nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒07‒23
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Vulnerability and Clientelism By Gustavo J. Bobonis; Paul Gertler; Marco Gonzalez-Navarro; Simeon Nichter
  2. Polls, the Press, and Political Participation: The Effects of Anticipated Election Closeness on Voter Turnout By Leonardo Bursztyn; Davide Cantoni; Patricia Funk; Noam Yuchtman
  3. Concurrent Elections and Political Accountability: Evidence from Italian Local Elections. By Bracco, Emanuele; Revelli, Federico
  4. Voting in the Aftermath of a Pension Reform: The Role of Financial Literacy. By Fornero, Elsa; Lo Prete, Anna
  5. Political Influence, Firm Performance and Survival By Vladimir Sokolov; Laura Solanko
  6. Perception of Corruption and Public Support for Redistribution in Latin America By Esther Hauk; Mónica Oviedo; Xavier Ramos
  7. Incumbecy Disadvantage in U.S. National Politics By Burcu Eyigungor; Satyajit Chatterjee
  8. Law enforcement and political participation: Italy, 1861-65 By Antonio Accetturo; Matteo Bugamelli; Andrea Lamorgese
  9. Towards a Political Theory of the Firm By Luigi Zingales
  10. Making Direct Democracy Work. An economic perspective on the graphe paranomon in ancient Athens By Lyttkens, Carl Hampus; Tridimas, George; Lindgren, Anna
  11. Geopolitics and Asia’s Little Divergence: State Building in China and Japan After 1850 By KOYAMA, Mark; MORIGUCHI, Chiaki; SNG, Tuan-Hwee

  1. By: Gustavo J. Bobonis; Paul Gertler; Marco Gonzalez-Navarro; Simeon Nichter
    Abstract: Political clientelism is often deemed to undermine democratic accountability and representation. This study argues that economic vulnerability causes citizens to participate in clientelism. We test this hypothesis with a randomized control trial that reduced household vulnerability through a development intervention: constructing residential water cisterns in drought-prone areas of Northeast Brazil. This exogenous reduction in vulnerability significantly decreased requests for private benefits from local politicians, especially by citizens likely to be involved in clientelistic relationships. We also link program beneficiaries to granular voting outcomes, and show that this reduction in vulnerability decreased votes for incumbent mayors, who typically have more resources to engage in clientelism. Our evidence points to a persistent reduction in clientelism, given that findings are observed not only during an election campaign, but also a full year later.
    JEL: O11 O12 O54 P16
    Date: 2017–07
  2. By: Leonardo Bursztyn (University of Chicago); Davide Cantoni (Ludwig-Maximilians Universitåt München); Patricia Funk (Università della Svizzera Italiana); Noam Yuchtman (Haas School of Business, University of California--Berkeley)
    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: voter turnout, media, polls
    JEL: D72 P16
    Date: 2017–06
  3. By: Bracco, Emanuele; Revelli, Federico (University of Turin)
    Abstract: This paper analyses the effects of holding concurrent elections in multi-tiered government structures on turnout decision and voting behaviour, based on municipal and provincial electoral data from Italy during the 2000s. When the less-salient provincial elections are held concurrently with the highly salient municipal elections, we observe three main effects: (1) turnout increases significantly by almost ten percentage points; (2) issues that are specific of the more salient (mayoral) contest affect the less salient (provincial) contest, with mayors' fiscal decisions impacting on the vote share of provincial incumbents; (3) issues that are specific to the less salient (provincial) contest stop affecting provincial elections outcomes. These findings shed light on how voters acquire information on incumbent politicians, and proves that the effectiveness of an election as an accountability tool may be hindered by the concurrence with higher-stakes elections.
    Date: 2017–05
  4. By: Fornero, Elsa; Lo Prete, Anna (University of Turin)
    Abstract: Economic reforms affecting people’s lives are generally quite unpopular and may imply an electoral cost. This can derive, among other things, from lack of understanding of the basic elements of reforms. Our paper shows that the electoral cost of a pension reform is significantly lower in countries where the level of financial literacy is higher. The evidence from data on legislative elections held between 1990 and 2010 in 21 advanced countries is robust when we control for macro-economic conditions, demographic factors, and characteristics of the political system. Interestingly, these findings are not robust when we use less specific indicators of human capital – such as general schooling - supporting the view that knowledge of basic economic and financial concepts has distinctive features that may help reduce the electoral cost of reforms having a relevant impact on the life cycle of individuals.
    Date: 2017–06
  5. By: Vladimir Sokolov (National Research University Higher School of Economics); Laura Solanko (Bank of Finland)
    Abstract: We examine how regional-level political influence affects firm financial performance and survival. Combining representative survey data on mid-sized manufacturing firms in Russia with official registry data, we find that politically influential firms exhibit higher profitability and retain larger financial investments than non-influential firms. Most importantly, our empirical analysis suggests that the benefits of influence may be transient. Influential firms experienced significantly lower growth during our sample period than non-influential firms. Moreover, influential firms had a significantly higher probability of being liquidated than non-influential firms and the likelihood of the subsequent plant utilization by a new firm was higher for the politically influential liquidated firms.
    Keywords: political influence, firm performance, firm liquidation, government quality
    JEL: D22 D72 G33 G38
    Date: 2017
  6. By: Esther Hauk (Barcelona Graduate School of Economics); Mónica Oviedo (Dept. Economia Aplicada, Facultat dEconomia i Empresa, Campus UAB); Xavier Ramos (Dept. Economia Aplicada, Facultat dEconomia i Empresa, Campus UAB)
    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 find 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
  7. By: Burcu Eyigungor (Federal Reserve Bank of Philadelphia); Satyajit Chatterjee (Federal Reserve Bank of Philadelphia)
    Abstract: We document that postwar U.S. national elections show a strong pattern of ``incumbency disadvantage'': If the presidency has been held by a party for some time, that party tends to lose seats in Congress. A dynamic model of partisan politics with inertia in public expenditure policies and endogenously determined election outcomes is developed to explain this finding.
    Date: 2017
  8. By: Antonio Accetturo (Bank of Italy); Matteo Bugamelli (Bank of Italy); Andrea Lamorgese (Bank of Italy)
    Abstract: Does tougher law enforcement positively affect political participation? This paper addresses this question, which hinges upon the causal impact of formal institutions on informal ones, by using a historical event from 19th century Italy. This event was the Pica Law, which was introduced in 1863 to fight a surge of criminal violence in Southern Italy and to ensure a safer environment for wealthy people, the only ones allowed to vote at that time. Our main finding, obtained using a spatial regression discontinuity technique in a diff-in-diffs framework, is that voter turnout greatly increased in those areas where the Pica Law was applied, compared with bordering and otherwise similar areas. This result is confirmed by a number of robustness checks and placebo exercises and turns out to be persistent over time.
    Keywords: turnout, electoral results, spatial discontinuity
    JEL: D72 R5
    Date: 2017–07
  9. By: Luigi Zingales
    Abstract: Neoclassical theory assumes that firms have no power of fiat any different from ordinary market contracting, thus a fortiori no power to influence the rules of the game. In the real world, firms have such power. I argue that the more firms have market power, the more they have both the ability and the need to gain political power. Thus, market concentration can easily lead to a “Medici vicious circle,” where money is used to get political power and political power is used to make money.
    JEL: G3
    Date: 2017–07
  10. By: Lyttkens, Carl Hampus (Department of Economics, Lund University); Tridimas, George (Department of Accounting, Finance and Economics, Ulster University); Lindgren, Anna (Centre for Mathematical Sciences, Lund University)
    Abstract: The specific way the Athenians set up their democracy presents both theoretical and empirical challenges. Decisions were taken by majority vote in the Assembly. To keep politicians in line, the Athenians first used ostracism, which however was replaced by the graphe paranomon around 415 BCE. The latter provided that anybody who had made a proposal in the Assembly could be accused of having made an unconstitu¬tional suggestion, bringing a severe penalty if found guilty. We know of 35 such cases between 403 and 322. During the fourth century the notion of illegality was extended to a mere question of undesirability. Henceforth any decision by the Assembly could be overturned by the courts, but if the accuser failed to get at least 20% of the jury votes, he was punished instead. While these rules can be seen as a safeguard against bad decisions, they also provided the Athenian politicians with important information about the relative strength of their political support. This effect has not been analysed before, and it may help explain the relative stability of political life in classical Athens. Furthermore this analysis also contributes to our understanding of a curious but often overlooked fact, namely that the decrees of the Athenian Assembly to a great extent concerned honorary rewards, and the use of the graphe paranomon in turn was largely focussed on the honorary decrees.
    Keywords: Ancient Athens; graphe paranomon; direct democracy; judicial review; voter; information; political stability; jury composition
    JEL: H10 N40 N43
    Date: 2017–07–14
  11. By: KOYAMA, Mark; MORIGUCHI, Chiaki; SNG, Tuan-Hwee
    Abstract: We provide a new framework to account for the diverging paths of political development in China and Japan during the late nineteenth century. The arrival of Western powers not only brought opportunities to adopt new technologies, but also fundamentally threatened the sovereignty of both countries. These threats and opportunities produce an unambiguous impetus toward centralization and modernization for small states, but place conflicting demands on larger states. We use our theory to study why China, which had been centralized for much of its history, experienced gradual disintegration upon the Western arrival, and how Japan rapidly unified and modernized.
    Keywords: China, Japan, Geopolitics, State Capacity, Political Fragmentation, Political Centralization, Economic Modernization
    Date: 2017–07

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