nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒04‒09
twenty papers chosen by
Eugene Beaulieu
University of Calgary

  1. Multi winner Approval Voting: An Apportionment Approach By Brams, Steven J.; Kilgour, D. Marc; Potthoff, Richard F.
  2. Electing a parliament: an experimental study By Francesco De Sinopoli; Giovanna Iannantuoni; Maria Vittoria Levati; Ivan Soraperra
  3. Place of registration and place of residence: the detrimental impact of transport cost on electoral participation By Christine Fauvelle-Aymar; Abel François
  4. The Price of Political Uncertainty: Evidence from the 2016 U.S. Presidential Election and the U.S. Stock Markets By Jamal Bouoiyour; Refk Selmi
  5. The Political Economy of Higher Education Admission Standards and Participation Gap By Philippe De Donder; Francisco Martinez-Mora
  6. Unlikely Democrats: Economic Elite Uncertainty Under Dictatorship and Support for Democratization By Gay, Victor; Albertus, Michael
  7. Can Television Reduce Xenophobia? The Case of East Germany By Lars Hornuf; Marc Oliver Rieger
  8. Precision-Guided or Blunt? The Effects of US Economic Sanctions on Human Rights By Gutmann, Jerg; Neuenkirch, Matthias; Neumeier, Florian
  9. News Consumption, Political Preferences, and Accurate Views on Inflation By David-Jan Jansen; Matthias Neuenkirch
  10. Subpoena Power and Information Transmission By Arnaud Dellis; Mandar Oak
  11. Do Political Connections Reduce Job Creation? Evidence from Lebanon By Ishac Diwan; Jamal Ibrahim Haider
  12. The performance of four possible rules for selecting the Prime Minister after the Dutch Parliamentary elections of March 2017 By Colignatus, Thomas
  13. When to expect a coup d’état? An extreme bounds analysis of coup determinants By Gassebner, Martin; Gutmann, Jerg; Voigt, Stefan
  14. Aristotle’s Politics: On Constitutions, Justice, Laws and Stability By Krishna K Ladha
  15. Frequency Based Analysis of Voting Rules By Chatterjee, Swarnendu; Storcken, Ton
  16. Simultaneous and sequential voting under general decision rules By Bolle, Friedel
  17. Organised crime and international aid subversion: evidence from Colombia and Afghanistan By Vesna Bojicic-Dzelilovic; Denisa Kostovicova; Mariana Escobar; Jelena Bjelica
  18. Perfection of the Jury Rule by Rule-Reforming Voters By Krishna K Ladha
  19. Endogenous Public Evidence in Committee Persuasion Games and Private Communication By Luca Ferrari

  1. By: Brams, Steven J.; Kilgour, D. Marc; Potthoff, Richard F.
    Abstract: We extend approval voting so as to elect multiple candidates, who may be either individuals or members of a political party, in rough proportion to their approval in the electorate. We analyze two divisor methods of apportionment, first proposed by Jefferson and Webster, that iteratively depreciate the approval votes of voters who have one or more of their approved candidates already elected. We compare the usual sequential version of these methods with a nonsequential version, which is computationally complex but feasible for many elections. Whereas Webster apportionments tend to be more representative of the electorate than those of Jefferson, the latter, whose equally spaced vote thresholds for winning seats duplicate those of cumulative voting in 2-party elections, is even-handed or balanced.
    Keywords: Approval voting, apportionment methods, multiple winners, proportional representation, cumulative voting
    JEL: C6 C63 C7 C72 C8 D6 D63 D7 D71 D72
    Date: 2017–03–26
  2. By: Francesco De Sinopoli (Department of Economics (University of Verona)); Giovanna Iannantuoni (University of Milano-Bicocca); Maria Vittoria Levati (Department of Economics (University of Verona)); Ivan Soraperra (Department of Economics (University of Verona))
    Abstract: We use laboratory experiments to explore what electoral outcomes emerge and how voters behave in a setting in which the electorate must determine the number of seats that two parties obtain in the parliament. Previous experimental work has mainly focused on winner-take-all elections and voting over fixed agendas, and has not studied elections where participants decide on the composition of a parliament. We consider two electoral systems, multidistrict majoritarian and single district proportional. Relying on De Sinopoli et al.'s (2013) model of a parliamentary election, we obtain a unique perfect equilibrium outcome under both systems and exploit this uniqueness to gauge, and compare, the predictive value of the equilibrium concept in the two systems. The experimental results are broadly supportive of the theory and reveal that electoral outcomes and individual votes are more often in line with the equilibrium in the proportional than in the majoritarian system.
    Keywords: Voting, Majority election, Proportional election, Experiment
    JEL: C72 D72
    Date: 2016–07
  3. By: Christine Fauvelle-Aymar; Abel François
    Abstract: Few studies have tried to assess the empirical impact of transport cost on electoral turnout. Unfortunately, these researches suffer from different limits, especially limites related to the endogeneity of the voting station localization. Our study, based on French data, overcomes the main usual empirical difficulties. In particular, the French case provides a very valuable opportunity for testing the impact of transport cost on individual decision of turnout, because voters can be registered in another municipality than their residential municipality. As such, some of them have to travel important distance in order to cast their ballot. And this distance is totally exogenous to the electoral manipulation of places of voting location potentially made by local administration. So, we show that distance, and in fine cost of voting, have a highly significant impact on electoral turnout: at average distance (122 km) a 1% increase of distance induces a 0.05% decrease at the first round of 2012 presidential election and 0.04% at the second round. This result is robust to many tests: if we change the empirical method carried out or the election studied or if we control for the weight of the largest distance, the results remain the same.
    Keywords: Electoral turnout; cost of voting; transport cost; transport cost; electoral registration; voting paradox
    JEL: D72
    Date: 2017–03–30
  4. By: Jamal Bouoiyour (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour); Refk Selmi (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)
    Abstract: There is bountiful evidence that political uncertainty stemming from presidential elections or doubt about the direction of future policy make financial markets significantly volatile, especially in proximity to close elections or elections that may prompt radical policy changes. Although several studies have examined the association between presidential elections and stock returns, very little attention has been given to the impacts of elections and election induced uncertainty on stock markets. This paper explores, at sectoral level, the uncertain information hypothesis (UIH) as a means of explaining the reaction of markets to the arrival of unanticipated information. This hypothesis postulates that political uncertainty is greater prior to the elections (relative to pre-election period) but is resolved once the outcome of the elections is determined (relative to post-election period). To this end, we adopt an event-study methodology that examines abnormal return behavior around the election date. We show that collapsing stock returns around the election result is reversed by positive abnormal return on the next day, except some cases where we note negative responses following the vote count. Although Trump’s win plunges US into uncertain future, positive reactions of abnormal return are found. Therefore, our results do not support the UIH hypothesis. Besides, the effect of political uncertainty is sector-specific. While some sectors emerged winners (healthcare, oil and gas, real estate, defense, financials and consumer goods and services), others took the opposite route (technology and utilities). The winning industries are generally those that will benefit from the new administration’s focus on rebuilding infrastructure, renegotiating trade agreements, reforming tax policy and labour laws, increasing defense funding, easing restrictions on energy production, and rolling back Obamacare.
    Keywords: US election,Trump's victory,stock market,Political uncertainty
    Date: 2017–03–01
  5. By: Philippe De Donder; Francisco Martinez-Mora
    Abstract: We build a political economy model in order to shed light on the empirically observed simultaneous increase in university size and participation gap. Parents differ in income and in the ability of their unique child. They vote over the minimum ability level required to attend public universities, which are tuition-free and financed by proportional income taxation. Parents can invest in private tutoring to help their child pass the admission test. A university participation gap emerges endogenously with richer parents investing more in tutoring. A unique majority voting equilibrium exists, which can be either classical or “ends-against-the-middle” (in which case parents of both low- and high-ability children favor a smaller university). Four factors increase the university size (larger skill premium enjoyed by university graduates, smaller tutoring costs, smaller university cost per student, larger minimum ability of students), but only the former two also increase the participation gap. A more unequal parental income distribution also increases the participation gap, but barely affects the university size.
    Keywords: majority voting, ends-against-the-middle equilibrium, non single-peaked
    JEL: D72 I22
    Date: 2017–03
  6. By: Gay, Victor; Albertus, Michael
    Abstract: Influential recent scholarship assumes that authoritarian rulers act as perfect agents of economic elites, foreclosing the possibility that economic elites may at times prefer democracy absent a popular threat from below. Motivated by a puzzling set of democratic transitions, we relax this assumption and examine how elite uncertainty about dictatorship -- a novel and generalizable causal mechanism impacting democratization -- can induce elite support for democracy. We construct a noisy signaling model in which a potential autocrat attempts to convince economic elites that he will be a faithful partner should elites install him in power. The model generates clear predictions about how two major types of elite uncertainty -- uncertainty in a potential autocratic successor's policies produced by variance in the pool of would-be dictator types, and uncertainty in the truthfulness of policy promises made by potential autocratic successors -- impact the likelihood of elite-driven democratization. We demonstrate the model's plausibility in a series of cases of democratic transition.
    Keywords: Game theory, Comparative politics, Political economy, Democratization, Political elites, Economic elites, Formal methods, Dictatorships, Autocracies, Authoritarianism, Democratic transitions
    JEL: C72 D82 D83 N40 N46 P16
    Date: 2017–03
  7. By: Lars Hornuf; Marc Oliver Rieger
    Abstract: Can television have a mitigating effect 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 P30
    Date: 2017
  8. By: Gutmann, Jerg; Neuenkirch, Matthias; Neumeier, Florian
    Abstract: We use endogenous treatment-regression models to estimate the causal average treatment effect of US economic sanctions on four types of human rights. In contrast to previous studies, we find no support for adverse effects of sanctions on economic rights, political and civil rights, and basic human rights. With respect to women's rights, our findings even indicate a positive relationship. Emancipatory rights are, on average, strengthened when a country faces sanctions by the US. Our findings are robust when applying various changes to the empirical specification. Most importantly, this study provides strong evidence that the endogeneity of treatment assignment must be modelled when the consequences of sanctions are studied empirically.
    Keywords: Democratization,Discrimination,Economic Sanctions,Endogenous Treatment Model,Human Rights,Interventionism,Protectionism,Repression,United States
    JEL: F51 F52 F53 K10 K11 P14 P16 P26
    Date: 2016
  9. By: David-Jan Jansen; Matthias Neuenkirch
    Abstract: Using three waves of a customised survey among Dutch households, this paper studies the variation in people’s views on inflation. Based on a range of panel regressions, we find that accurate perceptions of recent price changes are an important determinant of the accuracy of next-year inflation expectations. The realism of inflation perceptions is, in turn, related to the intensity of newspaper consumption and also affected by the broadness of a person’s political preferences. However, more frequent newspaper usage does not necessarily reduce errors in inflation perceptions.
    Keywords: Inflation expectations, inflation perceptions, newspaper readership, political preferences, household survey data
    JEL: D12 D83 D84 E31 E58
    Date: 2017
  10. By: Arnaud Dellis (Université du Québec à Montréal); Mandar Oak (School of Economics, University of Adelaide)
    Abstract: This paper studies the role of subpoena power in enabling a policymaker to make better informed decisions. In particular, we take into account the effect of subpoena power on the information voluntarily supplied by interest groups as well as the information obtained by the policymaker via the subpoena process. To this end, we develop a model of informational lobbying in which interest groups seek access to the policymaker in order to provide him verifiable evidence about the desirability of implementing reforms they care about. The policymaker is access-constrained, i.e., he lacks time/resources to verify the evidence provided by all interest groups. The policymaker may also be agenda-constrained, i.e., he may lack time/resources to reform all issues. We find that if a policymaker is agenda-constrained, then he is better off by having subpoena power. On the other hand, if a policymaker is not agenda-constrained, he is made worse off by having subpoena power. The key insight behind these findings is that subpoena power influences interest groupsÂ’ incentives to provide information voluntarily, and that this influence differs depending on whether or not the policymaker is agenda-constrained.
    Keywords: Lobbying; Information transmission; Subpoena; Agenda.
    JEL: D72 D78 D83
    Date: 2017–03
  11. By: Ishac Diwan (Center for International Development at Harvard University); Jamal Ibrahim Haider (Center for International Development at Harvard University)
    Abstract: Using firm-level census data, we determine how politically-connected firms (PCFs) reduce job creation in Lebanon. After observing that large firms account for the bulk of net job creation, we find that PCFs are larger and create more jobs, but are also less productive, than non-PCFs in their sectors. On a net basis, at the sector-level, each additional PCF reduces jobs created by 7.2% and jobs created by non-PCFs by 11.3%. These findings support the notion that politically-connected firms are used for clientelistic purposes in Lebanon, exchanging privileges for jobs that benefit their patrons’ supporters.
    Keywords: job creation; politically-connected firms; clientelism; Lebanon
    JEL: D47 J21 J38 L11 L53
    Date: 2016–06
  12. By: Colignatus, Thomas
    Abstract: Economic policy depends not only on national elections but also on coalition bargaining strategies. In coalition government, minority parties bargain on policy and form a majority coalition, and select a Prime Minister from their mids. In Holland the latter is done conventionally with Plurality, so that the largest party provides the chair of the cabinet. Alternative methods are Condorcet, Borda or Borda Fixed Point. Since the role of the Prime Minister is to be above all parties, to represent the nation and to be there for all citizens, it would enhance democracy and likely be optimal if the potential Prime Minister is selected from all parties and at the start of the bargaining process. The performance of the four selection rules is evaluated using the results of the 2017 Dutch Parliamentary elections. Plurality gives VVD. VVD is almost a Condorcet winner except for a tie with 50Plus. Borda and BordaFP give CU as the prime minister. The impossibility theorem by Kenneth Arrow (Nobel memorial prize in economics 1972) finds a crucially different interpretation.
    Keywords: Political economy; public choice; political science; optimal representation; electoral systems; elections; coalition; impossibility theorem
    JEL: D71 C88 A2
    Date: 2017–03–17
  13. By: Gassebner, Martin; Gutmann, Jerg; Voigt, Stefan
    Abstract: Over the last several decades, both economists and political scientists have shown interest in coups d’état. Numerous studies have been dedicated to understanding the causes of coups. However, model uncertainty still looms large. About one hundred potential determinants of coups have been proposed, but no consensus has emerged on an established baseline model for analyzing coups. We address this problem by testing the sensitivity of inferences to over three million model permutations in an extreme bounds analysis. Overall, we test the robustness of 66 factors proposed in the empirical literature based on a monthly sample of 164 countries that covers the years 1952 to 2011. We find that slow economic growth rates, previous coup experiences, and other forms of political violence to be particularly conducive to inciting coups.
    Keywords: Coups d’état,Military coups,Coup-proofing,Extreme bounds analysis
    JEL: D74 F52 H56 K10
    Date: 2016
  14. By: Krishna K Ladha (Indian Institute of Management Kozhikode)
    Abstract: Aristotle's Politics can be divided into two inquiries, each amenable to mathematical representation. The first inquiry assumes, probably idealistically, that individuals act in the collective interest and leads to the following theorem: polity (a rule of many good men) is better than aristocracy (few good men), and aristocracy is better than monarchy (one good man). The second inquiry assumes, more realistically, that individuals act in self-interest and leads to the following theorem as a justification for democracy: Among various systems of government, democracy (a mixed constitution with a rule of law sustained by competing factions) offers the best prospect to deliver two things at once: justice (pursuit of the common interest) and stability (obedience of the rule of law). The latter theorem implies that institutionalization of competing factions governed by good laws is likely to be just and stable. It applies to nations, corporations and towns facing the tragedy of the commons, externalities and reneging.
  15. By: Chatterjee, Swarnendu (QE / Mathematical economics and game the); Storcken, Ton (QE / Mathematical economics and game the)
    Keywords: voting, Unimodal distribution, Condercet consistent rule, Borda rule, Plurality rule
    JEL: D71 D72
    Date: 2017–03–23
  16. By: Bolle, Friedel
    Abstract: In an economic theory of voting, voters have positive or negative costs of voting in favor of a proposal and positive or negative benefits from an accepted proposal. When votes have equal weight then simultaneous voting mostly has a unique pure strategy Nash equilibrium which is independent of benefits. Voting with respect to (arbitrarily small) costs alone, however, often results in voting against the "true majority". If voting is sequential as in the roll call votes of the US Senate then, in the unique subgame perfect equilibrium, the "true majority" prevails (Groseclose and Milyo, 2010, 2013). In this paper, it is shown that the result for sequential voting holds also with different weights of voters (shareholders) or with multiple necessary majorities (EU decision making). Simultaneous voting in the general model can be plagued by non-existent or non-unique pure strategy equilibria under most preference constellations.
    Keywords: voting,free riding,binary decisions,unique equilibria
    JEL: H41 D71
    Date: 2017
  17. By: Vesna Bojicic-Dzelilovic; Denisa Kostovicova; Mariana Escobar; Jelena Bjelica
    Abstract: Scholarly attempts to explain aid subversion in post-conflict contexts frame the challenge in terms of corrupt practices and transactions disconnected from local power struggles. Also, they assume a distinction between organised crime and the state. This comparative analysis of aid subversion in Colombia and Afghanistan reveals the limits of such an approach. Focusing on relations that anchor organised crime within local political, social and economic processes, we demonstrate that organised crime is dynamic, driven by multiple motives, and endogenous to local power politics. Better understanding of governance arrangements around the organised crime-conflict nexus which enable aid subversion is therefore required.
    Keywords: aid subversion; organised crime; corruption; Colombia; Afghanistan
    JEL: N0
    Date: 2015–07–06
  18. By: Krishna K Ladha (Indian Institute of Management Kozhikode)
    Abstract: With no authority to change the constitution, a jury does the next best thing: it adopts the optimal rule given the constitution. At equilibrium, some jurors, called the rule reformers, vote independent of their information producing the second-best rule. The remaining jurors vote on the basis of their information enabling aggregation of the dispersed information. Arising from this asymmetric voting in a simultaneous jury game is an equivalence class of asymmetric strong Nash equilibria in pure strategies at which the information aggregation is at its best. Thus, the strategic act of rule reforming enables individual rationality to yield collective rationality. The coordination problem, as to which juror would play which role, can be solved by letting the jurors make a non-binding pre-play agreement specifying each juror’s role; the agreement is self enforcing. The results hold for any voting rule, and any costs of erroneous conviction and acquittal.
  19. By: Luca Ferrari (Dipartimento di Scienze per l'Economia e l'Impresa)
    Abstract: I extend a Jury decision making model allowing jurors to observe, in addition to their private information, public evidence strategically designed by a Prosecutor who wants to maximize the probability of conviction of a defendant under trial. I show that jurors’ communication, modeled as a non-binding straw vote before the final verdict, allows the Jury to force Prosecutor to supply evidence whose accuracy becomes perfect as the num- ber of jurors goes to infinity. Thus, the same outcome predicted by the Condorcet’s Jury Theorem is reached although evidence is strategically de- signed so as to prevent this outcome.
    JEL: D72 D82 D83
    Date: 2017
  20. By: Krishna K Ladha (Indian Institute of Management Kozhikode); Gary J. Miller (Washington University, St. Louis)
    Abstract: Recent game-theoretic literature on juries proposes many reforms including the abandonment of the unanimity rule. Considering the scope of the proposed change, this paper sets out to do one thing: it tests the critical game-theoretic assumption that jurors vote on the basis of being pivotal. The test is devised such that if the groups do well in aggregating dispersed information, they would support the game-theoretic view of juries; if not, they would oppose the game-theoretic view. Here is how. In theory, as shown in the paper, large enough juries remain relatively unaffected when public signals the jurors observe happen to be misleading because theoretical juries do not erroneously overweight the public signals at the expense of the private signals. In reality, however, each individual may overweight misleading public signals leading real juries to a terrible outcome. It is this potential for direct contradiction between theoretical and experimental juries that makes our experimental test sharper than previous tests: given misleading public signals, rational voting would still produce information aggregation; naïve voting would not. In prior research with no public signals, both rational and naïve voting produced information aggregation. Hence, we present a sharper test. Certain public policy implications of our work pertaining to the media are offered.

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