|
on Positive Political Economics |
| By: | Seror, Avner; Verdier, Thierry |
| Abstract: | In this paper, we present a microfounded theory of multi-candidate political competition taking an "industrial organization" perspective of politics. The analytical framework is shown to be exible enough to address several applications on the topics of special interest politics, coalition formation in the legislature in proportional elections, and redistribution under alternative electoral rules. |
| Keywords: | Frechet distributions; Plurality; Probabilistic Voting Models; Proportionality; public policy; redistribution; runoff |
| JEL: | D71 D72 L11 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13121&r=pol |
| By: | Simone Moriconi (IÉSEG School of Management); Giowanni Peri (University of California, Davis); Riccardo Turati (IRES, Université Catholique de Louvain); |
| Abstract: | In this paper we document the impact of immigration at the regional level on Europeans’ political preferences as expressed by voting behavior in parliamentary or presidential elections between 2007 and 2016. We combine individual data on party voting with a classification of each party’s political agenda on a scale of their "nationalistic" attitudes over 28 elections across 126 parties in 12 countries. To reduce immigrant selection and omitted variable bias, we use immigrant settlements in 2005 and the skill compo- sition of recent immigrant flows as instruments. OLS and IV estimates show that larger inflows of highly educated immigrants were associated with a change in the vote of citizens away from nationalism. How- ever the inflow of less educated immigrants was positively associated with a vote shift towards nationalist positions. These effects were stronger for non-tertiary educated voters and in response to non-European immigrants. We also show that they are consistent with the impact of immigration on individual political preferences, which we estimate using longitudinal data, and on opinions about immigrants. Conversely, immigration did not affect electoral turnout. Simulations based on the estimated coefficients show that immigration policies balancing the number of high-skilled and low-skilled immigrants from outside the EU would be associated with a shift in votes away from nationalist parties in almost all European regions. |
| Keywords: | Immigration, Nationalism, Elections, Europe |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:e201713&r=pol |
| By: | Amedeo Piolatto (Universidad de Alicante) |
| Abstract: | Lower-level governments often receive federal support through transfers or bailouts. We study how the regional or local ties of federal politicians can steer this process. We build a two-tier model of government, where regionally elected federal legislators bargain over federal support aimed at their own constituency. This leads to strategic voting on the regional level. Federal legislators are strategically elected to watch over the interests of their own region, cushioning shocks to local consumption and driving down borrowing costs. Lower-level legislators anticipate this, which sets the stage for regional over-borrowing both if they receive annual grants, or when a bailout scheme is introduced during periods of crisis. Voters strategically select federal representatives with more extreme positions than the median voter, as long as federal co-funding schemes imply some degree of interregional redistribution. These theoretical predictions are con¿rmed by our empirical analysis, where we compare the political extremism of representatives elected to the EU Parliament with that of representatives elected to national Parliaments. |
| Keywords: | Strategic Delegation, Decentralisation, Soft Budget Constraints, Political Extremism, Bailouts, Intergovernmental Grants, Fiscal Federalism. |
| JEL: | H6 H71 H74 H77 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2018-05&r=pol |
| By: | Eitan Sapiro-Gheiler |
| Abstract: | The increasing digitization of political speech has opened the door to studying a new dimension of political behavior using text analysis. This work investigates the value of word-level statistical data from the US Congressional Record--which contains the full text of all speeches made in the US Congress--for studying the ideological positions and behavior of senators. Applying machine learning techniques, we use this data to automatically classify senators according to party, obtaining accuracy in the 70-95% range depending on the specific method used. We also show that using text to predict DW-NOMINATE scores, a common proxy for ideology, does not improve upon these already-successful results. This classification deteriorates when applied to text from sessions of Congress that are four or more years removed from the training set, pointing to a need on the part of voters to dynamically update the heuristics they use to evaluate party based on political speech. Text-based predictions are less accurate than those based on voting behavior, supporting the theory that roll-call votes represent greater commitment on the part of politicians and are thus a more accurate reflection of their ideological preferences. However, the overall success of the machine learning approaches studied here demonstrates that political speeches are highly predictive of partisan affiliation. In addition to these findings, this work also introduces the computational tools and methods relevant to the use of political speech data. |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1809.00741&r=pol |
| By: | Laurent Bouton (Department of Economics, Georgetown University); Micael Castanheira; Allan Drazen (Department of Economics, University of Maryland) |
| Abstract: | We propose a formal model of small campaign contributions driven by an electoral motive, that is, by the possible influence of contributions on the outcome of an election. Electoral considerations produce strategic interactions among contributors, even when each donor takes as given the actions of other donors. These interactions induce patterns of individual contributions that are in line with empirical findings in the literature. For instance, equilibrium contributions increase when the support for the two candidates is more equal --a “closeness effect”-- and relative contributions for the advantaged party are smaller than their underlying advantage --an “underdog effect”. We then study the impact of different forms of campaign finance laws. We show that caps affect small donors even if they are not directly capped, and that it may be optimal to combine caps with a progressive tax on contributions. We also indicate why our results may have implications for empirical studies of campaign contributions. |
| Keywords: | Campaign Donations, Campaign Finance Laws, Elections, Income Inequality |
| JEL: | D71 D72 H31 |
| Date: | 2018–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~18-18-05&r=pol |
| By: | Anja Prummer (Queen Mary University of London) |
| Abstract: | This paper characterizes the optimal advertising strategy of candidates in an election campaign, where groups of heterogeneous voters are targeted through media outlets. We discuss its effects on the implemented policy and relate it to the well-documented increase in polarization. Additionally, we empirically establish that polarization displays electoral cycles. These cycles emerge in the model as candidates find it optimal to cater to different groups of voters and thus to adjust policies. Further, technologies that allow targeting voters more precisely tend to increase polarization. Our prediction is confirmed empirically as an increase in internet penetration leads to higher polarization. |
| Keywords: | Targeting, Media, Networks, Voting |
| JEL: | D85 D72 D83 |
| Date: | 2016–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:805&r=pol |
| By: | Anna Maria Mayda (Department of Economics and SFS, Georgetown University); Giovanni Peri (University of California, Davis); Walter Steingress (Bank of Canada - Banque du Canada) |
| 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. |
| Keywords: | Immigration, Republican Party, Electoral Effects, Economic and Fiscal Channels. |
| JEL: | F22 J61 |
| Date: | 2018–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~18-18-09&r=pol |
| By: | Becher, Michael |
| Abstract: | There is striking variation across parliamentary democracies in the power of prime ministers to employ two prominent procedures to resolve legislative conflict: the vote of confidence and the dissolution of parliament. While previous contributions in comparative politics have investigated each of these two fundamental institutions in isolation, I develop a simple unified model to unbundle how this richer variety of institutional configurations shapes political bargaining over policy. The analysis clarifies that the effects of the confidence vote and dissolution power interact. As a consequence, there can be a non-monotonic effect of increasing prime ministers’ formal power on their ability to shape the policy compromise. Counterintuitively, introducing dissolution power makes the prime minister worse off under some conditions. These results suggest new directions for empirical research on the consequences of parliamentary institutions for legislative politics and policy. They also lay analytical foundations for explaining institutional variation and reforms. |
| JEL: | D72 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:32897&r=pol |
| By: | Vincent Anesi (University of Nottingham, School of Economics); T Renee Bowen (University of California, San Diego and NBER) |
| Abstract: | We study conditions under which optimal policy experimentation can be implemented by a committee. We consider a dynamic bargaining game in which committee members choose to implement either a risky reform or a safe alternative with known returns each period. We find that when no redistribution is allowed the unique equilibrium outcome is generically inefficient. When committee members are allowed to redistribute resources (even arbitrarily small amounts), there always exists an equilibrium that supports optimal experimentation for any voting rule with no veto players. With veto players, however, optimal policy experimentation is possible only with a sufficient amount of redistribution. We conclude that veto rights are more of an obstacle to optimal policy experimentation than constraints on redistribution. |
| Keywords: | voting, redistribution, policy experimentation |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2018-09&r=pol |
| By: | Manuel Hidalgo-Pérez (Universidad Pablo de Olavide); José Luis Ferreira (Universidad Carlos III); Carmen Rubio-Castaño (Universidad Pablo de Olavide) |
| Abstract: | Economic performance has been historically better under Democrat presidents compared to Republican ones. This gap has not yet been fully explained appealing to better management or luck. In fact, the economic cycles under one group of administrations or the other are quite similar. Blinder and Watson (2016) provide the best attempt so far at solving the paradox, but can explain only half of the gap. Drawing from them, and using a different method to account for the initial conditions of each presidential term, we are able to show that the phase of the economic cycle at the different elections are correlated to the party of the president. We also find ample evidence suggesting that there is a subtle causality: when the unemployment is high, the probability of a person voting for a Democrat president increases, thus causing Democrats being elected more often at the end of a recession and the beginning of a recovery. This, and not the difference in competence dealing with the economic cycles, is enough to close the gap. |
| Keywords: | Business cycle, econometric time series, elections, economic growth |
| JEL: | D72 E23 E32 E65 N12 N42 C43 C32 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:pab:wpaper:18.10&r=pol |
| By: | Pástor, Luboš; Veronesi, Pietro |
| Abstract: | Motivated by the recent rise of populism in western democracies, we develop a model in which a populist backlash emerges endogenously in a growing economy. In the model, voters dislike inequality, especially the high consumption of the ``elites." Economic growth exacerbates inequality due to heterogeneity in risk aversion. In response to rising inequality, rich-country voters optimally elect a populist promising to end globalization. Redistribution is of limited value in containing the backlash against globalization. Countries with more inequality, higher financial development, and current account deficits are more vulnerable to populism, both in the model and in the data. Evidence on who voted for Brexit and Trump in 2016 also largely supports the model. |
| Keywords: | Brexit; Globalization; inequality; populism; risk aversion; Trump |
| JEL: | D72 G11 G12 G18 P16 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13107&r=pol |
| By: | Thomas Groll (Columbia University); Anja Prummer (Queen Mary University of London) |
| Abstract: | We study lobbying in a setting in which decision-makers share resources in a network. Two opposing interest groups choose which decision-maker they want to target with their resource provision, and their decision depends on the decision-makers' ideologies as well as the network structure. We characterize the lobbying strategies in various network settings and show that a higher resource flow as well as homophily reinforce decision-makers' ideological bias. We highlight that competing lobbyists' efforts do not neutralize each other and their payoffs and competitive advantages depend on the networks they face. Our findings are consistent with empirically established lobbying activities. |
| Keywords: | Networks, Lobbying, Targeting, Flow of resources, Ideology, Centrality, Homophily, Colonel Blotto, Externalities |
| JEL: | D72 D78 D83 D85 |
| Date: | 2016–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:808&r=pol |
| By: | Chevalier, Arnaud (Royal Holloway, University of London); Elsner, Benjamin (University College Dublin); Lichter, Andreas (IZA); Pestel, Nico (IZA) |
| Abstract: | This paper studies the impact of immigration on public policy setting. As a natural experiment, we exploit the sudden arrival of eight million forced migrants in West Germany after World War II. These migrants were on average poorer than the West German population, but unlike most international migrants they had full voting rights and were eligible for social welfare. Using panel data for West German cities and applying difference-in-differences and an instrumental variables approach, we show that local governments responded to this migration shock with selective and persistent tax raises as well as shifts in spending. In response to the inflow, farm and business owners were taxed more while residential property and wage bill taxes were left unchanged. Moreover, high-inflow cities significantly raised welfare spending while reducing spending on infrastructure and housing. Election data suggest that these policy changes were partly driven by the political influence of the immigrants: in high-inflow regions, the major parties were more likely to nominate immigrants as candidates, and a pro-immigrant party received high vote shares. We further document that this episode of mass immigration had lasting effects on people's preferences for redistribution. In areas with larger inflows in the 1940s, people have substantially higher demand for redistribution more than 50 years later. |
| Keywords: | migration, taxation, spending, welfare state |
| JEL: | J61 H20 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11725&r=pol |
| By: | Orkoh, Emmanuel; Claassen, Carike; Blaauw, Phillip Frederick |
| Abstract: | This paper examines the effect of corruption control and political stability on illicit financial outflows in Sub-Saharan Africa. We use a balanced panel data from the World Bank, United Nations Conference on Trade and Development and Global Financial Integrity on Sub-Saharan African countries covering the period 2005-2014. Our regression estimates reveal that a unit increase in political stability and corruption control reduce illicit financial outflow due to misinvoicing in merchandise trade by an average of US$ 20.5 million and US$ 44.3 million respectively. The results also show that high trade rating, financial sector rating and exchange rates reduce illicit financial outflows while an increase in foreign direct investment and inflation increase illicit financial outflow. We recommend that governments in Sub-Saharan Africa countries must ensure that institutions responsible for fighting corruption and enhancing stable governance are well empowered and given the needed resources to work effectively to reduce corruption to the barest minimum. |
| Keywords: | Corruption, political stability, illicit financial outflow, Sub-Saharan Africa |
| JEL: | G3 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:89044&r=pol |
| By: | Anusha Nath (Federal Reserve Bank of Minneapolis) |
| Abstract: | This paper shows that electoral competition can adversely impact bureaucratic performance. Politicians use promise of favorable future promotions to incentivize career bureaucrats. Higher competition results in lower probability of re-election; making promises less credible and resulting in worse performance. Constructing a unique dataset from India based on bureaucrats’ work histories and using a novel identification strategy, results show that bureaucrats perform better close to their pre-determined promotion screening dates. Across politicians, the same bureaucrat performs better for incumbents more likely to be in office during screening. Results hold when effects of exogenously changing re-election probabilities are examined within bureaucrat-politician pairs. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:896&r=pol |
| By: | Anna Maria Mayda (Department of Economics and SFS, Georgetown University); Rodney D. Ludema (Department of Economics and SFS, Georgetown University); Miaojie Yu (Peking University); Zhi Yu (Shanghai University of Finance and Economics,) |
| Abstract: | This paper explores the political economy of import protection in a setting where imports may contain a country’s own domestic value added (DVA) via domestically-produced inputs that get exported and used in foreign downstream production. We show that domestic upstream and downstream producers are generally allies in favor of protection, but this alliance may weaken as DVA increases, because a home tariff on finished goods decreases foreign demand for home inputs. Empirically, we examine detailed discriminatory trade policies of 27 countries plus the EU toward China and use Chinese transaction-level processing trade data to construct a measure of DVA. We also measure input customization. We find that both upstream and downstream political organization increase downstream protection, but the effect of the former is smaller when inputs are customized and DVA as a share of final imports from China is larger. Tariffs on products containing inputs that are neither customized nor politically organized appear to be unaffected by the DVA share. |
| Keywords: | Trade policy, lobbying, global value chains. |
| JEL: | F10 F13 F14 |
| Date: | 2018–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~18-18-07&r=pol |
| By: | Boxell, Levi |
| Abstract: | I build a dataset of over one million images used on the front page of websites around the 2016 election period. I then use machine-learning tools to detect the faces of politicians across the images and measure the nonverbal emotional content expressed by each politician. Combining this with data on the partisan composition of each website’s users, I show that websites portray politicians that align with the partisan preferences of their users with more positive emotions. I also find that nonverbal coverage by Republican-leaning websites was not consistent over the 2016 election, but became more favorable towards Donald Trump after he clinched the Republican nomination. |
| Keywords: | media bias, images, emotions, nonverbal, polarization |
| JEL: | C0 H0 L82 L86 |
| Date: | 2018–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:89047&r=pol |
| By: | Francisco Javier Braña Pino (Instituto Complutense de Estudios Internacionales. Universidad Complutense de Madrid.); José Molero Zayas (Instituto Complutense de Estudios Internacionales. Universidad Complutense de Madrid.) |
| Abstract: | This paper analyses and discusses, from a political economy perspective, the long period of the Spanish economy, starting at the end of the Civil War and ending in 1993, being our final goal to establish whether what happened in that period of time in Spain can be characterized as a “success.” The analysis is initiated in 1936 when a military uprising led by General Franco, successfully won a civil war and becoming in a military dictatorship regime, which extended itself until 1975. After the dead of General Franco in 1975, though with much pain, a transition to a democratic regimen was initiated, being a first millstone the new Constitution of 1978. Since then the new regime was associated to an economic development with no precedents, despite economic and political crisis periods. We end in 1993, when a cycle or sub-period is over, a new economic crisis starts and Spain culminates its entrance at the European Union and, particularly, at the Monetary and Economic Union what, as it is well known, means the assumption of the Euro as a currency with a substantial change on the political and social policies role. |
| Keywords: | Political economy; Spanish economy; Civil War; Constitution of 1978; Political crisis; Euro. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ucm:opaper:02&r=pol |
| By: | Algan, Yann; Beasley, Elizabeth; Cohen, Daniel; Foucault, Martial |
| Abstract: | We examine the dislocation from the traditional left-right political axis in the 2017 French election, analyze support for populist movements and show that subjective variables are key to understanding it. Votes on the traditional left-right axis are correlated to ideology concerning redistribution, and predicted by socio-economic variables such as income and social status. Votes on the new diagonal opposing "open vs closed society" are predicted by individual and subjective variables. More specifically, low well-being predicts anti-system opinions (from the left or from the right) while low interpersonal trust (ITP) predicts right-wing populism. |
| Keywords: | inequality; populism |
| JEL: | P26 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13103&r=pol |
| By: | Adlai Newson; Francesco Trebbi |
| Abstract: | We explore the role of ruling elites in autocratic regimes and provide an assessment of tools useful to clarify the structure of opaque political environments. We first showcase the importance of analyzing autocratic regimes as non-unitary actors by discussing extant work on nondemocracies in Sub-Saharan Africa and China, where the prevailing view of winner-take-all contests can be clearly rejected. We show how specific biographical information about powerful cadres helps shed light upon the composition of the inner circles that empower autocrats. We further provide an application of these methods to the Democratic People’s Republic of Korea (DPRK), one of the most personalistic, opaque, and data-poor political regimes in the world today. Employing information from DPRK state media on participants at official state events, we are able to trace the evolution and consolidation of Supreme Leader Kim Jong Un around the transition period following the death of his father, Kim Jong Il. The internal factional divisions of the DPRK are explored during and after this transition. Final general considerations for the future study of the political economy of development are presented. |
| JEL: | P16 P48 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24966&r=pol |
| By: | Donato Masciandaro; Davide Romelli |
| Abstract: | The aim of this paper is to use a behavioural political economy approach to revise the standard approach of optimal currency areas, and applying it to the Eurozone case. We discuss the pros and cons of the Euro membership if behavioural biases - prospect theory - influence the citizens and consequently the political actors. The theoretical framework is used to analyse in general under which conditions the Euro irreversibility assumption is likely to hold and specifically the support in favour of the Euro membership in a country case. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp1883&r=pol |
| By: | Rose, Andrew K |
| Abstract: | A country's exports rise when its leadership is approved by other countries. I show this using a standard gravity model of bilateral exports, a panel of data from 2006 through 2017, and an annual Gallup survey which asks people in up to 157 countries about whether they approve of the job performance of the leadership of China, Germany, Russia, the United Kingdom and the United States. Holding other things constant, a country's exports are higher if its leadership is approved by the importer, since; 'soft power' promotes exports. The Gallup effect is statistically and economically significant; a one percent increase in leadership approval raises exports by around .66 percent. This effect is reasonably robust and different measures of soft power deliver similar results. I conservatively estimate that the >20 percentage point decline in foreign approval of American leadership between 2016 (Obama's last year) and 2017 (Trump's first year) lowered American exports by at least .2% or >$3 billion. |
| Keywords: | approval; data; empirical; Gallup; Gravity; international; leadership; panel; positive |
| JEL: | F14 F59 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13139&r=pol |
| By: | Clemens, Jeffrey (University of California, San Diego); Hobbs, Duncan (American Enterprise Institute for Public Policy Research); Strain, Michael R. (American Enterprise Institute for Public Policy Research) |
| Abstract: | This paper presents a dataset that tracks effective minimum wage rates across the U.S. states, including the District of Columbia, from January 1, 2011 to January 1, 2018. We link minimum wage changes to their underlying legislation or ballot initiative and document key dates in their legislative histories. The key dates we track include the dates on which each measure was approved by the legislature, signed by the state governor, or passed via ballot initiative. We then calculate lags between the date on which each minimum wage increase was approved and the date on which it came into effect. Comparing minimum wage increases implemented via ballot initiative to those passed by state legislatures, we find that minimum wage increases enacted through legislation tend to have longer lags to the first increase, longer lags to the last scheduled increase, smaller initial increases, and larger total increases than minimum wage increases approved by ballot initiative. |
| Keywords: | minimum wage, inflation indexing, legislative history |
| JEL: | J08 J38 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11748&r=pol |
| By: | Vincent Anesi (University of Nottingham, School of Economics) |
| Abstract: | This paper develops a dynamic model of legislative policy making with evolving, privately observed policy preferences. Our goal is to find conditions under which decision rules, which assign feasible policies based on the legislators' preferences, are sustainable in the long run. We show that under some mild conditions, every decision rule that would be implementable with monetary transfers can be approximately sustained in a perfect Bayesian equilibrium of the dynamic model. In this equilibrium, the legislators receive payoffs arbitrarily close to those they would obtain if they could commit ex ante to truthfully apply the decision rule in every period. An application of our result yields a dynamic issue-by-issue median voter theorem in the vein of Baron's (1996) for a spatial framework with incomplete information. |
| Keywords: | Committee voting, Information, Legislative bargaining, Sustainability |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2018-08&r=pol |