nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒04‒16
nineteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Are Hard-Working MPs Electorally Rewarded? Empirical Evidence from the 2007 French Legislative Elections By Abel FRANCOIS; Julien NAVARRO
  2. Redistribution, Polarization, and Ideology By Rosalia Greco
  3. Political elections and uncertainty -Are BRICS markets equally exposed to Trump's agenda? By Jamal Bouoiyour; Refk Selmi
  4. They win, I leave: the impact of the Northern League party on foreign internal migration By Egidio Farina
  5. Who Voted for Brexit? A Comprehensive District-Level Analysis By Becker, Sascha O.; Fetzer, Thiemo; Novy, Dennis
  6. The Effect of Far Right Parties on the Location Choice of Immigrants: Evidence from Lega Nord Mayors By Bracco, Emanuele; De Paola, Maria; Green, Colin P.; Scoppa, Vincenzo
  7. Why Does Social Capital Increase Government Performance? The Role of Local Elections across Italian Municipalities By Alberto Batinti; Andrea Filippetti; Luca Andriani
  8. The Limits of Political Compromise: Debt Ceilings and Political Turnover By Cunha, Alexandre B.; Ornelas, Emanuel
  9. Inherited Institutions: Cooperation in the Light of Democratic Legitimacy By Pascal Langenbach; Franziska Tausch
  10. Public Goods and Ethnic Diversity: Evidence from Deforestation in Indonesia By Alberto Alesina; Caterina Gennaioli; Stefania Lovo
  11. The Political Legacy of Entertainment TV By Ruben Durante; Paolo Pinotti; Andrea Tesei
  12. Female political representation in the aftermath of ethnic violence: A comparative analysis of Burundi and Rwanda By Andrea Guariso; Bert Ingelaere; Marijke Verpoorten
  13. Fiscal Rules to Tame the Political Budget Cycle; Evidence from Italian Municipalities By Lorenzo Forni; Andrea Bonfatti
  14. What Motivates French Pork: Political Career Concerns or Private Connections? By Brice Fabre; Marc Sangnier
  15. Blockholder Voting By Bar-Isaac, Heski; Shapiro, Joel
  16. Local corruption and support for fuel subsidy reform: Evidence from Indonesia: By Kyle, Jordan
  17. Impacts of OPEC's political risk on the international crude oil prices: An empirical analysis based on the SVAR models By Hao Chen; Hua Liao; Bao-Jun Tang; Yi-Ming Wei
  18. The political economy of high speed rail in Florida: 1981-present By Cohen, James
  19. Individual Characteristics, Behavioral Biases, and Attitudes toward Immigration: Evidence from a survey in Japan By TOMIURA Eiichi; ITO Banri; MUKUNOKI Hiroshi; WAKASUGI Ryuhei

  1. By: Abel FRANCOIS (LEM-CNRS (UMR 9221), Université de Lille 1 Sciences et Technologies); Julien NAVARRO (ESPOL, Université Catholique de Lille)
    Abstract: The purpose of this paper is to study the impact of incumbent MPs’ activities on their electoral fortune. In other words, are incumbents with a strong parliamentary record rewarded by their party and their voters? We ask this question in the context of the French political system characterized by: an executive domination; a candidate-centered electoral system; and an electoral agenda maximizing the impact of the presidential elections. Since these three institutional features have contradictory expected effects on relationship between MP’s activities and electoral fortune, their overall impact can only be assessed empirically. Taking the 2007 French legislative elections as a study case, we test the effects of several measurements of the MPs’ activities on both votes share and reelection probability, and we take into account the potential bias related to the decision to be candidate. Our results show that MPs’ activities differently impact both the incumbents’ candidacy prospects, their first-round vote share and their reelection. Despite the weakness of the French National Assembly, it is demonstrated that several parliamentary activities, especially bill-initiation, have a positive effect on the MPs’ probability of running again and staying in office.
    Keywords: Personal voting, Parliamentary activities and productivity, Incumbent candidacy and reelection, Electoral reward.
    JEL: D72
    Date: 2017
  2. By: Rosalia Greco
    Abstract: Why doesn’t rising inequality encourage income redistribution? The standard model posits that the more concentrated are income and wealth, the more the median voter values redistribution. Yet despite the marked increase in U.S. inequality, redistribution has barely changed. I approach this puzzle from a fresh angle by considering the role and nature of polarization for the politics of redistribution. While inequality increases voting elasticity with respect of redistribution, polarization has the opposite effect, thus reducing parties' accountability towards voters. But without further structure, inequality and polarization’s effects on redistribution cannot be determined. I demonstrate that for polarization to discourage redistribution, ideology must be a ``normal good'', i.e. its importance for the voters needs to rise with income. Using data from the American National Election Study and the Census, I verify that this is indeed the case. Armed with this result, I use the model to assess the effects of inequality and polarization on redistribution within no-inequality and no-polarization counterfactuals. Effects of ``income elastic'' ideology can account for the stability of redistribution policy, and shed light on the economic implications of political extremism. - Highlight the role of ``ideological salience'' (= importance that voters place on ideology); develop a model of party competition where voters are heterogenous in: 1. income, 2. ideology, 3. ideological salience to analyze the effect of income inequality and party polarization on redistribution. The results depend on the sign of the correlation between income and ideological salience - Validate the model: use survey data to estimate correlation between income and ideological salience via maximum simulated likelihood - Counterfactual analysis: calibrate the model to decompose effects of inequality and polarization - Model: 1. Inequality and polarization push redistribution in opposite directions 2. Sign of effects depends on which group (richer or poorer voters) cares more about social issues (has higher ideological salience) - Empirical analysis: income and ideological salience are positive correlated. In terms of the model, this implies that inequality increases redistribution, while party polarization decreases it - Counterfactual analysis: 1. Estimates of ideological salience, plus contemporaneous increase in inequality and polarization in 1980-2008, can account for stability of redistribution 2. Larger effect for Republican party
    Keywords: United States, Public finance, Tax policy
    Date: 2016–07–04
  3. 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 certainly is little or no doubt that politicians, sometimes consciously and sometimes not, exert a significant impact on stock markets. The evolving volatility over the Republican Donald Trump's surprise victory in the US presidential election is a perfect example when politicians, through announced policies, send signals to financial markets. The present paper seeks to address whether BRICS (Brazil, Russia, India, China and South Africa) stock markets equally vulnerable to Trump's plans. For this purpose, two methods were adopted. The first presents an event-study methodology based on regression estimation of abnormal returns. The second is based on vote intentions by integrating data from social media (Twitter), search queries (Google Trends) and public opinion polls. Our results robustly reveal that although some markets emerged losers, others took the opposite route. China took the biggest hit with Brazil, while the damage was much more limited for India and South Africa. These adverse responses can be explained by the Trump's neo-mercantilist attitude revolving around tearing up trade deals, instituting tariffs, and labeling China a " currency manipulator ". However, Russia looks to be benefiting due to Trump's sympathetic attitude towards Vladimir Putin and expectations about the scaling down of sanctions imposed on Russia over its role in the conflict in Ukraine.
    Keywords: event study,stock markets,BRICS,US presidential election,Trump's agenda,social media,search queries,public opinion polls
    Date: 2017–01–08
  4. By: Egidio Farina (Department of Economics, University of Sussex)
    Abstract: This paper studies how electoral outcomes can shape individuals’ migration decisions. Using the Italian mayoral elections data from 2001 to 2014, I study how foreign citizens’ internal migration with a regular residency permit in North-Italy can be affected by the election of a mayor affiliated to the Northern League (Lega Nord) party, a far-right political movement characterized by a strong federalist, populist and anti-immigration ideology. In order to deal with the endogeneity of Northern League to city characteristics, a sharp regression discontinuity is used. Overall the results show that a mayor affiliated to the Northern League party causes an increase in the foreign out-migration rate one year after the election.
    Keywords: Northern League mayor, partisanship, close elections, regression discontinuity, migration
    JEL: R23 D72
    Date: 2017–04
  5. By: Becker, Sascha O.; Fetzer, Thiemo; Novy, Dennis
    Abstract: On 23 June 2016, the British electorate voted to leave the European Union. We analyze vote and turnout shares across 380 local authority areas in the United Kingdom. We find that exposure to the EU in terms of immigration and trade provides relatively little explanatory power for the referendum vote. Instead, we find that fundamental characteristics of the voting population were key drivers of the Vote Leave share, in particular their education profiles, their historical dependence on manufacturing employment as well as low income and high unemployment. At the much finer level of wards within cities, we find that areas with deprivation in terms of education, income and employment were more likely to vote Leave. Our results indicate that a higher turnout of younger voters, who were more likely to vote Remain, would not have overturned the referendum result.
    Keywords: austerity; EU; globalisation; migration; political economy; Referendum; Scotland; UK; voting
    JEL: D72 N44 R23 Z13
    Date: 2017–04
  6. By: Bracco, Emanuele (Lancaster University); De Paola, Maria (University of Calabria); Green, Colin P. (Lancaster University); Scoppa, Vincenzo (University of 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
  7. By: Alberto Batinti (School of Public Economics and Administration, Shanghai University of Finance); Andrea Filippetti (National Research Council (CNR), Rome, Italy); Luca Andriani (Department of Management, Birkbeck, University of London)
    Abstract: There is wide consensus that social capital increases government performance. However, the very mechanism underlying the relationship between social capital and well-performing governments remains unclear. In this paper we focus on the budgetary composition of local governments and find that the joint effect of larger social capital and higher quality in government’s spending improves the re-election chances of incumbent policy makers. By looking at 8,000 Italian municipalities over the period 2003-2012, we show that incumbent mayors who carry out a forward-looking and transparent fiscal agenda are more likely to be reelected where the level of local social capital is larger. In contextswith larger social capital, we obtain a non-trivial average effect of a 54% larger probability to be reelected when a more forward-looking agenda is in place. Thus, the good conduct of incumbent mayors is rewarded, but only in contexts with more social capital. Twin estimates considering a more transparent fiscal agenda are not significantbut show the predicted sign and the comparable size of a 31% larger probability. Our evidence is robust when controlling for the political budget cycle, and provides ground for further exploration of the electoral mechanism as an important channel to explain the connection between social capital and good government performance.
    Date: 2017–04
  8. By: Cunha, Alexandre B.; Ornelas, Emanuel
    Abstract: We study the desirability of limits on the public debt and of political turnover in an economy where incumbents have an incentive to set public expenditures above the socially optimal level due to rent-seeking motives. Parties alternate in office and cannot commit to future policies, but they can forge a political compromise where each party curbs excessive spending when in office if it expects future governments to do the same. In contrast to the received literature, we find that strict limits on government borrowing can exacerbate political economy distortions by making a political compromise unsustainable. This tends to happen when political turnover is limited. Conversely, a tight limit on the public debt fosters a compromise that yields the efficient outcome if political turnover is vigorous. Our analysis thus suggests that to sustain good economic policies, a society needs to restrict either the extent of political turnover or the ability of governments to issue debt, but not both.
    Keywords: debt limits; political turnover; efficient policies; fiscal rules
    JEL: E61 E62 H30 H63
    Date: 2017–03
  9. By: Pascal Langenbach (Max Planck Institute for Research on Collective Goods); Franziska Tausch (Max Planck Institute for Research on Collective Goods)
    Abstract: We experimentally investigate whether the procedural history of a sanctioning institution affects cooperation in a social dilemma. Subjects inherit the institutional setting from a previous generation of subjects who either decided on the implementation of the institution democratically by majority vote or were exogenously assigned a setting. In order to isolate the impact of the voting procedure, no information about the cooperation history is provided. In line with existing empirical evidence, we observe that in the starting generation cooperation is higher (lower) with a democratically chosen (rejected) institution, as compared to the corresponding, randomly imposed setting. In the second generation, the procedural history only partly affects cooperation. While there is no positive democracy effect when the institution is implemented, the vote-based rejection of the institution negatively affects cooperation in the second generation. The effect size is similar to that in the first generation.
    Keywords: Endogeneity, Voting, Institutions, Social dilemma, Public good, Inherited rules
    JEL: C92 D02 D71 D72 H41
    Date: 2017–01
  10. By: Alberto Alesina; Caterina Gennaioli; Stefania Lovo
    Abstract: This paper shows that the level of deforestation in Indonesia is positively related to the degree of ethnic fractionalization at the district level. To identify a casual relation we exploit the exogenous timing of variations in the level of ethnic heterogeneity due to the creation of new jurisdictions. We provide evidence consistent with a lower control of politicians, through electoral punishment, in more ethnically fragmented districts. Our results bring a new perspective on the political economy of deforestation. They are consistent with the literature on (under) provision of public goods and social capital in ethnically diverse societies and suggest that when the underlying communities are ethnically fractionalized decentralisation can reduce deforestation by delegating powers to more homogeneous communities.
    Keywords: Deforestation, Ethnic Diversity, Corruption, Indonesia.
    JEL: D73 H0 L73
    Date: 2016–12
  11. By: Ruben Durante; Paolo Pinotti; Andrea Tesei
    Abstract: We study the political impact of entertainment television in Italy exploiting the staggered introduction of Berlusconi's commercial TV network, Mediaset, in the early 1980s. We find that individuals with early access to Mediaset all-entertainment content were more likely to vote for Berlusconi's party in 1994, when he first ran for office. The effect persists for five elections and is driven by heavy TV viewers, namely the very young and the elders. Regarding possible mechanisms, we find that individuals exposed to entertainment TV as children were less cognitively sophisticated and civic-minded as adults, and ultimately more vulnerable to Berlusconi's populist rhetoric.
    Keywords: entertainment TV, voting, cognitive abilities, civic engagement
    JEL: L82 D72 Z13
    Date: 2017–04
  12. By: Andrea Guariso; Bert Ingelaere; Marijke Verpoorten
    Abstract: We study the impact of electoral gender quotas in post-war Burundi and Rwanda on women’s political representation. First, we look at descriptive representation by studying the number of female representatives and the prestige of their positions in the legislative and executive branches of government. Second, we focus on political representation as perceived by ordinary women, before, during, and after the introduction of gender quotas. We find that, both in Rwanda and Burundi, descriptive female political representation significantly increased with the introduction of gender quotas, with the share of women in parliament and ministries consistently exceeding 30 per cent. While women still disproportionally end up in ministries of relatively lower prestige, the gap with men is closing as more women have joined the executive branches of power. We do not find any tangible effect on women’s perceived political representation. Among the possible explanations, we discuss the authoritarian nature of the regime and the crowding out of gender identity by ethnic identity. We argue that these explanations are not entirely consistent with our data and put forward a third explanation, i.e. that the perception of political representation depends on the implementation of policies—thus substantive representation, not descriptive representation—and that men and women are to a very large extent appreciative of the same policies.
    Date: 2017
  13. By: Lorenzo Forni; Andrea Bonfatti
    Abstract: The paper provides evidence that fiscal rules can limit the political budget cycle. It focuses on the application of the Italian fiscal rule at the sub-national level over the period 2004-2006 and shows that: 1) municipalities are subject to political budget cycles in capital spending; 2) the Italian subnational fiscal rule introduced in 1999 has been enforced by the central government; 3) municipalities subject to the fiscal rule show more limited political budget cycles than municipalities not subject to the rule. In order to identify the effect, we rely on the fact that the domestic fiscal rule does not apply to municipalities below 5,000 inhabitants. We find that the political budget cycle increases real capital spending by about 35 percent on average in the years prior to municipal elections and that the sub-national fiscal rule reduces these figures by about two thirds.
    Keywords: Time series;Fiscal rules;Italy;Europe;Government expenditures;Budgets;Regression analysis;local government finance, regression discontinuity, Cross-Sectional Models, Models with Panel Data, Deficit, State and Local Budget and Expenditures, Intergovernmental Relations
    Date: 2017–01–20
  14. By: Brice Fabre (PSE - Paris School of Economics, IPP - Institut des politiques publiques); Marc Sangnier (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille 2 - Université Paul Cézanne - Aix-Marseille 3 - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper uses the detailed curricula of French ministers and the detailed accounts of French municipalities to identify governmental investment grants targeted to specific jurisdictions. We distinguish between municipalities in which a politician held office before being appointed as a government’s member and those in which current ministers lived during their childhood. We provide evidence that municipalities in which a minister held office during her career experience a 45% increase in the amount of discretionary investment subsidies they receive during the time the politician they are linked to serves as minister. In contrast, we do not find any evidence that subsidies flow to municipalities from which ministers originate. Additional evidence advocate in favour of a key role of network and knowledge accumulated through connections, illustrated by a persistence of the impact of intergovernmental ties.
    Keywords: pork-barrel economics,distributive politics,political connections,private connections
    Date: 2017–02
  15. By: Bar-Isaac, Heski; Shapiro, Joel
    Abstract: By introducing a shareholder with many votes (a blockholder) to a standard model of voting, we uncover several striking results. First, if a blockholder is unbiased, she may not vote with all of her shares. This is efficient, as it prevents her vote from drowning out the information provided by other votes. Second, if this blockholder can announce her vote before the vote takes place, other shareholders may ignore their information and vote with the blockholder to support her superior information. Third, if the blockholder is biased, some shareholders will try to counter the blockholder's vote. The results are robust to allowing for information acquisition and trade. This suggests that regulations discouraging or prohibiting abstention, strategic behavior, and/or coordination may reduce efficiency.
    Keywords: Blockholder; corporate governance; shareholder voting
    JEL: D72 G34
    Date: 2017–03
  16. By: Kyle, Jordan
    Abstract: There is an urgent need to phase out global petroleum subsidies, due to the severe strain they impose on government expenditures and on the environment. However, reform efforts are often stymied by popular resistance to subsidy reform. This article examines the role played by local governments in shaping resistance to reforming fiscally and environmentally disastrous fuel subsidies. Shifting from universalaccess social programs, such as fuel subsidies, to targeted programs requires vesting authority with local politicians and bureaucrats, whom the state relies on to identify poor households and to deliver benefits. Where local governments are corrupt, citizens find promises to replace fuel subsidies with targeted spending less credible, and resistance to reform is higher. Using household survey data from Indonesia, this paper finds that corruption in the implementation of targeted transfer programs increases resistance to fuel subsidy reform among the poor citizens who consume the least fuel and who stand to benefit the most from targeted programs. Matching methods are employed to reduce endogeneity concerns. The findings suggest that improving capacity within subnational governments to deliver social programs is important in developing public support for reform.
    Keywords: INDONESIA; SOUTH EAST ASIA; SOUTHEAST ASIA; ASIA, petroleum; subsidies; public expenditure; fuels; environment; environmental protection; households; surveys; support measures; reforms; delinquent behavior, fuel subsidies; corruption; service delivery,
    Date: 2017
  17. By: Hao Chen; Hua Liao; Bao-Jun Tang; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology)
    Abstract: The impacts of OPEC's political risk on the fluctuations of international crude oil prices have caused widespread concern and analyzing the impacts is of great significance to the investment decisions and risk aversion strategies in the crude oil markets. Therefore, using the International Country Risk Guide (ICRG) index as a proxy for the countries' political risk situation, we empirically investigate the impacts of OPEC's political risk on the Brent crude oil prices, based on several Structural Vector Autoregression (SVAR) models. The main empirical results indicate that: (1) The political risk of OPEC countries does have a significant and positive influence on Brent crude oil prices in the sample period from January 1998 to September 2014, and the most significant positive influences appear in about one and a half year and last about a year. (2) The OPEC's integrated political risk contribute to 17.58% of the oil price fluctuations in the sample period, which is only lesser than that of the oil demand shocks (34.64%). (3) Compared with the political risk of OPEC countries in North Africa and South America, the political risk of OPEC countries in Middle East contribute most to the oil price fluctuations. (4) Among the eight components of the political risk in OPEC, the internal conflicts contribute most to the oil price fluctuations in the sample period.
    Keywords: OPEC; Political risk; Oil price; SVAR
    JEL: Q54 Q40
    Date: 2016–10–01
  18. By: Cohen, James
    Abstract: Cohen argues that the rise of neo-liberalism in the U.S. framed the failure of attempts to implement high speed rail in Florida between 1981 and 2011. In the 1980's rail promoters attempted, but were unable to apply neo-liberal precepts of financing new lines solely from sources of private capital, such as real estate development. Subsequently, financing plans based on both public and private funds were defeated by neo-liberal governors and their allies in Congress. As a result, the only new passenger line that appears likely to begin operations in Florida in the near future, is Florida East Coast Railway's Brightliner, which will operate at between 79 and 125 miles per hour, on existing freight rights of way between Miami and Orlando, with a possible future extension to Tampa. Cohen explains why this moderate speed line is likely to succeed, where prior attempts at high speed failed.
    Keywords: High speed rail; railways; political economy; capital finance; financial history; neo-liberalism; Florida
    JEL: N2
    Date: 2016–01–31
  19. By: TOMIURA Eiichi; ITO Banri; MUKUNOKI Hiroshi; WAKASUGI Ryuhei
    Abstract: This paper examines individual attitudes toward immigration and compares them with trade policy preferences based on a survey of over 10,000 respondents in Japan. People opposing both immigration and import liberalization are influenced by status-quo bias, while risk averters are more likely to be protectionists. Individuals with anti-immigrant sentiments tend to have pessimistic prospects of the national economy, dislike of changing of residential locations, or have no personal acquaintances with foreigners. These findings suggest that wide-ranging measures are required for expanding support for immigration. We also confirm the effects of such standard variables as education, occupation, unemployment, and gender.
    Date: 2017–03

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