nep-pol New Economics Papers
on Positive Political Economics
Issue of 2016‒12‒11
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Exposing Corruption: Can Electoral Competition Discipline Politicians? By Afridi, Farzana; Dhillon, Amrita; Solan, Eilon
  2. Popularity shocks and political selection : the effects of anti-corruption audits on candidates' quality By Framcisco Cavalcanti; Gianmarco Daniele; Sergio Galletta
  3. Does democracy reduce the HIV epidemic? Evidence from Kenya By Antoine Marsaudon; Josselin Thuilliez
  4. Strength of Partisan and Candidate Ties in India By Aditi Singhal
  5. Race and Gender Affinities in Voting: Experimental Evidence By Jeffrey Penney; Erin Tolley; Elizabeth Goodyear-Grant
  6. Can fiscal decentralisation curb fiscal imbalances? By Grażyna Bukowska; Joanna Siwińska-Gorzelak
  7. Political borders and bank lending in post-crisis America By Chavaz, Matthieu; Rose, Andrew
  8. The Geography of Linguistic Diversity and the Provision of Public Goods By Joseph Gomes; Klaus Desmet; Ignacio Ortuño-Ortín
  9. Collective decision-making under drought: An empirical study of water resource management in Japan By Kaori Tembata; Kenji Takeuchi

  1. By: Afridi, Farzana (Indian Statistical Institute); Dhillon, Amrita (King's College London); Solan, Eilon (Tel Aviv University)
    Abstract: In developing countries with weak institutions, there is implicitly a large reliance on elections to instill norms of accountability and reduce corruption. In this paper we show that electoral discipline may be ineffective in reducing corruption when political competition is too high or too low. We first build a simple game theoretic model to capture the effect of electoral competition on corruption. We show that in equilibrium, corruption has a U-shaped relationship with electoral competition. If the election is safe for the incumbent (low competition) or if it is extremely fragile (high competition) then corruption is higher, and for intermediate levels of competition, corruption is lower. We also predict that when there are different types of corruption, then incumbents increase corruption in the components that voters care less about regardless of competition. We test the model's predictions using data gathered on audit findings of leakages from a large public program in Indian villages belonging to the state of Andhra Pradesh during 2006-10 and on elections to the village council headship in 2006. Our results largely confirm the theoretical results that competition has a non-linear effect on corruption, and that the impact of electoral competition varies by whether theft is from the public or private component of the service delivery. Overall, our results suggest that over-reliance on elections to discipline politicians is misplaced.
    Keywords: audit, electoral competition, corruption, social accountability
    JEL: D72 D82 H75 O43 C72
    Date: 2016–11
  2. By: Framcisco Cavalcanti (Barcelona Economic Institute, University of Barcelona, Spain); Gianmarco Daniele (Barcelona Economic Institute, University of Barcelona, Spain); Sergio Galletta (IdEP, Economia, Universita' Svizzera italiana, Switzerland)
    Abstract: We show that the disclosure of information about a government's conduct affects the types of candidates who stand for election. Our empirical test focuses on Brazilian city council elections in 2004 and 2008. The identification strategy exploits the randomness of the timing of the release of audit reports on the (mis)use of federal funds by local governments. We observe that when the audit finds low levels of corruption (i.e., when it represents a positive popularity shock), the parties supporting the incumbent select less-educated candidates. On the contrary, parties pick, on average, more-educated candidates when the audit reveals a high level of corruption (i.e., when it represents a negative popularity shock). These effects are stronger in municipalities that have easier access to local media. Our evidence confirms that parties are strategic players: their decisions are affected by shocks that influence the electoral race.
    Keywords: Political selection, Corruption, Competence, Local election, Political parties, Candidates
    JEL: D70 D72 D73
    Date: 2016–10–25
  3. By: Antoine Marsaudon (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); Josselin Thuilliez (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: Does democracy help Kenyan citizens to struggle against the HIV epidemic? Yet, very little attention has been devoted to establish whether political regimes react differently to the HIV infection. Using an electoral definition of democracy makes a contribution in understanding which aspects of political rules matter to manage the disease. Using a difference-in-difference design that draws upon pre-existing variations in HIV intensity and cohort's exposure to democracy, we find that a person living under democracy is less likely to have a HIV infection. Further, we present some evidence of ethnic favoritism and gender disparities during periods of non-democracy.
    Keywords: Institution,Democracy,HIV,Health,Kenya
    Date: 2016–11
  4. By: Aditi Singhal (Department of Economics, Delhi School of Economics)
    Abstract: This study estimates the impact of incumbency on re-election prospects of parties and candidates in India, between 1977 and 2014, for Lok Sabha elections. We make use of regression discontinuity design to estimate the causal effect of incumbency by comparing outcomes in closely fought elections. Results indicate that on an average, incumbent parties are significantly disadvantaged in comparisontonon-incumbentparties. Similarly,thecausal impact of incumbency on candidates highlights significant disadvantage to the incumbents. Moreover, on comparing the results, we conclude that it is a candidate who is more disadvantaged than a party. This is indicative of stronger ties amongst voters and parties rather than with candidates.
    Keywords: Elections, party, candidates, regression discontinuity design
    JEL: D72
    Date: 2016–11
  5. By: Jeffrey Penney (Pontificia Universidad Javeriana); Erin Tolley (University of Toronto); Elizabeth Goodyear-Grant (Queen's University)
    Abstract: We analyze the results of a large-scale experiment wherein subjects participate in a hypothetical primary election and must choose between two fictional candidates who vary by sex and race. We find evidence of affinities along these dimensions in voting behaviour. A number of phenomena regarding these affinities and their interactions are detailed and explored. We find that they compete with each other on the basis of race and gender. Neuroeconomic metrics suggest that people who vote for own race candidates tend to rely more on heuristics than those who do not.
    Keywords: Gender, Prejudice, Race, Voting
    JEL: D72 C90 J15 J16
    Date: 2016–10
  6. By: Grażyna Bukowska (Faculty of Economic Sciences, University of Warsaw); Joanna Siwińska-Gorzelak (Faculty of Economic Sciences, University of Warsaw)
    Abstract: The aim of this paper is to study the impact of fiscal decentralisation on fiscal discipline. We use annual data for more than 2400 Polish municipalities, over the years 2002-2014. We introduce the distinction between “de facto” and “de jure” fiscal decentralisation, what is the first novelty of this study. The second novelty is that we control for the characteristics of the political scene and include interactions of decentralisation and political variables. We show that higher decentralisation is associated with higher fiscal discipline and that this result is robust for all our decentralisation measures. We also show that the impact of decentralisation is different, depending on the characteristics of the local political scene. Therefore, its overall effect on fiscal balance is not necessarily straightforward.
    Keywords: deficit, fiscal decentralization, political competition
    JEL: D72 H72 H77
    Date: 2016
  7. By: Chavaz, Matthieu (Bank of England); Rose, Andrew (Haas School of Business Administration, University of California, Berkeley.)
    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: Empirical; data; panel; fixed; effect; county; district; congress; policy; mortgage.
    JEL: F36 G28
    Date: 2016–12–02
  8. By: Joseph Gomes; Klaus Desmet; Ignacio Ortuño-Ortín
    Abstract: This paper theoretically analyzes and empirically investigates the importance of local interaction between individuals of different linguistic groups for the provision of public goods at the national level. Depending on whether local interaction mitigates or reinforces antagonism towards other groups, the micro-founded theory we develop predicts that a country's provision of public goods (i) decreases in its overall linguistic fractionalization, and (ii) either increases or decreases in how much individuals locally learn about other groups. After constructing a 5 km by 5 km geographic dataset on language use for 223 countries, we compute measures of overall fractionalization and local learning, and investigate their relation to public good provision at the country level. While overall fractionalization worsens outcomes, we find a positive causal relation between local learning and public goods. Local mixing therefore mitigates the negative impact of a country's overall linguistic fractionalization. An IV strategy shows that this result is not driven by the possible endogenous spatial distribution of language speakers within countries.
    JEL: H4 H5 J15 D7 D74
    Date: 2016–11
  9. By: Kaori Tembata (Graduate School of Economics, Kobe University); Kenji Takeuchi (Graduate School of Economics, Kobe University)
    Abstract: The management of common-pool resources requires collective action and cooperation, especially when resource users face extreme weather events. This study examines col- lective decision-making in water resource management during droughts. By focusing on the drought response by groups of water users in river basin communities in Japan, we investigate the determinants of collective decisions on water withdrawal restrictions. Our main finding suggests that water user groups are more willing to cooperate for water con- servation when other water user groups in a community also cooperate. Moreover, we examine the impact of climate variability on drought management. Our findings show that drought-related weather patterns lead to more stringent water restrictions, suggesting that climate change may pose a threat to the management of the water supply.
    Keywords: Common-pool resource, Collective decision-making, Cooperation, Drought, Water conservation, Japan
    JEL: D70 Q25 Q54
    Date: 2016–12

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