nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒08‒27
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Abandon Ship? Party Brands and Politicians' Responses to a Political Scandal By Gianmarco Daniele; Sergio Galletta; Benny Geys
  2. The Political Economy of Program Enforcement: Evidence from Brazil By Brollo, Fernanda; Kaufmann, Katja Maria; Ferrara, Eliana La
  3. The Political Economy of Transportation Investment By Edward L. Glaeser; Giacomo A.M. Ponzetto
  4. Fundamental Errors in the Voting Booth By Edward L. Glaeser; Giacomo A.M. Ponzetto
  5. Migration-Induced Redistribution with and without Migrant's Voting By Assaf Razin; Efraim Sadka
  6. Fiscal policy in developing countries: Do governments wish to have procyclical fiscal reactions? By GBATO, ANDRE
  7. Political approval ratings and economic performance: evidence from Latin America By Rodrigo Cerda; Natalia Gallardo; Rodrigo Vergara
  8. Divided We Stand: Immigration Attitudes, Identity, and Subjective Well-Being By Heinz Welsch; Jan Kuehling
  9. The ties that bind: Geopolitical motivations for economic integration By Hinz, Julian
  10. Relationship between Remittances and Macroeconomic Variables in Times of Political and Social Upheaval: Evidence from Tunisia's Arab Spring By Jamal Bouoiyour; Refk Selmi; Amal Miftah
  11. Think Tank networks of German neoliberalism. Power structures in economics and economic policies in post-war Germany By Stephan Puehringer
  12. Collective Action, White Flight, and the Origins of Formal Segregation Laws By Werner Troesken; Randall Walsh
  13. Neoliberal Think Tanks as (new) actors in Austrian socio-political discourses. The case of the Hayek Institute and Agenda Austria By Stephan Puehringer; Christine Stelzer-Orthofer

  1. By: Gianmarco Daniele (Barcelona Economic Institute (IEB), University of Barcelona (UB), Spain); Sergio Galletta (IdEP, Economia, Universita' Svizzera italiana, Switzerland); Benny Geys (BI Norwegian Business School, Oslo, Norway)
    Abstract: In this article, we study politicians' - rather than voters' - responses to the main political scandal in Italian recent history (Tangentopoli), and overcome endogeneity concerns by analysing the local implications of this national corruption scandal. We find that local politicians withdraw support for incumbents in parties hit by Tangentopoli - inducing increased political instability in such municipalities. Moreover, politicians in parties hit by the scandal exhibit higher rates of party switching and lower re-running rates. Scandals thus appear to decrease the value of the party "brand", and become transmitted across politicians and levels of government via partisan cues.
    Keywords: Accountability, Corruption, Party Cues, Brands, Multi-level governance
    JEL: D72 H30 H77
    Date: 2017–07–27
  2. By: Brollo, Fernanda (University of Warwick); Kaufmann, Katja Maria (Mannheim University); Ferrara, Eliana La (Bocconi University)
    Abstract: Do politicians manipulate the enforcement of conditional welfare programs to in- fluence electoral outcomes? We study the Bolsa Familia Program (BFP) in Brazil, which provides a monthly stipend to poor families conditional on school attendance. Repeated failure to comply with this requirement results in increasing penalties. First, we exploit random variation in the timing when beneficiaries learn about penalties for noncompliance around the 2008 municipal elections. We find that the vote share of candidates aligned with the President is lower in zip codes where more beneficiaries received penalties shortly before (as opposed to shortly after) the elections. Second, we show that politicians strategically manipulate enforcement. Using a regression discontinuity design, we find weaker enforcement before elections in municipalities where mayors from the presidential coalition can run for reelection. Finally, we provide evidence that manipulation occurs through misreporting school attendance, particularly in municipalities with a higher fraction of students in schools with politically connected principals.
    Keywords: JEL Classification:
    Date: 2017
  3. By: Edward L. Glaeser; Giacomo A.M. Ponzetto
    Abstract: Will politics lead to over-building or under-building of transportation projects? In this paper, we develop a model of infrastructure policy in which politicians overdo things that have hidden costs and underperform tasks whose costs voters readily perceive. Consequently, national funding of transportation leads to overspending, since voters more readily perceive the upside of new projects than the future taxes that will be paid for distant highways. Yet when local voters are well-informed, the highly salient nuisances of local construction, including land taking and noise, lead to under-building. This framework explains the decline of urban mega-projects in the US (Altshuler and Luberoff 2003) as the result of increasingly educated and organized urban voters. Our framework also predicts more per capita transportation spending in low-density and less educated areas, which seems to be empirically correct.
    JEL: D72 D82 H54 H76 R42 R53
    Date: 2017–08
  4. By: Edward L. Glaeser; Giacomo A.M. Ponzetto
    Abstract: Psychologists have long documented that we over-attribute people’s actions to innate characteristics, rather than to luck or circumstances. Similarly, economists have found that both politicians and businessmen are rewarded for luck. In this paper, we introduce this “Fundamental Attribution Error” into two benchmark political economy models. In both models, voter irrationality can improve politicians’ behavior, because voters attribute good behavior to fixed attributes that merit reelection. This upside of irrationality is countered by suboptimal leader selection, including electing leaders who emphasize objectives that are beyond their control. The error has particularly adverse consequences for institutional choice, where it generates too little demand for a free press, too much demand for dictatorship, and responding to endemic corruption by electing new supposedly honest leaders, instead of investing in institutional reform.
    JEL: D72
    Date: 2017–08
  5. By: Assaf Razin; Efraim Sadka
    Abstract: We are motivated by the unique migration experience of Israel of a supply-side shock triggering skilled immigration and the concurrent decline in welfare-state redistribution. This paper develops a model, which can provide an explanation for the mechanism through which a supply-side shock triggering high-skill migration can also reshape the political-economy balance and the redistributive policies. The paper highlights the differences in the political-economy induced redistribution policies between the cases in which migrants participate in the electoral system and the case where they do not. When migrants are allowed to vote, and they take advantage of this right, then, following the shock, all income groups gain, except low skilled immigrants who lose. When migrants are not allowed to vote, or choose not to participate in elections, all income groups gain, except the skilled migrants who lose.
    JEL: F22 H0
    Date: 2017–08
    Abstract: This study aimed to analyze the intentionally fiscal position of the governments of developing countries. Our results suggest that a significant proportion of developing countries adopts counter-cyclical positions. However, forecasting errors weak their positions. Results lead to conclude that if developing countries want to increase the effectiveness of their fiscal policies, they must build the skills of their forecast offices, and enhance the political and institutional framework governing the budget process.
    Keywords: Fiscal policy; Real Time Data; Developing countries; Generalized moment method, Revision errors
    JEL: C23 E30 E62 H30 H60
    Date: 2017–08–19
  7. By: Rodrigo Cerda (Centro Latinoamericano de Políticas Económicas y Sociales (CLAPES UC), Santiago); Natalia Gallardo (Banco Central de Chile, Santiago); Rodrigo Vergara (Centro de Estudios Públicos, Santiago)
    Abstract: Using a panel of 18 Latin American countries for the period 2002-2015, we study the impact of economic variables on government approval. Our empirical analysis shows that the composition of government spending, growth and inflation are related to government�s approval ratings in Latin America. More specifically, we show that for each point of additional growth the approval rating can increase as much as 4.2 percentage points; and that an increase in the share of social spending in total government spending is associated with 2.5 percentage points of increase in government approval. Inflation also affects negatively government�s approval. This tells us that a program focused on social spending, growth and macroeconomic stability have a positive influence in the popularity of the government.
    Keywords: Government approval, Government spending, GDP growth, Latin America
    JEL: O11 H53
    Date: 2017–08
  8. By: Heinz Welsch (University of Oldenburg, Department of Economics); Jan Kuehling (University of Oldenburg, Department of Economics A)
    Abstract: : Immigration is a crucial issue in contemporary politics, and attitudes towards immigration are highly dispersed in many countries. We treat individuals’ immigration friendliness (IF) as a feature of their self-image or identity and hypothesize that, similar to other pro-social self-images, greater immigration friendliness is associated with greater subjective well-being (SWB). We further hypothesize that greater disparity of immigration attitudes yields social antagonism and as such is associated with less SWB. Finally, we hypothesize that greater disparity of immigration attitudes permits immigration-friendly individuals to differentiate themselves from others, thus raising the SWB benefit of holding an immigration-friendly self- image. Using 225,356 observations from 35 European countries, 2002-2015, we find evidence consistent with the hypotheses stated above. A 1-standard-deviation (SD) increase in IF is associated with an increase in 11-point life satisfaction (LS) by 0.15 to 0.32 points, whereas a 1-SD increase in attitude disparity is associated with a decrease in LS by 0.05 to 0.11 points.
    Keywords: immigration; attitudes; identity; antagonism; social conflict; subjective well-being
    Date: 2017–08
  9. By: Hinz, Julian
    Abstract: Economic determinants of economic integration agreements (EIAs) have received ample attention in the economic literature. Political motivations for such agreements have been mostly studied as functions of domestic politics or in the context of conflict. In this paper I suggest a different narrative. Economic integration could be used as an instrument of foreign policy, where political considerations influence the choice of contracting partners. I sketch a simple model that exhibits the proposed mechanism in which a big country chooses between alternatives for integration in terms of economic and political welfare gains, while the small country is indifferent between possible partners for integration. In the empirical part I use a novel dataset on political events to test the predictions of the model and find evidence for the hypothesis that there is more to economic integration than "just trade". Geopolitical considerations play a determining role in the choice of the contracting partner country and the depth of economic integration.
    Keywords: trade agreements,geopolitics,gravity equation,event data
    JEL: F13 F15 F51 F53
    Date: 2017
  10. By: Jamal Bouoiyour (CATT); Refk Selmi (CATT); Amal Miftah (CATT)
    Abstract: If Tunisia was hailed as a success story with its high rankings on economic, educational, and other indicators compared to other Arab countries, the 2011 popular uprisings demonstrate the need for political reforms but also major economic reforms. The Arab spring highlights the fragility of its main economic pillars including the tourism and the foreign direct investment. In such turbulent times, the paper examines the economic impact of migrant' remittances, expected to have a countercyclical behavior. Our results reveal that prior to the Arab Spring, the impacts of remittances on growth and consumption seem negative and positive respectively, while they varyingly influence local investment. These three relationships held in the short-run. By considering the period surrounding the 2011 uprisings, the investment effect of remittances becomes negative and weak in the short-and medium-run, whereas positive and strong remittances' impacts on growth and consumption are found in the long term.
    Date: 2017–07
  11. By: Stephan Puehringer
    Abstract: Even after the financial crisis, economists still exert influence on politics and society in general on several levels and thus can be still interpreted as a discipline of power. Particularly in Germany there is a long tradition of institutionalized economic policy advice, which offers economists a channel of direct and indirect impact on politics. During the European crisis policies many scholar stressed a "comeback", "revival" or "return" of ordoliberalism, the German variety of neoliberalism. In this paper I show how economists connected in the "German neoliberal thought collective" since the end of WW II have built up a strong institutional powerstructure, which had a continuous impact on German economic politics over many decades. It can be shown that in several turning points of German economic history, German neoliberalism and its core politico-economic concept of "Social market economy" served as guiding principle of economic policy. Furthermore I will show that up to now there is an uneven power balance among economists with high political and societal influence, i.e. economists connected in Keynesian or union-linked networks are in a minority position compared to the dense network of economists in the "German neoliberale thought collective". Hence, what was observed during the European crisis policies as a "comeback of ordoliberalism" should rather be interpreted as the consequence of a persistant influence of German neoliberal networks on German economic politics over many decades.
    Date: 2016–09
  12. By: Werner Troesken; Randall Walsh
    Abstract: This paper develops and tests a simple model to explain the origins of municipal segregation ordinances. Passed by cities between 1909 and 1917, these ordinances prohibited members of the majority racial group on a given city block from selling or renting property to members of another racial group. Our results suggest that prior to these laws cities had created and sustained residential segregation through private norms and vigilante activity. Only when these private arrangements began to break down during the early 1900s did whites start lobbying municipal governments for segregation ordinances.
    JEL: H1 K11 N32 N92 R14 R31
    Date: 2017–08
  13. By: Stephan Puehringer; Christine Stelzer-Orthofer (Institute for Social and Societal Politics, Johannes Kepler University Linz, Austria)
    Abstract: Austrian chancellor Schüssel’s right wing-conservative administration during the early 2000s induced a number of neoliberal reforms, resting on the strict dichotomy of state and politics vs. markets and private enterprise. Whereas the former in this conception is characterized as inefficient, static and uneconomic, the latter is euphemistically attributed with liberty, efficiency and dynamics. After this far-reaching neoliberal turn Austrian neoliberal during the last years think tanks increasingly have enter ed socio-political discourses. In this article , applying a social network analysis, on the one hand we demonstrate the close interconnections of think tanks like e.g. the Hayek Institute and the Agenda Austria in existing market radical networks of economic potent actors and employer s’ associations. On the other hand we employ a discourse analysis framework focusing on documents of think tanks self-representation and media response in opinion-leading newspapers in order to show that neoliberal think tanks are more and more becoming an integral part of a “discourse coalition†(Hajer) for the dismantling of the Austrian welfare state.
    Date: 2016–01

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