nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒06‒25
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Resource Discovery and the Political Fortunes of National Leaders By Sambit Bhattacharyya; Michael Keller; Rabah Arezki
  2. The Political Economy of Macroeconomic Policy in Arab Resource- Rich Economies By Adeel Malik
  3. Security, Trade, and Political Violence By Amodio, Francesco; Baccini, Leonardo; Di Maio, Michele
  4. Steel, Aluminum, Lumber, Solar: Trump's Stealth Trade Protection By Chad P. Bown
  5. Intensity valence By Fabian Gouret; Stéphane Rossignol
  6. The making of a liberal education: Political economy of Austrian school reform, 1865 - 1875 By Tomáš Cvrcek; Miroslav Zajicek
  7. Utilising the judiciary to reject the popular will? : legal mobilization after the Arab uprising in Kuwait By Ishiguro, Hirotake
  8. Public Opinion on Immigration in Europe: Preference versus Salience By Hatton, Timothy J.
  9. Public Expenditures and the Performance of Latin American and Caribbean Agriculture By Gustavo Anríquez; William Foster; Jorge Ortega; César Falconi; Carmine Paolo De Salvo
  10. Public Referenda and Public Opinion on Olympic Games By Wolfgang Maennig
  11. Pyramid Capitalism: Cronyism, Regulation, and Firm Productivity in Egypt By Ishac Diwan; Philip Keefer; Marc Schiffbauer
  12. Social Innovation, Democracy and Makerspaces By Adrian Smith
  13. Democratization and the Conditional Dynamics of Income Distribution By Michael T. Dorsch; Paul Maarek

  1. By: Sambit Bhattacharyya (Department of Economics, University of Sussex); Michael Keller (Department of Economics, University of Sussex); Rabah Arezki (Research Department, IMF)
    Abstract: We investigate how giant and supergiant oil and mineral discoveries shape the political fortunes of national leaders using a large dataset of 1255 leaders in 158 countries over the period 1950 to 2010. We depart from the existing literature by using both ‘single risk’ and ‘multiple risk’ discrete time proportional hazard models. We find that mineral discoveries reduce risk for the incumbent in a ‘single risk model’ especially in a non-election year. In contrast oil discoveries reduce risk disproportionately more for the incumbent in countries with weak political institutions. The effects appear to be induced by actual income or rent rather than income expectations. In a ‘multiple risk model’ oil discovery significantly reduces the risk of losing office via military coup while resource (oil and minerals) discovery in general reduces the risk of resignation. Resource discovery does not seem to have any impact on the risk of election loss.
    Keywords: resource discovery; leaders; political survival
    JEL: D72 O11
    Date: 2017–06
  2. By: Adeel Malik (University of Oxford)
    Abstract: Revisiting macroeconomic policies and outcomes of Arab resource-rich economies (RREs), this paper synthesizes the political economy considerations that underpin policy choices. The paper argues that, in the context of Arab RREs, fiscal and financial sector policies play a particularly important role in absorbing natural resource rents. Fiscal policy is highly pro-cyclical and rooted in the underlying political settlement, which is based on extensive distributional commitments. Financial systems are deep but are known for restricted financial access to vast areas of economy. Given the excessive dependence on hydrocarbon rents and the prevalence of fixed exchange rate regimes, the external constraint remains more binding. Even where monetary policy has greater room to operate, existing policy frameworks are not geared towards domestic targets, such as inflation and unemployment, and are largely determined outside the purview of macroeconomic policy. I argue that the political objective function is essential for understanding these macroeconomic arrangements. With weak productive constituencies and few institutional constraints, macroeconomic policy involves limited feedback from the private sector and upholds the interest of the sovereign. In this milieu, institutional constraints on fiscal policy are more important than central bank independence. The paper also discusses the stability implications of current macroeconomic arrangements, arguing that stability in Arab RREs is almost entirely predicated on the uninterrupted flow of oil rents rather than resilient institutional structures.
    Date: 2017–06–07
  3. By: Amodio, Francesco (McGill University); Baccini, Leonardo (McGill University); Di Maio, Michele (University of Naples Parthenope)
    Abstract: To address security concerns, governments often implement trade barriers and restrictions on the movement of goods and people. These restrictions have negative economic consequences, possibly increasing the supply of political violence. To test this hypothesis, we exploit the restrictions imposed by Israel on imports to the West Bank as a quasi-experiment. In 2008 Israel started enforcing severe restrictions on the import of selected dual-use goods and materials, de facto banning a number of production inputs from entering the West Bank. We show that after 2008 (i) output and wages decrease in those manufacturing sectors that use those materials more intensively as production inputs, (ii) wages decrease in those localities where employment is more concentrated in these sectors, and (iii) episodes of political violence are more likely to occur in these localities. Our calculations suggest these effects account for 18% of the violent political events that occurred in the West Bank from 2008 to 2014.
    Keywords: security, trade, political violence
    JEL: D22 D24 F51 N45 O12
    Date: 2017–06
  4. By: Chad P. Bown (Peterson Institute for International Economics)
    Abstract: The Trump administration has quickly adopted an aggressive and antagonistic approach to using US trade laws as a protectionist tool. The effect on trade relations may not be as immediately disruptive as if Trump had followed through on campaign threats to pull the United States out of the North American Free Trade Agreement or impose 45 percent tariffs on China. However, the escalating trade barriers and the means through which the Trump administration is motivating their use have the potential to severely weaken the rules-based trading system. Rather than blowing it up by simply withdrawing, the end result of the Trump administration's tactics may be that the World Trade Organization implodes from within.
    Date: 2017–06
  5. By: Fabian Gouret; Stéphane Rossignol (Université de Cergy-Pontoise, THEMA)
    Abstract: This paper studies a continuous one-dimensional spatial model of electoral competition with two office-motivated candidates differentiated by their “intensity” valence. All voters agree that one candidate will implement more intensively his announced policy than his opponent. However, and contrary to existing models, the intensity valence has a different impact on the utility of voters according to their position in the policy space. The assumption that voters have utility functions with intensity valence, an assumption which has been found to be grounded empirically, generates very different results than those obtained with traditional utility functions with additive valence. First, the candidate with low intensity valence is supported by voters whose ideal points are on both extremes of the policy space. Second, there exist pure strategy Nash equilibria in which the winner is the candidate with high intensity if the distribution of voters in the policy space is sufficiently homogeneous. On the contrary, if the distribution of voters in the policy space is very heterogeneous, there are pure strategy Nash equilibria in which the candidate with low intensity wins. For moderate heterogeneity of the distribution of voters, there is no pure strategy Nash equilibrium.
    Keywords: valence, voter’s utility functions, Downsian model, spatial voting.
    JEL: D72
    Date: 2016
  6. By: Tomáš Cvrcek (UCL School of Slavonic and East European Studies); Miroslav Zajicek
    Abstract: The rise of mass schooling is an important contributor to modern economic growth. But its form, content, scale and manner of provision are all matters of public policy that are subject to politics. The rise of modern schooling is frequently cast as a product of broadened suffrage and stronger political voice of the masses, which overcame the political opposition from old ruling elites. We investigate this hypothesis, using the case of a school reform undertaken in Imperial Austria in 1869. We show that while landowners were less likely to vote for school modernization than urban and business interests, the strongest opposition came from the rural areas where the suffrage was in fact most numerous. The reform passed in spite of their opposition but, interestingly, post-reform developments suggest that passive resistance to it continued in the countryside in spite of the alleged benefits that education was billed to bring the masses.
    Keywords: mass schooling, political economy, Austria-Hungary
    Date: 2017–03
  7. By: Ishiguro, Hirotake
    Abstract: This study examines the role of the judiciary in the political process after the Arab Uprising, focusing on a Constitutional Court and its judgements in a case where the popular will was rejected via a judicial ruling. In particular, I will analyse a case of Kuwait where the Constitutional Court declared election void and ordered the dissolution of parliament, after the opposition had won a stable majority. This case conjures images of legal mobilization by the regime; however, considering the political context where the government and parliament were in a serious ongoing conflict, the constitutional rulings by the Constitutional Court can be evaluated as a mediator intended to ease the stalemate and prevent a fall into a more serious crisis concurrent with the political upheaval in other Arab countries.
    Keywords: Justice,Courts,Legal mobilization,Judicialization of politics,Democratization,Kuwait
    Date: 2017–03
  8. By: Hatton, Timothy J. (University of Essex)
    Abstract: There is growing interest among economists in public opinion towards immigration, something that is often seen as the foundation for restrictive immigration policies. Existing studies have focused on the responses to survey questions on whether the individual would prefer more or less immigration but not on his or her assessment of its importance as a policy issue. Here I distinguish between preference and salience. Analysis of data from the European Social Survey and Eurobarometer indicates that these are associated with different individual-level characteristics. At the national level these two dimensions of public opinion move differently over time and in response to different macro-level variables. The results suggest that both dimensions need to be taken into account when assessing the overall climate of public opinion towards immigration. Finally, there is some evidence that both preference and salience are important influences on immigration policy.
    Keywords: public opinion, salience, attitudes to immigration
    JEL: D72 F22 J61
    Date: 2017–06
  9. By: Gustavo Anríquez; William Foster; Jorge Ortega; César Falconi; Carmine Paolo De Salvo
    Abstract: Economic theory and econometric evidence support the thesis that the displacement of government expenditures on public goods by subsidies to private goods inhibits the performance of the farm sector. This paper presents an analysis of the influence of the mix of expenditures related to agriculture on net income generation, using data for 19 Latin American and Caribbean countries during 1985-2012. The econometric results demonstrate that total government spending on the farm sector positively impacts agriculture's performance. More importantly, and of greater practical economic significance, increasing the share of expenditures committed to public goods, ceteris paribus, would significantly raise rural income as measured by sector value added per capita of the rural population.
    Keywords: Agricultural policy, Public expenditure, Agricultural research & extension, Agricultural productivity, Rural Infrastructure, government agricultural policy, government spending, agricultural spending
    JEL: Q18 Q17 Q16 O13 H50
    Date: 2016–09
  10. By: Wolfgang Maennig (Chair for Economic Policy, University of Hamburg)
    Date: 2017–06–20
  11. By: Ishac Diwan; Philip Keefer; Marc Schiffbauer
    Abstract: Using a large, original database of 385 politically connected firms under the Mubarak regime in Egypt, we document for the first time the negative impact of cronyism on economic growth. In the early 2000s, a policy shift in Egypt led to the expansion of crony activities into new, previously unconnected sectors. 4-digit sectors that experienced crony entry between 1996 and 2006 experienced lower aggregate employment growth during the period than those that did not. A wide array of supporting evidence indicates that this effect was causal, reflecting the mechanisms described in Aghion et al. (2001), and not due to selection. Crony entry skewed the distribution of employment toward smaller, less productive firms; crony firms did not enter into sectors that would have also grown more slowly even in the absence of crony entry; and they enjoyed multiple regulatory and fiscal privileges that reduced competition and investments by non-crony firms, including trade protection, energy subsidies, access to land, and favorable regulatory enforcement. Moreover, energy subsidies and trade protection account for the higher profits of politically connected firms.
    Keywords: Firm performance, Patronage, Productivity Growth, Industrial Productivity, Productivity Level, Corruption, Economic Growth
    JEL: D72 D24 O47
    Date: 2016–10
  12. By: Adrian Smith (University of Sussex - Science and Technology Policy Research Unit (SPRU))
    Abstract: Social innovation requires a transformation in innovation practices. These transformations should be democratic. At least that is the hypothesis in this paper. Makerspaces are studied as potential sites for democratising innovation activity. Makerspaces are community-based workshops where people access the tools, skills and collaborators to design and make almost anything they wish. Makerspaces are also networked spaces for reflection and debate over design and making in society. But they are many other things too, including a place for personal recreation, entrepreneurship, and education - features of increasing interest to institutions. Makerspaces are pulled and pushed in different directions. An open innovation agenda seeks to insert makerspace creativity into global manufacturing circuits under business as usual. Others see in makerspaces an inchoate infrastructure for a commons-based, sustainable and redistributed manufacturing economy. Activists anticipate new relations in material culture and political economy. Makerspaces are thus socially innovative and not socially innovative at the same time: a site of struggle over issues of profound social significance, and hence an example of innovation democracy in action.
    Keywords: Social innovation; democracy; makerspaces; digital fabrication; commons; critical theory; technology
    Date: 2017–05
  13. By: Michael T. Dorsch; Paul Maarek (Université de Cergy-Pontoise, THEMA)
    Abstract: Most theoretical accounts imply that democratization will reduce income inequality as representative governments become accountable to citizens who would bene t from increased redistribution from the elite. Yet, available empirical evidence does not support the notion that democratization, on average, leads to more equal income distributions. This paper starts from the simple observation that autocracies are quite heterogeneous and govern extreme distributional outcomes (also egalitarian). From extreme initial conditions, democratization may lead income distributions to a "middle ground". We thus examine the extent to which initial inequality levels determine the path of distributional dynamics following democratization. Using xed e ects and instrumental variable estimates we demonstrate that egalitarian autocracies become more unequal following democratization, whereas democratization has an equalizing e ect in highly unequal autocracies.
    Date: 2016

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