index is 60 percent higher from July 2011 to August 2016 than in the previous fourteen and one-half years and 22 percent higher than in 2008-09.
    JEL: D80 E66 G18 L50
    Date: 2016–10

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