nep-pol New Economics Papers
on Positive Political Economics
Issue of 2018‒06‒18
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Accountability, Political Capture and Selection into Politics: Evidence from Peruvian Municipalities By León, Gianmarco
  2. EXECUTIVES IN POLITICS By Ilona Babenko; Viktar Fedaseyeu; Song Zhang
  3. The Political Impact of Immigration: Evidence from the United States By Anna Maria Mayda; Giovanni Peri; Walter Steingress
  4. Destabilizing orders - Understanding the consequences of neoliberalism. Proceedings of the MaxPo Fifth-Anniversary Conference, Paris, January 12-13, 2018 By Andersson, Jenny; Godechot, Olivier
  5. Global Crises and Populism: the Role of Eurozone Institutions By Guiso, Luigi; Herrera, Helios; Morelli, Massimo; Sonno, Tommaso
  6. Value for Money? Community Targeting in Vote-Buying and Politician Accountability By Leight, Jessica; Foarta, Dana; Pande, Rohini; Ralston, Laura
  7. Protection for Sale with Price Interactions and Incomplete Pass-Through By Barbara Annicchiarico; Enrico Marvasi
  8. The Impact of Bailouts on Political Turnover and Sovereign Default Risk By Timm M. Prein; Almuth Scholl
  9. The Political Behavior of Wealthy Americans: Evidence from Technology Entrepreneurs By Broockman, David; Ferenstein, Greg F.; Malhotra, Neil
  10. Women's Political Participation and Intrahousehold Empowerment: Evidence from the Egyptian Arab Spring By Bargain, Olivier; Boutin, Delphine; Champeaux, Hugues
  11. Political Connections and Firms: Network Dimensions By Bussolo, Maurizio; Commander, Simon; Poupakis, Stavros

  1. By: León, Gianmarco
    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 Peru, 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; Peru; Selection into Politics
    JEL: D71 D72 O10 O53
    Date: 2018–05
  2. By: Ilona Babenko; Viktar Fedaseyeu; Song Zhang
    Abstract: Between 1980 and 2014, the share of politicians in federal office who held a corporate executive position prior to being elected increased from 13.5% to 21.2%, while the likelihood that an executive runs for federal elective office doubled over the same period. Firms whose executives win federal elections experience significant positive stock returns around the dates of such elections and around the dates when Congress passes legislation introduced by their former executives. Relative to non-businessman politicians, we show that businessman politicians are not more effective at introducing or passing legislation but are significantly more likely to vote for legislation supported by pro-business interest groups and less likely to vote for legislation supported by labor unions or consumer advocacy groups. Businessman politicians have a 44.4% higher likelihood of winning elections, and executives with a good track record at their firms are more likely to run for political office. Our results indicate that business representatives have increased their direct involvement in the legislative process in the United States and that this involvement may have generated substantial benefits for their firms. American voters appear to value business experience in political candidates, even though, once elected, such candidates are not more effective legislators than other politicians.
    Keywords: businessman politicians, executives, corporate political connections
    JEL: G32 G38 D72 G30
    Date: 2017
  3. By: Anna Maria Mayda; Giovanni Peri; Walter Steingress
    Abstract: In this paper we study the impact of immigration to the United States on the vote for the Republican Party by analyzing county-level data on election outcomes between 1990 and 2010. Our main contribution is to separate the effect of high-skilled and low-skilled immigrants, by exploiting the different geography and timing of the inflows of these two groups of immigrants. We find that an increase in the first type of immigrants decreases the share of the Republican vote, while an inflow of the second type increases it. These effects are mainly due to the local impact of immigrants on votes of U.S. citizens and they seem independent of the country of origin of immigrants. We also find that the pro-Republican impact of low-skilled immigrants is stronger in low-skilled and non-urban counties. This is consistent with citizens' political preferences shifting towards the Republican Party in places where low-skilled immigrants are more likely to be perceived as competition in the labor market and for public resources.
    JEL: F22 J61
    Date: 2018–04
  4. By: Andersson, Jenny; Godechot, Olivier
    Abstract: Throughout the long postwar period, crisis was a conjectural phenomenon and the exception in a normalcy of growth and social progress. Many key concepts of the social sciences - indeed, our understanding of democracy, embedded markets, enlightened electorates, benevolent political elites, and problem-solving progressive alliances - seem inapt for understanding today's societal upheaval. In the wake of the financial crisis of 2008, we have witnessed the breakdown of majority alliances, the return of populism on a grand scale both in the Western world and globally, and the eruption into chaotic and sometimes violent social protests. The forces that underpinned the framework of welfare capitalism seem obsolete in the face of financial and political elites who are paradoxically both disconnected from national territory and sometimes in direct alliance with nationalist and populist movements. Politics of resentment, politics of place, and new politics of class interact in ways that we do not yet understand. Perhaps the greatest paradox of all is that neoliberalism has spawned authoritarianism. At the same time, these processes are not at all new, but must be put in the context of the socioeconomic and cultural cleavages produced by the shift to neoliberalism since the 1970s. The paper presents arguments by leading scholars in economic history, economic sociology, and political economy in brief thinknotes that were prepared for the MaxPo Fifth-Anniversary Conference on January 12 and 13, 2018, in Paris.
    Keywords: crisis,neoliberalism,elites,political economy,economic sociology
    Date: 2018
  5. By: Guiso, Luigi; Herrera, Helios; Morelli, Massimo; Sonno, Tommaso
    Abstract: Populist parties are likely to gain consensus when mainstream parties and status quo institutions fail to manage the shocks faced by their economies. Institutional constraints, which limit the possible actions in the face of shocks, result in poorer performance and frustration among voters who turn to populist movements. We rely on this logic to explain the different support of populist parties among European countries in response to the globalization shock and to the 2008-2011 - financial and sovereign debt crisis. We predict a greater success of populist parties in response to these shocks in Euro zone countries, and our empirical analysis confirms this prediction. This is consistent with voters' frustration for the greater inability of the Euro zone governments to react to dicult-to-manage globalization shocks and financial crises. Our evidence has implications for the speed of construction of political unions. A slow, staged process of political unification can expose the EU to a risk of political backlash if hard to manage shocks hit the economies during the integration process.
    Keywords: Financial Dependence; Frustration; Globalization; populism; Relocation
    JEL: D72 D78 F14 F16
    Date: 2018–05
  6. By: Leight, Jessica (American University); Foarta, Dana (Stanford University); Pande, Rohini (Harvard University); Ralston, Laura (World Bank)
    Abstract: Community targeting of vote payments--defined as the saturation of entire neighborhoods with cash prior to elections--is widespread in the developing world. In this paper, we utilize laboratory experiments conducted in the U.S. and Kenya to demonstrate that, relative to individual targeting, a vote-buying regime that distributes payments widely renders voters more tolerant of politician rent-seeking, and increases the level of politician rent-seeking observed in equilibrium. The most parsimonious model of preferences consistent with these patterns is a model in which both politicians and voters are characterized by multifaceted social preferences, encompassing reciprocity, altruism, and inequality aversion.
    Date: 2017–12
  7. By: Barbara Annicchiarico (DEF and CEIS, Università di Roma "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 the government to consumer welfare when making its 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. 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: F12 F13
    Date: 2018–06–08
  8. By: Timm M. Prein (University of Konstanz, Department of Economics, Germany); Almuth Scholl (University of Konstanz, Department of Economics, Germany)
    Abstract: This paper develops a stochastic dynamic politico-economic model of sovereign debt to analyze the impact of bailouts on sovereign default risk and political turnover. We consider a small open economy in which the government has access to official loans conditional on the implementation of austerity policies. There is a two-party system in which both parties care about the population’s welfare but differ in an exogenous utility cost of default. Political turnover is the endogenous outcome of the individual voting behavior. In a quantitative exercise we apply the model to Greece and find that bailout episodes are characterized by an increased risk of political turnover. In the short run, stricter conditionality raises the risk of sovereign default because it reduces the participation rate in bailout programs. In the long run, however, stricter conditionality limits the accumulation of debt which lowers sovereign default risk. We show that the frequency of political turnover is U-shaped in the strength of conditionality.
    Keywords: sovereign default risk, political turnover, bailouts, conditionality, austerity
    JEL: E44 E62 F34
    Date: 2018–06–08
  9. By: Broockman, David (Stanford University); Ferenstein, Greg F.; Malhotra, Neil
    Abstract: American politics overrepresents the wealthy. But what policies do the wealthy support? Many accounts implicitly assume the wealthy are monolithically conservative and that increases in their political power will increase inequality. Instead, we argue there is substantial heterogeneity by industry, wherein the wealthy from an industry can share a distinctive set of political preferences. Consequently, how increases in the wealthy's influence affect inequality depends on which industries' rich are gaining influence and which issues are at stake. We demonstrate our argument with three original surveys, including the two largest surveys of wealthy Americans to date: one of technology entrepreneurs--a burgeoning wealthy demographic' and another of political campaign donors. We show that technology entrepreneurs support liberal redistributive, social, and globalistic policies but conservative regulatory policies--a bundle of preferences rare among other wealthy individuals. Consistent with our theoretical argument, we also present evidence that suggests these differences arise from their distinctive predispositions.
    Date: 2017–12
  10. By: Bargain, Olivier (University of Bordeaux); Boutin, Delphine (CERDI, University of Auvergne); Champeaux, Hugues (CERDI, University of Auvergne)
    Abstract: Egyptian women have played an unprecedented role in the Arab Spring democratic movement, possibly changing women's perception about their own rights and role. We question whether these events have translated into better outcomes within Egyptian households. We conjecture that potential changes must have been heterogeneous and depended on the local intensity of protests and women's participation over 2011-13. We exploit the geographical heterogeneity along these two margins to conduct a double difference analysis using data surrounding the period. We find a significant improvement in women's final say regarding decisions on health, socialization and household expenditure, as well as a decline in the acceptation of domestic violence and girls' circumcision, in the regions most affected by the protests. This effect is not due to particular regional patterns or pre-existing trends in empowerment. It is also robust to alternative treatment definitions and confirmed by triple difference estimations. We confront our main interpretation to alternative mechanisms that could have explained this effect.
    Keywords: Arab Spring, revolutions, gender, empowerment, Egypt
    JEL: J12 J16 D74 I14
    Date: 2018–05
  11. By: Bussolo, Maurizio (World Bank); Commander, Simon (IE Business School, Altura Partners); Poupakis, Stavros (University College London)
    Abstract: Business and politician interaction is pervasive but has mostly been analysed with a binary approach. Yet the network dimensions of such connections are ubiquitous. We use a unique dataset for seven economies that documents politically exposed persons (PEPs) and their links to companies, political parties and other individuals. With this dataset, we can identify networks of connections, including their scale and composition. We find that all country networks are integrated having a Big Island. They also tend to be marked by small-world properties of high clustering and short path length. Matching our data to firm level information, we examine the association between being connected and firm-level attributes. The originality of our analysis is to identify how location in a network, including extent of ties and centrality, are correlated with firm scale and performance. In a binary approach such network characteristics are omitted and the scale and economic impact of politically connected business may be significantly mis/under-estimated. By comparing results of the binary approach with our network approach, we can also assess the biases that result from ignoring network attributes.
    Keywords: connections: PEPs, networks, rents
    JEL: L14 L53 P26
    Date: 2018–04

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