nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒09‒10
six papers chosen by
Eugene Beaulieu
University of Calgary

  1. Economic Voting Under Single-Party and Coalition Governments: Evidence From The Turkish Case By Ali T. Akarca
  2. Politics, Hospital Behavior, and Health Care Spending By Zack Cooper; Amanda E Kowalski; Eleanor N Powell; Jennifer Wu
  3. The Microeconomic Impact of Political Instability: Firm-Level Evidence from Tunisia By Samer Matta
  4. Corporate lobbying for environmental protection By Grey, F.
  5. Identities and Public Policies: Unintended Effects of Political Reservations for Women in India By Guilhem Cassan; Lore Vandewalle
  6. The Impact of Terrorism on Governance in African Countries By Asongu, Simplice; Nwachukwu, Jacinta C.

  1. By: Ali T. Akarca (University of Illinois at Chicago)
    Abstract: Strength of economic voting under single-party and coalition governments is investigated in the case of Turkey. The vote equation developed for this purpose is fitted to data covering 31 parliamentary and local administrations elections held between 1950 and 2015, and considers incumbency advantage, political inertia, strategic voting by the electorate, and political realignments as well. It is found that voters hold coalition governments less responsible for economic performance than single-party governments and minor members of a coalition government less responsible than its major member. The latter gap widens as fragmentation in the government increases numerically and/or ideologically. In governments involving many parties and parties with significantly different ideologies, some of the junior coalition members benefit rather than suffer from a bad economy. These findings may explain, at least partially, why economic performance is poor under coalition governments, particularly under those combining both left and right wing parties.
    Date: 2017–08–17
  2. By: Zack Cooper; Amanda E Kowalski; Eleanor N Powell; Jennifer Wu
    Abstract: This paper examines the link between legislative politics, hospital behavior, and health care spending. When trying to pass sweeping legislation, congressional leaders can attract votes by adding targeted provisions that steer money toward the districts of reluctant legislators. This targeted spending provides tangible local benefits that legislators can highlight when fundraising or running for reelection. We study a provision - Section 508 – that was added to the 2003 Medicare Modernization Act (MMA). Section 508 created a pathway for hospitals to apply to get their Medicare payment rates increased. We find that hospitals represented by members of the House of Representatives who voted ‘Yea’ on the MMA were significantly more likely to receive a 508 waiver than hospitals represented by members who voted ‘Nay.’ Following the payment increase generated by the 508 program, recipient hospitals treated more patients, increased payroll, hired nurses, added new technology, raised CEO pay, and ultimately increased their spending by over $100 million annually. Section 508 recipient hospitals formed the Section 508 Hospital Coalition, which spent millions of dollars lobbying Congress to extend the program. After the vote on the MMA and before the vote to reauthorize the 508 program, members of Congress with a 508 hospital in their district received a 22% increase in total campaign contributions and a 65% increase in contributions from individuals working in the health care industry in the members’ home states. Our work demonstrates a pathway through which the link between politics and Medicare policy can dramatically affect US health spending.
    JEL: D72 H51 I10 I18 P16
    Date: 2017–08
  3. By: Samer Matta (University of Nottingham)
    Abstract: This paper explores the impact of political instability on firms. The context of this paper is Tunisia, a country that saw a surge in political instability events after the 2011 Jasmine revolution. Using a new dataset, we show that political instability was a major concern for small and exporting firms as well as for those that were operating in the tourism sector, those that have suffered from vandalism and those that were located in the interior region of Tunisia. Most importantly, we find that political instability was the most damaging constraint to firm growth after the Arab Spring.
    Date: 2017–07–09
  4. By: Grey, F.
    Abstract: Much of the time, firms lobby against environmental protection, but there are major exceptions to this rule. DuPont, the leading ozone polluter in the 1980s, lobbied for a complete ban of its product. In 2015, in the run up to the Paris Agreement, Europe's six largest oil and gas companies lobbied for a global carbon price. This kind of political support is often pivotal for governments trying to protect the environment. I offer an explanation for this phenomenon, suggesting firms behave as they do in order to steal market share from their rivals. I develop a simple model in which a polluting firm makes a clean technology investment and then lobbies successfully for strong environmental protection, since this will shift market share away from its rival who has not made the clean investment. The key result is that there are situations where it is only because of firms' lobbying that environmental protection is achieved, and this raises welfare.
    Keywords: lobbying, environmental policy, political economics
    JEL: D72 H23 Q58
    Date: 2017–08–31
  5. By: Guilhem Cassan (University of Namur); Lore Vandewalle (IHEID, Graduate Institute of International and Development Studies, Geneva)
    Abstract: Identity is an important determinant of economic behavior. A limitation of the existing literature is the focus on one identity dimension at a time. We show that the multiplicity of identity dimensions matters for economic behavior and that neglecting it may lead policy makers to overlook important, unintended effects of economic policies. We exploit the randomized nature of political reservations for women in India to show that a policy designed along one identity dimension (gender) alters the distribution of the benefits of this policy along another one (caste). We propose an important variation in gender norms across caste groups as a plausible mechanism.
    Keywords: Intersectionality, identity economics, gender, quotas, affirmative action
    Date: 2017–08–30
  6. By: Asongu, Simplice; Nwachukwu, Jacinta C.
    Abstract: This study investigates how terrorism affects governance in 53 African countries for the period 1998-2012. Four terrorism indicators are used namely: domestic, transnational, unclear and total terrorism. Ten bundled and unbundled governance indicators are also employed namely: political governance (consisting of political stability and voice and accountability), economic governance (encompassing government effectiveness and regulation quality); institutional governance (entailing corruption-control and the rule of law) and general governance. The governance indicators are bundled by means of principal component analysis. The empirical evidence is based on Generalized Method of Moments. Three key findings are established. First, all selected terrorism dynamics negatively affect political governance and its constituents. Second, evidence of a negative relationship is sparingly apparent in economic governance and its components. Third, no proof was confirmed in relation to the impact of terrorism and institutional governance with its elements. Fourth, compared with domestic terrorism, transnational terrorism more negatively and significantly affects political, economic and general governances. Policy implications are discussed.
    Keywords: Terrorism; Governance; Africa
    JEL: C52 D74 F42 O38 P37
    Date: 2017–01

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