nep-pol New Economics Papers
on Positive Political Economics
Issue of 2018‒05‒28
nineteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Accountability, Political Capture and Selection into Politics: Evidence from Peruvian Municipalities By Gianmarco León; Lukas Kleine-Rueschkamp
  2. Populist Threats to Electoral Integrity: The Year in Elections 2016-2017 By Norris, Pippa; Gromping, Max
  3. State Capacity and Economic Integration: Evidence from the Eastern Enlargement By László Bruszt; Nauro F. Campos
  4. Condorcet Efficiency of the Preference Approval Voting and the Probability of Selecting the Condorcet Loser By Eric Kamwa
  5. Political Uncertainty and Commodity Prices By Hou, Kewei; Tang, Ke; Zhang, Bohui
  6. On the Likelihood of the Borda Effect: The Overall Probabilities for General Weighted Scoring Rules and Scoring Runoff Rules By Eric Kamwa
  7. The Politics of Foreclosures By Agarwal, Sumit; Amromin, Gene; Ben-David, Itzhak; Dinc, Serdar
  8. Presidential Elections 2018: The Struggle of Putin and Navalny for a Media Agenda By Anastasia Kazun; Kseniia Semykina
  9. The Legal Academy's Ideological Uniformity By Bonica, Adam; Chilton, Adam; Rozema, Kyle; Sen, Maya
  10. Preferences for the scope of protests By Miquel Pellicer; Eva Wegner; Alexander De Juan
  11. On the Political Economy of Industrial, Labor and Social Reforms as Complements By Antonio Estache; Renaud Foucart
  12. The rule of law and Islam By Gutmann, Jerg; Voigt, Stefan
  13. Terrorist Attacks and Immigration Rhetoric: A Natural Experiment on British MPs By Daniele Guariso
  14. From ‘international’ to ‘global’ development in the UK? Recent evidence from political party manifestos By David Hulme and Eleni Sifaki
  15. Polarization or Moderation? Intra-group heterogeneity in endogenous-policy contest By Daniel Cardona; Jenny De Freitas; Antoni Rubí-Barceló
  16. Predicting Stock Market Movements in the United States: The Role of Presidential Approval Ratings By Rangan Gupta; Patrick Kanda; Mark E. Wohar
  17. Protection for Sale with Price Interactions and Incomplete Pass-Through By Barbara Annicchiarico; Enrico Marvasi
  18. 21st Century Trade Agreements and the Owl of Minerva By Bernard Hoekman; Douglas Nelson
  19. Populism and the Economics of Globalization By Rodrik, Dani

  1. By: Gianmarco León; Lukas Kleine-Rueschkamp
    Abstract: We estimate the effects of political accountability on the selection of politicians when accountability mechanisms are prone to political capture. Using a comprehensive dataset that records characteristics of candidates for mayor in the last three local elections in Perú, and a close election sharp regression discontinuity design, we compare candidates running for mayor in districts where the incumbent was ousted from office through a recall referendum in the previous electoral term with those who run in districts where the recall referendum failed by a small margin. Candidates in municipalities where the incumbent was recalled are less educated, have less experience in elected offices and in the public sector, and are younger. These findings are consistent with a framework where potential candidates learn about an accountability mechanism which is prone to capture, distorting the main objectives of improving the quality of government, and instead discouraging high quality candidates to run. The negative selection of candidates is partially offset by voters, who elect the best politician out of a lower quality pool of candidates.
    Keywords: accountability, selection into Politics, Peru
    JEL: O10 D72 O53 D71
    Date: 2018–05
  2. By: Norris, Pippa (Harvard University); Gromping, Max (University of Sydney)
    Abstract: National elections for the legislature and/or the executive are held in almost all countries around the globe. This development has the potential to strengthen democracy. Yet, numerous contests suffer from electoral malpractice, whether from unfair laws, gerrymandered boundaries, restrictions on the free press, maladministration, election-related violence, ballot box fraud, or the abuse of money in politics. How widespread are these problems? For updated evidence, this report draws upon the fifth release of the Perceptions of Electoral Integrity dataset (PEI 5.0), in May 2017. This dataset compares the views of 2,709 experts who have evaluated electoral integrity in 158 countries holding 241 national elections from 1 July 2012 to 31 December 2016. Part II of the report summarizes the latest results by global region and highlights selected cases to go beyond the numbers, contrasting positive and negative practices. We focus on several elections held in 2015 and 2016--including the UK and Iceland in Western Europe, the United States in the Americas, Australia and the Philippines in Asia Pacific, Russia and Lithuania in Central and Eastern Europe, Iran and Syria in the MENA region, and The Gambia and Gabon in Sub-Saharan Africa. Part III examines two major challenges--electoral corruption and coercion. The EIP project has developed new measures to monitor the extent of these problems--where they occur and what conditions these malpractices commonly undermine electoral integrity. Are these techniques of carrots and sticks deployed separately--or are they combined? More systematic evidence about these problems can provide insights about how best to target reforms and what policies have proved most effective. Part IV focuses on populist threats to electoral integrity. We first compare several recent European elections to see whether contemporary support for populist parties is rising or stalled, including in the Netherlands, France, the United Kingdom, and Germany. We then identify three mechanisms whereby populism threatens free and fair contests including through damaging public confidence in elections, actively undermining international standards of electoral integrity and violating electoral laws, and colluding from Russian attempts to interfere with democracy abroad. Parts V and VI provide additional reference and technical information. With this update, PEI 5.0 covers 91% of all independent nation states holding national parliamentary and presidential elections around the world, excluding micro-states (with a population below 100,000). The study provides independent assessments utilizing a rolling survey where experts assess the quality of national elections one month after the close of the polls. Based on the views of 2,709 experts, the average response rate for PEI 5.0 is 28%. The technical appendix provides full details about the reliability and validity of the dataset.
    Date: 2017–05
  3. By: László Bruszt; Nauro F. Campos
    Abstract: We study whether and how economic integration increases state capacity. Despite the recent surge in economist’s interest in state capacity, there remains a lack of theory-based detailed empirical measures. This paper introduces a new panel of institutional reform measures. We present a political economy framework highlighting the Montesquieu, Weber and Smith channels and yielding hypotheses about the judiciary, bureaucracy, and competition policy. Our main finding is that the relationship between bureaucratic independence and judiciary capacity seems to be the main engine of the process of state capacity building engendered by the prospect of European Union membership.
    Keywords: state capacity, institutions, deep integration.
    JEL: D72 D78 H23 P11 P16
    Date: 2017–10
  4. By: Eric Kamwa (LC2S - Laboratoire Caribéen de Sciences Sociales - UAG - Université des Antilles et de la Guyane)
    Abstract: Under Approval Voting (AV), each voter just distinguishes the candidates he approves of from those appearing as unacceptable. The Preference Approval Voting (PAV) is a hybrid version of the approval voting first introduced by Brams and Sanver (2009). Under PAV, each voter ranks all the candidates and then indicates the ones he approves. In this paper, we provide analytical representations for the probability that PAV elects the Condorcet winner when she exists in three-candidate elections with large electorates. We also provide analytical representations for the probability that PAV elects the Condorcet loser. We perform our analysis by assuming the assumption of the Extended Impartial Culture. Under this assumption, it comes that AV seems to perform better than PAV on electing the Condorcet winner and that in most of the cases, PAV seems to be less likely to elect the Condorcet loser than AV.
    Keywords: Approval Voting,Ranking,Condorcet,Extended Impartial Culture,Probability
    Date: 2018–05–05
  5. By: Hou, Kewei (Ohio State University); Tang, Ke (Tsinghua University); Zhang, Bohui (Chinese University of Hong Kong)
    Abstract: Using a comprehensive sample of 87 commodities, we examine the effect of political uncertainty on commodity prices. We show that political uncertainty surrounding U.S. presidential elections has a significant negative impact on commodity prices worldwide, likely due to shrinking demand before the elections. On average, commodity prices decline by 6.4% in the quarter leading up to U.S. elections. This effect holds true for gold, and is stronger for close elections and elections during recessions. On the other hand, political uncertainty in commodity producing countries with little demand pushes commodity prices up by 5.4% in the quarter before their national elections.
    JEL: G12 G14 G15 G18 Q02
    Date: 2017–10
  6. By: Eric Kamwa (LC2S - Laboratoire Caribéen de Sciences Sociales - UAG - Université des Antilles et de la Guyane)
    Abstract: The Borda Effect, first introduced by Colman and Poutney (1978), occurs in a preference aggregation process using the Plurality rule if given the (unique) winner there is at least one loser that is preferred to the winner by a majority of the electorate. Colman and Poutney (1978) distinguished two forms of the Borda Effect:-the Weak Borda Effect describing a situation under which the unique winner of the Plurality rule is majority dominated by only one loser; and-the Strong Borda Effect under which the Plurality winner is majority dominated by each of the losers. The Strong Borda Effect is well documented in the literature as the Strong Borda Paradox. Colman and Poutney (1978) showed that the probability of the Weak Borda Effect is not negligible; they only focused on the Plurality rule. In this note, we extend the work of Colman and Poutney (1978) by providing in three-candidate elections, the representations for the limiting probabilities of the (Weak) Borda Effect for the whole family of the scoring rules and scoring runoff rules. We highlight that there is a relation between the (Weak) Borda Effect and the Condorcet efficiency. We perform our analysis under the Impartial Culture and the Impartial Anonymous Culture which are two well-known assumptions often used for such a study.
    Date: 2018–05–05
  7. By: Agarwal, Sumit (Georgetown University); Amromin, Gene (Federal Reserve Bank of Chicago); Ben-David, Itzhak (Ohio State University); Dinc, Serdar (Rutgers University)
    Abstract: U.S. House of Representatives Financial Services Committee considered many important banking reforms in 2009-2010 including the Dodd-Frank Act. We show that during this period, the foreclosure starts on delinquent mortgages were delayed in the districts of committee members even though there was no difference in delinquency rates between committee and non-committee districts. In these areas, banks delayed the start of the foreclosure process by 0.5 months (relative to the 12-month average). The total estimated cost of delay to lenders is an order of magnitude greater than the campaign contributions by the Political Action Committees of the largest mortgage servicing banks to the committee members in that period and is comparable to these banks’ lobbying expenditures.
    JEL: D72 G01 G21
    Date: 2017–10
  8. By: Anastasia Kazun (National Research University Higher School of Economics); Kseniia Semykina (National Research University Higher School of Economics)
    Abstract: The study analyzes the construction of the network links of Vladimir Putin and Alexei Navalny with various issues of Russian public discussion in the national print media. The theoretical framework is issue ownership theory, according to which political actors have a range of issues that are most strongly associated with them. Ownership by the politician of topics that are perceived as important in the society determines his popularity among the population. In this study, we use the Integrum database, which contains extensive print media archives of approximately 500 Russian magazines and more than 250 national newspapers. We analyze the period from 12.12.2016 to 12.12.2017, i.å., one year after Alexey Navalny's announcement of his intention to participate in the presidential election in 2018. The analysis shows that Putin has more opportunities to form an agenda, as he attracts much more attention from national media than Navalny does. Putin is often mentioned in connection with economic issues and international relations, which attract the attention of the population and are perceived as important, while his activity in these spheres is perceived as successful. Navalny is associated with the issues of corruption, NGOs and civic activism. Corruption is an important topic for Russians, but the low attention of the media to Navalny does not allow him to gain the maximum benefit from owning this story.
    Keywords: mass media, network agenda-setting, issue ownership, image of politicians, electoral behavior, public opinion, Putin, Navalny, elections 2018
    JEL: Z
    Date: 2018
  9. By: Bonica, Adam (Stanford University); Chilton, Adam (University of Chicago); Rozema, Kyle (Northwestern University); Sen, Maya (Harvard University)
    Abstract: We compare the ideological balance of the legal academy to the ideological balance of the legal profession. To do so, we match professors listed in the Association of American Law Schools Directory of Law Teachers and lawyers listed in the Martindale-Hubbell directory to a measure of political ideology based on political donations. We find that 15% of law professors, compared to 35% of lawyers, are conservative. After controlling for individual characteristics, however, this 20 percentage point ideological gap narrows to around 13 percentage points. We argue that this ideological uniformity marginalizes law professors, but that it may not be possible to improve the ideological balance of the legal academy without sacrificing other values.
    Date: 2017–04
  10. By: Miquel Pellicer (GIGA Institute of Middle East Studies and SALDRU, School of Economics, University of Cape Town); Eva Wegner (School of Politics & International Relations, University College Dublin); Alexander De Juan (Department of Politics and Public Administration, University of Konstanz)
    Abstract: This paper studies a dimension of protest largely overlooked in the literature: protest scope, that is, whether protests seek large, structural, changes for a large share of the population or focus on small-scale improvements for small groups. We argue that this protest dimension is relevant for understanding the political consequences of protests. We show empirically that protests vary substantially in scope and that scope is not collinear with other protest dimensions, such as size, motive, or tactics. We explore drivers of individual preferences for protest scope with a survey experiment in two South African townships. We find that respondents made to feel more efficacious tend to support protests of broader scope. This effect operates via a social psychology channel whereby efficacy leads people to assign blame for their problems to more systemic causes.
    Keywords: Protest Dimensions, Political Behaviour, Social Psychology, Survey Experiment, Efficacy, South Africa
    Date: 2018
  11. By: Antonio Estache; Renaud Foucart
    Abstract: We study the coordination between industrial, labor and social policy when voting determines policy choices. Firms choose to invest in either an old or a new sector. Most workers have skills constraining them to work in the old sector. A minority of workers are more productive in the new sector, and choose to be active where they expect a higher wage. Aggregate surplus is higher if firms invest in both sectors and workers are employed where they are the most productive. We identify conditions for such a modernized economy to develop. First, any labor policy must give workers enough bargaining power to have incentives to find the right job. Second, for an industrial policy to stimulate the new sector, a social policy involving both workers and firms must compensate the losers of modernization. Third, policies must be delegated to a social planner able to commit to the joint implementation of reforms and transfers.
    Keywords: bargaining power, industrial policy, voting
    Date: 2018–05
  12. By: Gutmann, Jerg; Voigt, Stefan
    Abstract: No other religion's role in politics is as controversial as that of Islam – at least in Western societies. It has been claimed that Muslims are more likely than others to voice opinions that conflict with core elements of a free society, such as capitalism, constitutional democracy, and the rule of law. Indeed, Muslim countries seem to struggle with establishing democracy and the rule of law, while the acknowledgement and protection of minority rights in particular are a constant concern in Muslim societies. A recent survey by the PEW Research Centre indicates that values expressed by large numbers of Muslims around the world remain incompatible with the liberalism favoured in modern-day Western societies. Although Muslims in most parts of the world think that women should decide whether they veil themselves, overwhelming majorities of Muslims also say that a wife should always obey her husband. Furthermore it is still controversial whether women should have a right to divorce and whether sons and daughters have the same inheritance rights. Even though a majority of Muslims support democracy and it is almost universally agreed that religious freedom is something positive, the view that religion should play a role in politics is widely embraced among Muslims. A majority of Muslims favour enshrining Shari'a in official state law and specifically among those Muslims, honour killings and the death penalty for apostates are widely supported...
    Date: 2018
  13. By: Daniele Guariso (Department of Economics, University of Sussex, Brighton, UK)
    Abstract: We study the effects of exogenous shocks on the rhetoric of British politicians on social media. In particular, we focus on the impact of terrorist attacks on the issue of immigration. For this purpose, we collect all the immigration-related Tweets from the active Twitter accounts of MPs using Web Scraping and Machine Learning techniques. Looking at the Manchester bombing of 2017 as our main Event Study, we detect a counterintuitive finding: a substantial decrease in the expected number of immigration-related Tweets occurred after the incident. We hypothesize that this “muting effect” results from risk-averse strategic behaviour of politicians during the election campaign. However, the MPs' response shows remarkable heterogeneity according to the socio-economic characteristics of their constituencies.
    Keywords: political behaviour; machine learning; social media; immigration; terrorism
    JEL: C81 D72 Z13
    Date: 2018–05
  14. By: David Hulme and Eleni Sifaki
    Abstract: Abstract This paper explores whether UK political parties have moved from an understanding of development cooperation as international development/foreign aid, towards a more ‘global developmental’ approach. Its analytical framework is based on the components of the Commitment to Development Index (CDI), with an additional theme of ‘addressing global inequalities’. The empirical sections examine the election manifestos of the UK’s major political parties since 1997 to see if there is any evidence that they are beginning to recognise that development cooperation is about much more than foreign aid and that it will entail cross-sectoral, ‘joined up’ policy analysis and action. In the conclusion the different speeds at which parties are moving are compared and an initial attempt is made at explaining these differences.tion is that improving access to formal financial services may not, on its own, be sufficient to drive the structural transformation process without the integration of the informal financial sector into the mainstream financial system.
    Date: 2018
  15. By: Daniel Cardona (Universitat de les Illes Balears); Jenny De Freitas (Universitat de les Illes Balears); Antoni Rubí-Barceló (Universitat de les Illes Balears)
    Abstract: We analyze the selection of a policy platform by a group of heterogeneous agents to confront the status quo policy defended by another group in a subsequent contest. This policy choice results from the interaction between the inter-group effects that lead to strategic restraint and the intra-group effects due to the heterogeneity among challengers. We detail the conditions that give rise to polarization or moderation of the selected challenging policy with respect to what would be selected by this group in the absence of any struggle.
    Keywords: political processes; conflict; group contests; endogenous claims; intra-group heterogeneity
    JEL: D72 D74 C72
    Date: 2018
  16. By: Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Patrick Kanda (Laboratoire THéorie Économique, Modélisation et Applications (THEMA), Université de Cergy-Pontoise, France); Mark E. Wohar (College of Business Administration, University of Nebraska at Omaha, Omaha, USA and School of Business and Economics, Loughborough University, Leicestershire, UK)
    Abstract: In this paper we analyze whether presidential approval ratings can predict the S&P500 returns over the monthly period of 1941:07 to 2018:04, using a dynamic conditional correlation multivariate generalized autoregressive conditional heteroscedasticity (DCC-MGARCH) model. Our results show that, standard linear Granger causality test fail to detect any evidence of predictability. However, the linear model is found to be misspecified due to structural breaks and nonlinearity, and hence, the result of no causality from presidential approval ratings to stock returns cannot be considered reliable. When we use the DCC-MGARCH model, which is robust to such misspecifications, in 69 percent of the sample period, approval ratings in fact do strongly predict the S&P500 stock return. Moreover, using the DCC-MGARCH model we find that presidential approval rating is also a strong predictor of the realized volatility of S&P500. Overall, our results highlight that presidential approval ratings is helpful in predicting stock return and volatility, when one accounts for nonlinearity and regime changes through a robust time-varying model.
    Keywords: US Presidential Approval Ratings, DCC-MGARCH, Stock Returns, Realized Volatility, S&P500
    JEL: C32 G10
    Date: 2018–05
  17. By: Barbara Annicchiarico (Universita degli Studi di Roma2 "Tor Vergata"); Enrico Marvasi (Politecnico di Milano)
    Abstract: We extend the protection for sale model of Grossman and Helpman (1994) by introducing a general model of monopolistic competition with variable markups and incomplete pass-through. We show that the structure of protection emerging in the political equilibrium not only depends on the weight attached by governments to consumer welfare when making their policy decision, but also on the degree of market power of firms and on the terms-of-trade variations due to the degree of pass-through. Overall, our results highlight the importance of demand characteristics in shaping the structure of protection and are consistent with the occurring of protectionism also in unorganized industries.
    Keywords: Protection for Sale, Monopolistic Competition, Incomplete Pass-Through, Endogenous Markups
    JEL: F1 F13
    Date: 2018
  18. By: Bernard Hoekman; Douglas Nelson
    Abstract: The post Second World War liberal trade order has been a driver of global economic growth and rising average per capita incomes. This order confronts increasing opposition, reflecting concerns about adjustment costs and distributional effects of globalization, and the ability to pursue national policy goals. At the same time the development of complex production relations distributed across many countries calls for cooperation on a variety of regulatory policies. Contrary to what is argued by opponents of globalization, this does not imply one size fits all rules that constitute a threat to national sovereignty and democratic legitimation. There remains an important ‘traditional’ integration agenda that centers on rule-making by major trading powers on policies that generate negative international spillovers. But the core challenge for the political economy of 21st Century trade agreements is to support regulatory cooperation to better govern international production and address the non-pecuniary externalities associated with greater economic integration.
    Keywords: Trade agreements, globalization, WTO, adjustment costs, economic integration, political economy
    JEL: F02 F13 F15
    Date: 2018–01
  19. By: Rodrik, Dani (Harvard University)
    Abstract: Populism may seem like it has come out of nowhere, but it has been on the rise for a while. I argue that economic history and economic theory both provide ample grounds for anticipating that advanced stages of economic globalization would produce a political backlash. While the backlash may have been predictable, the specific form it took was less so. I distinguish between left-wing and right-wing variants of populism, which differ with respect to the societal cleavages that populist politicians highlight. The first has been predominant in Latin America, and the second in Europe. I argue that these different reactions are related to the relative salience of different types of globalization shocks.
    Date: 2017–06

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