nep-pol New Economics Papers
on Positive Political Economics
Issue of 2017‒11‒12
twenty papers chosen by
Eugene Beaulieu
University of Calgary

  1. Exposition to Corruption and Political Participation: Evidence from Italian Municipalities By Tommaso Giommoni
  2. Political Awareness, Microtargeting of Voters, and Negative Electoral Campaigning By Burkhard Schipper; Hee Yeul Woo
  3. Image Concerns and the Political Economy of Publicly Provided Private Goods By Tobias König; Tobias Lausen; Andreas Wagener
  4. Youth Enfranchisement, Political Responsiveness and Education Expenditure: Evidence from the U.S. By Bertocchi, Graziella; Dimico, Arcangelo; Lancia, Francesco; Russo, Alessia
  5. Does electoral competition curb party favoritism? By Marta Curto‐Grau; Albert Solé‐Ollé; Pilar Sorribas‐Navarro
  6. Efficiency Consequences of Affirmative Action in Politics: Evidence from India By Das, Sabyasachi; Mukhopadhyay, Abhiroop; Saroy, Rajas
  7. Russia's 1999–2000 election cycle and the politics-banking interface By Schoors, Koen; Weill, Laurent
  8. Reluctant to reform? A note on risk-loving politicians and bureaucrats By Thomas, Tobias; Heß, Moritz; Wagner, Gert G.
  9. Reluctant to Reform? A Note on Risk-Loving Politicians and Bureaucrats By Thomas, Tobias; Heß, Moritz; Wagner, Gert G.
  10. The Political Economy of Liberal Democracy By Sharun Mukand; Dani Rodrik
  11. Towards a More Nuanced Understanding of How International Pooling of Authority May Affect the Perceived Legitimacy of Global Governance By Brilé Anderson; Thomas Bernauer; Aya Kachi
  12. Institutional Choice and Cooperation in Representative Democracies: An Experimental Approach By Schories, Fanny E.
  13. Using Cheap Talk to Polarize or Unify a Group of Decision Makers By Daeyoung Jeong
  14. Opinion Dynamics via Search Engines (and other Algorithmic Gatekeepers) By Fabrizio Germano; Francesco Sobbrio
  15. Natural Disasters and Political Engagement: Evidence from the 2010-11 Pakistani Floods By Fair, C. Christine; Kuhn, Patrick; Malhotra, Neil; Shapiro, Jacob
  16. Politically Feasible Reforms of Non-Linear Tax Systems By Felix Bierbrauer; Pierre C. Boyer
  17. Does Political Competition affect Fiscal Structure? What time series analysis says for Canada, 1870 - 20151 By J. Stephen Ferris; Stanley L. Winer
  18. Majority Rule and Selfishly Optimal Nonlinear Income Tax Schedules with Discrete Skill Levels By Craig Brett; John A Weymark
  19. Term limits and voter turnout By Francisco José Veiga; Linda Gon¸calves Veiga
  20. The Myth of Deconsolidation: Rising Liberalism and the Populist Reaction By Alexander, Amy C.; Welzel, Christian

  1. By: Tommaso Giommoni
    Abstract: The aim of this paper is to study the effect of local corruption on political participation which is mediated by the press. Focusing on Italy, we generate a daily measure of exposition to local corruption screening articles of main Italian press agency. Applying an event-study methodology on local elections, two results emerge. First, corruption exposition reduces citizens participation: voter turnout decreases but characteristics of elected politicians are not affected; second, politicians participation modifies: number of candidates lowers along with proportion of running freshmen. These results suggest that corruption exposition produces resignation rather than retaliation in terms of political participation.
    Keywords: corruption, media, turnout, political selection, electoral competition
    JEL: D72 D73 H70 K42
    Date: 2017
  2. By: Burkhard Schipper; Hee Yeul Woo (Department of Economics, University of California Davis)
    Abstract: We study the informational effectiveness of electoral campaigns. Voters may not think about all political issues and have incomplete information with regard to political positions of candidates. Nevertheless, we show that if candidates are allowed to microtarget voters with messages then election outcomes are as if voters have full awareness of political issues and complete information about candidate's political positions. Political competition is paramount for overcoming the voter's limited awareness of political issues but unnecessary for overcoming just uncertainty about candidates' political positions. Our positive results break down if microtargeting is not allowed or voters lack political reasoning abilities. Yet, in such cases, negative campaigning comes to rescue.
    Keywords: Electoral competition, campaign advertising, multidimensional policy space, microtargeting, dog-whistle politics, negative campaigning, persuasion games, unawareness
    JEL: C72 D72 D82 P16
    Date: 2017–05–02
  3. By: Tobias König; Tobias Lausen; Andreas Wagener
    Abstract: Governments often provide their citizens with goods and services that are also supplied in markets: education, housing, nutritional assistance, etc. We analyze the political economy of the public provision of private goods when individuals care about their social image. We show that image concerns motivate richer individuals to vote for the public provision of goods they themselves buy in markets, the reason being that a higher provision level attracts more individuals to the public system, enhancing the social exclusivity of market purchases. In effect, majority voting may lead to a public provision that only a minority of citizens use. Users in the public system may enjoy better provision than users in the private system. We characterize the coalitions that can prevail in a political equilibrium.
    Keywords: in-kind provision, status preferences, majority voting
    JEL: H42 D72
    Date: 2017
  4. By: Bertocchi, Graziella (University of Modena and Reggio Emilia); Dimico, Arcangelo (Queen's University Belfast); Lancia, Francesco (University of Salerno); Russo, Alessia (Norwegian Business School (BI))
    Abstract: This paper studies the effect of preregistration laws on government spending in the U.S. Preregistration allows young citizens to register before being eligible to vote and has been introduced in different states in different years. Employing a difference-in-differences regression design, we first establish that preregistration shifts state-level government spending toward expenditure on higher education. The magnitude of the increase is larger when political competition is weaker and inequality is higher. Second, we document a positive effect of preregistration on state-provided student aid and its number of recipients by comparing higher education institutions within border-county pairs. Lastly, using individual-level data on voting records, we show that preregistration promotes a de facto youth enfranchisement episode. Consistent with a political economy model of distributive politics, the results collectively suggest strong political responsiveness to the needs of the newly-enfranchised constituent group.
    Keywords: education expenditure, political responsiveness, preregistration, voter turnout, youth enfranchisement
    JEL: D72 H52 P16
    Date: 2017–10
  5. By: Marta Curto‐Grau (IEB, Universitat de Barcelona); Albert Solé‐Ollé (IEB, Universitat de Barcelona); Pilar Sorribas‐Navarro (IEB, Universitat de Barcelona)
    Abstract: We study whether incumbents facing uncontested elections channel public spending towards co‐partisan officials more than is the case of incumbents that are worried about their chances of re‐election. To do so, we draw on data detailing capital transfers allocated by Spanish regions to local governments during the period 1995‐2007. Using a regression discontinuity design, we document strong and robust effects. We find that, on average, a mayor belonging to the same party as that of the regional president obtains nearly twice the amount in grants as is received by a mayor belonging to an opposition party. This effect is much greater for regional incumbents that won the previous election by a large margin, but it disappears in the case of highly competitive elections. The effects estimated by difference‐in‐differences are not so great but they point in the same direction. Overall, the results are consistent with predictions that regional incumbents focus on obtaining the most votes possible when elections are strongly contested, while they seek to increase the number of aligned mayors when their position at the ballot box is not vulnerable.
    Keywords: Political parties, intergovernmental transfers, distributive politics, regression discontinuity
    JEL: C2 D72
    Date: 2017–11
  6. By: Das, Sabyasachi (Ashoka University); Mukhopadhyay, Abhiroop (Indian Statistical Institute); Saroy, Rajas (Indian Statistical Institute)
    Abstract: We examine how overall delivery of public goods (i.e., efficiency) is affected by affirmative action in elections, i.e., restricting candidate entry in elections to one population group. We argue that when group identities are salient, such restrictions on candidate entry need not necessarily reduce electoral competition. In fact, when group sizes are asymmetric, affirmative action may increase electoral competition and consequently, improve provision of public goods. This happens because in an open election, the (best) candidate from the large group facing a minority candidate suffers from a moral hazard problem. Affirmative action eliminates this problem and increases within-group competition. We study a randomized caste based quota policy in village elections in a large state in India to test these claims. Consistently, we find that electoral quotas for a caste group (OBCs) increased provision of public goods in villages with high OBC population shares. We show that this did not happen due to changes in politicians' preferences or quality, and the increased provision of public goods did not disproportionately benefit the OBCs. Further, using election data, we show evidence in favor of our mechanism: win margins are narrower in quota elections relative to open elections in villages where OBC group is large. Our results highlight that efficiency concerns regarding affirmative action in politics may need reevaluation.
    Keywords: electoral competition, reservation, public goods, Gram Panchayat
    JEL: D72 D78 H41 O12
    Date: 2017–10
  7. By: Schoors, Koen; Weill, Laurent
    Abstract: We investigate whether lending by the dominant Russian state bank, Sberbank, contributed to Vla-dimir Putin’s ascent to power during the presidential elections of March 2000. Our hypothesis is that Sberbank corporate loans could have been used as incentives for managers at private firms to mobilize employees to vote for the incumbent regime. In line with our proposed voter mobilization mechanism, we find that the regional growth of Sberbank corporate loans in the months before the presidential election is related to the regional increase in votes for Putin and to the regional increase in voter turnout between the Duma election of December 1999 and the presidential election of March 2000. The effect of Sberbank firm lending on Putin votes was most pronounced in regions where the governor was affiliated with the regime and in regions with extensive private employ-ment. The effect was less apparent in regions with many single-company towns, where voter intim-idation is sufficient to get the required result. Additional robustness checks and placebo regressions confirm the main findings. Our results support the view that additional Sberbank corporate loans granted prior to the March 2000 presidential election facilitated Putin’s early electoral success.
    JEL: G21 P34
    Date: 2017–11–01
  8. By: Thomas, Tobias; Heß, Moritz; Wagner, Gert G.
    Abstract: From a political economy perspective, politicians often fail to implement structural reforms. In this contribution we investigate if the resistance to reform is based on the differences in the risk preferences of voters, politicians, and bureaucrats. Based on three surveys among the German electorate, 175 members of the Federal German Parliament and 106 officials from German ministries, this is not the case. Since both politicians and bureaucrats have a higher risk appetite than the voters, their risk preferences cannot be seen as an explanation for the resistance to structural reform. Hence, it must be caused by other reasons. These could be interventions by veto players, wars of attrition by powerful interest groups, or reform logjams initiated. However, as during times of populist campaigns, the election process can put forth candidates with very high risk appetites, the constitutions of democracies turn out to be rather smart if hazardous actions and measures by political rookies and gamblers are inhibited by checks and balances.
    Keywords: political reforms,political decision-making,principal agent-theory,risk aversion,German,SOEP
    JEL: D71 D78 H11 H70 P16 Z13
    Date: 2017
  9. By: Thomas, Tobias (Düsseldorf Institute for Competition Economics (DICE)); Heß, Moritz (TU Dortmund); Wagner, Gert G. (DIW Berlin)
    Abstract: As from a political economy perspective, politicians often fail to implement structural reforms, we investigate if the resistance to reform is based on the differences in the risk preferences of voters, politicians, and bureaucrats. Based on the empirical results of a survey of the population in Germany, 175 members of the Federal German Parliament (Bundestag), and 106 officials ("bureaucrats") from German ministries, this is not the case. Since both politicians and bureaucrats have a higher risk appetite than the general population, their risk preferences cannot be seen as an explanation for the resistance to structural reform. Hence, it must be caused by other reasons. These can be for instance – as public choice scholars argue – interventions by veto players, wars of attrition by powerful interest groups, or reform logjams initiated. However, another point of view could be that modern democracies are doing better than many believe. During times of populist campaigns, the election process can put forth candidates with very high risk appetites, but the constitutions of democracies turn out to be rather smart if hazardous actions and measures by political rookies and gamblers are inhibited by checks and balances.
    Keywords: political reforms, political decision-making, principal agent-theory, risk aversion, German, SOEP
    JEL: D71 D78 H11 H70 P16 Z13
    Date: 2017–10
  10. By: Sharun Mukand; Dani Rodrik
    Abstract: We distinguish between three sets of rights – property rights, political rights, and civil rights – and provide a taxonomy of political regimes. The distinctive nature of liberal democracy is that it protects civil rights (equality before the law for minorities) in addition to the other two. When democratic transitions are the product of a settlement between the elite (who care mostly about property rights) and the majority (who care mostly about political rights), they generically fail to produce liberal democracy. This is because the minority has neither the resources nor the numbers to make a contribution to the settlement. We develop a formal model to sharpen the contrast between electoral and liberal democracies and highlight circumstances under which liberal democracy can emerge. We show that liberal democracy requires quite special circumstances: mild levels of income inequality as well as weak identity cleavages. We provide some evidence consistent with this result, and also present a new classification of countries as electoral or liberal democracies.
    JEL: P48
    Date: 2017
  11. By: Brilé Anderson; Thomas Bernauer; Aya Kachi (University of Basel)
    Abstract: Recent instances of political backlash against global governance efforts as well as conventional wisdom suggest that there is a link between shifting authority from the domestic to the global level, on the one hand, and the legitimacy of global governance institutions as perceived by citizens and other stakeholders on the other. We thus investigate whether and how increasing the authority of a global governance institution affects citizens' legitimacy perceptions, using a population-based survey experiment in Germany and the United States (N=1600 each). The empirical focus is on climate change, a costly and paradigmatic global governance effort. The results show that certain shifts of political authority, such as changes to majority decision making at the international level and automatic implementation of international decisions domestically, do not significantly affect "average" citizens' legitimacy perceptions of global governance institutions. This result is not due to citizens' incapacity to understand the implications of increasing authority, namely, that increasing authority results in a loss of control over climate policy in Germany and the United States. Rather, legitimacy perceptions appear to be shaped by citizens' perceptions of procedural and performance quality of such efforts as well as by their level of cognitive mobilization, namely their interest in international politics. In brief, we find that citizens relate perceived procedural and performance quality of global governance with their evaluation of its legitimacy, but that subtle shifts of authority from the domestic to the global level do not per se affect citizens' legitimacy perceptions.
    Date: 2017
  12. By: Schories, Fanny E.
    Abstract: This paper examines whether an institution has a differing impact on cooperation if it is introduced by a representative of the affected parties rather than exogenously imposed. The experimental design is able to control for selection effects arising from the democratic policy choice. I find evidence of a large democracy premium in the sense that endogenously implemented institutions lead to more cooperation than iden- tical exogenous institutions. Especially the subjects who initially did not prefer the policy comply if it was brought about by an elected representative. The results have implications for the analysis of decision-making processes and policy recommendations in general.
    Keywords: Laboratory Experiment,Representative Democracy,Collective Decision-Making,Social Dilemma,Legitimacy
    JEL: C9 D02 D72
    Date: 2017
  13. By: Daeyoung Jeong (Economic Research Institute, Bank of Korea)
    Abstract: We develop a model of strategic information transmission from an outside expert with informational superiority to a group of people who make a decision by voting on a proposal. An outside expert who observes the qualities of a proposal sends a cheap talk message to decision makers with limited information. A simple cheap talk strategy of the expert can be surprisingly effective in persuading decision makers by polarizing or unifying their opinions. When there is a significant informational gap, decision makers vote in the expert's interest by focusing only on the expert's message, even though they know she has her own bias.
    Keywords: Cheap Talk, Voting, Polarization
    JEL: D71 D72 D78 D82 D83
    Date: 2017–06–28
  14. By: Fabrizio Germano; Francesco Sobbrio
    Abstract: Ranking algorithms are the information gatekeepers of the Internet era. We develop a stylized framework to study the effects of ranking algorithms on opinion dynamics. We consider rankings that depend on popularity and on personalization. We find that popularity driven rankings can enhance asymptotic learning while personalized ones can both inhibit or enhance it, depending on whether individuals have common or private value preferences. We also find that ranking algorithms can contribute towards the diffusion of misinformation (e.g., “fake news†), since lower ex-ante accuracy of content of minority websites can actually increase their overall traffic share.
    Keywords: search engines, ranking algorithm, search behavior, opinion dynamics, information aggregation, asymptotic learning, misinformation, polarization, website traffic, fake news
    JEL: D83 L86
    Date: 2017
  15. By: Fair, C. Christine (?); Kuhn, Patrick (?); Malhotra, Neil (Stanford University); Shapiro, Jacob (?)
    Abstract: How natural disasters affect politics in developing countries is an important question, given the fragility of fledgling democratic institutions in some of these countries as well as likely increased exposure to natural disasters over time due to climate change. Research in sociology and psychology suggests traumatic events can inspire pro-social behavior and therefore might increase political engagement. Research in political science argues that economic resources are critical for political engagement and thus the economic dislocation from disasters may dampen participation. We argue that when the government and civil society response effectively blunts a disaster's economic impacts, then political engagement may increase as citizens learn about government capacity. Using diverse data from the massive 2010-11 Pakistan floods, we find that Pakistanis in highly flood-affected areas turned out to vote at substantially higher rates three years later than those less exposed. We also provide speculative evidence on the mechanism. The increase in turnout was higher in areas with lower ex ante flood risk, which is consistent with a learning process. These results suggest that natural disasters may not necessarily undermine civil society in emerging developing democracies.
    Date: 2017–05
  16. By: Felix Bierbrauer; Pierre C. Boyer
    Abstract: We present a conceptual framework for the analysis of politically feasible tax reforms. First, we prove a median voter theorem for monotonic reforms of non-linear tax systems. This yields a characterization of reforms that are preferred by a majority of individuals over the status quo and hence politically feasible. Second, we show that every Pareto-efficient tax systems is such that moving towards lower tax rates for below-median incomes and towards higher rates for above median incomes is politically feasible. Third, we develop a method for diagnosing whether a given tax system admits reforms that are welfare-improving and/ or politically feasible.
    Keywords: non-linear income taxation, tax reforms, political economy, welfare analysis
    JEL: C72 D72 D82 H21
    Date: 2017
  17. By: J. Stephen Ferris (Department of Economics, Carleton University); Stanley L. Winer (Department of Economics, Carleton University)
    Abstract: This paper asks whether political competition has played a role in moderating the governance issues that arise in relation to Canada’s fiscal structure. By fiscal structure we mean three distinct but interrelated fiscal dimensions of the state: financial stability, long run size and short run interventions into the private economy, particularly with respect to the business cycle. The distinctiveness of this paper is that it focuses on four different measures of the degree of political competition: the size of the seat majority of the governing party in the House; the distribution of the volatility adjusted winning margins of the governing party; the proportion of electorally marginal constituencies adjusted for asymmetry; and the Przeworski-Sprague measure of electoral competitiveness at the constituency level. The analysis accounts for the differing time series properties of the political and economic variables and the comingling of long and short term fiscal policies in the time series data while finding support for the hypotheses that greater political competition will enhance fiscal stability (maintain a non-accelerating debt to GDP ratio), that government size will converge from above on economic and structural fundamentals and that period deficits/surpluses will align better with the business cycle. The potential impact of greater political competition is analyzed by applying the deficit model to the period of fiscal instability that arose in the 1980’s. Classification- H1, H3, H5
    Keywords: political competition, fiscal stability, government size, ARDL models
    Date: 2017–11–02
  18. By: Craig Brett (Mt. Allison University); John A Weymark (Vanderbilt University)
    Abstract: Röell (unpublished, 2012) shows that Black's Median Voter Theorem for majority voting with single-peaked preferences applies to voting over nonlinear income tax schedules that satisfy the constraints of a finite type version of the Mirrlees optimal income tax problem when voting takes place over the tax schedules that are selfishly optimal for some individual and preferences are quasilinear. An alternative way of establishing Röell's median voter result is provided that offers a different perspective on her findings, drawing on insights obtained by Brett and Weymark (GEB, 2017) in their analysis of a version of this problem with a continuum of types. In order to characterize a selfishly optimal schedule, it is determined how to optimally bunch different types of individuals.
    Keywords: nonlinear income taxation, political economy of taxation, optimal bunching, redistributive taxation, voting over tax schedules
    JEL: H2 D7
    Date: 2017–11–05
  19. By: Francisco José Veiga (NIPE/University of Minho); Linda Gon¸calves Veiga (NIPE/University of Minho)
    Abstract: This paper studies the impact of term limits on voter turnout, using the recent introduction of term limits at the local government level in Portugal as a natural experiment. Although instrumental, expressive, and information-based theories of voter participation imply effects of term limits on turnout, this is clearly an under-researched topic. Applying a difference-in-differences approach to data at both the municipal and parish levels, we find strong evidence that the introduction of term limits increased voter participation. Our results contrast with previous findings for California and demonstrate that more research on this topic is clearly necessary.
    Keywords: Term limits, Voter turnout, Local elections, Portugal, Natural experiment
    JEL: D72 H7
    Date: 2017
  20. By: Alexander, Amy C.; Welzel, Christian
    Abstract: [Introduction] In two widely read articles, Roberto Foa and Yascha Mounk reach the alarming conclusion that support for democracy is in a rapid generational decline. The remarkable point about this diagnosis is its emphasis on the Millennial generation’s fading support for democracy and the claim that democratic support is steeply eroding in even the most mature democracies. The latter contention marks a significant turning point in the debate. Public discourse has taken a pessimistic tone since quite some time, bemoaning the apparently ubiquitous resurgence of authoritarianism outside the Western world. But the mature democracies of the West seemed to constitute an insurmountable firewall against the authoritarian offense. The novelty in Foa and Mounk’s analysis is that it questions this very premise, resonating with growing concerns in the face of spreading populism. Indeed, Foa and Mounk imply that the generational erosion of democratic support is responsible for the populist turn throughout the electorates of mature democracies, especially among younger cohorts. In conclusion, Foa and Mounk suggest that democracy itself is in danger, including places where it seemed safest over many generations...
    Date: 2017

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