nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒02‒12
fifteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Exposure to Refugees and Voting for the Far-Right. (Unexpected) Results from Austria By Steinmayr, Andreas
  2. Image concerns and the political economy of publicly provided private goods By König, Tobias; Lausen, Tobias; Wagener, Andreas
  3. The Swing Voter's Curse in Social Networks By Berno Buechel; Lydia Mechtenberg
  4. Deflecting my burden, hindering redistribution: How elites influence tax legislation in Latin America By Juan A. Bogliaccini; Juan Pablo Luna
  5. Introduction to Indian Politics By Borooah, Vani
  6. Understanding the Etiology of Electoral Violence: The Case of Zimbabwe By David Fielding
  7. Why American Elections Are Flawed (and How to Fix Them) By Norris, Pippa
  8. Neighbors and Friends: The Effect of Globalization on Party Positions By Ftergioti, Stamatia
  9. Secrecy and State Capacity : A Look Behind the Iron Curtain By Harrison, Mark
  10. Social Media and Political Donations: New Technology and Incumbency Advantage in the United States By Petrova, Maria; Sen, Ananya; Yildirim, Pinar
  11. Political Connections and the Informativeness of Insider Trades By Jagolinzer, Alan D.; Larcker, David F.; Ormazabal, Gaizka; Taylor, Daniel J.
  12. An Institutional Approach to Trade Unions’ Density. The Case of Legal Origin and Political Ideology By Jacek Lewkowicz; Anna Lewczuk
  13. Public Policy Against Political Frictions By Grechyna, Daryna
  14. The political economy of exchange rate stability during the gold standard. The case of Spain, 1874-1914 By Nogues-Marco, Pilar; Martínez-Ruiz, Elena
  15. On President Putin’s popularity: Evidence from survey experiment on the streets of Moscow By Mecheva, M.

  1. By: Steinmayr, Andreas
    Abstract: The massive increase in the number of arriving refugees in Europe in 2015 creates enormous economic and political challenges in the receiving countries. An important concern is that the inflow of refugees increases the support for far-right, nationalist, anti-immigration parties. This paper studies a natural experiment in an Austrian state to identify the causal effect of exposure to refugees in the neighborhood on the support for the far-right Freedom Party of Austria (FPÖ). Before the local and state elections in September 2015 the inflow of refugees dominated the entire pre-electoral discussion and the FPÖ - with a fierce anti-asylum campaign - doubled its vote share in this election. At the time of the election, 42 percent of Upper Austrian communities hosted refugees, which provides variation in the exposure to refugees at the community level. To account for the potential endogeneity in the distribution of refugees, I use the availability of existing group accommodations as instrumental variable. To cope with the sudden inflow of large number of refugees, these buildings were used as accommodation and their existence strongly increases the probability of refugee presence. In line with the contact hypothesis I find that hosting refugees in the community decreases the support for the FPÖ by 4.42 percentage points in state elections and increases the optimism in the population that the integration of refugees can be managed. The effects are robust to a series of sensitivity and placebo checks.
    JEL: D72 J15 P16
    Date: 2016
  2. By: König, Tobias; Lausen, Tobias; Wagener, Andreas
    Abstract: Governments often provide their citizens with goods and services that are also supplied in markets: education, housing, nutritional assistance, etc. We analyze the political economy of the public provision of private goods when individuals care about their social image. We show that image concerns motivate richer individuals to vote for the public provision of goods they themselves buy in markets, the reason being that a higher provision level attracts more individuals to the public system, enhancing the social exclusivity of market purchases. In effect, majority voting may lead to a public provision that only a minority of citizens use. Users in the public system may enjoy better provision than users in the private system. We characterize the coalition structures across voters that can prevail in a political equilibrium.
    Keywords: [Dual provision] In-kind provision,Status preferences,Majority voting
    JEL: H42 D72 D63
    Date: 2016
  3. By: Berno Buechel (University of St. Gallen and Liechtenstein-Institute); Lydia Mechtenberg (University of Hamburg)
    Abstract: We study private communication in social networks prior to a majority vote on two alternative policies. Some (or all) agents receive a private imperfect signal about which policy is correct. They can, but need not, recommend a policy to their neighbors in the social network prior to the vote. We show theoretically and empirically that communication can undermine efficiency of the vote and hence reduce welfare in a common interest setting. Both efficiency and existence of fully informative equilibria in which vote recommendations are always truthfully given and followed hinge on the structure of the communication network. If some voters have distinctly larger audiences than others, their neighbors should not follow their vote recommendation; however, they may do so in equilibrium. We test the model in a lab experiment and strong support for the comparative-statics and, more generally, for the importance of the network structure for voting behavior.
    Keywords: Strategic Voting, Social Networks, Swing Voter's Curse, Information Aggregation
    JEL: D72 D83 D85 C91
    Date: 2017–01
  4. By: Juan A. Bogliaccini; Juan Pablo Luna
    Abstract: This paper proposes to understand a singular but salient factor that enables the wealthy to deflect their tax burden downwards: elites. political leverage to shape legislation via their capacity to influence political actors and policy outcomes. The analysis sheds light on alternative mechanisms used by economic elites over time and space. Our analysis of the political economy of taxing upper-income groups in Chile and Uruguay reveals the importance of continuous political agency on the part of organized elite interest groups. Our results show how even centre-left parties competing on a redistributive programmatic platform confront and concede to the interests of wealthy elites, especially when sustained interaction between political leaders and economic elites becomes routinized in the long run.
    Keywords: tax policy, Latin America, elites, tax avoidance, redistribution, case study
    Date: 2016
  5. By: Borooah, Vani
    Abstract: Borooah reviews the major developments in Indian politics from Independence in 1947 till the latest Parliamentary General election of 2014. He discusses the three pillars of India’s identity – democracy, unity, and secularism – and shows the influence of democracy on India’s unity and on the concept of secularism that is has adopted.
    Keywords: India, Democracy, Secularism
    JEL: O53 P16
    Date: 2015–12
  6. By: David Fielding (Department of Economics, University of Otago, New Zealand)
    Abstract: Recent theoretical and empirical work indicates that incumbent governments are likely to attempt to influence election outcomes by violent means (rather than by bribery and fraud) when their level of popular support is relatively low. However, evidence also suggests that in some countries electoral violence can be quite easy to thwart through peaceful means. This may seem surprising when the incumbent has control over an extensive and well-equipped state security apparatus. The analysis of Zimbabwean data in this paper suggests an explanation: the incumbent prefers to avoid the direct involvement of the state security apparatus when intimidating voters (perhaps because such involvement would undermine the incumbent’s legitimacy abroad), and relies instead on informal groups with very limited organizational capacity. One consequence in Zimbabwe is that the intimidation is heavily focused in places where the incumbent is relatively popular, ceteris paribus.
    Keywords: Elections; Voter intimidation; Zimbabwe
    Date: 2015–06
  7. By: Norris, Pippa (Harvard University and University of Sydney)
    Abstract: Concern about how American elections work has risen since 2000 and has been exacerbated by events during the 2016 campaign. To understand these issues, the first section examines several major challenges facing U.S. elections, including deepening party polarization over electoral procedures, the vulnerability of electronic records to hacking, and the impact of deregulating campaign spending, compounding the lack of professional standards of electoral management. For a broader perspective, section 2 clarifies the core concept and measure of 'electoral integrity', the key yardstick used in this report to evaluate the performance of American contests. Section 3 compares cross-national evidence from expert surveys, finding that recent US elections have the worst performance among two-dozen Western democracies. Section 4 considers pragmatic reforms designed to strengthen U.S. electoral laws and procedures, recommending expanding secure and convenient registration and balloting facilities, improving the independence and professional standards of electoral management, monitoring performance, and strengthening impartial dispute resolution mechanisms. The conclusion summarizes the core argument and the reforms.
    Date: 2016–09
  8. By: Ftergioti, Stamatia
    Abstract: This paper seeks to examine the effect of economic, social and political globalization on parties’ overall positions. Our empirical analysis is based on a panel model of 34 political parties in 17 west European countries between 1970 and 2010. We find that both economic and social globalization have a significant effect on parties’ positions, whereas political globalization seems to have less of an influence. However, the effect of globalization varies depending on the type of political party. Right-wing parties move leftward in response to all types of globalization while left-wing parties do not alter their position, or move rightward. Moreover, we find strong evidence about party’s influence of the positions that parties in other countries take. These findings give support for the existence of parties’ convergence in the face of globalization with right-wing parties coming closer to left-wing parties, rejecting the established in the literature argument of the so-called “neoliberal convergence”.
    Keywords: party’s position; globalization; partisan politics; panel data
    JEL: F15 H5
    Date: 2017–01–01
  9. By: Harrison, Mark (Department of Economics, University of Warwick)
    Abstract: This paper reviews two decades of research on the political economy of secrecy, based on the records of former Soviet state and party archives. Secrecy was an element of Soviet state capacity, particularly its capacity for decisiveness, free of the pressures and demands for accountability that might have arisen from a better informed citizenry. But secrecy was double-edged. Its uses also incurred substantial costs that weakened the capacity of the Soviet state to direct and decide. The paper details the costs of secrecy associated with “conspirative” government business processes, adverse selection of management personnel, everyday abuses of authority, and an uninformed leadership.
    Keywords: abuse of authority ; adverse selection ; censorship ; military outlays ; secrecy ; state capacity ; transaction costs ; trust
    JEL: N44 P37
    Date: 2017
  10. By: Petrova, Maria; Sen, Ananya; Yildirim, Pinar
    Abstract: Can new technologies increase political competition? We study the impact of adopting Twitter on campaign contributions received by politicians. For identification, we compare donations just before and just after politicians open Twitter accounts in regions with high and low levels of Twitter penetration, controlling for politician-month fixed effects. We estimate that opening a Twitter account amounts to an increase of at least 2-3% in donations per campaign. This effect is stronger for new politicians, who were never elected before, for donations coming from new donors, for politicians who tweet more informatively, and for politicians from regions with lower newspaper circulation.
    Date: 2017–01
  11. By: Jagolinzer, Alan D. (University of CO); Larcker, David F. (Rock Center for Corporate Governance, Stanford University); Ormazabal, Gaizka (University of Navarra); Taylor, Daniel J. (University of PA)
    Abstract: This paper examines the relation between political connections and informed trading by corporate insiders in the context of the Financial Crisis. The unprecedented magnitude of government intervention, the substantial impact of this intervention on firm value, and the political nature of the intervention provide a powerful setting to examine the relation between political connections and informed trading. Consistent with political connections providing corporate insiders with an information advantage, we find strong evidence of a relation between political connections and the informativeness of their trades. Consistent with this relation stemming from private information related to government intervention, we find the relation is strongest during the period in which TARP funds were dispersed, and strongest among politically connected insiders at banks that received TARP funds. Examining insider trades around the announcements of TARP infusions, we find evidence of significant trading thirty days in advance of the announcement, and that these trades predict the market reaction to the announcement. Notably, we find these relations are present only for the trades of politically connected insiders. Overall, our results suggest that politically connected insiders had an information advantage during the Crisis and traded to exploit this advantage.
    JEL: G14 G20 G28 G30 K20
    Date: 2016–09
  12. By: Jacek Lewkowicz (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland); Anna Lewczuk (Faculty of Economic Sciences, University of Warsaw)
    Abstract: Which institutions may be important in terms of trade unions’ density and how significant they are? However, trade unions’ status is very different among states, they are still a very meaningful component of labor markets. In this paper we contribute to the debate on the institutions, which may affect the outcome of trade unions in different legal systems. Firstly, we draw on theoretical underpinnings of trade unions’ activity and density. Then, we conduct an empirical analysis of the relationships between trade union density in a particular country, its legal origin and government’s ideology. In this way the paper enriches an underexploited niche in institutional research devoted to labor market issues.
    Keywords: new institutional economics, institutions, political economy, trade unions, labor market, legal origin, parties’ ideologies
    JEL: J51 K31 K40 P16
    Date: 2017
  13. By: Grechyna, Daryna
    Abstract: Recent research has demonstrated that political distortions can increase macroeconomic volatility. The aim of this paper is to analyze a fiscal policy institution capable of reducing the influence of such distortions on politically-driven fluctuations. We introduce the distinction between mandatory and discretionary public spending in the political model of optimal fiscal policy. We show that the different legislative nature of these components of government spending leads to a divergent impact of mandatory and discretionary spending on macroeconomic volatility. Increasing the fraction of mandatory spending in total government spending reduces the politically-driven volatility of income taxes, total government spending, consumption, labor, and output. Increasing the fraction of discretionary spending has the opposite effect. Our findings are supported by empirical evidence.
    Keywords: optimal fiscal policy, mandatory and discretionary public spending, political polarization, political turnover, macroeconomic volatility.
    JEL: E6 H10 H30 H40
    Date: 2017–01
  14. By: Nogues-Marco, Pilar; Martínez-Ruiz, Elena
    Abstract: This article contributes to the literature on the commitment to gold during the classical period of the gold standard. We use the case of Spain to analyse how national institutional design determined adherence to gold in peripheral countries, and argue that institutional design was the result of negotiation between the government and the central bank. We construct indicators of the relative bargaining power of the two actors to assess their respective influence in determining adherence to gold. Our results show that a powerful government facilitated adherence to the gold standard, but an independent central bank hindered it, especially if confronted by an unstable political authority. Central banks were private institutions whose objective was profit maximization, not monetary stability. Strongly independent private central banks operating in politically very weak countries avoided the responsibility of defending the national currency, even in a stable macroeconomic situation. In peripheral countries, therefore, adherence (or not) to gold was determined by the institutional design in which the monetary system operated.
    Keywords: Gold Standard, Political Economy, Central Bank Independence, Institutional Design, Monetary Stability, Spain
    JEL: E02 E42 E58 F33 N13
    Date: 2017
  15. By: Mecheva, M.
    Abstract: During his sixteen years in power Vladimir Putin has enjoyed high approval ratings. Despite a recent deterioration of Russia’s economy the President remains very popular. The research paper studies the possible effect of allegedly threatening media content on the support for Putin using survey experiments conducted on the streets of Moscow. The study explores whether experimentally induced anxiety may influence citizens’ support for a controversial internet censorship policy, and that, in turn, can help to understand whether people may alter their attitudes based on the frightening signals from media. The experimental evidence suggests that priming may induce confusion-anxiety emotions. The threatening effect of media content elicited by priming was not detected. The framing of internet censorship policy has merely a moderate effect on tested attitudes, suggesting that the level of Putin’s public support may not be that high.
    Keywords: Putin, survey experiment, media effects, terror management theory
    Date: 2016–12–29

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