nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒07‒16
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. Targeted campaign competition, loyal voters, and supermajorities By Pierre C. Boyer; Kai A. Konrad; Brian Roberson
  2. The Political Cost of Being Soft on Crime: Evidence from a Natural Experiment By Drago, Francesco; Galbiati, Roberto; Sobbrio, Francesco
  3. Do Refugees Impact Voting Behavior in the Host Country? Evidence from Syrian Refugee Inflows in Turkey By Altindag, Onur; Kaushal, Neeraj
  4. Opening Access: Banks and Politics in New York from the Revolution to the Civil War By Howard Bodenhorn
  5. Cash for Votes: Evidence from India By Anirban Mitra; Shabana Mitra; Arnab Mukherji
  6. Institutions and Political Party Systems: The Euro Case By Fernández-Villaverde, Jesús; Santos, Tano
  7. Perception of Corruption and Public Support for Redistribution in Latin America By Hauk, Esther; Oviedo, Mónica; Ramos, Xavier
  8. Political (In)Stability of Social Security Reform By Krzysztof Makarski; Joanna Tyrowicz
  9. Making exit costly but efficient: the political economy of exit clauses and secession By Martijn Huysmans; Christophe Crombez
  10. Utilitarianism, Voting and the Redistribution of Income By Dan Usher

  1. By: Pierre C. Boyer; Kai A. Konrad; Brian Roberson
    Abstract: We consider campaign competition in which candidates compete for votes among a continuum of voters by engaging in persuasive e orts that are targetable. Each individual voter is persuaded by campaign e ort and votes for the candidate who targets more persuasive e ort to this voter. Each candidate chooses a level of total campaign e ort and allocates their e ort among the set of voters. We completely characterize equilibrium for the majoritarian objective game and compare that to the vote-share maximizing game. If the candidates are symmetric ex ante, both types of electoral competition dissipate the rents from oce in expectation. However, the equilibria arising under the two electoral objectives qualitatively di er. In majoritarian elections, candidates randomize over their level of total campaign e ort, which provides support for the puzzling phenomenon of the emergence of supermajorities in majoritarian systems. Vote-share maximization leads to an equilibrium in which both candidates make deterministic budget choices and reach a precise fty- fty split of vote shares. We also study how asymmetry between the candidates a ects the equilibrium. If some share of the voters is loyal to one of the candidates, then both candidates expend the same expected e orts in equilibrium, but the advantaged candidate wins with higher probability for majoritarian voting or a higher share of voters for vote-share maximization.
    Keywords: Campaign competition; continuous General Lotto game; vote buying; exible budgets; supermajorities, loyal voters
    JEL: D72 D78 D82
    Date: 2017–03
  2. By: Drago, Francesco (University of Naples Federico II); Galbiati, Roberto (CNRS); Sobbrio, Francesco (European University Institute)
    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, voting, natural experiment, crime, recidivism
    JEL: D72 K42
    Date: 2017–06
  3. By: Altindag, Onur (National Bureau of Economic Research); Kaushal, Neeraj (Columbia University)
    Abstract: We study the effect of an influx of approximately three million Syrian refugees on voting behavior in Turkey. The analysis is based on data from three recent general elections, 54 waves of a monthly survey on voter preferences as well as a unique field survey that directly measures voter attitude towards refugees. We exploit the substantial variation in the inflow of refugees, both over time and across provinces, and use a difference-in-differences approach, comparing the political outcomes in geographic areas with high and low intensity of refugee presence before and after the beginning of Syrian civil war. To address the endogeneity in refugees' location choices, we adopt an instrumental variables approach that relies on the historic dispersion of Arabic speakers across Turkish provinces, taking advantage of the fact that Syrians are more likely to settle in locations where the host population speaks Arabic. Empirical analyses of survey data documents strong polarization in attitudes towards refugees between the supporters and opponents of the ruling Justice and Development party (AKP). Regression analyses of political preferences, however, suggest that the massive inflow of refugees induced a modest and statistically significant drop in support for the ruling AKP. Leavers did not swing to the other major political parties but were more likely to become indecisive or absentee. We show similarly small, but statistically insignificant impact on actual election outcomes during the study period. Based on other questions in the survey data, we interpret our findings as suggestive that while partisanship is highly correlated with public opinion towards refugees, exposure to refugee has little impact on electoral outcomes.
    Keywords: Syrian refugees, voting behavior in Turkey, attitudes towards refugees
    JEL: F22
    Date: 2017–06
  4. By: Howard Bodenhorn
    Abstract: Before 1838 commercial banks in New York, as elsewhere, were incorporated by special legislative charter. In 1838 New York adopted free banking, which transformed bank formation from legislative prerogative to administrative procedure. This paper places this transition within the context of the North, Wallis, and Weingast (2009) model of social transitions from natural states to open access orders, and shows that the transition was more process than discrete event. A confluence of events, including the expansion of the franchise under the 1821 constitution, the emergence of party machine politics under the direction of Martin Van Buren, and the rise of the opposition Antimasonic Party, brought patronage-based politics and the political disbursement of economic privileges under attack. Pre-1838 attempts to open access to finance were turned back by natural state politicians, who used the chartering process to reward party operatives. By the mid-1830s, public distaste for spoils-driven patronage generated pressure to expand access to bank finance, especially among entrepreneurs in southern and western New York frustrated by their limited access to transportation and financial networks. New York’s adoption of free banking then was not an ill-advised response to the panic of 1837, but rather a manifestation of a longer-term process toward a more open polity and economy.
    JEL: N21 P16
    Date: 2017–06
  5. By: Anirban Mitra; Shabana Mitra; Arnab Mukherji
    Abstract: This paper investigates the prevalence of vote-buying in democratic elections where stringent restrictions on corporate donations to political parties exist. We combine data from state assembly elections in India with household-level consumer expenditure surveys (conducted by NSSO) over the period 2004-11. Exploiting a difference-in-differences methodology, we estimate the effects elections have on the consumption of various household items: food, clothes, education-related, etc. Moreover, there is heterogeneity in such consumption adjustments across households. Our estimates suggest that legal sources of funds are not sufficient for generating such "spikes" in consumption and indicate the role of the hidden economy in politics.
    Keywords: Political economy; election finance; black economy
    JEL: D12 D72 H40
    Date: 2017–06
  6. By: Fernández-Villaverde, Jesús; Santos, Tano
    Abstract: This paper argues that institutions and political party systems are simultaneously determined. A large change to the institutional framework, such as the creation of the euro by a group of European countries, will realign -after a transition period- the party system as well. The new political landscape may not be compatible with the institutions that triggered it. To illustrate this point, we study the case of the euro and how the party system has evolved in Southern and Northern European countries in response to it.
    Keywords: euro; Federalism; Party Systems; Political Institutions
    JEL: D72 F30 F40
    Date: 2017–07
  7. By: Hauk, Esther (IAE Barcelona (CSIC)); Oviedo, Mónica (Universitat Autònoma de Barcelona); Ramos, Xavier (Universitat Autònoma de Barcelona)
    Abstract: This paper studies the relationship between people's beliefs about the quality of their institutions, as measured by corruption perceptions, and preferences for redistribution in Latin America. Our empirical study is guided by a theoretical model which introduces taxes into Foellmi and Oechslin's (2007) general equilibrium model of non-collusive corruption. In this model perceived corruption influences people's preferences for redistribution through two channels. On the one hand it undermines trust in government, which reduces people's support for redistribution. On the other hand, more corruption decreases own wealth relative to average wealth of below-average-wealth individuals leading to a higher demand for redistribution. Thus, the effect of perceived corruption on redistribution cannot be signed a priori. Our novel empirical findings for Latin America suggest that perceiving corruption in the public sector increases people's support for redistribution. Although the positive channel dominates in the data, we also and evidence for the negative channel from corruption to demand for redistribution via reduced trust.
    Keywords: preference for redistribution, perception of corruption, political trust, bribery, Latin America
    JEL: D31 D63 H1 H2 P16
    Date: 2017–06
  8. By: Krzysztof Makarski (Group for Research in Applied Economics (GRAPE); Warsaw School of Economics; Narodowy Bank Polski); Joanna Tyrowicz (Group for Research in Applied Economics (GRAPE); University of Warsaw)
    Abstract: We analyze the political stability social security reforms which introduce a funded pillar (a.k.a. privatizations). We consider an economy populated by overlapping generations, which introduces a funded pillar. This reform is efficient in Kaldor-Hicks sense and has political support. Subsequently, agents vote on abolishing the funded system and replacing it with the pay-as-you-go scheme, i.e. “unprivatizing” the pension system. We show that even if abolishing the system reduces welfare in the long run, the distribution of benefits across cohorts along the transition path implies that “unprivatizing” social security is always politically favored. This suggests that property rights definition over retirement savings may be of crucial importance for determining the stability of retirement systems with a funded pillar.
    Keywords: majority voting, pension system reform, welfare
    JEL: H55 D72 C68 E17 E27
    Date: 2017
  9. By: Martijn Huysmans; Christophe Crombez
    Abstract: This article presents a political economic analysis of exit from federations. Over time, members’ benefits from being in a federation can fluctuate because of changes in the state of the world. If a member stops benefitting, it may wish to secede i.e. exit the federation. Based on a real options model, we show that state-contingent exit penalties can induce socially efficient exit decisions. In addition to the substantive implications, this represents a methodological contribution to real options theory. Even if ex-ante specified exit penalties cannot be made state-contingent, they may still enhance social welfare by preventing secession wars. This finding runs counter to the dominant view in the literature that exit clauses should be avoided in federations. As a first test of the model, we derive five hypotheses and show that they hold for the breakup of Yugoslavia and all cases known to us of federations with an exit clause.
    Keywords: Exit clauses, Secession, Federalism, Real options
    Date: 2017–06
  10. By: Dan Usher (Queen's University)
    Abstract: Utilitarianism can be misplaced or ambiguous. As a prescription for individual behaviour, the injunction to seek the greatest good for the greatest number is misplaced because there remains a domain of life where, within the bounds of law and custom, one is free to act as selfishly or as altruistically as one pleases. As a criterion for responsible government, it is ambiguous because there is no universally-recognized perception of the greatest good; people have different perceptions which can only be reconciled by compromise or by voting. The greatest number must be of citizens alive today, but governments may be vicariously concerned about people in other countries or yet to be born, in so far as citizens today have such concerns and are prepared to sacrifice for the benefit of others. The greatest good for the greatest number has no rival as a criterion for government, but it is vague nonetheless. Utilitarian ambiguity is inherited in any attempt to combine the ordinary measure of economic growth with changes in the distribution of income on a common scale.
    Keywords: utilitarianism, voting, redistribution
    JEL: E31 E31 O40
    Date: 2017–07

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