nep-pol New Economics Papers
on Positive Political Economics
Issue of 2018‒07‒16
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence By Bertrand, Marianne; Bombardini, Matilde; Fisman, Raymond; Trebbi, Francesco
  2. The Privatization Origins of Political Corporations By Felipe González; Mounu Prem; Francisco Urzúa I
  3. Extensions of the Simpson voting rule to the committee selection setting By Daniela Bubboloni; Mostapha Diss; Michele Gori
  4. Exploring the Effects on the Electoral College of National and Regional Popular Vote Interstate Compact: An Electoral Engineering Perspective By Laurent, Thibault; Le Breton, Michel; Lepelley, Dominique; de Mouzon, Olivier
  5. Negative advertising and electoral rules: an empirical evaluation of the Brazilian case By Danilo P. Souza; Marcos Y. Nakaguma
  6. The Chamberlin-Courant Rule and the k-Scoring Rules: Agreement and Condorcet Committee Consistency By Mostapha Diss; Eric Kamwa; Abdelmonaim Tlidi
  7. Cohesive Institutions and Political Violence By Fetzer, Thiemo; Kyburz, Stephan
  8. The Theoretical Shapley-Shubik Probability of an Election Inversion in a Toy Symmetric Version of the U.S. Presidential Electoral System By Laurent, Thibault; Le Breton, Michel; Lepelley, Dominique; de Mouzon, Olivier
  9. Soviet legacies of economic development, oligarchic rule and electoral quality in Eastern Europe’s partial democracies: the case of Ukraine By Lankina, Tomila V.; Libman, Alexander
  10. Politics-Driven Exchange Rate Cycles : East Asia vs. Latin America By Arslan Razmi
  11. Borda Count Method for Fiscal Policy- A Political Economic Analysis - By Ryo Ishida; Kazumasa Oguro
  12. The Media and Challenges of Adopting Western Democracy: Nigeria and the Restructuring Debate By Hadiza Wada
  13. Essays on political economy of finance and fintech By Zhu, Haikun

  1. By: Bertrand, Marianne; Bombardini, Matilde; Fisman, Raymond; Trebbi, Francesco
    Abstract: We explore the role of charitable giving as a means of political influence, a channel that has been heretofore unexplored in the political economy literature. For philanthropic foundations associated with Fortune 500 and S&P500 corporations, we show that grants given to charitable organizations located in a congressional district increase when its representative obtains seats on committees that are of policy relevance to the firm associated with the foundation. This pattern parallels that of publicly disclosed Political Action Committee (PAC) spending. As further evidence on firms' political motivations for charitable giving, we show that a member of Congress's departure leads to a short-term decline in charitable giving to his district, and we again observe similar patterns in PAC spending. Charities directly linked to politicians through personal financial disclosure forms fled in accordance to Ethics in Government Act requirements exhibit similar patterns of political dependence. Our analysis suggests that firms deploy their charitable foundations as a form of tax-exempt influence seeking. Based on a straightforward model of political influence, our estimates imply that 7.2 percent of total U.S. corporate charitable giving is politically motivated, an amount that is economically significant: it is 280 percent larger than annual PAC contributions and about 40 percent of total federal lobbying expenditures. Given the lack of formal electoral or regulatory disclosure requirements, charitable giving may be a form of political influence that goes mostly undetected by voters and shareholders, and which is directly subsidized by taxpayers.
    Date: 2018–06
  2. By: Felipe González; Mounu Prem; Francisco Urzúa I
    Abstract: We show how the sale of state owned firms in dictatorships may lead to the creation of political corporations operating in democracies. Using several novel datasets, we characterize the privatizations of the Pinochet regime in Chile using a data driven algorithm, confirming that some state owned firms were sold underpriced to politically connected individuals. We then show how firms with crooked privatization processes grew and benefited from Pinochet and in democracy formed political connections, financed political campaigns, and were more likely to appear in the Panama Papers. These results reveal how authoritarian regimes can influence a subsequent democracy and document a way in which political corporations are created.
    Keywords: Corporation, privatization, rent seeking, dictatorship, democracy
    Date: 2018–06–20
  3. By: Daniela Bubboloni (Dipartimento di Matematica e Informatica “Ulisse Dini” Università degli Studi di Firenze, viale Morgagni, 67/a, 50134, Firenze, Italy); Mostapha Diss (Univ Lyon, UJM Saint-Etienne, GATE UMR 5824, F-42023 Saint-Etienne, France); Michele Gori (Dipartimento di Scienze per l’Economia e l’Impresa, Università degli Studi di Firenze, via delle Pandette 9, 50127, Firenze, Italy)
    Abstract: Committee selection rules are procedures selecting sets of candidates of a given size on the basis of the preferences of the voters. There are in the literature two natural extensions of the well-known single-winner Simpson voting rule to the multiwinner setting. The first method gives a ranking of candidates according to their minimum number of wins against the other candidates. Then, if a fixed number k of candidates are to be elected, the k best ranked candidates are chosen as the overall winners. The second method gives a ranking of committees according to the minimum number of wins of committee members against committee nonmembers. Accordingly, the committee of size k with the highest score is chosen as the winner. We propose an in-depth analysis of those committee selection rules, assessing and comparing them with respect to several desirable properties among which unanimity, fixed majority, non-imposition, stability, local stability, Condorcet consistency, some kinds of monotonicity, resolvability and consensus committee. We also investigate the probability that the two methods are resolute and suffer the reversal bias, the Condorcet loser paradox and the leaving member paradox. We compare the results obtained with the ones related to further well-known committee selection rules. The probability assumption on which our results are based is the widely used Impartial Anonymous Culture.
    Keywords: Multiwinner Elections, Committee Selection Rule, Simpson Voting Rule, Paradoxes, Probability
    JEL: D71 D72
    Date: 2018
  4. By: Laurent, Thibault; Le Breton, Michel; Lepelley, Dominique; de Mouzon, Olivier
    Abstract: The main purpose of this paper is to explore the consequences of the formation of either a Regional Popular Vote Interstate compact or a National Popular Vote Interstate compact on the functioning of the Electoral College. The two versions of interstate Compact which are considered here differ in only one respect: in one case the interstate compact allocates its electoral votes to the regional popular winner while in the other case it allocates these votes to the national popular winner. They both differ from the ongoing National Popular Vote Interstate Compact as it is assumed that the agreement is effective as soon as the members sign it. The decisiveness and welfare analysis are conducted for a simplified symmetric theoretical version of the Electoral College where the malapportionment problems are absent. The three most popular probabilistic models are considered and the study is conducted either from the self-interest perspective of the initiators of the interstate compact or from a general interest perspective. The analysis combines analytical arguments and simulations.
    Keywords: Electoral College; Voting Power
    JEL: D71 D72
    Date: 2018–05
  5. By: Danilo P. Souza; Marcos Y. Nakaguma
    Abstract: This paper assesses how electoral institutions shape candidates’ incentives about their political advertising strategies. Taking advantage of a discontinuity in the assigment of brazilian municipal election rules, we use a RDD approach to assess how the candidates campaign tone is affected by a shift from a single-ballot to a runoff system. Using an unique database about litigations involving mayor candidates in the elections of 2012 and 2016, results show that 2nd and 3rd placed candidates in the first round of a runoff election have a probability more than 50 p.p. higher of being part in a litigation regarding negative advertising when compared to a single round election.
    Keywords: elections; negative advertising; political advertising
    JEL: D72 D79 C29
    Date: 2018–07–03
  6. By: Mostapha Diss (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Eric Kamwa (LC2S - Laboratoire Caribéen de Sciences Sociales - UAG - Université des Antilles et de la Guyane); Abdelmonaim Tlidi (Université Cadi Ayyad [Marrakech])
    Abstract: For committee or multiwinner elections, the Chamberlin-Courant rule (CCR), which combines the Borda rule and the proportional representation, aims to pick the most representative committee (Chamberlin and Courant, 1983). Chamberlin and Courant (1983) have shown that if the size of the committee to be elected is k = 1 among m ≥ 3 candidates, the CCR is equivalent to the Borda rule; Kamwa and Merlin (2014) claimed that if k = m − 1, the CCR is equivalent to the k-Plurality rule. In this paper, we explore what happens for 1
    Keywords: Committee, Representativeness, Borda, Condorcet, Chamberlin-Courant, k-Scoring rule
    Date: 2018–06–18
  7. By: Fetzer, Thiemo (University of Warwick); Kyburz, Stephan (Center for Global Development)
    Abstract: Can institutionalized transfers of resource rents be a source of civil conflict? Are cohesive institutions better in managing distributive conflicts? We study these questions exploiting exogenous variation in revenue disbursements to local governments together with new data on local democratic institutions in Nigeria. We make three contributions. First, we document the existence of a strong link between rents and conflict far away from the location of the actual resource. Second, we show that distributive conflict is highly organized involving political militias and concentrated in the extent to which local governments are non-cohesive. Third, we show that democratic practice in form having elected local governments significantly weakens the causal link between rents and political violence. We document that elections (vis-a-vis appointments), by producing more cohesive institutions, vastly limit the extent to which distributional conflict between groups breaks out following shocks to the available rents. Throughout, we confirm these findings using individual level survey data.Keywords: conflict, ethnicity, natural resources, political economy, commodity prices. JEL Classification: Q33, O13, N52, R11, L71
    Date: 2018
  8. By: Laurent, Thibault; Le Breton, Michel; Lepelley, Dominique; de Mouzon, Olivier
    Keywords: Electoral system; Election Inversions; Impartial Anonymous Culture
    JEL: D71 D72
    Date: 2018–02
  9. By: Lankina, Tomila V.; Libman, Alexander
    Abstract: Can economic development retard democracy, defying expectations of classic modernization theorizing? If so, under what conditions? Our paper addresses the puzzle of poor democratic performance in highly urbanized and industrialized post-communist states. We assembled an original dataset with data from Ukraine’s local and national elections and constructed district- (rayon) and region- (oblast) level indices of electoral quality. Regions and districts that score higher on developmental indices also score lower on electoral quality, including in Ukraine’s Western regions conventionally considered more democratic than the predominantly Russian-speaking Eastern regions. We explain these outcomes with reference to the peculiarities of Soviet industrial development, which facilitated the emergence of “oligarchs” in territories housing Soviet-era mega-industries. Our research contributes to comparative debates about the links between economic development and democracy.
    JEL: J1
    Date: 2019–10
  10. By: Arslan Razmi (Department of Economics, University of Massachusetts Amherst)
    Abstract: I develop the implications for real exchange rate cycles of different policy preferences, focusing in particular on broadly stylized features of major Latin American and East Asian economies. Recent political science literature has emphasized the role of factors such as the influence of the manufacturing sector and the nature of labor markets. I formalize some of these insights in a developing country framework with policy makers who inter-temporally optimize and voters/audiences that are incompletely informed. Given the choice between assigning greater weight to immediate worker purchasing power versus generating manufacturing employment and income over time, I show that countries where policy makers choose the former are more likely to experience cycles with overvaluation, current account deficits, and abrupt (postponed) devaluations.
    Keywords: Political business cycles, real exchange rate, capital accumulation, balance of payments
    JEL: O25 D72 F41 O14
    Date: 2018
  11. By: Ryo Ishida (Policy Research Institute, Ministry of Finance); Kazumasa Oguro (Faculty of Economics, Hosei University)
    Abstract: Survey data reveals that government budgets tend to go into the red. Public Choice economists as well as public finance economists have been interested in this phenomenon. This paper presents a new explanation for this tendency from the political economic point of view; the current voting system might have a tendency to bring about a budget deficit. If policy choices only deal with the current tax rate and do not take into account the intertemporal tax rate, budget-balanced choice is difficult to be chosen. Even if voting choices take into account intertemporal aspects, we show that a budget-balanced choice is difficult to be chosen under relative majority rule. We further demonstrate that the Borda count method might overcome this issue.
    Keywords: relative majority rule, Borda count method, deficit
    JEL: D72 H41 H62
    Date: 2017–05
  12. By: Hadiza Wada (Ahmadu Bello University, Samaru, Zaria)
    Abstract: This study using the media effect theory, particularly the agenda setting theory, hypothesized that a heated media debate over what was tagged national ‘restructuring conference’ in Nigeria was a subject of deliberate media ‘framing.’ The issue which advocated for circumventing the federal legislature created much emotional rhetoric, where existing democratic structures suffice in debating and addressing the issues the conference was supposed to address. A random survey of Nigerian citizens confirmed that the issue was overrated in importance by the media. An analysis of the frequency of news coverage of restructuring by major newspapers during peak debating time confirmed that the hyping was disproportionally coming from sectional special interests, as opposed to balanced reporting based on national interest. Highlighted in the paper is the negative use of ‘framing’ to influence and divert the audience’s attention from more critical issues plaguing Nigeria. The study recommends that the media, in consonance with its ethical code of social responsibility joins other institutions in strengthening democratic structures above all else, including special interests.
    Keywords: Nigerian Press, Media and Democracy
    Date: 2018–05
  13. By: Zhu, Haikun (Tilburg University, School of Economics and Management)
    Abstract: This thesis consists of two chapters in political economy of finance and one chapter in FinTech. My central interest is to study the interaction between socioeconomic stability and financial activities of corporations and financial institutions. The first chapter focuses on whether economic shocks trigger labour unrest and fuel political extremism. The second chapter provides an analysis as to how state-owned firms use internal funds to address sudden social unrest events. The final chapter investigates if new peer-to-peer (P2P) lending technology undermines macroprudential regulation and adds risk to financial stability.
    Date: 2018

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