nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒10‒29
twenty-six papers chosen by
Eugene Beaulieu
University of Calgary

  1. Ethical Voting in Multicandidate Elections By Bouton, Laurent; Ogden, Benjamin
  2. The White Working Class and Voter Turnout in US Presidential Elections, 2004-2016 By Stephen Morgan; Jiwon Lee
  3. "Favoritism and Flooding: Clientelism and Allocation of River Waters" By Sabrin Beg
  4. Government Ideology and Economic Policy-Making in the United States By Niklas Potrafke
  5. Hate at First Sight? Dynamic Aspects of the Electoral Impact of Migrations: The Case of the UK and Brexit By Fabrizio Patriarca; Rama Dasi Mariani; Eugenio Levi
  6. Electoral Externalities in Federations - Evidence from German Opinion Polls By Xenia Frei; Sebastian Langer; Robert Lehmann; Felix Rösel
  7. Repeat Voting: Two-Vote May Lead More People To Vote By Sergiu Hart
  8. "Traditional Elites: Political Economy of Agricultural Technology and Tenancy" By Sabrin Beg
  9. Trump trumps Bush By Rafael Treibich; Martin Van der linden
  10. Can Power-sharing Foster Peace? Evidence From Northern Ireland By Mueller, Hannes Felix; Rohner, Dominic
  11. Effect of Political Decentralization and Female Leadership on Institutional Births and Child Mortality in Rural Bihar, India By Santosh Kumar; Nishith Prakash
  12. The Influence of Migration on Adaptation and Mitigation - a Political Economy Approach By Rybicki, Jakub
  13. Human Capital, Public Debt, and Economic Growth: A Political Economy Analysis By Tetsuo Ono; Yuki Uchida
  14. The impact of oil rents on military spending: Does corruption matter? By Farzanegan, Mohammad Reza
  15. Pampered Bureaucracy, Political Stability, and Trade Integration By Caleb Stroup; Benjamin Zissimos
  16. Why Should Majority Voting Be Unfair? By Breitmoser, Yves; Tan, Jonathan H.W.
  17. How do ideas shape national preferences? The Financial Transaction Tax in Ireland By Niamh Hardiman; Saliha Metinsoy
  18. Economic and Political determinants of government expenditure in the state of Jammu and Kashmir (India): A multivariate co-integration analysis By Samir Ul Hassan; Biswhambhara Mishra
  19. Time preferences and political regimes: Evidence from reunified Germany By Pannenberg, Markus; Friehe, Tim
  20. Riots and the Window of Opportunity for Coup Plotters: Evidence on the Link between Urban Protests and Coups d’État By Gerling, Lena
  21. Sentiments and Economic Activity: Evidence from U.S. States By Jess Benhabib; Mark M. Spiegel
  22. Climate Risk, Cooperation, and the Co-Evolution of Culture and Institutions By Buggle, Johannes; Durante, Ruben
  23. Exiting the fragility trap: Rethinking our approach to the world’s most fragile states By David Carment; Yiagadeesen Samy
  24. Kinship, Fractionalization and Corruption By Mahsa Akbari; Duman Bahrami-Rad; Erik O. Kimbrough
  25. Income Comparisons and Attitudes towards Foreigners By Hyll, Walter; Schneider, Lutz
  26. The economics and politics of foreign aid and domestic revenue By Abrams M.E. Tagem

  1. By: Bouton, Laurent; Ogden, Benjamin
    Abstract: We study the behavior of ethical voters in multicandidate elections. We consider two common electoral rules: plurality and majority runoff. Our model delivers crisper predictions than those of the pivotal voter model. An equilibrium always exists, and is unique for a broad range of parameter values. There are two types of equilibria: (i) the sincere voting equilibrium (voters vote for their most-preferred candidate), and (ii) Duverger's Law equilibria (two candidates attract all the votes). These never coexist. We identify the features of an election that favor sincere voting. Consistent with evidence, incentives to vote sincerely are stronger under majority runoff.
    Keywords: Ethical Voting; Group-based Voting; Majority Runoff Rule; Multicandidate Elections; Plurality Rule
    JEL: C72 D72
    Date: 2017–10
  2. By: Stephen Morgan (Cornell University); Jiwon Lee (Johns Hopkins University)
    Abstract: Through an analysis of the 2004, 2008, 2012, and 2016 Current Population Surveys, as well as the 2004 through 2016 General Social Surveys, this article investigates class differences and patterns of voter turnout for the last four US presidential elections. After developing some support for the claim that a surge of white working-class voters emerged in competitive states in 2016, a portrait of class differences on political matters among white non-Hispanic eligible voters between 2004 and 2016 is offered to consider the consequences of this compositional shift. These latter results are consistent with the claim that racial prejudice, anti-immigrant sentiment, concerns about economic security, and frustration with government responsiveness may have led many white working-class voters to support an outsider candidate who campaigned on these themes. However, these same results give no support to the related claim that the white working class changed its positions on these matters in response to the 2016 primary election campaign or in the months just before the general election.
    Keywords: voter turnout, presidential elections, class
    JEL: J15 D72 D63
    Date: 2017–10
  3. By: Sabrin Beg (Department of Economics, University of Delaware)
    Abstract: Political favoritism is commonly documented in developing democracies, demonstrated by better outcomes in favored regions. There is little understanding of the mechanisms driving such allocation of resources. I demonstrate favoritism in the allocation of agricultural resources, which eventually affect agricultural production. I use close elections to get random variation in a region's alignment with the political party in power and find that water may be diverted to favor areas aligned with the ruling party. Water availability is in favor of upstream districts and against downstream districts when upstream districts are aligned with the ruling party. The opposite is true when downstream regions are aligned with the ruling party. As a result of this favoritism, floods (or droughts) are less likely to occur in downstream regions, and agricultural yields are better there when the ruling party has incentives to favor them. I argue that the ruling party's influence over autonomous agencies that control water allocation allow them to favor their constituents.
    Keywords: Favoritism, Clientelism, Conflict, Environment, Irrigations, Dams
    JEL: O15 Q25 D72 R11
    Date: 2017
  4. By: Niklas Potrafke
    Abstract: This paper describes the role of government ideology on economic policy-making in the United States. I consider studies using data for the national, state and local level and elaborate on checks and balances, especially divided government, measurement of government ideology and empirical strategies to identify causal effects. Many studies conclude that parties do matter in the United States. Democratic presidents generate, for example, higher economic growth than Republican presidents, but these studies using data for the national level do not derive causal effects. Ideology-induced policies are prevalent at the state level: Democratic governors implement somewhat more expansionary and liberal policies than Republican governors. At the local level, government ideology hardly influences economic policymaking. How increasing political polarization and demographic change will influence the role of government ideology on economic policy-making will be an important issue for future research.
    Keywords: government ideology, economic policy-making, partisan politics, United States, Democrats, Republicans, political polarization, causal effects
    JEL: D72 E60 H00 N12 N42 P16
    Date: 2017
  5. By: Fabrizio Patriarca (Sapienza University of Rome); Rama Dasi Mariani (Sapienza University of Rome); Eugenio Levi (Sapienza University of Rome)
    Abstract: Recent studies provide evidence that immigration has a significant positive effect on the vote for parties with anti-immigration agendas. However, this result does not emerge if we apply the same empirical analysis to the UK, whether in the case of Brexit, or if we consider support for Ukip or the political intentions expressed in the BES survey. To account for this and other fragmented evidence in the literature on personal attitudes towards immigration, we formulate the hypothesis that the increase in anti-immigration views resulting from an increased number of immigrants in a neighbourhood is a temporary effect. Different underlying mechanisms may be at the root of such negative short-run effects, such as material concerns about the adjustment cost of new migration flows, or prejudicial attitudes, both denoting a “hate at first sight” effect. We build an econometric strategy to test for the existence of such a short-run effect in the case of Brexit and then assess the robustness of our result using a panel of the vote for Ukip and individual data from the BES survey. The evidence robustly supports our hypothesis and provides a basis for further analysis.
    Keywords: Immigration, Voting, Political Economy, Brexit, Biased attitudes
    JEL: P16 J61 D72 D83
    Date: 2017–10
  6. By: Xenia Frei; Sebastian Langer; Robert Lehmann; Felix Rösel
    Abstract: Party performance in state and federal elections is highly interdependent. Federal elections impact regional voting dynamics and vice versa (electoral externalities). We quantify the extent of simultaneous electoral externalities between two layers of government. We apply vector autoregressions with predetermined variables to unique opinion poll data for the German state of Berlin and the federal level in Germany. State voting intentions for the state and for the federal parliament are the endogenous variables; the federal election trend is treated as predetermined. Our results suggest that shocks in federal parliament voting intention impact state parliament voting intention, but – as a new finding – to the same extent also vice versa. Externalities account for around 10% to 30% of variation at the other level of government. The effects differ across parties. Electoral externalities are less pronounced for the conservative party, but increase in times of government. The opposite holds true for left-wing parties.
    Keywords: elections, opinion polls, time series, party vote shares, federalism
    JEL: D72 H77 C32
    Date: 2017
  7. By: Sergiu Hart
    Abstract: A repeat voting procedure is proposed, whereby voting is carried out in two identical rounds. Every voter can vote in each round, the results of the first round are made public before the second round, and the final result is determined by adding up all the votes in both rounds. It is argued that this simple modification of election procedures may well increase voter participation and result in more accurate and representative outcomes.
    Date: 2017–10
  8. By: Sabrin Beg (Department of Economics, University of Delaware)
    Abstract: Traditional elites can perpetuate their political influence through agricultural relationships. I show that landlords in Pakistan can make cost-effective transfers to sharecropper-tenants, thereby gaining tenants' electoral support and controlling policy. Technological change in agriculture makes sharecropping less optimal, attenuating landlords' electoral advantage. Exogenous productivity change lowers the rate of sharecropping and lowers the likelihood of election of landlords in landlord-dominated areas; in turn electoral competition improves and the composition of public goods shifts. While demonstrating clientelism in rural agrarian societies through sharecropping contracts, I also highlight how changes in agricultural technology affect it.
    Keywords: Land Inequality; Clientelism; Public Goods; Colonial Institutions; Electoral Competition, Traditional Chiefs; Political Economy; Elite Capture; Agricultural Productivity.
    JEL: O10 O13
    Date: 2017
  9. By: Rafael Treibich (University of Southern Denmark); Martin Van der linden (Utah State University)
    Abstract: In the United States, the legitimacy of presidents who do not obtain a majority of the popular vote is often questioned. Debates on electoral legitimacy tend to revolve around the relative importance of the Electoral College and the popular vote. We develop a theory of electoral legitimacy judgments when legitimacy depends on these two factors. Under natural restrictions on these judgments, the legitimacy of some candidates can be unambiguously compared. In particular, we show that D. Trump's election was more legitimate than G.W. Bush's 2000 election. We also show that Trump's election remains one of the most contentious in history.
    JEL: D7
    Date: 2017–10–25
  10. By: Mueller, Hannes Felix; Rohner, Dominic
    Abstract: In the absence of power-sharing, minority groups in opposition have powerful incentives to substitute the ballot with the bullet. In contrast, when power is shared among all major groups in society, the relative gains of sticking to electoral politics are larger for minority groups. After making the theoretical argument, we provide in the current paper an empirical analysis of the impact of power-sharing at the local level, making use of fine-grained data from Northern Ireland's 26 local district councils over the 1973-2001 period. We find that power-sharing has a sizable and robust conflict-reducing impact.
    Keywords: conflict; elections; Northern Ireland; Peace; Power-Sharing; Terrorism
    JEL: C26 D72 D74
    Date: 2017–10
  11. By: Santosh Kumar (Department of Economics and International Business, Sam Houston State University); Nishith Prakash (Department of Economics and Human Rights Institute, University of Connecticut)
    Abstract: In this paper, we investigate the impacts of political decentralization and women reservation in local governance on institutional births and child mortality in the state of Bihar, India. Using the difference-in-differences methodology, we find a significant positive association between political decentralization and institutional births. We also find that the increased participation of women at local governance led to an increased survival rate of children belonging to richer households. We argue that our results are consistent with female leaders having policy preference for women and child well-being.
    Keywords: Gender Quota, Political Decentralization, Institutional Delivery, Child Mortality, Bihar, India
    JEL: H41 I15 J16 O12
    Date: 2017–05
  12. By: Rybicki, Jakub
    Abstract: This paper analyses the effect of migration on other adaptation measures and on mitigation from a political economy perspective. Mitigation is represented by an ecotax while adaptation is represented by a dike. In our model, we focus on a coastal region where individuals are heterogeneous in income and location and where flood risk exists. A main result is that the option to move away decreases the political support for mitigation while the effect on adaptation can be positive or negative.
    JEL: D70 Q54 R23
    Date: 2017
  13. By: Tetsuo Ono (Graduate School of Economics, Osaka University); Yuki Uchida (Faculty of Economics, Seikei University)
    Abstract: This study considers the politics of public education policy in an overlapping- generations model with physical and human capital accumulation. In particular, this study examines how debt and tax financing differ in terms of growth and welfare across generations, as well as which fiscal stance voters support. The analysis shows that the growth rate in debt financing is lower than that in tax financing, and that debt financing creates a tradeoff between the present and future generations. The analysis also shows that debt financing attains slower economic growth than that realized by the choice of a social planner who cares about the welfare of all generations.
    Keywords: Economic growth, Human capital, Public debt, Political equilib- rium
    JEL: D70 E24 H63
    Date: 2016–01
  14. By: Farzanegan, Mohammad Reza
    Abstract: This study shows that the level of corruption matters in how oil rents affect the military spending within countries. Using panel data covering the 1984–2014 period for the Middle East and North Africa countries, we find that the effect of oil rents on military budget depends on the extent of political corruption. Oil wealth boosts military spending when corruption (measured by the re-scaled ICRG index) exceeds a critical score of 5 (out of 6) in the MENA region.
    JEL: H10 H56 H57
    Date: 2017
  15. By: Caleb Stroup; Benjamin Zissimos
    Abstract: This paper examines the effect of trade integration and comparative advantage on one of a country’s institutions, which in turn inuences its economic efficiency. The environment we explore is one in which a country’s lower classes may revolt and appropriate wealth owned by a ruling elite. The elite can avert revolution by incentivizing a potentially productive middle class to sink their human capital into a relatively unproductive bureaucracy. Thus the bureaucracy serves as an institution through which the elite can credibly commit to make transfers to the rest of society, but in the process this reduces economic efficiency. Trade integration alters the relative value of the elite’s wealth. This alters the lower classes’ incentive to revolt on the one hand and the elite’s incentive to subsidize participation in the inefficient bureaucracy on the other. Therefore, the interaction between a country’s comparative advantage and an inefficient economic institution determines whether trade integration increases or reduces economic efficiency. The econometric findings support the model’s main prediction.
    Keywords: efficiency, institutions, property rights, social unrest, trade integration
    JEL: D30 D74 F10 O12 P14
    Date: 2017
  16. By: Breitmoser, Yves (Humboldt University Berlin); Tan, Jonathan H.W. (Nottingham University)
    Abstract: The common use of majority rule in group decision making is puzzling. In theory, it inequitably favors the proposer, and paradoxically, it disadvantages voters further if they are inequity averse. In practice, however, outcomes are equitable. The present paper analyzes data from a novel experimental design to identify the underlying social preferences. Our experiment compares one-shot and indefinite horizon versions of random-proposer majority bargaining (the Baron-Ferejohn game) which allow us to disentangle behaviors compatible with altruism, inequity aversion, and reference dependent altruism. Most subjects are classified as reference-dependent altruists, around 10% are inequity averse. Subjects are egoistic when their payoff is below their reference point, they become efficiency concerned when satisfied, and the reference point is either the ex ante expectation or the opponent\'s payoff. Finally, we successfully test RDA out-of-sample on a number of distribution and bargaining games from three seminal social preference experiments.
    Keywords: bargaining; voting; experiment; social preferences; quantal response equilibrium;
    JEL: C72 C78 D72
    Date: 2017–10–26
  17. By: Niamh Hardiman (UCD School of Politics and International Relations, and UCD Geary Institute for Public Policy); Saliha Metinsoy (UCD School of Politics and International Relations, and UCD Geary Institute for Public Policy)
    Abstract: European countries have been required to formulate a national preference in relation to the EU Financial Transaction Tax. The two leading approaches to explaining how the financial sector makes its views felt in the political process – the structural power of the financial services sector based on potential disinvestment, and its instrumental power arising from direct political lobbying – fall short of providing a comprehensive account. The missing link is how and why policy-makers might be willing to adopt the priorities of key sectors of the financial services industry. We outline how two levels of ideational power might be at work in shaping outcomes, using Ireland as a case study. We argue firstly that background systems of shared knowledge that are institutionalized in policy networks generated broad ideational convergence between the financial sector and policymakers over the priorities of industrial policy in general. Secondly, and against that backdrop, debate over specific policy choices can leave room for a wider range of disagreement and indeed political and ideational contestation. Irish policymakers proved responsive to industry interests in the case of the FTT, but not for the reasons normally given. This work seeks to link literatures in two fields of inquiry. It poses questions for liberal intergovernmentalism in suggesting that the translation of structurally grounded material interests into national policy preferences is far from automatic, and argues that this is mediated by ideational considerations that are often under-estimated. It also contributes to our understanding of how constructivist explanations of policy outcomes work in practice, through a detailed case study of how material and ideational interests interact.
    JEL: F02 F15 F23 F55 H25 H70 P16
    Date: 2017–10–17
  18. By: Samir Ul Hassan; Biswhambhara Mishra
    Abstract: The study examine the long and short run determinants of marked expansion of government expenditure in the state of Jammu and Kashmir. Using annual time series data for the period 1984-2013 and broader data pertaining to economic and political dimension, the paper seeks to identify the significant variables from each dimension that determines the growth of government expenditure in the state. Further, an attempt is made to examine whether the short run economic and political dimensions play any significant role in correcting the disequilibrium in government expenditure over the long run. Using multivariate co-integration technique followed by VECM and OLS model, we find that that absolute level of Government expenditure is largely determined by economic and political environment in the state. From the point of view of economic dimension, the study reveals that NSDP, tax revenue and grants from center are positively significant in determining government expenditure both in long as well as short run, while rate of unemployment and Gross fiscal deficit are found to be negative but significant determinants of government expenditure both in long and short run. An analysis of political dimension exhibits that Majoritarian government leads to lesser government expenditure than coalition government or governorâs rule. Law and order found to be negative but significant determinant of government expenditure while as election cycle is insignificant. Finally, the study reveals that the speed of adjustment of economic variables is significant and any disequilibrium in government expenditure is being restored by economic variables within the period of 2 years.
    JEL: H3 B23 D74 H5
    Date: 2017–10–20
  19. By: Pannenberg, Markus; Friehe, Tim
    Abstract: This paper presents evidence on the impact of political regimes on time preferences using survey measures of present bias and patience. Treating the German separation and reunification as a natural experiment, our results indicate that the GDR's socialist regime significantly diminished the present bias of its former citizens, while their patience appears to be unaffected.
    JEL: D02 D12
    Date: 2017
  20. By: Gerling, Lena
    Abstract: This paper investigates the impact of urban protests on coup attempts in a sample of 39 SSA countries for the period 1990 to 2007. Widespread public discontent, especially when occurring in urban centers, can act as a trigger of coups in autocratic regimes by opening a window of opportunity for leadership removals. Variation in rainfall is used to create an instrument for protests. The results show that rainfall-related popular uprisings in urban areas increase the likelihood of a coup attempt.
    JEL: C26 D74 P16
    Date: 2017
  21. By: Jess Benhabib; Mark M. Spiegel
    Abstract: We examine whether sentiment influences aggregate demand by studying the relationship between the Michigan Survey expectations concerning national output growth and future economic activity at the state level. We instrument for local sentiments with political outcomes, positing that agents in states with a higher share of congressmen from the political party of the sitting President will be more optimistic. This instrument is strong in the first stage, and our results confirm a positive relationship between sentiments and future state economic activity that is robust to a battery of sensitivity tests.
    JEL: E20 E3 E32
    Date: 2017–10
  22. By: Buggle, Johannes; Durante, Ruben
    Abstract: This research examines the historical relationship between economic risk and the evolution of social cooperation. We hypothesize that norms of generalized trust developed in pre-industrial times as a result of experiences of cooperation triggered by the need of subsistence farmers to cope with climatic risk. These norms persisted over time, even after climate had become largely unimportant for economic activity. We test this hypothesis for Europe combining high-resolution climate data for the period 1500-2000 with survey data at the sub-national level. We find that regions with higher inter-annual variability in precipitation and temperature display higher levels of trust. This effect is driven by variability in the growing season months, and by historical rather than recent variability. Regarding possible mechanisms, we find that regions with more variable climate were more closely connected to the Medieval trade network, indicating a higher propensity to engage in inter-community exchange. These regions were also more likely to adopt inclusive political institutions earlier on, and are characterized by a higher quality of local governments still today. Our findings suggest that, by favoring the emergence of mutually-reinforcing norms and institutions, exposure to environmental risk had a long-lasting impact on human cooperation.
    Keywords: Climate; Cooperation; Persistence; Political Institutions; Risk; Trust
    JEL: N53 O11 O13 Q54 Z10
    Date: 2017–10
  23. By: David Carment; Yiagadeesen Samy
    Abstract: Those fragile states whose stagnation is so tenacious despite generous aid programs, and substantial and costly interventions, are stuck in a ‘fragility trap.’ Caught in a low-level equilibrium, trapped states appear to be in a perpetual political and economic limbo that can last for years and in several cases, decades. Our goal is to determine those features that trapped states have in common, and compare changes in those features over time with states that have successfully exited. The paper unfolds in four parts. In the first part we examine key concepts underpinning fragility traps in addition to conducting a review of current theorizing. In the second part we present the results of our large sample analysis. In the third part we compare the results of our comparative case studies with findings from the large sample analysis. In the fourth and final section we conclude with a discussion on how our findings inform policy.
    Date: 2017
  24. By: Mahsa Akbari (Simon Fraser University); Duman Bahrami-Rad (Simon Fraser University); Erik O. Kimbrough (Simon Fraser University)
    Abstract: By shaping patterns of relatedness and interaction, marriage practices influence the relative returns to norms of nepotism/favoritism versus norms of impartial cooperation. In-marriage (e.g. consanguineous marriage) yields a relatively closed society of related individuals and thereby encourages favoritism and corruption. Out-marriage creates a relatively open society with increased interaction between non-relatives and strangers, thereby encouraging impartiality. We report a robust association between in-marriage practices and corruption across countries and across Italian provinces. A stylized corruption experiment comparing subjects from two countries with divergent marriage patterns provides complementary evidence that the degree of impartiality varies with marriage patterns.
    Keywords: corruption, fractionalization, institutions, mating patterns, consanguinity, experiments
    JEL: D7 D0 C9 J1
    Date: 2017–07
  25. By: Hyll, Walter; Schneider, Lutz
    Abstract: We exploit a natural experiment related to the German re-unification to address the question whether disutility from income comparisons affects attitudes towards foreigners. We find robust evidence that East Germans expose strong negative attitudes towards foreigners, particularly from low-wage countries, if they worry about their economic status compared to better-off West Germans.
    JEL: D31 J61 N34
    Date: 2017
  26. By: Abrams M.E. Tagem
    Abstract: The main argument of this paper is that there is considerable heterogeneity in the way aid can shape tax performance in developing countries: through behavioural effects, donor conditionality, recipient policy reform and technical assistance; and these effects are countryspecific. We investigate these effects by applying the dynamic Common Correlated Effects Mean Group estimator to a dataset comprising 84 developing countries from 1980 to 2013. The following results ensued: aid and taxes comprise an equilibrium relation, with a positive long-run association between aid and taxes; causality runs from aid to taxes, suggesting that on average, changes in aid induce permanent changes in taxes.
    Date: 2017

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