nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒03‒19
twenty papers chosen by
Eugene Beaulieu
University of Calgary

  1. How Do Electoral Quotas Influence Political Competition? Evidence from Municipal, State, and National Elections in India By Adam Michael Auerbach; Adam Ziegfeld
  2. Redistributive Politics, Power Sharing and Fairness By Dario Debowicz; Alejandro Saporiti; Yizhi Wang
  4. Wealth Distribution and Individual Voting Preferences: A Comparative Perspective By Piotr Paradowski; Lindsay Flynn
  5. The Political Foundations of Redistribution in Post-industrial Democracies By Duane Swank
  6. The political economy of peripheral tax reform : the Spanish fiscal transition By Torregrosa Hetland, Sara
  7. The income distribution of voters: a case study from Germany By Engelhardt, Carina; Wagener, Andreas
  8. partisan Technocratic Cycles in Latin America By Stephan Kaplan
  9. Political Instability, Uncertainty, Democracy, and Economic Growth in Egypt By Hossam ELdin Mohammed Abdelkader
  10. Financial Literacy and Attitudes to Redistribution By Alberto Montagnoli; Mirko Moro; Georgios A. Panos; Robert E. Wright
  11. The Political Economy of Fiscal Institutions and Macroeconomic Management in Sudan By Kabbashi M. Suliman
  12. Can Television Reduce Xenophobia? - The Case of East Germany By Lars Hornuf; Marc Oliver Rieger
  13. Fiscal Politics in the Euro Area By Luc Eyraud; Vitor Gaspar; Tigran Poghosyan
  14. The Trade-off between Governance and Checks and Balances By Alvaro Forteza; Juan Sebastian Pereyra Barreiro
  15. Deservingness, Self-Interest and the Welfare State: Why Some Care More about Deservingness than Others and Why It Matters By Charlotte Cavaillé
  16. Individual Preferences for Democracy In the Arab World Explaining the Gap By Mohamad Al-Ississ; Ishac Diwan
  17. Biofuels in Southern Africa: Political economy, trade, and policy environment By Taku Fundira; Giles Henley
  18. Economic and Political Factors in Infrastructure Investment: Evidence from Railroads and Roads in Africa 1960–2015 By Remi Jedwab; Adam Storeygard
  19. When Britain turned inward: Protection and the shift towards Empire in interwar Britain By De Bromhead, Alan; Fernihough, Alan; Lampe, Markus; O'Rourke, Kevin H.
  20. Education Politics, Schooling Choice and Public School Quality: The Impact of Income Polarisation By Majda Benzidia; Michel Lubrano; Paolo Melindi-Ghidi

  1. By: Adam Michael Auerbach (American University); Adam Ziegfeld (George Washington University)
    Abstract: Countries around the world use electoral quotas to ensure that underrepresented groups gain legislative representation. Despite the fact that electoral quotas are political interventions, the large literature on the subject has mostly ignored their impact on political competition. We argue that electoral quotas diminish the number of viable candidates and increase the extent to which competition revolves around major parties. Furthermore, these effects should be most pronounced in lower-level elections, where candidates can more easily run outside major-party labels. To test our hypotheses, we draw on a rich set of quantitative and interview data collected from original fieldwork in India. We find substantial evidence that the effective number of candidates is lower in electoral districts with quotas and vote shares for major parties are higher. These effects are largest in local elections and smallest in national elections. The paper advances research on electoral competition, party politics, and institutional design.
    Keywords: Quotas, Elections, Political Parties, India
    JEL: D72 H77
    Date: 2016
  2. By: Dario Debowicz; Alejandro Saporiti; Yizhi Wang
    Abstract: We study the effect of power sharing over income redistribution among different socio-economic groups in a model of redistributive politics with fairness concern. We prove that a unique pure-strategy equilibrium exists under fairly general conditions; and we show that equilibrium transfers depend on the interplay of four main factors: (i) the gap between the population and the group average pre-tax income; (ii) the relative ideological neutrality of the poor, (iii) parties’ and voters’ concern with income inequality, and (iv) the proportionality of the electoral rule. A number of comparative statics predictions emerge from our characterization. Among them, our analysis shows that the net transfers to the middle class and the rich (resp., the poor) increase (resp., decrease) with power sharing disproportionality. Further, we prove that the Gini coefficient associated with the distribution of disposable incomes also rises with the disproportionality of the power sharing rule, which amount to say that income inequality rises as policymaking power gets more concentrated in the majority winning party. We confront these predictions to the data, using an unbalanced panel of developed and developing democracies. The empirical evidence strongly supports both, the positive effect of the income gap over the group transfers, and the relationship between the Gini index (and respectively, the group transfers) and power sharing disproportionality.
    Keywords: Income Redistribution, Targeted Spending, Swing Voter, Electoral Rule, Power Sharing, Fairness, Income Inequality
    JEL: C72 D72 D78
    Date: 2016–10
  3. By: Emanuele Bracco; Maria De Paola; Colin Green; Vincenzo Scoppa (Dipartimento di Economia, Statistica e Finanza, Università della Calabria)
    Abstract: Immigration has increasingly taken centre-stage in the political landscape. Part of this has been rise in far-right, anti-immigration parties in a range of countries. Existing evidence suggests that the presence of immigrants has a substantial effect on the political views of the electorate, generating an advantage to these parties with anti-immigration or nationalist platforms. This paper explores a closely related but overlooked issue: how immigrant behavior is influenced by these parties. We focus on immigrant location decisions in Northern Italy which has seen the rise of the anti-immigration party Lega Nord. We construct a dataset of mayoral elections in Italy for the years 2002-2014, and calculate the effect of electing a mayor belonging to, or supported by Lega Nord. To identify this relationship we focus on mayors who have been elected with narrow margins of victory in a Regression Discontinuity framework. The election of Lega Nord mayor discourages immigrants from moving into the municipality.
    Keywords: Immigration, Geographical Mobility, Voting Behavior, Political economy, Regression Discontinuity Design
    JEL: J15 J61 D72
    Date: 2017–03
  4. By: Piotr Paradowski; Lindsay Flynn
    Abstract: The political science literature has neglected the role that economic wealth may play in shaping voting preferences during national elections, most likely because of a lack of data on wealth. This paper examines the influence of household net worth on voting preferences in the United States, with reference to Sweden and Germany. This paper employs individual-level data from the American National Election Studies (ANES), the Comparative Study of Electoral Systems (CSES), and the Luxembourg Wealth Study Database (LWS). Statistical matching methods are used to integrate the electoral and wealth surveys, and probit regression models are used to quantitatively analyze relationships. Wealth, which serves as a strong conceptual proxy to social class, is found to influence voting behavior – especially in the United States. This effect exists over and above the effect of income, indicating that the discipline should incorporate wealth more fully into studies of voting behavior.
    Date: 2015–04
  5. By: Duane Swank
    Abstract: Fiscal redistribution by the state provides a powerful counterweight to the growth of market income inequality in post-industrial democracies. Yet, significant questions remain about what explains the substantial variation in redistribution across nations and time in the contemporary era. In addition to recognizing the response of election-minded governments to the growth in insecurities and demands for redistribution associated with post-industrialization, I argue that where social democratic parties rule, and where employers and labor remain highly organized, inequality is blunted through redistribution of income by cash transfers and direct taxes and policies targeted at low income strata. This should be the case because the organizational scope, centralization, and policymaking integration of labor and capital facilitates the creation of post-industrial political coalitions necessary for redistributive policy making and implementation by social democratic governments, and organizationally suppresses insider politics by sectorally fragmented actors and excessive rent seeking by narrow interest groups. Labor organization, in particular, directly promotes demands for redistribution through several channels. I use 1979 to 2011 data from 18 democracies and estimate models of redistribution and policies for “outsiders.†The main argument is supported by the evidence: social democratic government has especially significant egalitarian impacts on unemployment benefits and minimum income supports for low income workers as well as active labor market policies at high levels of labor and employer organization. Labor organization, itself, has significant and substantively large effects on fiscal redistribution. I use these results and evidence on recent trends in key determinants of redistribution to reflect on whether an era of “permanent inequality†is inevitable or simply a political possibility.
    Date: 2015–10
  6. By: Torregrosa Hetland, Sara (Department of Economic History, Lund University)
    Abstract: The Spanish fiscal system underwent profound reforms between 1977 and 1986, in close connection to the transition from dictatorship to democracy. These were meant to bring the country towards the welfare state model of its European neighbours. Some practical results in terms of progressivity and redistribution, however, were not outstanding, and inequality did not significantly decrease after democratization. In recent times, the system has shown its incapacity to sustain European-level welfare services. Can a historical analysis help us understand the constraints faced by this young welfare state in the periphery? This paper looks at two factors in the political economy of tax reform: social preferences and the decision-making institutions. Perhaps the general citizen – or the decisive voter – was not very keen on redistribution. Alternatively, the new political system might not have translated effectively the public stances onto policies. Furthermore, at this time of the transition, international developments were changing the emphasis from equity to efficiency in tax system design, and increasing capital mobility provided an enhanced capacity to escape from taxation.
    Keywords: redistribution; tax reform; public policy; democratization; distributive preferences;
    JEL: D72 D78 H20 N44
    Date: 2017–03–13
  7. By: Engelhardt, Carina; Wagener, Andreas
    Abstract: Although voter turnout in the 2013 general election to the German Bundestag differed considerably across income brackets, the income distribution of voters did not differ, in a statistically significant way, from that of the entire population. The non-uniform turnout, thus, is unlikely to affect the political support for, or the feasibility of, policies that are sensitive with respect to the income distribution.
    Keywords: Majority Voting; Income Distribution; Redistribution
    JEL: D72 H53 D31
    Date: 2017–03
  8. By: Stephan Kaplan (George Washington University)
    Abstract: Given their powerful position in presidential cabinets, technocrats are an important transmission mechanism for explaining economic policy choices, but have received less attention compared to other wellestablished channels such as elections or democratic tenure. I incorporate the role of technocratic advisors into a domestic policymaking framework. Specifcally, I contend that left governments tend to appoint technocrats, or ministers with mainstream economics training, to signal their commitment to sound governance to the electorate. This partisan technocratic pattern, however, is conditioned by a country’s place in its business cycle. During periods of high growth, left governments are more likely to align with their partisan preferences and appoint heterodox advisors that drift from scal discipline. Employing an originally constructed data index, the Index of Economic Advisors, I conduct a statistical test of 16 Latin American countries from 1960 to 2011, finding partisan shifts in technocratic appointments and fiscal governance that are conditioned by national business cycles.
    Keywords: economic policy, technocrats, partisanship, heterodox, fiscal policy, inflation
    Date: 2016
  9. By: Hossam ELdin Mohammed Abdelkader (Ain Shams University, Egypt)
    Abstract: This paper aims to determine if there is a relationship between political instability, uncertainty, and political regime, on the one hand, and economic growth in Egypt, on the other. According to the literature, there is a relationship between political regime and stability and economic performance. However, the empirical studies show different results for different regions, different countries, and different periods. Studies concerning the effect of political instability on economic growth are rich in the case of some countries, but are not for other developing countries, like Egypt. This paper tries to estimate the robust relationship between economic growth in Egypt and political instability, uncertainty, and political regime, and estimates their impact on the Egyptian economy during the last four decades. Furthermore, the paper tests the uncertainty impact, resulting from unstable political and economic conditions on economic growth in Egypt. Accordingly, time-series data are used from 1972 to 2013 under the cointegration approach to determine the short- and long-run relationships. Moreover, a GARCH model approach is used in Error-Correction Model (ECM) to introduce the uncertainty impact, and Pesaran’s bound test is used to confirm the results. Results assert the positive impact of the level of democracy on economic growth, while they assert the negative impact of uncertainty on economic growth. However, the impact of political instability on economic growth is ambiguous in the case of Egypt. The results are helpful for policymakers targeting Egypt’s economic growth in the short- and long-runs.
    Date: 2015–10
  10. By: Alberto Montagnoli (Department of Economics, University of Sheffield); Mirko Moro (University of Stirling); Georgios A. Panos (Adam Smith Business School, University of Glasgow); Robert E. Wright (University of Strathclyde Business School)
    Abstract: This study combines novel financial-literacy data with measures of attitudes to redistribution from the British Election Study. We find a significant negative relationship between financial literacy and attitudes in favour of government intervention for income redistribution. The effect is robust to several specifications, samples, longitudinal models and instrumental variable regressions. Falsification tests show that these results are independent of generic attitudes towards other types of inequality/discrimination, e.g. based on gender, race or sexual orientation. An inquiry into the mechanisms of the effect indicates that the homo oeconomicus effect does not exert an impact on attitudes to redistribution for the less financially literate.
    Keywords: Financial literacy, redistribution, inequality, attitudes, Great Britain
    JEL: D14 D31 I24
    Date: 2017–02
  11. By: Kabbashi M. Suliman (University of Khartoum)
    Abstract: The literature on distributive politics indicates that many low-income countries are saddled with extractive institutions that not only contribute to politically biased fiscal outcomes, but tend to undermine long-run real growth. An analytical narrative based on the critical juncture and path dependence general equilibrium approach is utilized to highlight the effects of the political institutions on the fiscal policy outcomes in Sudan and indicate their mechanisms of perpetuation. The results suggest that Sudan has experience two critical junctures that featured, respectively, the path-dependence of public source of finance and budgeting based on cotton and its eventual destruction. The political patronage appears to be the major mechanism of reproduction of the ‘path dependent’ state development including the source of public revenue. But, the greater centralization of power and parsonage networks has resulted in problematic incorporation of the rural communities triggering a process of territorial fragmentation that escalated into open civil wars, contributed to the cumulative decline of the historic source of public finance and eventually led to the breakup of the state. The policy implications of these findings are outlined.
    Date: 2016–01–09
  12. By: Lars Hornuf (Institute for Labour Law and Industrial Relations in the EU, Trier University); Marc Oliver Rieger (Trier University)
    Abstract: Can television have a mitigating e?ect on xenophobia? To examine this question, we exploit the fact that individuals in some areas of East Germany – due to their geographic location – could not receive West German television until 1989. We conjecture that individuals who received West German television were exposed more frequently to foreigners and thus have developed less xenophobia than people who were not exposed to those programs. Our results show that regions that could receive West German television were less likely to vote for right-wing parties during the national elections from 1998 to 2013. Only recently, the same regions were also more likely to vote for left-wing parties. Moreover, while counties that hosted more foreigners in 1989 were also more likely to vote for right-wing parties in most elections, we find counties that recently hosted more foreign visitors showed less xenophobia, which is in line with intergroup contact theory.
    Keywords: Mass media; Television; Xenophobia; Attitudes towards foreigners; East Germany; Natural experiment
    JEL: D72 L82 P3
    Date: 2017–02
  13. By: Luc Eyraud; Vitor Gaspar; Tigran Poghosyan
    Abstract: This paper provides evidence of fiscal procyclicality, excessive deficits, distorted budget composition and poor compliance with fiscal rules in the euro area. Our analysis relies on real-time data for 19 countries participating in the euro area over 1999–2015. We look for, but do not find, conclusive evidence of bias in procedures in relation to country size. The paper also briefly reviews the literature on political economy factors and policy biases, and offers some reflections on the euro area architecture.
    Keywords: Political economy;Euro Area;Fiscal policy;Fiscal reforms;political economy factors, deficit bias, procyclicality, fiscal rules
    Date: 2017–01–30
  14. By: Alvaro Forteza; Juan Sebastian Pereyra Barreiro
    Abstract: Strong checks and balances aimed at protecting citizens from government abuse of power are key features of well performing democracies. Nevertheless, some presidents have enjoyed strong and often explicit popular support when they undermined these controls. We present a formal model of the trade-off between control on the executive and delegation to analyze voters' decision on the strength of checks and balances. We argue that voters may support their loosening, even when this allows rent extraction, if they are convinced that checks on the executive are blocking necessary reforms. We discuss several cases of strong presidents in Latin America who, alleging that radical reforms were necessary, obtained popular support that allowed them to loosen checks on the executive. Some of these presidents had a pro- and some an anti-market reform agenda so, as our model suggests, voters' willingness to remove checks and balances can emerge under both right- and left-wing executives.
    Keywords: political agency; separation of powers; checks and balances
    JEL: H11 P16 P48
    Date: 2017–03
  15. By: Charlotte Cavaillé
    Abstract: A common assumption in political economy is that voters are self-regarding maximizers of material goods, choosing their preferred level of social spending accordingly. In contrast, students of American social policy have emphasized the key role of an other-regarding motive that makes support for social transfers conditional on the perceived deservingness of recipients. The two motives often conflict as large portions of the poor (rich) find recipients undeserving (deserving). Under what conditions might one motive trump the other? I argue that material self-interest overruns perceptions of deservingness when the share of income affected by social transfers is high. Using European data, I show that low (high) income individuals are less (more) likely to be driven by considerations of deservingness. This framework has important macro-level implications: the more working-age benefits are evenly spread across income groups, the less likely considerations of deservingness will permeate public debates on welfare state reform.
    Keywords: Social policy preferences, Deservingness, Self interest, Heuristic, Welfare state reform
    Date: 2015–09
  16. By: Mohamad Al-Ississ; Ishac Diwan (Harvard University)
    Abstract: We take a new look at the question of the Arab democratic exception. We use the new sixth wave of the World Value Survey, which was collected between 2012 and 2013, and which included for the first time 12 Arab countries, up from only four in wave 5. We innovate empirically, by measuring the demand for democracy in a more robust way than past studies, and conceptually, by looking at how the forces of modernist aspirations, economic grievances, social preferences, and attachment to the status-quo interact for particular socio-economic groups to determine their preference for a democratic order over an autocratic one, and how these are affected in the Arab region by specificities related to self-interest, culture, and policy. Our statistical analysis reveals a democratic gap in the Arab region, which is correlated, and thus possibly explained in parts, by lower emancipative effects of education among the educated, compared to global experience. We argue that these effects must have been shaped in parts by the policies of power preservation pursued by the autocratic regimes of the past, rather than by local culture lone.
    Date: 2016–03
  17. By: Taku Fundira; Giles Henley
    Abstract: Expansion of biofuels production and consumption at the regional and national levels relies on both supportive energy prices and policy interventions. Despite enthusiasm for policy interventions to stimulate biofuel production in Southern African countries in the mid-2000s, the years since have seen a decline in interest due to concerns over environmental and social externalities, and the costs associated with subsidies. This paper reviews the state of the policy, regulation, and narratives around opportunities and challenges for biofuels in each country to assess broader challenges associated with expanding biofuels production and consumption at a regional level.
    Date: 2017
  18. By: Remi Jedwab (George Washington University); Adam Storeygard (Tufts University)
    Keywords: Transportation Infrastructure; Public Investment; Railroads; Roads; Paved Roads; Africa; Growth; Institutions; History; World Development Indicators
    JEL: O18 O11 O20 H54 R11 R12 R40 N77
  19. By: De Bromhead, Alan; Fernihough, Alan; Lampe, Markus; O'Rourke, Kevin H.
    Abstract: International trade became much less multilateral during the 1930s. Previous studies, looking at aggregate trade flows, have argued that discriminatory trade policies had comparatively little to do with this. Using highly disaggregated information on the UK's imports and trade policies, we find that policy can explain the majority of Britain's shift towards Imperial imports in the 1930s. Trade policy mattered, a lot.
    Date: 2017
  20. By: Majda Benzidia (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, EHESS); Michel Lubrano (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS); Paolo Melindi-Ghidi (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS)
    Abstract: Do communities with the same level of inequality but a different level of income polarisation perform differently in terms of public schooling? To answer this question, we extend the theoretical model of schooling choice and voting developed by de la Croix and Doepke (2009), introducing a more general income distribution characterised by a three-member mixture instead of a single uniform distribution. We show that not only income inequality, but also income polarisation, matters in explaining disparities in public education quality across communities. Public schooling is an important issue for the middle class, which is more inclined to pay higher taxes in return for better public schools. Contrastingly, poorer households may be less concerned about public education, while rich parents are more willing to opt-out of the public system, sending their children to private schools. Using micro-data covering 724 school districts of California and introducing a new measure of income polarisation, we find that school quality in low-income districts depends mainly on income polarisation, while in richer districts it depends mainly on income inequality.
    Keywords: schooling choice, income polarisation, probabilistic voting, education politics, Bayesian inference
    JEL: I24 D31 D72 H52 C11
    Date: 2016–11

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