nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒05‒21
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Strategic Voting in Multi-Winner Elections with Approval Balloting: A Theory for Large Electorates By Jean-François Laslier; Karine Van Der Straeten
  2. Pocketbook voting, social preferences, and expressive motives in referenda By Meya, Johannes; Poutvaara, Panu; Schwager, Robert
  3. On Legislative Lobbying under Political Uncertainty By Tyutin, Anton; Zaporozhets, Vera
  4. All the President’s Friends: Political Access and Firm Value By Jeffrey R. Brown; Jiekun Huang
  5. Campaign Contributions for Free Trade: Salient and Non-salient Agendas By Hideo Konishi; Chen-Yu Pan
  6. Heuristic voting under the Alternative Vote: the efficiency of “sour grapes" behavior By Jean-François Laslier
  7. The Dog that Didn’t Bark: On the Effect of the Great Recession on the Surge of Secessionism By Xavier Cuadras Morató; Toni Rodon
  8. Under Political Uncertainties:Organisational Changes in the Imperial Continental Gas Association, 1824?1987 By Ryo Izawa
  9. The Multiannual Financial Framework post-2020: Balancing political ambition and realism By Núñez Ferrer, Jorge
  10. Change in membership and ranking of the elites over phases of regime change By Tomoko Matsumoto; Tetsuji Okazaki
  11. Governance and Ownership of Significant Euro Area Banks By Nicolas Veron

  1. By: Jean-François Laslier (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Karine Van Der Straeten (TSE - Toulouse School of Economics - Toulouse School of Economics, Institute advanced for advanced studies in Toulouse - Institute advanced for advanced studies in Toulouse)
    Abstract: We propose a theory of strategic voting in multi-winner elections with approval balloting: A fixed number M of candidates are to be elected; each voter votes for as many candidates as she wants; the M candidates with the most votes are elected. We assume that voter preferences are separable and that there exists a tiny probability that any vote might be misrecorded. Best responses involve voting by pairwise comparisons. Two candidates play a critical role: the weakest expected winner and the strongest expected loser. Expected winners are approved if and only if they are preferred to the strongest expected loser and expected losers are approved if and only if they are preferred to the weakest expected winner. At equilibrium, if any, a candidate is elected if and only if he is approved by at least half of the voters. With single-peaked preferences, an equilibrium always exists, in which the first M candidates according to the majority tournament relation are elected. The theory is tested on individual data from the 2011 Regional Government election in Zurich.
    Keywords: Approval Voting,Elections,Voting behavior
    Date: 2016–04
  2. By: Meya, Johannes; Poutvaara, Panu; Schwager, Robert
    Abstract: We develop and test a theory of voting and turnout decisions that integrates self-interest, social preferences, and expressive motives. Our model implies that if pocketbook benefits are relevant, voters either perceive their impact on the outcome to be non-negligible, or expressive motivations do not play a role in the decision on how to vote. Conversely, if own pocketbook benefits do not explain voting, then voting is expressive. If the perceived probability of being pivotal is non-negligible, social preferences and expressive concerns are observationally equivalent. Our empirical analysis studies collective choices which are analogous to decisions on local public goods. We consider referenda among university students on whether to collectively purchase deeply discounted flat rate tickets for public transportation and cultural amenities. Individual us- age data allow quantifying the monetary benefits associated with each ticket. As voters had precise information on the individual costs and benefits, our setting comprises a real-world laboratory of direct democracy. We find that monetary benefits strongly influence participation and voting. However, social or expressive motives, such as stated altruism, environmental concerns, and paternalism, are decisive for a significant minority. Our results rule out purely expressive voting and imply that a substantial share of the electorate perceived their impact on the outcome to be non-negligible.
    Keywords: Pocketbook Voting,Social Preferences,Expressive Voting,Instrumental Voting,Public Goods,Altruism,Referendum
    JEL: D72 H41 D64
    Date: 2017
  3. By: Tyutin, Anton; Zaporozhets, Vera
    Abstract: We study a simple influence game, in which a lobby tries to manipulate the decision of a legislature via monetary o¤ers to one or more members. The type of a legislator is the relative weight he/she places on social welfare as compared to money. We study the equilibria of this lobbying game under political certainty and uncertainty, and examine the circumstances under which the lobby is successful, and the amount of money invested in the political process. Special attention is paid to three primitives of the environment: the budget available for lobbying, the internal organization of the legislature and the proportion of "bad" and "good" legislators in the political arena.
    Date: 2017–05
  4. By: Jeffrey R. Brown; Jiekun Huang
    Abstract: Using novel data on White House visitors from 2009 through 2015, we find that corporate executives’ meetings with key policymakers are associated with positive abnormal stock returns. We also find evidence suggesting that following meetings with federal government officials, firms receive more government contracts and are more likely to receive regulatory relief (as measured by the tone of regulatory news). The investment of these firms also becomes less affected by political uncertainty after the meetings. Using the 2016 presidential election as a shock to political access, we find that firms with access to the Obama administration experience significantly lower stock returns following the release of the election result than otherwise similar firms. Overall, our results provide evidence suggesting that political access is of significant value to corporations.
    JEL: G28 G3 H32
    Date: 2017–04
  5. By: Hideo Konishi (Boston College); Chen-Yu Pan (Wuhan University)
    Abstract: Although protectionism became a salient issue in the 2016 presidential election campaign, both Republican and Democratic adminis- trations have been silently promoting free trade for decades. We set up a two-party electoral competition model in a two-dimensional policy space with campaign contributions by a group (exporting/multinational firms) that is interested in promoting free trade, for which voters do not have positive sentiment. Assuming that voters are impressionable to campaign spending for/against candidates, we analyze the optimal contract between the interest group and the candidates on policy is- sues and campaign contributions. If voters' negative sentiment to free trade is not too strong, the interest group tends to contribute to both candidates to make free trade a nonsalient issue, and the candidates compete over the other (ideological) dimension only. If votersíneg- ative sentiment to free trade is strong, the interest group tends to contribute to a more malleable candidate only.
    Keywords: electoral competition, campaign contribution, trade negotiation, GATT, preferential trade agreement, populism
    JEL: C72 D72 F02 F13
    Date: 2017–05–05
  6. By: Jean-François Laslier (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: This theoretical paper contrasts two voting heuristics: overstating and replacing. Under the Alternative Vote, overstatement is inefficient but replacement is efficient. The paper argues that the “replacing" manipulation corresponds to a psychologically and politically plausible voter behavior.
    Keywords: Behavioral voting,Alternative vote,Manipulation
    Date: 2015–06
  7. By: Xavier Cuadras Morató; Toni Rodon
    Abstract: This paper explores the relationship between the economic turmoil generated by the Great Recession and the increase of secessionism in different regions of Western countries. Some authors have stressed that the Great Recession triggered profound changes in political attitudes and preferences and, in the context of a conflict between the centre and the periphery, fuelled secessionism as a radical shift of the institutional setup. Nevertheless, other researchers have remarked that a deep recession may make voters more accommodating with the status quo and more reluctant to take radical stances. Our paper aims at contributing to this debate by analyzing the case of Catalonia. We use the variation of economic variables and data from surveys and electoral outcomes at the level of municipalities to explore the relationship between the deterioration of the economic situation (that is, the local variation in the intensity of the crisis) and the increase of preferences for secession among the Catalan population. The findings from the analysis of our empirical models do not support the hypothesis that the heterogeneous effects of the Great Recession had any significant impact on political preferences at the level of municipality in Catalonia. These findings contribute to our understanding of the effects of hard economic times on people’s attitudes and behaviour.
    Keywords: great recession, unemployment, Secession, economic crisis, Catalonia
    JEL: H77 N44
    Date: 2017–05
  8. By: Ryo Izawa (Faculty of Economics, Shiga University)
    Abstract: This study followed the brief history of a British multinational utility enterprise, Imperial Continental Gas Association (ICGA). The company passed through successive waves of technological and political shocks throughout its life. In particular, political issues such as municipalisation, wars, international taxation and nationalisation had a critical impact on its corporate behaviours. Some political events, such as compulsory liquidation by the German occupation government during the First World War, forced the company to divest its works. The fear of deprivatisation and international double taxation prompted the company to decentralise its corporate structure, whereby ICGA gradually shifted from a company with over-centralism to a pure holding company during the first half of the 20th century. Eventually, the political capabilities nurtured by these experiences contributed to the survival of ICGA for 164 years.
    Keywords: Risk,Political risk, Political capabilities, Business history, International business, International taxation, Public utility company
    Date: 2017–05
  9. By: Núñez Ferrer, Jorge
    Abstract: The EU budget is suffering not simply from a technical crisis, but rather from a deep crisis of trust on the part of EU citizens. Public support for the mainstream political class in general and the EU institutions in particular is rapidly waning. Restoring this trust is the single-most important task in countering rising populism and the forces intent on dismantling the European Union. This paper argues that the EU budget offers one of the most visible tools available to express the principles of the European Union in concrete action; its improvement is therefore essential for building trust. It aims to offer food for thought to promote reflection on the future of the budget, in view of the challenges facing the EU.
    Date: 2016–11
  10. By: Tomoko Matsumoto; Tetsuji Okazaki
    Abstract: This study examines the difference between the regime transition phase and consolidation phase, dividing government elites into the pre-Meiji-Restoration-born group and the post-Meiji-Restoration-born group. Using the newly constructed government elites' data after the Meiji Restoration in Japan, we show that reformers' strategies to recruit government elites and establish a new intra-elite hierarchy changed from the regime transition phase to its consolidation phase. Initially, in order to contend against the incumbent elites, reformers recruited talented activists from the non-elite strata and assigned them to higher-level positions based on their abilities. On achieving a transfer of power, however, reformers' primary concern shifted to alleviating the dissatisfaction of the masses and the former elites. Therefore, while the barrier preventing access to the elite group keep lowering, which opened the way for non-elites to gain elite status, former elites are reintegrated into the elite group and the intra-elite hierarchy again comes to reflect the social stratum of the former regime.
    Date: 2017–03
  11. By: Nicolas Veron (Peterson Institute for International Economics)
    Abstract: European policymakers and analysts often appear to assume that most euro area banks are publicly listed companies with ownership scattered among many institutional investors, a structure in which no single shareholder has controlling influence and that allows for considerable flexibility to raise capital when needed. Such an ownership structure is indeed prevalent among banks in advanced countries such as Australia, Canada, the United Kingdom, and the United States. Veron shows, however, that listed banks with dispersed ownership are the exception rather than the rule among the euro area’s significant banks, especially if one looks beyond the very largest banking groups. The bulk of these significant banks are government-owned or cooperatives, or uniquely influenced by one or several large shareholders, or otherwise prone to direct political influence. As a result, the public transparency of many banks is low, with correspondingly low market discipline; they have weak incentives to prioritize profitability; their ability to shore up their balance sheets through either retained earnings or external capital raising is limited, resulting in insufficient capital flexibility; they take unnecessary risks due to political interference; and their links with governments perpetuate the vicious circle between banks and sovereigns, which has been a key driver of the euro area crisis.
    Date: 2017–05

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