nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒02‒19
nineteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Competition with Endogenous Party Formation and Citizen Activists By Hansen, Emanuel
  2. Collective Memories, Propaganda and Authoritarian Political Support By Alessandro Belmonte; Michael Rochlitz
  3. Electoral cycles in government employment: Evidence from US gubernatorial elections By Cahan, Dodge
  4. Vetoing and Inaugurating Policy Like Others Do: Evidence on Spatial Interactions in Voter Initiatives By Streif, Frank; Asatryan, Zareh; Havlik, Annika
  5. Politicization, party politics and military missions deployment votes in France, Germany, Spain, and the United Kingdom By Wagner, Wolfgang; Herranz-Surrallés, Anna; Kaarbo, Juliet; Ostermann, Falk
  6. Electoral Choices and Basic Values of Russians By Alexander Tatarko; Anna Mironova
  7. Who Becomes a Politician? By Ernesto Dal Bó; Frederico Finan; Olle Folke; Torsten Persson; Johanna Rickne
  8. Do Political Parties Matter? - Evidence from German Communities By Wittrock, Christian; Riedel, Nadine; Simmler, Martin
  9. Social Ties and Favoritism in Chinese Science By Raymond Fisman; Jing Shi; Yongxiang Wang; Rong Xu
  10. Strong democracy, weak state: The political economy of Ghana’s stalled structural transformation: By Resnick, Danielle
  11. The Swing Voter's Curse in Social Networks By Buechel, Berno; Mechtenberg, Lydia
  12. Volunteerism after the tsunami: the effects of democratization By Tiago Freire; J. Vernon Henderson; Ari Kuncoro
  13. The corporate political activity of MNEs under the pressures of institutional duality By Sallai, Dorottya
  14. Emission taxes, lobbying, and incomplete enforcement By Gerigk, Joschka
  15. Abnormal Returns from Joining Congress? Evidence from New Members By Joshua C. Hall; Serkan Karadas; Minh Tam T. Schlosky
  16. Human capital inequality and electoral outcomes in South Africa By Biniam Bedasso; Nonoso Obikili
  17. The Distortionary Effects of Incentives in Government: Evidence from China's “Death Ceiling” Program By Raymond Fisman; Yongxiang Wang
  18. Modern Authoritarianism and Political Ideology By Yuliy Anatolievich Nisnevich; Andrey Vilenovich Ryabov
  19. Global power shifts and the future of democracy: An evolutionary approach, with special attention to China By Owen, John M.

  1. By: Hansen, Emanuel
    Abstract: The paper studies political competition between endogenously formed parties instead of independent candidates. Party formation allows policy-motivated citizens to nominate one of their fellow party members as their candidate for a general election and to share the cost of running in this election. Thus, like-minded citizens are able to coordinate their political behavior in order to improve the policy outcome. The paper focuses on political equilibria with two active parties, and investigates the properties of stable parties and the policy platforms offered in equilibrium. The platforms of both parties can neither be fully convergent as in the median voter model (Downs 1957) nor extremely polarized as in the citizen candidate model (Besley & Coate 1997). In the benchmark case of full electoral certainty, a unique political equilibrium with positive platform distance exists. Endogenous party formation thus eliminates a major weakness of the citizen candidate model, the extreme multiplicity of equilibria. The model remains tractable, and the qualitative results are shown to be robust under the assumption of electoral uncertainty, where vote results cannot be perfectly predicted.
    JEL: D72 D78 C72
    Date: 2016
  2. By: Alessandro Belmonte (IMT Alti Studi Lucca); Michael Rochlitz (National Research University Higher School of Economics)
    Abstract: To what extent does the degree of authoritarian political support depend on collective memories of a past experience with democracy? And how costly is it for a dictator to manipulate such memories with the help of propaganda? In this paper, we develop a political economy model with endogenous reference points, where a dictator strategically recalls traumatic collective memories of past political instability with the help of propaganda, to convince the population that an autocratic status quo is superior to a potential democratic alternative. In our model, both the optimal level of propaganda and collective memories are jointly determined. We show how the marginal bene t of propaganda is positively correlated both with the amount of rent distribution within the elite, and the intensity of a past traumatic experience with democracy. We illustrate our theoretical findings with case-studies of two authoritarian regimes that were preceded by periods of political instability|the Russian Federation under Vladimir Putin, and Chile under Augusto Pinochet. We then also provide cross-country empirical evidence in support of our argument.
    Keywords: collective memory, propaganda, political support, rebellion, private investment
    JEL: D74 D83 P16 Z13
    Date: 2017
  3. By: Cahan, Dodge
    Abstract: Elections create incentives for politicians to manipulate policy to improve their re-election chances, and employment conditions are an important consideration formany voters. Politicians may opportunistically design policies that increase employment before elections, or postpone cuts until afterwards. I investigate electoralcycles in public sector employment around US gubernatorial elections. Taking advantage of the staggered nature of gubernatorial elections across states, I use bothfixed effects models and a geographic discontinuity design that compares neighboring counties at the borders of states with different election cycles. In the periodleading up to November each year, growth in both local and state government employment is higher in counties in states that experience gubernatorial electionscompared to counties in states that do not, by up to half a percentage point or more. In the post-electoral period, employment growth is lower by comparablemagnitudes in counties that just experienced an election. Both of these findings are consistent with manipulation in government employment. I also study heterogeneityacross different institutional and political environments, private sector employment, Senate elections, and show that the results hold up to a range ofrobustness and placebo tests.
    Keywords: Social and Behavioral Sciences
    Date: 2017–02–16
  4. By: Streif, Frank; Asatryan, Zareh; Havlik, Annika
    Abstract: A sizeable literature studies whether governments strategically interact with each other through policy-diffusion, learning, fiscal and yardstick competition. This paper asks whether, in the presence of direct democratic institutions, spatial interactions additionally result from voters' direct actions. The proposed mechanism is that the voters' actions in vetoing a decision or inaugurating a preferred policy by a binding initiative in their jurisdiction can potentially have spillover effects on the actions of voters and special interest groups of neighboring jurisdictions. Utilizing data on around 1,800 voter-petitions across over 12,000 German municipalities in 2002-09, we find that a jurisdiction's probability of hosting a petition is positively driven by the neighbors' direct democratic activity. These effects are persistent, and are stronger for more visible instruments of direct democracy. The interactions are also mostly driven by petitions in same or similar policy areas, and are stronger in towns with relatively more per capita newspapers.
    JEL: D72 D78 R50
    Date: 2016
  5. By: Wagner, Wolfgang; Herranz-Surrallés, Anna; Kaarbo, Juliet; Ostermann, Falk
    Abstract: This paper examines whether decisions at the core of international security politics, namely decisions on the deployment of military forces, have undergone a process of politicization. It is guided by two interrelated questions, namely a) whether deployment decisions have been politically contested and b) what kind of party-political cleavage has emerged in this process. We examine data from the Chapel Hill Expert Survey (CHES) as well as data that we gathered on parliamentary votes on deployment decisions in France, Germany, Spain and the United Kingdom. We find that military deployments have indeed been contested amongst political parties. Further and notwithstanding country-specific peculiarities, we find that the partypolitical cleavage is by and large captured by the left/right-axis.
    Keywords: party-political contestation,parliamentary vote,foreign policy,Militäreinsätze,politische Parteien,Politisierung,Parlamentee
    Date: 2017
  6. By: Alexander Tatarko (National Research University Higher School of Economics); Anna Mironova (National Research University Higher School of Economics)
    Abstract: This research assesses which values were related to the voting results of the Russian presidential election in March 2012. This empirical study was based on the results of a representative poll conducted in two federal districts of Russia (N=2058), which was held shortly after the elections. Participants were given Schwartz’s values questionnaire and were asked which of the five Russian presidency candidates they voted for. Empirical analysis showed that the respondents’ values were related to their political preferences. The study showed that the conservation–openness to change values were related to participants’ voting choices. The conservation values were related to four of the five candidates, which suggest an absence of key differences in the values represented by these politicians
    Keywords: basic values, political behaviour, voting, elections.
    JEL: Z
    Date: 2017
  7. By: Ernesto Dal Bó; Frederico Finan; Olle Folke; Torsten Persson; Johanna Rickne
    Abstract: Can a democracy attract competent leaders, while attaining broad representation? Economic models suggest that free-riding incentives and lower opportunity costs give the less competent a comparative advantage at entering political life. Moreover, if elites have more human capital, selecting on competence may lead to uneven representation. This paper examines patterns of political selection among the universe of municipal politicians and national legislators in Sweden, using extraordinarily rich data on competence traits and social background for the entire population. We document four new facts that together characterize an “inclusive meritocracy.” First, politicians are on average significantly smarter and better leaders than the population they represent. Second, this positive selection is present even when conditioning on family (and hence social) background, suggesting that individual competence is key for selection. Third, the representation of social background, whether measured by parental earnings or occupational social class, is remarkably even. Fourth, there is at best a weak tradeoff in selection between competence and social representation, mainly due to strong positive selection of politicians of low (parental) socioeconomic status. A broad implication of these facts is that it is possible for democracy to generate competent and socially-representative leadership.
    JEL: H10 H70 J45 P16
    Date: 2017–02
  8. By: Wittrock, Christian; Riedel, Nadine; Simmler, Martin
    Abstract: The paper aims to test whether partisanship affects policy outcomes at the local level. While the literature has presented comprehensive evidence for partisan effects on policy outcomes at the state and federal level, recent findings suggest that partisan effects may be absent at the city and municipality level. Using detailed data on public goods and service spending, we assess the link between the partisanship of local councils and the composition of public good spending of German localities. Firstly, we estimate panel data models assessing whether changes in partisanship impact per-capita-spending in different spending-categories. Secondly, we investigate whether left-wing or right-wing communities differ in their spending response to exogenous revenue shocks during their legislative term (among others induced by changes of the personal income tax base assigned to communities). Using propensity score matching and weighting, the approach compares responses in comparable municipalities, which differ in the partisan composition of their local council. Based on both strategies, we find moderate partisan effects only.
    JEL: H70 H40 R50
    Date: 2016
  9. By: Raymond Fisman; Jing Shi; Yongxiang Wang; Rong Xu
    Abstract: We study favoritism via hometown ties, a common source of favor exchange in China, in fellow selection of the Chinese Academies of Sciences and Engineering. Hometown ties to fellow selection committee members increase candidates' election probability by 39 percent, coming entirely from the selection stage involving an in-person meeting. Elected hometown-connected candidates are half as likely to have a high-impact publication as elected fellows without connections. CAS/CAE membership increases the probability of university leadership appointments and is associated with a US$9.5 million increase in annual funding for fellows' institutions, indicating that hometown favoritism has potentially large effects on resource allocation.
    JEL: J71 O3 P16
    Date: 2017–02
  10. By: Resnick, Danielle
    Abstract: What are the political and institutional prerequisites for pursuing policies that contribute to structural transformation? This paper addresses this question by focusing on Ghana, which has achieved sustained economic growth in recent decades and is broadly lauded for its environment of political pluralism, respect for human rights, free and fair elections, and vocal civil society. Yet, despite these virtues, Ghana remains unable to achieve substantial structural transformation as identified as changes in economic productivity driven by value-added within sectors and shifts in the allocation of labor between sectors. This paper argues that Ghana is strongly democratic but plagued by weak state capacity, and these politico-institutional characteristics have shaped the economic policies pursued, including in the agricultural sector, and the resultant development trajectory. Specifically, three political economy factors have undermined Ghana’s ability to achieve substantive structural transformation since then. First, democracy has enabled a broader range of interest groups to permeate policymaking decisions, often resulting in policy backtracking and volatility as well as fiscal deficits around elections that, among other things, stifle credit access for domestic business through high interest rates. Secondly, public sector reforms were not pursued with the same vigor as macroeconomic reforms, meaning that the state has lacked the capacity typically necessary to identify winning industries or to actively facilitate the transition to higher value-added sectors. Thirdly, successive governments, regardless of party, have failed to actively invest in building strong, productive relationships with the private sector, which is a historical legacy of the strong distrust and alienation of the private sector that characterized previous government administrations.
    Keywords: governance, democracy,
    Date: 2016
  11. By: Buechel, Berno; Mechtenberg, Lydia
    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, Research Methods/ Statistical Methods, D72, D83, D85, C91,
    Date: 2017–02–08
  12. By: Tiago Freire; J. Vernon Henderson; Ari Kuncoro
    Abstract: Using three waves of survey data from fishing villages in Aceh, Indonesia for 2005–09, the paper examines the determinants of local volunteer labor after the tsunami. Volunteer labor is the village public sector labor force for maintenance, clean-up and renovation of public capital. While also examining the effects on volunteerism of village destruction and trauma, pre-existing social capital, diversity, and aid delivery, the papers focuses on effects of democratization. The tsunami and massive international aid effort prompted the settlement of the insurgency movement in Aceh, which had led to suspension of local elections over the prior twenty or more years. Until 2006, village heads who call volunteer days were effectively selected by village elites, who may highly value the public facilities maintained by volunteer labor. With elections, volunteer days fall under the new regime, with democratically elected village heads calling fewer volunteer days, which may appeal more to the typical villager. Identification comes from pseudo-randomized differential timing of elections.
    Keywords: aid; democratization; social capital; volunteerism
    JEL: D64 D72 H0 O10 P16
    Date: 2015–08–06
  13. By: Sallai, Dorottya
    Abstract: The paper investigates how multinational subsidiaries develop their political strategies within the constraints of institutional duality. Based on the empirical investigation of western subsidiaries operating in the post-socialist institutional context of Hungary, I develop a model that illustrates how political capabilities – affected by institutional duality - underpin the lobbying strategy of MNE subsidiaries. The article makes a theoretical connection between the literatures on institutional duality and corporate political activity (CPA) and makes three distinct theoretical contributions. First, I transfer the analysis of nonmarket strategies from the institutional to the firm level, by opening the black box of how subsidiaries develop host country strategies. Second, by focusing on the process of how subsidiaries turn external and internal resources into political capabilities, I argue that institutional duality should be viewed as an endogenous aspect of the institutional framework, which equips firms with political capabilities, rather than an exogenous factor that constraints companies and disadvantage them in the host environment (Nell et al., 2014, Tempel et al., 2006). Third the study contributes to the theory of MNE parent-subsidiary management literature by extending our knowledge on how parent strategies affect the development of subsidiary’s political strategies.
    Keywords: Emerging markets; lobbying; political strategies; institutional duality; capabilities; corporate political activities (CPA);
    JEL: F23 P16
    Date: 2017–01–06
  14. By: Gerigk, Joschka
    Abstract: In this paper, I analyze incomplete enforcement in a political economy model. I use a contest framework to explain changes in lobbying behavior when special interest groups anticipate the incomplete enforceability of environmental regulation. In this setting, I compare two instruments, namely an abatement standard and an emission tax. Regulation of a polluting output is proposed and two lobby groups - representing the interests of producers and environmentalists, respectively - seek to influence the government in order to prevent or support the implementation of the regulation. I develop a general framework to demonstrate that the lobbying efforts are determined not only by the stringency of the proposed policy - as determined by the level of the tax or abatement standard - but, importantly, also by its enforceability. Using common functional specifications, I then show that, when an emission tax is proposed, incomplete enforcement may not only reduce the industry's opposition to regulation compared to a situation with full enforcement, but it may, despite the possibility of untruthful reporting, also reduce expected environmental damage. When instead an abatement standard is proposed, however, the effects of regulatory stringency and enforceability are ambiguous, rendering unequivocal policy recommendations for this case impossible.
    JEL: D72 L51 Q58
    Date: 2016
  15. By: Joshua C. Hall (West Virginia University, Department of Economics); Serkan Karadas (Sewanee, The University of the South, Department of Economics); Minh Tam T. Schlosky (Sewanee, The University of the South, Department of Economics)
    Abstract: Past research shows that members of Congress are informed traders, i.e., that they earn abnormal returns while in office. This important research does not identify whether being elected leads to informed trading or whether informed traders are selected into office. We try to provide a partial answer to this question by looking at whether new members of Congress were informed traders prior to being elected and how their portfolio performance changes after election and appointment to different types of committees. Due to data limitations our analysis focus on the pre-congressional (i.e., election) and congressional (i.e., post-election) common stock trades made by newly elected members of Congress from 2004-2010. We find weak evidence of informed trading for the pre-Congress period, suggesting that informed traders are not being selected into office. When combined with our finding that the portfolios of members serving on powerful committees outperform the market during their second term in office, this provides additional evidence that serving on influential committees is the mechanism by which members of Congress earn abnormal returns.
    Keywords: informed trading, congressional trading, the STOCK Act
    Date: 2016–12
  16. By: Biniam Bedasso; Nonoso Obikili
    Abstract: This paper examines the nature and evolution of horizontal and vertical human capital inequality in South Africa since the end of apartheid. Using census data from 1996, 2001, and 2011, we use dierent measures of years of schooling to examine the dynamics both across and within racial, linguistic, gender and geographic groups. We find that on average inequality has been falling in South Africa although with signicant variation across the country. Finally we examine the relationship between changing inequality over time and electoral outcomes. We find that higher vertical inequality is very strongly associated with lower electoral competition.
    Keywords: inequality, Political Competition, Voting Behaviour, South Africa
    JEL: D63 I24 D72
    Date: 2017–02
  17. By: Raymond Fisman; Yongxiang Wang
    Abstract: We study a 2004 program designed to motivate Chinese bureaucrats to reduce accidental deaths. Each province received a set of ‘death ceilings’ that, if exceeded, would impede government officials' promotions. For each category of accidental deaths, we observe a sharp discontinuity in reported deaths at the ceiling, suggestive of manipulation. Provinces with safety incentives for municipal officials experienced larger declines in accidental deaths, suggesting complementarities between incentives at different levels of government. While realized accidental deaths predict the following year's ceiling, we observe no evidence that provinces manipulate deaths upward to avoid ratchet effects in the setting of death ceilings.
    JEL: D73 H75
    Date: 2017–01
  18. By: Yuliy Anatolievich Nisnevich (National Research University Higher School of Economics); Andrey Vilenovich Ryabov (Institute of World Economy and International Relations of the Russian Academy of Sciences)
    Abstract: This article analyses the ideologies of authoritarian and neo-authoritarian regimes. The analysis is carried out in three clusters: “rudimentary” authoritarian regimes, post-colonial dictatorships, neo-authoritarian regimes. The first cluster is subdivided into two subgroups: authoritarian monarchies and “communist regimes”. The regimes in the third cluster are also subdivided into two subgroups: post-Soviet regimes and neo-authoritarian regimes in Africa, Asia and Latin America. In an age of the decline of ideologies on a global scale, authoritarian and neo-authoritarian regimes, as before, need political ideologies to legitimise their power. However in the contemporary epoch which sets authoritarian and neo-authoritarian regimes new and much more complicated challenges, these regimes are forced to use more flexibility ideologies in order to adapt to the rapidly changing world. Ideologies of such regimes lose their former integrity and become “multi-layer”, eclectic. “Non-ideological” elements such as corruption have become a part of the ideologies of neo-authoritarian regimes. But herewith priority of the state as the highest value remains “the bearing structure” of the political ideologies of all authoritarian and neo-authoritarian regimes. Despite the official protection of human rights and liberties by neo-authoritarian regimes, this occupies a secondary and subordinate place in the ideological hierarchy and political practice of these regimes.
    Keywords: words: authoritarianism, neo-authoritarianism, political ideologies, values, personified regimes, democracy, human rights and liberties, triad “state–society–individual”.
    JEL: Z
    Date: 2017
  19. By: Owen, John M.
    Abstract: How may we best understand the effects of the ongoing rise of China on the future of liberal democracy in East Asia? Scholars who stress hegemony tend to predict a less democratic region, while those who stress diffusion tend to predict more democracy. This paper does not attempt to resolve the question, but argues for the use of evolutionary logic to help us with general questions concerning the regional and global waxing and waning of domestic regime types. Evolution's claims about the variety, selection, and retention of traits (in this case, democracy), rightly understood, can accommodate not only the standard international diffusion mechanisms of competition, learning, and emulation, but also that of coercion. The concepts of co-evolution and niche construction are crucial: an agent may modify its environment such that one or more traits of that agent enjoy a greater reproductive advantage. Agency, then, may be not an escape from evolution but a participation in co-evolution. Intentionally or not, rulers of states may construct niches that affect the longevity of the regime through which they rule. Intentional niche constructors may promote their domestic regime, or block the advance of a threatening regime, in their own state or their neighbors via various means. I consider phenomena to which evolutionary logic would direct us concerning China and Asia today, and suggest that China's leaders are engaging in domestic and regional niche construction to preserve the power monopoly of the Chinese Communist Party.
    Keywords: regime type,evolution,co-evolution,niche,China,Regimetyp,Evolution,Koevolution,Nische,China
    Date: 2016

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