nep-pol New Economics Papers
on Positive Political Economics
Issue of 2018‒03‒05
twenty-one papers chosen by
Eugene Beaulieu
University of Calgary

  1. To the ones in need or the ones you need? The Political Economy of Central Discretionary Grants − Empirical Evidence from Indonesia By Gerrit J. Gonschorek; Bambang Suharnoko Sjahrir; Guenther G. Schulze
  2. Why Delegate? Comparing Direct and Representative Democracy By Guadalupe Correa-Lopera
  3. Essays in the Economics of Corruption: Experimental and empirical evidence By Nastassia Leszczynska
  4. Regulatory Cycles: Revisiting the Political Economy of Financial Crises By Jihad Dagher
  5. Democracy and Governance By Riccardo Pelizzo
  6. The Determinants of Islamophobia – An Empirical Analysis of the Swiss Minaret Referendum By Olga Orlanski; Günther G. Schulze
  7. Deliberative Structures and their Impact on Voting Behavior under Social Conflict By Jordi Brandts; Leonie Gerhards; Lydia Mechtenberg
  8. I’m Neither Racist nor Xenophobic, but: Dissecting European Attitudes towards a Ban on Muslims’ Immigration By Marfouk, Abdeslam
  9. A theory of autocratic transition: Prerequisites to self-enforcing democracy By Apolte, Thomas
  10. Poverty, Politics and the Socially Marginalised – a state level analysis in India By Mondal, Snehasis
  11. Majority Vote on Educational Standards By Robert Schwager
  12. Collective vs. Individual Lobbying By Norimichi Matsueda
  13. Attribution Error in Economic Voting: Evidence From Trade Shocks By Masami Imai; Cameron Shelton; Rosa Hayes
  14. Presidential Cycles and Time-Varying Bond-Stock Correlations: Evidence from More than Two Centuries of Data By Riza Demirer; Rangan Gupta
  15. Politicians at higher levels of government are perceived as more corrupt By Abel François; Pierre-Guillaume Méon
  16. Determinants of Slum Formation: The Role of Local Politics and Policies By Alves, Guillermo
  17. Comparing the Aitchison distance and the angular distance for use as inequality or disproportionality measures for votes and seats By Colignatus, Thomas
  18. Online News and Protest Participation in a Political Context: Evidence from Self-Reported Cross-Sectional Data By Nora A. Kirkizh; Olessia Y. Koltsova
  19. Public Opinion and Immigration: Who Favors Employment Discrimination against Immigrants? By Cooray, Arusha; Marfouk, Abdeslam; Nazir, Maliha
  20. The median rule in judgement aggregation By Nehring, Klaus; Pivato, Marcus
  21. Regional lobbying and structural funds. Do regional representation offices in Brussels deliver? By Andrés Rodríguez-Pose; Julie Courty

  1. By: Gerrit J. Gonschorek; Bambang Suharnoko Sjahrir; Guenther G. Schulze (Department of International Economic Policy, University of Freiburg)
    Abstract: We analyze the allocation of discretionary grants from the central government to local governments in Indonesia. Using OLS and Fixed Effects models on an unbalanced panel data set for more than 400 Indonesian districts covering the period 2005-2013, we investigate whether the allocation of the grants is determined by the need of a district, by political alignment of the central government with the local district heads, or by reelection motives of the incumbent president. We find that grant allocations are not determined by need characteristics and that political considerations matter significantly. Districts with low support for the president received significantly more than the core supporting districts, especially in the year of national elections. This effect is limited to the first term of the president. In the second term, after which reelection is impossible, political considerations were largely absent. This pattern is consistent with the view that the incumbent president considers discretionary grants as an instrument to increase reelection probabilities. Unlike the evidence for most countries, we find no effect for political party alignment with local district heads. Our results are robust to the inclusion of a number of other variables capturing competing motives.
    Keywords: Intergovernmental transfer, Discretionary grants, Political alignment, Core/Swing voter, Fiscal decentralization, Indonesia
    JEL: D72 H72 H77
    Date: 2018–01
  2. By: Guadalupe Correa-Lopera (Department of Economics, University of Málaga)
    Abstract: The growing demand for referendums challenges the traditional model of representative democracy. Why may voters prefer to decide by themselves (direct democracy) rather than delegate on their representatives (representative democracy)? We propose a model in which voters select either a policy or a representative under uncertainty over the socially correct policy. Under direct democracy, the policy selected by voters is implemented, while under representative democracy the elected representative decides the policy. We assume that representatives have informational advantage. Our main result shows that a society in which the majority of voters are selfish may prefer a system of political representation when they are strongly ideologically polarized. If, instead of ideological confrontation, there is consensus among these selfish voters, referendum is the preferred instrument for making decisions. Non-selfish societies, however, always prefer to delegate on better informed representatives.
    Keywords: Direct democracy; Representative democracy; Ideological electorate; Pragmatic electorate; Polarization; Information.
    JEL: D72 D82
    Date: 2018–01
  3. By: Nastassia Leszczynska
    Abstract: The advent of experimental methodologies have led to decisive progress in the study of corrupt behaviour in the last two decades. Since they can complement survey data and perception indexes with controlled experimental data, scholars and policy makers have reached a better understanding of decision-making in bribery situations and are able to design innovative anticorruption policies.In this thesis, I use experimental and empirical data to contribute to the field of the economics of corruption. The first two chapters of this PhD dissertation use experimental methodologies to study decision-making in a bribery scenario. The first chapter tests an anti-corruption strategy with a lab in the field experiment in Burundi. The second chapter studies the fairness concerns that might arise when dealing with redistribution in a bribery situation. The third chapter uses an empirical analysis to explore the controversial issue of political moonlighting, i.e. having outside activities while holding public office. It investigates "double-hat politicians", who combine mayor and parliamentary positions in Wallonia.In a first chapter, written with Jean-Benoit Falisse, we explore the effect of anti- corruption messages on corrupt behavior and public service delivery. In a novel lab-in-the-field experiment, 527 public servants from Burundi were asked to allocate rationed vouchers between anonymous citizens; some of these citizens attempted to bribe the public servants to obtain more vouchers than they were entitled to. Two groups of public servants were randomly exposed to short messages about good governance or professional identity reminders. Participants in these two groups behaved in a fairer manner than those of a third group who were not exposed to any message. The result is more robust in the case of the group exposed to the professional identity reminder. The underlying mechanisms seem to be that when a public servant reflects upon governance values and her professional identity, the moral cost increases, prompting more equal service delivery. Bribe-taking was not impacted by the messages. The experiment provides new insights into the design of anti-corruption strategies.The second chapter, written with Lena Epp, investigates the impact of a public officials’ fairness considerations towards citizens in a petty corruption situation. Other-regarding preferences, and, more particularly, fairness concerns are widely acknowledged as crucial elements of individual economic decision-making. In petty corruption contexts, public officials are to a large extent aware of differences between citizens. Here, we experimentally investigate how fairness considerations may impact on corrupt behaviour. Our novel bribery game reveals that bribes are less frequently accepted when bribers are unequal in terms of endowments. These results suggest that fairness considerations can influence corrupt behaviour.In the last chapter, I focus on political moonlighting in Wallonia. Activities outside of public office or combining specific public offices simultaneously is a topic of ongoing heated debates. An element crucial to these discussions is whether moonlighting is detrimental for politicians’ performance. In Belgium, the combination of local executive and regional legislative offices, i.e. double hat politicians, is a frequent habit for a majority of politicians. This accumulation of activities might lead to (un-)desirable outcomes in terms of political achievements. This chapter investigates the impact of holding several remunerated and honorary positions on regional MPs parliamentary activities and mayor’s municipality performance in Wallonia. I use a database of all public and private positions held by Belgian politicians in Wallonia since the disclosure of positions became compulsory for those holding at least one public position, i.e. from 2004 to 2016. For members of Parliament, wearing a double hat reduces global parliamentary activity. For mayors, it seems that holding more remunerated positions is associated with less efficient municipality management.
    Keywords: corruption; experimental economics; behavioural games; public service delivery; fairness; political moonlighting; bribery game; messages; rank reversal aversion
    Date: 2018–02–20
  4. By: Jihad Dagher
    Abstract: Financial crises are traditionally analyzed as purely economic phenomena. The political economy of financial booms and busts remains both under-emphasized and limited to isolated episodes. This paper examines the political economy of financial policy during ten of the most infamous financial booms and busts since the 18th century, and presents consistent evidence of pro-cyclical regulatory policies by governments. Financial booms, and risk-taking during these episodes, were often amplified by political regulatory stimuli, credit subsidies, and an increasing light-touch approach to financial supervision. The regulatory backlash that ensues from financial crises can only be understood in the context of the deep political ramifications of these crises. Post-crisis regulations do not always survive the following boom. The interplay between politics and financial policy over these cycles deserves further attention. History suggests that politics can be the undoing of macro-prudential regulations.
    Date: 2018–01–15
  5. By: Riccardo Pelizzo (Nazarbayev University, Astana, Kazakhsta)
    Abstract: The purpose of the paper is to show that the nature of the relationship between governance and democracy varies depending on how the two terms (of a political discourse) are defined, that when the definition of one term encompasses distinctive features of the other we find that governance and democracy are not just mutually reinforcing but even overlapping, that only when we distinguish on theoretical ground governance from democracy we create the basis for analyzing their relationship on empirical grounds exactly as Fukuyama had suggested.
    Keywords: government, governance, good governance, democracy, measurement
    JEL: D02 D72 H00 H11 H89
    Date: 2018–01
  6. By: Olga Orlanski (CESifo); Günther G. Schulze (Department of International Economic Policy, University of Freiburg)
    Abstract: We analyze the determinants of Islamophobia using the only nation-wide anti-Islam referendum ever, which was held in Switzerland in 2009 and led to the prohibition of minarets. We find economic, environmental, and cultural factors as well as the presence of Muslims to determine voting behavior. Approval rates for the bill rise with unemployment and decrease with education, income, and the attractiveness of the location. Approval is higher in rural areas, in municipalities with a higher share of men, and in the Italian and German speaking parts of Switzerland. It is higher in municipalities with a higher share of Muslims, which strongly supports the ’religious threat’ hypothesis. We compare the voting behavior in the minaret referendum with the referendum “for democratic naturalizations”, held in 2008, in order to disentangle determinants of Islamophobia from those of xenophobia. We show that our results are robust to the estimation with ecological inference.
    Keywords: Referendum, Minaret referendum, Islamophobia, Xenophobia, Ecological Fallacy
    JEL: D72 D78 J15
    Date: 2018–01
  7. By: Jordi Brandts; Leonie Gerhards; Lydia Mechtenberg
    Abstract: Inequalities in democracies are multi-faceted. They not only incorporate differences in economic opportunities, but also differences in access to information and social influence. In a lab experiment, we study the interaction of these inequalities to provide a better understanding of socio-political tensions in modern societies. We identify the tragedy of the elite, the dilemma that privileged access to information about a fundamental state that mediates political conflict creates lying incentives for the better informed. In our experiment, an electorate consists of two groups, one informed and one uninformed about an uncertain state of the world. Incentives depend on this state. Before voting the two groups can communicate. We study four different communication protocols which vary the access to communication channels of the two groups and are meant to represent societies with different degrees of openness. We hypothesize that the deliberative structures affect group identities, preferences, and voting. Our observed outcomes largely coincide with those predicted by our theoretical analysis.
    Keywords: communication, social conflict, Inequality
    JEL: C92 D91
    Date: 2018–02
  8. By: Marfouk, Abdeslam
    Abstract: During his presidential campaign, the new elected President of U.S., Donald Trump, called for a complete ban on Muslims from entering the United States. Although numerous European observers have been shocked by his racist proposal, using the most recent round of the European Social Survey, this paper found that a sizeable proportion of Europeans support a similar ban in their own countries, e.g. Czech Republic (54%), Hungary (51%), Estonia (42%), Poland (33%), and Portugal (33%). The paper also provides evidence that racism and immigration phobia play a key role in shaping Europeans’ support of a ban on Muslim immigration. This finding challenges the discourse and campaigns of the populist groups who exploit the ‘Islamization of Europe’ rhetoric successfully and use various pretexts to justify a call for a ban on Muslims’ immigration, e.g. the threat to security, secularism, democracy, Western ‘identity’, culture and values.
    Keywords: Internatonal migration,discrimination,islamophobia,racism,public opinion
    JEL: F22 J71 J79
    Date: 2018
  9. By: Apolte, Thomas
    Abstract: This paper aims at contributing to a better understanding of the conditions of self-enforcing democracy by analyzing the recent wave of autocratic transitions. Based on a game-theoretic framework, we work out the conditions under which governments may induce the diverse public authorities to coordinate on extra-constitutional activities, eventually transforming the politico-institutional setting into one of autocratic rule. We find three empirically testable characteristics that promote this coordination process, namely: populism and public support, corruption, and a lack in the separation of powers. By contrast, low degrees of corruption and strongly separated powers can be viewed as prerequisites to self-enforcing democracy.
    JEL: D02 D72 D74 P48
    Date: 2018
  10. By: Mondal, Snehasis
    Abstract: Activities of the Government are mostly influenced by the political party or combinations of political parties are in the Government. Variation in the nature of the political rule can lead to differential effectiveness in the pursuit of the anti-poverty programmes the variations in the political rule at the state level allow us to make a comparative analysis among the different political ideas or regime in the alleviation of poverty among the socially marginalized in rural India. In this paper an attempted has been made to access whether variations in the political regimes across the states do have a different impact on the poverty reduction among the different social groups viz SCs, STs and others and whether the rate of reduction over the time varies among the different social groups with varying political regimes. This analysis found that the political affiliation is a significant determinant of poverty and it has been found that the odds of poverty decline most in the Left-ruled states. Further, the performance of the left ruled states are impressive in terms of steady decline in odds among all the social groups and between all the social groups over the time compare to Right and Other ruled states.
    Keywords: Left Ruled States,Right ruled states, other rule states
    JEL: H70
    Date: 2018–01–10
  11. By: Robert Schwager
    Abstract: The direct democratic choice of an examination standard, i.e., a performance level required to graduate, is evaluated against a utilitarian welfare function. It is shown that the median preferred standard is inefficiently low if the marginal cost of reaching a higher performance reacts more sensitively to ability for high than for low abilities, and if the right tail of the ability distribution is longer than the left tail. Moreover, a high number of agents who choose not to graduate may imply that the median preferred standard is inefficiently low even if these conditions fail.
    Keywords: examination, school, drop-outs, democracy, median voter
    JEL: I21 D72 I28
    Date: 2018
  12. By: Norimichi Matsueda (School of Economics, Kwansei Gakuin University)
    Abstract: In this paper, we compare the political equilibrium outcomes under two distinct institutional setups concerning the regulated firms' lobbying environment: collective and individual lobbying. Under both regimes, each firm voluntarily chooses whether or not to participate in lobbying activities to influence an environmental regulation with which all the firms need to comply eventually. While, under collective lobbying, firms form a single group before conducting lobbying activities, there is no such pre-coordination under individual lobbying and firms can lobby independently if they wish. The difference in the equilibrium outcomes is quite striking: whereas only a small fraction of firms join the industrial lobbying group under collective lobbying, all the firms participate in lobbying activities in the case of individual lobbying. We also evaluate the desirability of the two lobbying regimes from the perspectives of both individual firms and the society as a whole, and discuss the implications for possible institutional interventions.
    Keywords: common agency, compensating equilibrium, environmental regulation, free-rider, lobbying
    JEL: D72 H41 Q58
    Date: 2018–02
  13. By: Masami Imai; Cameron Shelton; Rosa Hayes
    Abstract: This paper exploits the international transmission of business cycles to examine the prevalence of attribution error in economic voting in a large panel of countries from 1990-2009. We find that voters, on average, exhibit a strong tendency to oust incumbent governments during an economic downturn, regardless of whether the recession is home-grown or merely imported from trading partners. However, we find important heterogeneity in the extent of attribution error. A split sample analysis shows that countries with more experienced voters, more educated voters, and possibly more informed voters。ェall conditions which have been shown to mitigate other voter agency problems。ェdo better in distinguishing imported from domestic growth.
  14. By: Riza Demirer (Department of Economics & Finance, Southern Illinois University Edwardsville, Edwardsville, USA); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa)
    Abstract: This paper examines the effect of presidential cycles on financial market correlations using monthly data for the U.S. stock and government bond returns over the historical period of 1791:09-2017:12. Utilizing a dynamic conditional correlation generalized autoregressive conditional heteroskedasticity (DCC-GARCH) model to capture the time-varying correlations, we show that Democratic administrations are generally associated with lower degree of co-movement between the stock and government bond returns. The observed negative presidential cycle effect is robust over various sub-samples identified by structural break tests. The findings are in line with the documented presidential cycle effect on stock market returns and corroborate recent evidence that, when risk aversion is high, agents tend to elect the Democratic Party.
    Keywords: Conditional correlation, GARCH, Bond and Stock Returns Comovement, US Presidential Cycles
    JEL: C22 C32 D72 G10 G12
    Date: 2018–02
  15. By: Abel François; Pierre-Guillaume Méon
    Abstract: Using an original survey where French citizens were asked to assess corruption at all levels of government, we observe that institutional distance increases perceived corruption. Specifically, municipal governments are perceived as the least corrupt, followed by local governments, senators, deputies, and the national cabinet. The president of the Republic is perceived as slightly less corrupt than the national cabinet, but more corrupt than any other level of government. The relation is robust to alternative specifications, controlling for a series of individual and regional characteristics, and to alternative definitions of the dependent variable. It is not reducible to geographical distance. We observe similar results in other countries.
    Keywords: Corruption; Levels of government; Decentralization; Federalism
    JEL: D72 D73 H11 H77 K42
    Date: 2018–02–22
  16. By: Alves, Guillermo
    Abstract: One-third of the developing world’s population lives in urban slums and the absolute number of slum residents grew from 650 million in 1990 to 863 million in 2012. Although negative impacts of slum living conditions on several dimensions of slum residents’ lives are well documented, much less research exists on why slums emerge and grow in the first place. This paper provides novel evidence on the effect of local political conditions and slum policies on slum growth. Using a regression discontinuity design in close municipal elections in Brazil, I show that victories by a center-left, pro-poor party led to both more slum upgrading policies and a higher share of slum housing. I further show evidence indicating that the pro-slum incentive effect from slum upgrading policies was the main mechanism behind this party’s effect on slum growth. By highlighting the relevance of local institutional conditions for understanding where slums are more likely to grow, these findings innovate over traditional explanations based on the role of rural-urban migration and rapid urban economic growth. This paper’s evidence on the potential incentive effect of slum upgrading policies on slum growth does not imply that slums upgrading efforts should stop. Given the solid evidence on the positive impacts of slum upgrading programs on the lives of the poor, these programs should continue to develop, and governments should consider, for example, complementing slum upgrading efforts with policies expanding the supply of non-slum housing.
    Keywords: Ciudades, Desarrollo social, Desarrollo urbano, Innovación social, Investigación socioeconómica, Pobreza, Vivienda,
    Date: 2018
  17. By: Colignatus, Thomas
    Abstract: Votes and seats satisfy only two of seven criteria for application of the Aitchison distance. Vectors of votes and seats, say for elections for political parties the House of Representatives, can be normalised to 1 or 100%, and then have the outward appearance of compositional data. The Aitchison geometry and distance for compositional data then might be considered for votes and seats too. However, there is an essential zero when a party gets votes but doesn't gain a seat, and a zero gives an undefined logratio. In geology, changing from weights to volumes affects the percentages but not the Aitchison distance. For votes and seats there are no different scales or densities per party component however, and thus reportioning (perturbation) would be improper. Another key issue is subcompositional dominance. For votes {10, 20, 70} and seats {20, 10, 70} it is essential that we consider three parties. For a disproportionality measure we would value it positively that there is a match on 70. The Aitchison distance looks at the ratio {10, 20, 70} / {20, 10, 70} = {1/2, 2, 1} and then neglects a ratio equal to 1. In this case it essentially compares the subcompositions, i.e. votes {10, 20} and seats {20, 10}, rescales to {1/3, 2/3} and {2/3, 1/3}, and finds high disproportionality. This means that it essentially looks at a two party outcome instead of a three party outcome. It follows that votes and seats are better served by another distance measure. Suggested is the angular distance and the Sine-Diagonal Inequality / Disproportionality (SDID) measure based upon this. Users may of course apply both the angular and the Aitchison measures while being aware of the crucial differences in properties.
    Keywords: Votes, Seats, Electoral System, Distance, Disproportionality, Aitchison Geometry, Angular Distance, Sine-Diagonal Inequality / Disproportionality, Loosemore-Hanby, Gallagher, Descriptive Statistics, Education, Reportion
    JEL: A10 D63 D71 D72
    Date: 2018–01–18
  18. By: Nora A. Kirkizh; Olessia Y. Koltsova
    Abstract: The availability of alternative information via online news sources is often said to induce social discontent, especially in states, where traditional media are under state control. But does this relation really exist, and is it universal? In contrast to previous studies, where generalized Internet use is treated as a proxy for online news consumption and general political participation is a proxy for protest participation, we render a test of relationship specifically between online news and protest participation. We explore survey data from WVS for 48 nations in 2010-2014. The analysis provides evidence that the likelihood of individual protest participation is positively associated with online news consumption. The study also shows that the magnitude of the effect varies depending upon the political context: surprisingly, despite supposedly unlimited control offline as well as online media, autocratic countries demonstrated higher effects of online news than transitional regimes, where the Internet media are relatively uninhibited.
    Keywords: Internet, new media, online news, protest, political regime
    JEL: Z
    Date: 2017
  19. By: Cooray, Arusha; Marfouk, Abdeslam; Nazir, Maliha
    Abstract: Using information from the world values survey wave 6 containing information from 78,743 respondents in 53 countries, we examine the factors which influence respondents’ answers to the question: “when jobs are scarce, should employers give priority to people of the country of origin rather than immigrants?” Taking into account a number of factors including, economic, socio-demographic, political and individual level characteristics we find that all of these factors influence respondents’ preference for this form of discrimination.
    Keywords: International migration,discrimination,public opinion
    JEL: F22 J71 J79
    Date: 2018
  20. By: Nehring, Klaus; Pivato, Marcus
    Abstract: A judgement aggregation rule takes the views of a collection of voters over a set of interconected issues, and yields a logically consistent collective view. The median rule is a judgement aggregation rule that selects the logically consistent view which minimizes the average distance to the views of the voters (where the “distance” between two views is the number of issues on which they disagree). In the special case of preference aggregation, this is called the Kemeny rule. We show that, under appropriate regularity conditions, the median rule is the unique judgement aggregation rule which satisfies three axioms: Ensemble Supermajority Efficiency, Reinforcement, and Continuity. Our analysis covers aggregation problems in which different issues have different weights, and in which the consistency restrictions on input and output judgments may differ.
    Keywords: Judgement aggregation; majoritarian; reinforcement; consistency; median.
    JEL: D71
    Date: 2018–01–30
  21. By: Andrés Rodríguez-Pose; Julie Courty
    Abstract: In recent years regional representation offices have proliferated in Brussels. Among the many aims of these offices are influencing the allocation and securing the transfer of European Structural and Cohesion funds to their respective regions. However, our knowledge about whether they have succeeded in this goal is limited. In this paper we assess the extent to which regional offices in Brussels have managed to affect the territorial commitment and payment of Structural and Cohesion funds for regional development beyond the main officially stated economic criteria of eligibility. The paper uses a custom-made survey of regional offices in Brussels, complemented by economic, institutional, and political data involving factors that should determine how much money is channelled to and disbursed in each region. The results of the Fixed Effects and Instrumental Variable analyses for a total of 123 regions over the period 2009-2013 highlight that the capacity - proxied by the budget and staff of the office - of the regional representation offices to influence the commitment and payment of Structural and Cohesion funds has been negligible, when not outright negative. Regional lobbying in Brussels does not lead to more funds or to an easier disbursement of regional development funds.
    Keywords: regional representation, regional offices, lobbying, European regional development policy, structural funds, EU
    JEL: D72 R51 R58
    Date: 2018–02

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