nep-pol New Economics Papers
on Positive Political Economics
Issue of 2018‒03‒19
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Alignment, Attitudes Toward Government and Tax Evasion By Julie Berry Cullen; Nicholas Turner; Ebonya L. Washington
  2. Victorian Voting: Party Orientation and Class Alignment Revisited By Dewan, Torun; Meriläinen, Jaakko; Tukiainen, Janne
  3. The Institutional Determinants of Southern Secession By Mario Chacon; Jeffrey Jensen
  4. Voting and expressing dissatisfaction: an experiment during the 2017 French Presidential election By Laruelle, Annick
  5. Intergovernmental fiscal transfers and tactical political maneuverings: Evidence from Ghana’s District Assemblies Common Fund By Abel Fumey
  6. Political activism as a determinant of clientelistic transfers: Evidence from an Indian public works program: By Chau, Nancy H.; Liu, Yanyan; Soundararajan, Vidhya
  7. Historical Roots of Political Extremism: The Effects of Nazi Occupation of Italy By Nicola Fontana; Tommaso Nannicini; Guido Tabellini
  8. Appointed Public Officials and Local Favoritism: Evidence from the German States By Thushyanthan Baskaran; Mariana Lopes da Fonseca
  9. Campaign externalities, programmatic spending, and voting preferences in rural Mexico: The case of Progresa-Oportunidades-Prospera programme By Dragan Filipovich; Miguel Niño-Zarazúa; Alma Santillán Hernández
  11. Fiscal Rules as Bargaining Chips By Facundo Piguillem; Alessandro Riboni
  12. The negotiated politics of social protection in sub-Saharan Africa By Sam Hickey; Tom Lavers; Miguel Niño-Zarazúa; Jeremy Seekings
  13. A dynamic spatial model of global governance structures By Giorgos Galanis; Ashok Kumar
  14. Firms and social policy preferences under weak institutions : Evidence from Russia By Marques II, Israel
  15. Political connection and bank in(efficiency) By Omneya Abdelsalam; Sabur Mollah; Emili Tortosa-Ausina
  16. Fake news and indifference to truth: Dissecting tweets and State of the Union Addresses by Presidents Obama and Trump By David E. Allen; Michael McAleer; David McHardy Reid

  1. By: Julie Berry Cullen; Nicholas Turner; Ebonya L. Washington
    Abstract: We ask whether attitudes toward government play a causal role in the evasion of U.S. personal income taxes. We first use individual-level survey data to demonstrate a link between sharing the party of the president and trust in the administration generally and opinions on taxation and spending policy, more specifically. Next, we move to the county level, and measure tax behavior as elections, decided by the voting behavior in swing-states, push voters in partisan counties into and out of alignment with the party of the president. Using IRS data, we find that reported taxable income increases as a county moves into alignment, with the increases concentrated in income sources that are easily evaded, due to lack of third-party reporting. Corroborating the view that evasion falls, potentially suspect EITC claims and audit rates also fall. Our results provide real-world evidence that a positive outlook on government lowers tax evasion.
    JEL: D72 H24 H26 H3
    Date: 2018–02
  2. By: Dewan, Torun; Meriläinen, Jaakko; Tukiainen, Janne
    Abstract: Much of what we know about the alignment of voters with parties comes from mass surveys of the electorate in the postwar period or from aggregate electoral data. Using individual elector level panel data from the 19th century UK poll books, we reassess the development of a party-centred electorate in the United Kingdom. We show that (i) the electorate was party-centred by the time of the extension of the franchise in 1867; (ii) a decline in candidate-centred voting is largely attributable to changes in the behaviour of the working class and (iii) the enfranchised working class aligned with the Liberal left. This early alignment of the working class with the left cannot entirely be explained by a decrease in vote buying. The evidence suggests instead that the alignment was based on the programmatic appeal of the Liberals. We argue that these facts can plausibly explain the subsequent development of the party system.
    Keywords: Candidate-vs-party-oriented voting, party development, partisan alignment, Local public economics, C23, D72, N33,
    Date: 2018
  3. By: Mario Chacon; Jeffrey Jensen (Division of Social Science)
    Abstract: We use the Southern secession movement of 1860-1861 to study how elites in democracy enact their preferred policies. Most states used specially convened conventions to determine whether or not to secede from the Union. We argue that although the delegates of these conventions were popularly elected, the electoral rules favored slaveholders. Using an original dataset of representation in each convention, we first demonstrate that slave-intensive districts were systematically overrepresented. Slave-holders were also spatially concentrated and could thereby obtain local pluralities in favor of secession more easily. As a result of these electoral biases, less than 10% of the electorate was sucient to elect a majority of delegates in four of the six original Confederate states. We also show how delegates representing slave-intensive counties were more likely to support secession. These factors explain the disproportionate in uence of slaveholders during the crisis and why secessionists strategically chose conventions over statewide referenda.
    Date: 2017–03
  4. By: Laruelle, Annick
    Abstract: This paper reports an experiment realised with 850 electors during the 2017 French presidential election. It tested a ballot di¤erent from the official one. Instead of voting for a unique candidate, participants were asked to cast one vote on each candidate. The vote could be "in favor", "neutral" or "against". The theoretical advantages of such a ballot are discussed and tested empirically.
    Keywords: voting, experiment, dissatisfaction, electoral, systems
    JEL: D72 C93
    Date: 2018–02–21
  5. By: Abel Fumey
    Abstract: This paper examines the influence of political considerations on intergovernmental fiscal transfers in Ghana. The two-step system GMM approach was used to estimate transfers and elections data for 167 districts from 1994 to 2014. The analysis was country-wide and covers swing districts as well as aligned districts, while the democracy transitions from ‘new’ to ‘mature’. The results show that each district received on average Gh?6.28 million per year and the amount generally increased by 8.4 per cent in election years. The increase favoured the swing districts over the non-swing ones, as the former received 5.2 per cent more than the latter. Aligned districts in the new democracy received 2.0 per cent more while it was 5.0 per cent more for swing districts in the mature democracy. In conclusion, the study finds that the allocation formula was politically influenced and as a preventive measure, a revision of the formula at intervals of five years—backed by legislation—is recommended.
    Date: 2018
  6. By: Chau, Nancy H.; Liu, Yanyan; Soundararajan, Vidhya
    Abstract: This paper contributes to the literature by developing a model of political clientelism based on an under-explored citizen attribute - political activism, in addition to two other attributes: political affiliation and income. The model uncovers the role of "politically active" individuals in their ability to influence and shape opinion, as well as the inclination of politicians to offer targeted transfers to this group in order to indirectly influence other voters (ie., activists or undecided voters).
    Keywords: politics; political power; information transfer; political parties,
    Date: 2017
  7. By: Nicola Fontana; Tommaso Nannicini; Guido Tabellini
    Abstract: The Italian civil war and the Nazi occupation of Italy occurred at a critical juncture, just before the birth of a new democracy. We study the impact of these traumatic events by exploiting geographic heterogeneity in the duration and intensity of civil war, and the persistence of the battlefront along the “Gothic line” cutting through Northern-Central Italy. We find that the Communist Party gained votes in postwar elections where the Nazi occupation lasted longer, mainly at the expense of centrist parties. This effect persists until the late 1980s and appears to be driven by equally persistent changes in political attitudes.
    JEL: N00
    Date: 2017
  8. By: Thushyanthan Baskaran; Mariana Lopes da Fonseca
    Abstract: We study the local favoritism of appointed German state ministers. Matching hand-collected data on ministers’ place of residence to a sample of more than 8,000 west German municipalities during the period 1994–2013, we find that the home municipality of a state minister experiences higher employment growth than control municipalities. Given the institutional context, this effect is ostensibly due to apolitical favoritism (home bias) rather than electoral considerations. We conclude that favoritism may lead to a distortion in the allocation of public resources even in contexts with strong political institutions.
    Keywords: distributive politics, favoritism, employment growth
    JEL: D73 H70
    Date: 2017
  9. By: Dragan Filipovich; Miguel Niño-Zarazúa; Alma Santillán Hernández
    Abstract: This study presents an analysis of the electoral impacts of one of the most prominent conditional cash transfers in the world: Mexico’s Progresa-Oportunidades-Prospera (POP) programme. Using population censuses, and POP’s administrative records and elections data, we exploit the targeting criteria of the programme and its gradual expansion to implement differencein-differences estimators and a regression discontinuity design for past presidential elections (2000, 2006, and 2012). Overall, we find no sizeable electoral effects of POP in favour to the incumbent in the 2000 and 2012 presidential elections, but instead a significant negative effect in the very competitive presidential election of 2006. We provide a theoretical rationalization for this result, which highlights the role of behaviour towards risk near a subsistence threshold and ex-ante expectations among the poor in control localities that were influenced by campaign externalities. We conclude with a discussion on the implications of our results for future theoretical and empirical research.
    Date: 2018
  10. By: Hakan Genç (Department of Economics, Middle East Technical University, Ankara, Turkey); Serkan Küçükşenel (Department of Economics, Middle East Technical University, Ankara, Turkey)
    Abstract: This paper studies a sequential model of multilateral bargaining with a majority rule in which legislators can make decisions over both private and public good dimensions with endogenous recognition process. Legislators expend resources to be the proposer and make proposals about the allocation of private and public goods. We show that legislators can exert effort to be the proposer and make proposals in both dimensions depending on legislative preferences. Effort choices in equilibrium mainly depend on preferences over both distributional and ideological dimensions, as well as the patience level of legislators and the size of the legislature. We also show that in a diverse legislature, it may be possible to have distributive policies when the majority has collective desires or vice-versa.
    Keywords: Multilateral bargaining, majority rule, public goods
    JEL: C71 C78 D72
    Date: 2018–03
  11. By: Facundo Piguillem (EIEF); Alessandro Riboni (Ecole Polytechnique and CREST)
    Abstract: Most fiscal rules can be overridden by consensus.We show that the possibility of overridding does not make fiscal rules ineffectual. Since fiscal rules determine the outside option in case of disagreement, the opposition uses fiscal rules as “bargaining chips”. The party in power offers spending concessions to the opposition to avoid the application of the fiscal rule. This political bargain reduces the incentive for inefficient debt accumulation. We analyze three standard fiscal rules: government shutdown, budget balance and mandatory spending, and show that when political polarization is high, a government shutdown provision maximizes the bargaining power of the opposition and leads to a sizeable reduction of debt. When the degree of polarization is low, a balanced budget rule is preferable. Mandatory spending eliminates the incentive to over-accumulate debt by reducing political risk. However, it gives a considerable advantage to the initial incumbent, generating large and persistent static inefficiencies.
    Date: 2018
  12. By: Sam Hickey; Tom Lavers; Miguel Niño-Zarazúa; Jeremy Seekings
    Abstract: Social assistance programmes proliferated and expanded across much of the global South from the mid-1990s. Within Africa there has been enormous variation in this trend: some governments expanded coverage dramatically while others resisted this. The existing literature on social assistance, or social protection more broadly, offers little in explanation of this variation. Drawing on the literature on political settlements and democratic politics, we argue that variation results from the political contestation and negotiation between political elites, voters, bureaucrats, and transnational actors. The forms of politics that matter at each of these inter-related sites of negotiation include struggles over ideas as well as material interests, and reflect the ways in which social assistance is being used to advance certain political as well as developmental projects in subSaharan Africa.
    Date: 2018
  13. By: Giorgos Galanis (Goldsmiths, University of London); Ashok Kumar
    Abstract: This paper presents a novel understanding of the changing governance structures in global supply chains. Motivated by the global garment sector, we develop a geographical political economy dynamic model which reflects the interaction between bargaining power and distribution of value among buyer and producer firms. We find that the interplay between these two forces, in combination with the spatial specificities of global production, are necessary and sufficient to drive governance structures towards an intermediate position regarding their level of explicit coordination and power asymmetry.
    Keywords: Global value chains, global production networks, uneven development, disequilibrium dynamics, monopsony power
    JEL: D02 D43 E32 R10
    Date: 2018–03
  14. By: Marques II, Israel
    Abstract: When does business support the expansion of social policy in the developing world? Existing work on managers’ preferences has tended to concentrate on the developed world, where governments can credibly commit to policy, tax evasion is constrained, and mechanisms exist to hold the bureaucracy accountable for policy implementation. In this paper, I relax these assumptions, arguing that weak institutions create opportunities for some firms to shift costs onto others: making social policy more attractive. I argue that firms with political connections are uniquely positioned to benefit from subsidies and property rights protection, which decreases the cost of social policy, while firms with low visibility can evade taxes and free-ride off universalistic social policy. Such firms will support social policy even where institutions are poor. I test this argument using a survey of 666 firms in 10 Russian regions.
    JEL: L21 L33 O15 H53
    Date: 2018–02–23
  15. By: Omneya Abdelsalam (Durham University); Sabur Mollah (School of Management, Swansea University); Emili Tortosa-Ausina (Universitat Jaume I and Ivie)
    Abstract: Does political connection affect bank efficiency during both financial and political crises? This study addresses this question by adopting a two-stage approach that uses a quantile regression analysis of a unique dataset of listed banks in the Middle East and North Africa region. Our results show that political connection is a driving force behind bank inefficiency in the region. We find that the least efficient banks have the most significant association with political connections, thus supporting the bailout theory. We also find that political connections influenced the efficiency of banks during the 2008-9 global financial crisis but not during the 2011-13 regional political crisis. Our results provide new evidence on the applicability of established political connection theories in developing countries during political regime turmoil. We therefore recommend that global banking regulators and market participants scrutinize the political connections of banks more thoroughly.
    Keywords: Banks, Efficiency, MENA countries, Political connections, Data Envelopment Analysis, Quantile regression.
    JEL: D24 G21 G28 O16
    Date: 2018–02–24
  16. By: David E. Allen (School of Mathematics and Statistics, University of Sydney, Australia, Department of Finance, Asia University, Taiwan, and School of Business and Law, Edith Cowan University, Western Australia.); Michael McAleer (Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute Erasmus School of Economics Erasmus University Rotterdam, The Netherlands and Department of Quantitative Economics Complutense University of Madrid, Spain And Institute of Advanced Sciences Yokohama National University, Japan.); David McHardy Reid (Albers School of Business and Economics, Seattle University, Washington, USA.)
    Abstract: State of the Union Addresses (SOUA) by two recent US Presidents, President Obama (2016) and President Trump (2018), and a series of recent of tweets by President Trump, are analysed by means of the data mining technique, sentiment analysis. The intention is to explore the contents and sentiments of the messages contained, the degree to which they di_er, and their potential implications for the national mood and state of the economy. President Trump's 2018 SOUA and his sample tweets are identi_ed as being more positive in sentiment than President Obama's 2016 SOUA. This is con_rmed by bootstrapped t tests and non-parametric sign tests on components of the respective sentiment scores. The issue of whether overly positive pronouncements amount to self-promotion, rather than intrinsic merit or sentiment, is a topic for future research.
    Keywords: Sentiment Analysis, Polarity, Bootstrapped tests, Sign tests.
    JEL: A1 C88 C44 Z0
    Date: 2018–03

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