nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒07‒02
eighteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Strategic vote trading under complete information By Dimitrios Xefteris; Nicholas Ziros
  2. The Political Cost of Being Soft on Crime: Evidence from a Natural Experiment By Drago, Francesco; Galbiati, Roberto; Sobbrio, Francesco
  3. Good Politicians' Distorted Incentives By Margherita Negri
  4. Contested Persuasion By Stergios Skaperdas; Samarth Vaidya
  5. Polls, the Press, and Political Participation: The Effects of Anticipated Election Closeness on Voter Turnout By Bursztyn, Leonardo; Cantoni, Davide; Funk, Patricia; Yuchtman, Noam
  6. Preferential Votes and Minority Representation By Margherita Negri
  7. Interpreting Arrow’s Impossibility Theorem By Dan Usher
  8. Demand for Redistribution: Individuals' Response to Economic Setbacks By Martén, Linna
  9. Partisan Conflict and Income Distribution in the United States: A Nonparametric Causality-in-Quantiles Approach By Mehmet Balcilar; Seyi Saint Akadiri; Rangan Gupta; Stephen M. Miller
  10. Can increased education help reduce the political opportunity gap? By Lindgren, Karl-Oskar; Oskarsson, Sven; Persson, Mikael
  11. Trade Openness and Political Distortions By Grechyna, Daryna
  12. Contesting an International Trade Agreement By Matthew T. Cole; James Lake; Ben Zissimos
  13. From Weber to Kafka: Political Instability and the Rise of an Inefficient Bureaucracy By Gabriele Gratton; Luigi Guiso; Claudio Michelacci; Massimo Morelli
  14. I’m Neither Racist nor Xenophobic, but: Dissecting European Attitudes towards a Ban on Muslims’ Immigration By Marfouk, Abdeslam
  15. The Future of Hong Kong Governance: The Pro-independence Legislators' Election Fallout and Beijing's Political Voice in Hong Kong By Tai Wei Lim
  16. Political Power, Resistance to Technological Change and Economic Development: Evidence from the 19th century Sweden By Tyrefors Hinnerich, Björn; Lindgren, Erik; Pettersson-Lidbom, Per
  17. Political Connections and Antidumping Investigations: Evidence from China By ZHANG Hongyong
  18. Geopolitical Tensions, OPEC News, and Oil Price: A Granger Causality Analysis. By Carlos Medel

  1. By: Dimitrios Xefteris; Nicholas Ziros
    Abstract: We study two-party elections considering that: a) prior to the voting stage voters are free to trade votes for money according to the rules of the Shapley-Shubik strategic market games; and b) voters' preferences -both ordinal rankings and cardinal intensities- are public information. While under plurality rule no trade occurs, under a power-sharing system (voters' utilities are proportionally increasing in the vote share of their favorite party) full trade is always an equilibrium (two voters -the strongest supporter of each party- buy the votes of all others). Notably, this equilibrium implements proportional justice with respect to the two buyers: the ratio of the parties' vote shares is equal to the ratio of the preference intensities of the two most opposing voters.
    Keywords: Vote trading; Complete information; Strategic market games; Power sharing; Proportional justice.
    JEL: C72 D72 P16
    Date: 2017–06
  2. By: Drago, Francesco; Galbiati, Roberto; Sobbrio, Francesco
    Abstract: We provide evidence about voters' response to crime control policies. We exploit a natural experiment arising from the Italian 2006 collective pardon releasing about one third of the prison population. The pardon created idiosyncratic incentives to recidivate across released individuals and municipalities. We show that municipalities where resident pardoned individuals have a higher incentive to recidivate experienced higher recidivism. Moreover, in these municipalities: i) newspapers were more likely to report crime news involving pardoned individuals; ii) voters held worse beliefs on the incumbent governments ability to control crime and iii) with respect to the previous elections, the incumbent national government experienced a worse electoral performance in the April 2008 national elections relative to the opposition coalition. Overall, our findings indicate that voters keep incumbent politicians accountable by conditioning their vote on the observed effects of their policies.
    Keywords: accountability; crime; Natural Experiment; Recidivism.; voting
    JEL: D72 K42
    Date: 2017–06
  3. By: Margherita Negri (School of Economics and Finance, University of St Andrews)
    Abstract: I construct a political agency model that provides a new explanation for sub-optimal policy making decisions by incumbents. I show that electoral incentives can induce politicians to address less relevant issues, disregarding more important ones. Issue importance is defined in terms of the utility voters would receive if the issue was solved. Contrary to existing literature, sub-optimal policy making occurs even when voters are perfectly informed about issues’ characteristics and politicians are policy oriented. I provide an explanation that relies on the negative correlation between issue importance and probability of solving it: for a given effort exerted by incumbents, less relevant issues guarantee higher probability of success. In equilibrium, voters cannot commit to re-elect the incumbent if and only if the most important issue was solved. This is because solving the easy issue also constitutes a positive signal about incumbents’ type. Whenever re-election is sufficiently valuable, then, politicians will choose to address less relevant and easier issues.
    Keywords: political agency, elections, incumbent behavior, politicians’ incentives
    JEL: D02 D72 D78
    Date: 2017–05–06
  4. By: Stergios Skaperdas (Department of Economics, University of California-Irvine); Samarth Vaidya (School of Accounting, Economics and Finance, Deakin University University)
    Abstract: We show how contest and rent-seeking functions can be thought of as persuasion functions that can be derived in a Bayesian setting. Two contestants (such as lobbyists or politicians) produce evidence for a decision-maker (such as an agency head or a voter) who has prior beliefs and possibly other biases and engages in Bayesian updating. The probability of each contestant winning depends on the resources and organization of the contestant, on the biases of the decision-maker, on the truth as well as on other factors. We discuss how this approach can be applied to lobbying government at its three branches (legislative, executive, and judicial, the latter in terms of litigation); political campaigning; general policy formulation and advocacy in the wider media; and ideological struggles.
    Keywords: Contests; Lobbying; Rent-seeking
    JEL: D72 D73 D78 H50
    Date: 2016–05
  5. By: Bursztyn, Leonardo; Cantoni, Davide; Funk, Patricia; Yuchtman, Noam
    Abstract: We exploit naturally occurring variation in the existence, closeness, and dissemination of pre-election polls to identify a causal effect of anticipated election closeness on voter turnout in Swiss referenda. Closer elections are associated with greater turnout only when polls exist. Examining within-election variation in newspaper reporting on polls across cantons, we find that close polls increase turnout significantly more where newspapers report on them most. This holds examining only "incidental" exposure to coverage by periodicals whose largest audience is elsewhere. The introduction of polls had larger effects in politically unrepresentative municipalities, where locally available information differs most from national polls.
    Keywords: media; polls; Voter turnout
    JEL: D72 P16
    Date: 2017–06
  6. By: Margherita Negri (School of Economics and Finance, University of St Andrews)
    Abstract: Under open list proportional representation, voters vote both for a party and for some candidates within its list (preferential vote). Seats are assigned to parties in proportion to their votes and, within parties, to the candidates obtaining the largest number of preferential votes. The paper examines how the number of candidates voters can vote for affects the representation of minorities in parliaments. I highlight a clear negative relationship between the two. Minorities are proportionally represented in parliament only if voters can cast a limited number of preferential votes. When the number of preferential votes increases, a multiplier effect arises, which disproportionately increases the power of the majority in determining the elected candidates.
    Keywords: proportional representation, open list, preferential vote, minority representation
    JEL: D02 D72
    Date: 2017–05–13
  7. By: Dan Usher (Queen's University)
    Abstract: Arrow’s Impossibility Theorem is commonly understood to invoke a dictatorship that is somehow lurking within our voting arrangements. A well-recognized statement of the theorem is that “any constitution that respects transitivity, independence of irrelevant alternatives and unanimity is a dictatorship†. The theorem is really not about dictatorship at all. It is more appropriately interpreted as about the spoiler problem, about the possibility that the presence of a candidate who cannot win the election himself may, nevertheless, violate the “independence of irrelevant alternatives†by switching the outcome of the election between two other candidates. The theorem becomes that no electoral system is guaranteed to avoid the spoiled problem altogether, regardless of the options and regardless of voter preferences.
    Keywords: Impossibility Theorem, Spoilers, Dictatorship
    JEL: D60 D72
    Date: 2017–06
  8. By: Martén, Linna (Immigration Policy Lab, Stanford University)
    Abstract: Although economic circumstances have been argued to be a major determining factor of attitudes to redistribution, there is little well identified evidence at the individual level. Utilizing a unique dataset, with detailed individual information,provides new and convincing evidence on the link between economic circumstances and demand for redistribution (in the form of bene ts and support). The Swedish National Election Studies are constructed as a rotating survey panel, which makes it possible to estimate the causal effect of economic changes. The empirical analysis shows that individuals who experience a job loss become considerably more supportive of redistribution. Yet, attitudes to redistribution return to their initial level as economic prospects improve, suggesting that the effect is only temporary. Despite the fact that a job loss also changes attitudes to the political parties, the probability to vote for the left-wing is not affected.
    Keywords: Redistribution; Social Insurance; Political attitudes; Unemployment
    JEL: D31 D72 H55 J64
    Date: 2017–01–27
  9. By: Mehmet Balcilar (Eastern Mediterranean University); Seyi Saint Akadiri (Montpellier Business School); Rangan Gupta (University of Pretoria); Stephen M. Miller (University of Nevada, Las Vegas)
    Abstract: This study examines the predictive power of a partisan conflict index on income inequality. Our study adds to the existing literature by using the newly introduced nonparametric causality-in-quantile testing approach to examine how political polarization in the Unites States affects several measures of income inequality and distribution overtime. The study uses annual time-series data from 1917-2013. We find evidence of a causal relationship running from partisan conflict to income inequality, except at the upper end of the quantiles. The study suggests that a reduction in partisan conflict will lead to a more equal income distribution.
    Keywords: Partisan Conflict; Income Distribution; Quantile Causality
    JEL: C22 O15
    Date: 2017–06
  10. By: Lindgren, Karl-Oskar (IFAU; Department of Government, Uppsala University; UCLS); Oskarsson, Sven (Department of Government, Uppsala University; UCLS); Persson, Mikael (Department of Political Science, University of Gothenburg)
    Abstract: It is well documented that voter turnout is lower among persons who grow up in families of low socio-economic status compared to persons from high-status families. This paper examines whether reforms in education can help to reduce the socio-economic gap in voting. We distinguish between reforms of two types that may lead to differences in the exercise of voting; (a) changes in the resources allocated to education between different socio-economic groups (reform effects) and (b) changes in return which relate to the impact of education on turnout in different groups. We use this framework to analyze a reform of the Swedish upper secondary school system in the 1990s. This reform increased the length and amount of social science education on vocational training programs. We find that the reform reduced the gap in voting mainly by means of its stronger influence among individuals from families of low socio-economic status.
    Keywords: political inequality; political participation; voting; education
    JEL: H70 I24
    Date: 2017–06–14
  11. By: Grechyna, Daryna
    Abstract: In this paper we explore the relationship between international trade openness and two major political distortions, political polarization and political instability. We consider the extensive and intensive margins of trade as measured by the number of trade partners and trade volume, respectively. As political distortions and trade characteristics of the country are endogenously related, we instrument political instability by the age difference between the youngest and the oldest effective political leaders of a country and the average neighbors' neighbors political instability. We find that political instability reduces trade openness at the extensive and intensive margin while political polarization negatively affects the extensive margin of trade. We propose a simple model that provides intuition on our findings.
    Keywords: trade openness; political instability; political polarization; instrumental variables.
    JEL: F10 H10 O24
    Date: 2017–05
  12. By: Matthew T. Cole (Department of Economics, California Polytechnic State University); James Lake (Department of Economics, Southern Methodist University); Ben Zissimos (Department of Economics, University of Exeter)
    Abstract: After governments sign an international trade agreement (TA), each government must ratify the TA. Often, this ratification process is lengthy and the outcome highly uncertain. We model a two-country TA where, unlike prior literature, pro-trade and anti-trade interest groups in each country recognize that (i) TA implementation requires ratification by both governments and (ii) they cannot condition contributions on their government's ratification decision. In this new class of contests, which we call 'parallel contests', we show that (i) anti- and pro-trade lobbies lobby in equilibrium, (ii) the probability of TA ratification lends itself to intuitive and tractable comparative statics, and (iii) the protection embodied in negotiated TA tariffs reflects a tension between the liberalizing force of lobbying and inherently protectionist government preferences.
    Keywords: Contests, Trade Agreements, Lobbying
    JEL: F02 F12 F13 D44 D72
    Date: 2017
  13. By: Gabriele Gratton (UNSW, Australia); Luigi Guiso (EIEF and CEPR); Claudio Michelacci (EIEF and CEPR); Massimo Morelli (Bocconi University and CEPR)
    Abstract: A well functioning bureaucracy can promote prosperity, as Max Weber maintained. But when bureaucracy gets jammed—a Kafkian situation—it causes stagnation. We propose a dynamic theory of the interaction between legislation and the efficiency of bureaucracy. When bureaucracy is inefficient, the effects of politicians’ legislative acts are hard to assess. Incompetent politicians thus have strong incentives of passing laws to acquire the reputation of skillful reformers. But a plethora of often contradictory laws can itself lead to a collapse in bureaucratic efficiency. This interaction can spawn both Weberian and Kafkian steady states. A temporary surge in political instability, which increases the likelihood of a premature end of the legislature, exerts pressure for reforms, or results in the appointment of short-lived technocratic governments can determine a permanent shift towards the nightmare Kafkian steady state. The aggregate experience of Italy in its transition from the so-called First to the Second Republic fits the narrative of the model quite well. Using micro-data for Italian MPs, we also provide evidence consistent with the claim that when political instability is high, politicians signal their competence through legislative activism, which leads to the overproduction of laws and norms.
    Date: 2017
  14. By: Marfouk, Abdeslam
    Abstract: During his presidential campaign, the new elected President of U.S., Donald Trump, called for a complete ban on Muslims from entering the United States. Although numerous European observers have been shocked by his racist proposal, using the most recent round of the European Social Survey, this paper found that a sizeable proportion of Europeans support a similar ban in their own countries, e.g. Czech Republic (54%), Hungary (51%), Estonia (42%), Poland (33%), and Portugal (33%). The paper also provides evidence that racism and immigration phobia play a key role in shaping Europeans’ support of a ban on Muslim immigration. This finding challenges the discourse and campaigns of the populist groups who exploit the ‘Islamization of Europe’ rhetoric successfully and use various pretexts to justify a call for a ban on Muslims’ immigration, e.g. the threat to security, secularism, democracy, Western ‘identity’, culture and values.
    Keywords: Anti-immigrants sentiment, Anti-Muslim sentiment, Islamophobia, Racism, Xenophobia,
    JEL: F22 J61 J71
    Date: 2016–11
  15. By: Tai Wei Lim
    Abstract: This article examines the activities, street-level and Legco tactics as well as the political orientation of the pro-autonomy advocates, localists and pro-independence groups in Hong Kong, contextualized within the September 2016 Legislative Council Election, ‘Fishball Revolution’ and Beijing's interpretation of the Basic Law that all took place within 2016. The ‘localists’, an amorphous group that ranges from greater Hong Kong autonomy seekers to outright independence sympathizers, were a major supporter of the street vendors at the site of the ‘Fishball Revolution’. After the ‘Fishball Revolution’ tapered off in early 2016, the second leg of post-Occupy Central resistance began in the Legislative Council when prodemocracy as well as pro-independence individuals ran for the Hong Kong Legislative Council or Legco elections. The study of political factionalism within Hong Kong serves as an important comparative case study in analysing other social movements in the Northeast Asian region.
    Keywords: Hong Kong, Legco, independence, Beijing, China
  16. By: Tyrefors Hinnerich, Björn (Research Institute of Industrial Economics (IFN)); Lindgren, Erik (Department of Economics, Stockholm University); Pettersson-Lidbom, Per (Research Institute of Industrial Economics (IFN))
    Abstract: This paper empirically tests the hypothesis that landed elites may block technological change and economic development if they fear that they will lose future political power (Acemoglu and Robinson (2002, 2006, and 2012). It exploits a plausible exogenous change in the distribution of political power of the landed elites, i.e., a Swedish suffrage reform in 1862 which extended the voting rights to industrialists at the local level. Importantly, the votes were also weighted according to taxes paid. Thus, the higher taxes paid the more votes received. As a result, the landed elites had an incentive to block industrialization and technological progress since they otherwise would be “political losers”. We find that the change in political power from the landed elites to industrialists, through the extension of suffrage rights, lead to more investments in railways, faster structural change, and higher firm productivity. We also find that the change of political power affected both labor coercion and the adaption of labor-saving technologies within the agriculture sector along the lines suggested by Acemoglu and Wolitzky (2011) and Acemoglu (2010). Specifically, we find that is more labor coercion and less investments in labor-saving technologies in areas were landowners have more political power. We also provide evidence that many demographic outcomes were affected by the change in political power. Moreover, we find strong evidence of persistence in both extractive economic and political institutions even after the weighted voting system was abolished and universal suffrage introduced in 1919. Specifically, local governments that were previously political controlled by the landed elites were still using both extractive economic and political institutions (Acemoglu and Robinson (2008)).
    Keywords: Economic development and growth; Political institutions; Technological change; Industrialization; Labor coercion; Labor-saving technologies; Persistence of extractive economic and political institutions
    JEL: E22 E23 E24 E62 F15 H41 H52 H53 H70 J10 J21 J22 J23 J24 J31 J32 J41 J43 J47 N10 N33 N53 N63 N73 N93 O10 O14 O15 O18 O33 O40 O52 R10 R42
    Date: 2017–06–21
  17. By: ZHANG Hongyong
    Abstract: Do political connections affect antidumping (AD) investigations? To address this question, we use antidumping filings data combined with micro data on Chinese manufacturing firms for the period 1998-2007. The political connections of a firm are defined by whether it has state-owned capital or whether it is under the administration of central or provincial government. Estimating a probit model of AD filings at the firm level, we find that strong political connections significantly increase the likelihood of AD petitions and affirmative final dumping decisions. State-owned enterprises, firms affiliated with the central or provincial government, low productivity firms, and large firms tend to file AD investigations in China. The industry-level estimation results also confirm that industries with a greater presence of state-owned enterprises are likely to receive trade protection from the Chinese government, controlling for import penetration, year, and industry fixed effects.
    Date: 2017–06
  18. By: Carlos Medel
    Abstract: To what extent geopolitical tensions in major oil-producer countries and unexpected news related to the Organisation of the Petroleum Exporting Countries (OPEC) affect oil price? What are the effects of non-market externalities in oil price? Are oil price forecasters aware or affected by such externalities when making their predictions? In this article, I analyse the influence of these events on oil price by means of Granger causality, using a unique measure of geopolitical tensions accounting for supply disruptions for the 2001-12 period. I found evidence favouring OPEC countries'-related news as an oil price driver jointly with supply disruptions as well as reducing the consensus when unanticipated news are available. When considering separately OPEC news, the evidence-- rather episodic--suggest some influence on the oil price expectations consensus plus a feedback dynamics between OPEC news and the level of oil price expectations.
    Date: 2017–06

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