nep-pol New Economics Papers
on Positive Political Economics
Issue of 2016‒11‒20
twenty-two papers chosen by
Eugene Beaulieu
University of Calgary

  1. Do Politicians Change Public Attitudes? By Carlsson, Magnus; Dahl, Gordon B.; Rooth, Dan-Olof
  2. Does majority voting improve board accountability? By Choi, Stephen J.; Fisch, Jill E.; Kahan, Marcel; Rock, Edward B.
  3. Voter Motivation and the Quality of Democratic Choice By Lydia Mechtenberg; Jean-Robert Tyran
  4. Competing cleavages in sub-Saharan Africa? How economic distance affects ethnic bloc politics By Jeffrey Conroy-Krutz
  5. The political economy of immigration and population ageing By Dotti, Valerio
  6. Does the 4th Estate Deliver? Towards a More Direct Measure of Political Media Bias By Ralf Dewenter; Uwe Dulleck; Tobias Thomas
  7. Experimental Evidence on Expressive Voting By Jean-Robert Tyran; Alexander K. Wagner
  8. Electoral incentives and firm behavior: Evidence from U.S. power plant pollution abatement By Matthew Doyle; Corrado Di Maria; Ian Lange; Emiliya Lazarova
  9. Rain, Emotions and Voting for the Status Quo By Meier, Armando N.; Schmid, Lukas D.; Stutzer, Alois
  10. Neural networks would 'vote' according to Borda's rule By Burka, David; Puppe, Clemens; Szepesvary, Laszlo; Tasnadi, Attila
  11. Political competition and tax revenues in developing countries By Urbain T. Yogo1; Martine M; Ngo Njib
  12. Horizontal inequalities and affirmative action: An analysis of attitudes towards redistribution across groups in Africa By Arnim Langer; Frances Stewart; Maarten Schroyens
  13. The single-peaked domain revisited: A simple global characterization By Puppe, Clemens
  14. Merchants of Doubt: Corporate Political Influence when Expert Credibility is Uncertain By Mireille Chiroleu-Assouline; Thomas P. Lyon
  15. Endogenous Leadership in a Federal Transfer Game. By Sengupta, Bodhisatva
  16. Protectionism in the 2016 Election: Causes and Consequences, Truths and Fictions By Cullen S. Hendrix
  17. It’s a Sweetheart of a Deal: Political Connections and Federal Contracting By Stephen P. Ferris; Reza Houston
  18. Tilting at windmills or whipping up a storm? Elites and ethno-nationalist conflict during democratisation By Krebs, Lutz
  19. How Information Affects Support for Education Spending: Evidence from Survey Experiments in Germany and the United States By West, Martin R.; Woessmann, Ludger; Lergetporer, Philipp; Werner, Katharina
  20. The politics of promoting social cash transfers in Uganda By Sam Hickey; Badru Bukenya
  21. Flip a coin or vote : an Experiment on choosing group decision By Hoffmann, Timo; Renes, Sander
  22. Political Borders and Bank Lending in Post-Crisis America By Chavaz, Matthieu; Rose, Andrew K

  1. By: Carlsson, Magnus (Linnaeus University); Dahl, Gordon B. (University of California, San Diego); Rooth, Dan-Olof (Stockholm University)
    Abstract: A large theoretical and empirical literature explores whether politicians and political parties change their policy positions in response to voters' preferences. This paper asks the opposite question: do political parties affect public attitudes on important policy issues? Problems of reverse causality and omitted variable bias make this a difficult question to answer empirically. We study attitudes towards the signature policies of small parties in Sweden using panel data from 290 municipal election districts. To identify causal effects, we take advantage of large nonlinearities in the function which assigns council seats, comparing otherwise similar elections where one party either barely wins or loses an additional seat. We estimate that a one seat increase for the anti-nuclear party reduces support for nuclear energy in that municipality by 3.3 percentage points. In contrast, when an anti-immigration or far left politician gets elected, negative attitudes towards immigration decrease by 4.8 percentage points and support for a six hour workday falls by 3.2 percentage points, respectively, in opposition to each party's policy position. Mirroring these attitudinal changes, the anti-nuclear party receives more votes in the next election after gaining a seat, while the anti-immigrant and far left parties lose their incumbency advantage. Exploring two possible mechanisms, we find evidence that when the anti-immigrant party gains an extra seat, they draw in lower quality politicians and receive negative local newspaper coverage. These findings have important implications for the theory and estimation of how voter preferences enter into electoral and political economy models.
    Keywords: voter preferences, incumbency effects, media influence
    JEL: D72 H70
    Date: 2016–11
  2. By: Choi, Stephen J.; Fisch, Jill E.; Kahan, Marcel; Rock, Edward B.
    Abstract: Directors have traditionally been elected by a plurality of the votes cast. This means that in uncontested elections, a candidate who receives even a single vote is elected. Proponents of "shareholder democracy" have advocated a shift to a majority voting rule in which a candidate must receive a majority of the votes cast to be elected. Over the past decade, they have been successful, and the shift to majority voting has been one of the most popular and successful governance reforms. Yet critics are skeptical as to whether majority voting improves board accountability. Tellingly, directors of companies with majority voting rarely fail to receive majority approval - even more rarely than directors of companies with plurality voting. Even when such directors fail to receive majority approval, they are unlikely to be forced to leave the board. This poses a puzzle: why do firms switch to majority voting and what effect does the switch have, if any, on director behavior? We empirically examine the adoption and impact of a majority voting rule using a sample of uncontested director elections from 2007 to 2013. We test and find partial support for four hypotheses that could explain why directors of majority voting firms so rarely fail to receive majority support: selection; deterrence/accountability; electioneering by firms; and restraint by shareholders. Our results further suggest that the reasons for and effects of adopting majority voting may differ between early and later adopters. We find that early adopters of majority voting were more shareholder-responsive than other firms even before they adopted majority voting. These firms seem to have adopted majority voting voluntarily, and the adoption of majority voting has made little difference in their responsiveness to shareholders responsiveness going forward. By contrast, for late adopters, we find no evidence that they were more shareholder-responsive than other firms before they adopted majority voting, but strong evidence that they became more responsive after adopting majority voting. Differences between early and late adopters can have important implications for understanding the spread of corporate governance reforms and evaluating their effects on firms. Reform advocates, rather than targeting the firms that, by their measures, are most in need of reform, instead seem to have targeted the firms that are already most responsive. They may then have used the widespread adoption of majority voting to create pressure on the nonadopting firms. Empirical studies of the effects of governance changes thus need to be sensitive to the possibility that early adopters and late adopters of reforms differ from each other and that the reforms may have different effects on these two groups of firms.
    Date: 2016
  3. By: Lydia Mechtenberg (Faculty of Business Economics and Social Sciences, University of Hamburg); Jean-Robert Tyran (Department of Economics, University of Copenhagen)
    Abstract: The quality of democratic choice critically depends on voter motivation, i.e. on voters’ willingness to cast an informed vote. If voters are motivated, voting may result in smart choices because of information aggregation but if voters remain ignorant, delegating decision making to an expert may yield better outcomes. We experimentally study a common interest situation in which we vary voters’ information cost and the competence of the expert. We find that voters are more motivated to collect information than predicted by standard theory and that voter motivation is higher when subjects demand to make choices by voting than when voting is imposed on subjects.
    Keywords: voting, experiment, information acquisition, information aggregation
    JEL: C91 D71 D72
    Date: 2016–09–15
  4. By: Jeffrey Conroy-Krutz
    Abstract: Does economic standing cross-cut ethnicity in African electoral politics? In many countries in the region, ethnicity appears to be a major consideration in individuals’ political decision-making. However, there is significant variation in the extent to which coethnics support parties en bloc; while some ethnic groups exhibit high rates of similarity in terms of members’ preferred parties, others are more fractionalized. One factor that might affect the probability that an individual will support the plurality-choice party of his or her ethnic group is relative economic standing. I expect that, as the distance between an individual’s level of wealth and his or her ethnic group’s median level of wealth increases, the probability of the member supporting the most-favoured party of their coethnics decreases. In other words, economic considerations can cross-cut ascriptive identities. I test this expectation with data from 27 countries included in the fifth round of the Afrobarometer and find that individuals who are significantly different, in terms of wealth, from other members of their ethnic group are significantly less likely to support their group’s plurality-choice party. Specifically, economic difference increases non-partisanship and support for out-parties (i.e., those not their group’s plurality choice). Further, being a member of a group that has greater levels of within-group inequality reduces support for a plurality-choice party, while living in a country with higher levels of between-group inequality increases support for a plurality-choice party. The results suggest that some ethnic groups’ propensity towards bloc voting can be explained, at least partially, by group-level similarities in economic interests.
    Keywords: Africa, elections, ethnicity, inequality, parties
  5. By: Dotti, Valerio
    Abstract: I investigate the effects of population ageing on immigration policies. Voters' attitude towards immigrants depends on how the net gains from immigration are divided up in the society by the fiscal policy. In the theoretical literature this aspect is treated as exogenous to the political process because of technical constraints. This generates inconsistent predictions about the policy outcome. I adopt a new equilibrium concept for voting models to analyse the endogenous relationship between immigration and fiscal policies and solve this apparent inconsistency. I show that the elderly and the poor have a common interest in limiting immigration and in increasing public spending. This exacerbates the effects of population ageing on public finances and results in a high tax burden on working age individuals and further worsens the age profile of the population. Moreover, I show that if the share of elderly population is suffciently large, then a society is unambiguously harmed by the tightening in the immigration policy caused by the demographic change. The implications of the model are consistent with the patterns observed in UK attitudinal data and in line with the findings of the empirical literature about migration.
    Keywords: Immigration , Ageing , Policy , Voting
    JEL: D72 C71 J61 H55
    Date: 2016
  6. By: Ralf Dewenter (Hulmut Schmidt University Hamburg); Uwe Dulleck (QUT); Tobias Thomas (Dusseldorf Institute for Competition Economics)
    Abstract: This contribution introduces a new direct measure of political media bias by analyzing articles and newscasts with respect to the tonality on political parties and politicians. On this basis we develop an index sorting the media in the political left to right spectrum. We apply the index to opinion‐leading media in Germany, analysing 7,203,351 reports on political parties and politicians in 35 media outlets from 1988 to 2012. With this approach, in contrast to other indexes, we are able to achieve a more direct and reliable measure of media bias. In addition, we apply the index to study whether the media fulfil their role as the fourth estate, i.e. provide another level of control for government, or whether there is evidence of government capture.
    Keywords: media bias, governmental capture, index
    JEL: C43 D72 L82
    Date: 2016–11–14
  7. By: Jean-Robert Tyran (Department of Economics, University of Copenhagen); Alexander K. Wagner (The Vienna Center for Experimental Economics, University of Vienna)
    Abstract: Standard economic reasoning assumes that people vote instrumentally, i.e., that the sole motivation to vote is to influence the outcome of an election. In contrast, voting is expressive if voters derive utility from the very act of expressing support for one of the options by voting for it, and this utility is independent of whether the vote affects the outcome. This paper surveys experimental tests of expressive voting with a particular focus on the low-cost theory of expressive voting. The evidence for the low-cost theory of expressive voting is mixed.
    Keywords: Expressive Voting, Experiment, Public Choice, Political Economy
    JEL: C91 C92 D72
    Date: 2016–09–12
  8. By: Matthew Doyle (Colorado School of Mines); Corrado Di Maria (University of East Anglia); Ian Lange (Colorado School of Mines); Emiliya Lazarova (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 enforce- ment. 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: 2016–09–30
  9. By: Meier, Armando N. (University of Basel); Schmid, Lukas D. (University of Lucerne); Stutzer, Alois (University of Basel)
    Abstract: Do emotions affect the decision between change and the status quo? We exploit exogenous variation in emotions caused by rain and analyze data on more than 400 ballot propositions in Switzerland for the years 1958 to 2014 to address this question. The empirical tests are based on administrative ballot outcomes and individual postvote survey data. We find that rain decreases the share of votes for a change. Our robustness checks suggest that changes in the composition of the electorate or changes in information acquisition do not drive this result. In addition, we provide evidence that rain might have altered the outcome of several high-stake votes. We discuss the psychological mechanism and document that rain reduces the willingness to take risks, a pattern that is consistent with the observed reduction in the support of change.
    Keywords: emotions, voting, status quo, risk aversion, rain, direct democracy, turnout
    JEL: D03 D72
    Date: 2016–11
  10. By: Burka, David; Puppe, Clemens; Szepesvary, Laszlo; Tasnadi, Attila
    Abstract: Can neural networks learn to select an alternative based on a systematic aggregation of conflicting individual preferences (i.e. a 'voting rule')? And if so, which voting rule best describes their behavior? We show that a prominent neural network can be trained to respect two fundamental principles of voting theory, the unanimity principle and the Pareto property. Building on this positive result, we train the neural network on profiles of ballots possessing a Condorcet winner, a unique Borda winner, and a unique plurality winner, respectively. We investigate which social outcome the trained neural network chooses, and find that among a number of popular voting rules its behavior mimics most closely the Borda rule. Indeed, the neural network chooses the Borda winner most often, no matter on which voting rule it was trained. Neural networks thus seem to give a surprisingly clear-cut answer to one of the most fundamental and controversial problems in voting theory: the determination of the most salient election method.
    Keywords: voting,social choice,neural networks,machine learning,Borda count
    Date: 2016
  11. By: Urbain T. Yogo1; Martine M; Ngo Njib
    Abstract: Building on the literature of the political economy of taxation, this article explores the relationship between political competition and tax revenues using a sample of 89 developing countries from 1988 to 2010. Owing to the inertia of tax variables, we estimate a dynamic panel data model using the Blundell and Bond two-step System-GMM. The analysis led to the following results: political competition positively and significantly affects total tax revenues; however, this general pattern differs slightly across the type of taxes; and the net effect of political competition on tax revenues is negative for countries which have adopted fiscal rules.
    Keywords: level of tax revenues, political competition, volatility of tax revenues pages
    Date: 2016
  12. By: Arnim Langer; Frances Stewart; Maarten Schroyens
    Abstract: Inequalities between ethnic or racial groups, defined as horizontal inequalities, are pervasive and persistent. They persist due to cumulative and reinforcing inequalities arising from unequal access to different types of capital. Affirmative action policies can provide promising opportunities for escaping this inequality trap. However, political support for these policies across a wide range of groups in society is crucial for introducing and maintaining them. Interestingly, little is known about the popular support for affirmative action policies and redistribution across ethnic groups, in particular in developing countries. We aim to address this lacuna by providing an overview of theories relating to attitudes towards redistribution across groups and analysing these issues empirically in Ghana, Nigeria, Kenya and Uganda. Keywords: horizontal inequalities, affirmative action, economic redistribution, ethnicity, Africa
    Date: 2016
  13. By: Puppe, Clemens
    Abstract: It is proved that, among all restricted preference domains that guarantee consistency (i.e. transitivity) of pairwise majority voting, the single-peaked domain is the only minimally rich and connected domain that contains two completely reversed strict preference orders. It is argued that this result explains the predominant role of single-peakedness as a domain restriction in models of political economy and elsewhere. The main result has a number of corollaries, among them a dual characterization of the single-dipped do- main; it also implies that a single-crossing ('order-restricted') domain can be minimally rich only if it is a subdomain of a single-peaked domain. The conclusions are robust as the results apply both to domains of strict and of weak preference orders, respectively.
    Keywords: social choice,restricted domains,Condorcet domains,single-peakedness,single-dippedness,majority voting,single-crossing property
    JEL: D71 C72
    Date: 2016
  14. By: Mireille Chiroleu-Assouline (Paris School of Economics, University of Paris 1 Panthéon-Sorbonne and INRA Economie Publique); Thomas P. Lyon (Dow Chair of Sustainable Science, Technology and Commerce, Ross School of Business, University of Michigan)
    Abstract: A key role of science-based non-governmental organizations (NGOs) is to communicate scientific knowledge to policymakers. However, recent evidence has emerged showing that industry-backed groups often attempt to undermine the credibility of such NGOs and weaken their ability to influence policy. To investigate the mechanisms by which a firm can profitably create doubt about scientific information, we use a signaling model of interest-group lobbying in which the policymaker has fixed costs of taking action. We explore two mechanisms for the creation of doubt. The first involves using Bayesian persuasion to imply that the NGO may be a radical extremist whose lobbying is not credible. The second involves the creation of a think tank which can offer its own testimony on scientific matters. We show the firm prefers that the think tank does not act as a credible moderate, but instead sometimes takes radical, non-credible, positions. We identify conditions under which each mechanism is preferred by the firm.
    Keywords: NGOs, Public Politics, Lobbying
    JEL: D72 D82 L31 Q58
    Date: 2016–11
  15. By: Sengupta, Bodhisatva (IIT-Guwahati)
    Abstract: Conventional wisdom suggests that, to negate fiscal externalities imposed by provinces which spend too much and raise lower local resources, central authority should always be a first mover in the transfer game. In spite of such recommendations, central governments, in almost all countries, chooses to be the second mover from time to time. We explore the conditions, other than the familiar political economy arguments, under which the central government optimally chooses to be the second mover. Moreover, ex post transfer protocols may induce provinces to generate more local resources than otherwise. The results depend upon the benefit received by each level of government from the project outcomes of other tier.
    Keywords: Federalism ; Transfer Game ; First and Second Mover Advantages
    JEL: H77 H23 H10
    Date: 2016–11
  16. By: Cullen S. Hendrix (Peterson Institute for International Economics)
    Abstract: The disconnect between the United States’ massive increase in trade exposure and minimal (if any) associated rise in government spending to address trade-related costs is at the heart of the apparent turn toward protectionist politics in the 2016 US presidential election. Protectionist rhetoric is a surrogate for a deeper discussion about the role of the government in an increasingly open economy. Trade makes the United States better off as a whole, but evidence that the costs are unevenly shared is mounting. Trade and technological change have cost many American people their jobs, and social transfers (for unemployment, disability, retirement, and health care) are not closing the gap in their incomes. In this environment, both left- and right-wing populist candidates have been able to gain traction, in large part by attacking free trade. But trade may not be the culprit: Many advanced economies sustain much higher levels of trade exposure and do so with large social expenditures to address the costs. The protectionist turn this election year is the result of neither a sea change in public opinion on trade nor an anti-trade youth in revolt. At root, it is the result of government spending and compensatory policies not keeping up with technological and trade shocks—particularly the China shock—to the US labor market.
    Date: 2016–11
  17. By: Stephen P. Ferris; Reza Houston
    Abstract: We examine whether political connections measured by political contributions influences the choice of terms included in government contracts awarded to firms. We construct an index of four “sweetheart” contract terms that are highly favorable to the firm, but not obviously advantageous to the government. We find that firms making larger political contributions more frequently have these terms included in their contracts. We then examine how changes in a firm’s political contributions influence the terms of subsequent contracts. We find that firms which increase their contributions are more likely to have these terms as part of their contract. We conclude that there is a political effect on the choice of terms included in federal contracts awarded to firms.
    Keywords: contracting; political connections
    JEL: G32 G38
    Date: 2016–09
  18. By: Krebs, Lutz (UNU-MERIT)
    Abstract: How much influence do political leaders have on the likelihood of ethnic civil war? Two opposing theoretical positions exist: elite manipulation theorists argue that leaders incite ethno-nationalism to secure their hold on power (Snyder 2000, Gagnon 2004). However, political leaders rarely have both the ability and the ideal environment to manipulate identities (Brubaker 1998). Instead, structural forces like ethnic security dilemmas could be driving forces behind conflict onset (Posen 1993), leaving elites virtually without influence on the probability of civil-war onset. This study uses large-N regressions to test both theories and a hybrid alternative focussing on two problems inherent to democratisation settings: the need to settle the demos question and ongoing competition between incumbent and challenging political leaders. Results confirm that ongoing democratisation phases, the prior existence of security worries caused by politicised ethnic divisions, and factors threatening incumbents have a significant positive influence on the risk of civil war.
    Keywords: emocratisation, ethno-nationalism, political elites, civil war
    JEL: N40
    Date: 2016–11–15
  19. By: West, Martin R. (Harvard Graduate School of Education); Woessmann, Ludger (Ifo Institute for Economic Research); Lergetporer, Philipp (Ifo Institute for Economic Research); Werner, Katharina (Ifo Institute for Economic Research)
    Abstract: To study whether current spending levels and public knowledge of them contribute to transatlantic differences in policy preferences, we implement parallel survey experiments in Germany and the United States. In both countries, support for increased education spending and teacher salaries falls when respondents receive information about existing levels. Treatment effects vary by prior knowledge in a manner consistent with information effects rather than priming. Support for salary increases is inversely related to salary levels across American states, suggesting that salary differences could explain much of Germans' lower support for increases. Information about the tradeoffs between specific spending categories shifts preferences from class-size reduction towards alternative purposes.
    Keywords: policy preferences, cross-country comparison, Germany, United States, education spending, information, survey experiments
    JEL: H52 I22 D72 D83
    Date: 2016–11
  20. By: Sam Hickey; Badru Bukenya
    Abstract: In 2015 the Government of Uganda agreed to start rolling out a social pension programme, and increasing its own contribution to it. This was driven by the highly politicized efforts of a transnational policy coalition, led by international donors and national bureaucrats. It was a struggle over ideas as well as resources, with this coalition having to overcome strong resistance from Finance Ministry tendencies until the policy coalition started ‘thinking and working politically’ to help align the social protection agenda with Uganda’s shifting political settlement dynamics. Government’s apparent commitment to social protection remains meagre; only a tiny proportion of Uganda’s poor will benefit. The evidence presented here raises serious concerns regarding the developmental character of Uganda’s contemporary political settlement and the costs of the ‘going with the grain’ motif of the new ‘thinking and working politically’ agenda. Aligning policy agendas with dominant interests and ideas may render interventions politically acceptable while further embedding clientelist logics and doing little to address distributional problem.
    Keywords: social protection, politics, Uganda, cash transfers, donors.
    Date: 2016
  21. By: Hoffmann, Timo; Renes, Sander
    Abstract: Before a group can take a decision, its members must agree on a mechanism to aggregate individual preferences. In this paper we present the results of an experiment on the influence of private payoff information and the role of the available alternatives on individuals’ mechanism choices in such group choice situations. While efficient mechanisms are desirable, we experimentally show that participation constraints can prevent their implementation. We find strong indications that individual preferences for choice rules are sensitive to individual expected payoffs. Our results highlight the importance of considering participation constraints when designing choice institutions.
    JEL: C91 C92 D70 D82
    Date: 2016
  22. By: Chavaz, Matthieu; Rose, Andrew K
    Abstract: We use spatial discontinuities associated with congressional district borders to identify the effect of political influences on American banks' lending. We show that recipients of the 2008 public capital injection program (TARP) increased mortgage and small business lending by 23% to 60% more in areas located inside their home-representative's district than elsewhere. The impact is stronger if the representative supported the TARP in Congress, was subsequently re-elected, and received more political contributions from the financial industry. Together, these results suggest that political considerations influence credit allocation in a politically mature system like the United States without the formal possibility of political interference in lending decisions, and that this influence is larger if the flows between banks and politicians are reciprocal.
    Keywords: congress; county; data; district; effect; empirical; fixed; mortgage; panel; policy
    JEL: F36 G28
    Date: 2016–11

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