nep-pol New Economics Papers
on Positive Political Economics
Issue of 2018‒10‒01
fifteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Immigration and far-right voting: Evidence from Greece By Chletsos, Michael; Roupakias, Stelios
  2. Political Openness and Armed Conflict: Evidence from Local Councils in Colombia By Hector Galindo Silva
  3. Economic Performance and Electoral Volatility: Testing the Economic Voting Hypothesis on Indian States, 1957–2013 By Bharatee Bhusana Dash; J. Stephen Ferris
  4. Political parties and climate change policy: why do parties sometimes talk about it, but sometimes keep silent By Baiba Witajewska-Baltvilka
  5. The Democrat-Republican growth gap paradox By Ferreira García, José Luis; Rubio-Castaño, Carmen; Hidalgo-Pérez, Manuel
  6. Measuring Electoral Competitiveness: With Application to the Indian States By Bharatee Bhusana Dash; J. Stephen Ferris; Stanley L. Winer
  7. How to model fake news By Dorje C. Brody; David M. Meier
  8. A Dynamic Model of Political Party Equilibrium: The Evolution of ENP in Canada, 1870–2011 By J. Stephen Ferris; Stanley L. Winer; Derek Olmstead
  9. Corruption, political stability and illicit financial outflows in Sub-Saharan Africa By Orkoh, Emmanuel; Claassen, Carike; Blaauw, Phillip Frederick
  10. Liberal Radicalism: Formal Rules for a Society Neutral among Communities By Vitalik Buterin; Zoe Hitzig; E. Glen Weyl
  11. The political economy of reforms in central bank design: evidence from a new dataset By Davide Romelli
  12. Executive Constraints as Robust Control By Timothy Besley; Hannes Mueller
  13. Democracy and aid donorship By Fuchs, Andreas; Müller, Angelika
  14. Job losses and the political acceptability of climate policies : an amplified collective action problem By Francesco Vona
  15. Political Stabilization by an independent Central Bank By Francesco Salsano

  1. By: Chletsos, Michael; Roupakias, Stelios
    Abstract: In this paper we analyze the impact of immigration on Greek politics over the 2004-2012 period, exploiting panel data on 51 Greek regional units. We account for potential endogenous clustering of migrants into more “tolerant” regions by using a shift-share imputed instrument, based on their allocation in 1991. Overall, our results are consistent with idea that immigration is positively associated with the vote share of extreme-right parties. This finding appears to be robust to alternative controls, sample restrictions and different estimation methods. We do not find supportive evidence for the conjecture that natives “vote with their feet”, i.e. move away from regions with high immigrant concentrations. We also find that the political success of the far-right comes at the expense of “Leftist” parties. Importantly, concerns on criminality and competition for jobs and public resources appear to drive our findings.
    Keywords: Immigration, Elections, Political economy
    JEL: D72 J15 J61
    Date: 2018–08–18
  2. By: Hector Galindo Silva
    Abstract: In this paper, I empirically investigate how openness of political institutions to diverse representation can impact con ict-related violence. By exploiting plausibly exogenous variations in the number of councillors in Colombian municipalities, I develop two sets of results. First, regression discontinuity estimates show that larger municipal councils have a considerably greater number of political parties with at least one elected representative. I interpret this result as evidence that larger municipal councils are more open to political participation by more groups in society. The estimates also reveal that smaller parties are the main bene ciaries of this greater political openness. Second, regression discontinuity estimates show that political openness substantially decreases con ict-related violence, namely the killing of civilian non-combatants. By exploiting plausibly exogenous variations in local election results, I show that the lower level of political violence stems from greater participation by parties with close links to armed groups. Using data about the types of violence employed by these groups, the provision of local public goods, scal outcomes and coca cultivation, Iargue that armed violence has decreased not because of power-sharing arrangements between the armed groups linked to the parties with more political representation, but rather because armed groups with less political power and visibility are deterred from initiating certain types of violence.
    Keywords: Political openness, violence and armed conflict, councils
    JEL: H72 D72
    Date: 2018–09–04
  3. By: Bharatee Bhusana Dash (National Institute of Public Finance and Policy, (NIPFP) New Delhi, India); J. Stephen Ferris (Department of Economics, Carleton University)
    Abstract: The electoral consequences of variations in economic growth on vote volatility are analyzed on a panel of fourteen Indian states between 1957 and 2013. Two measures of volatility are used: first changes in party vote shares at the assembly level and the state average of volatilities constructed at the constituency level. While the results suggest that both volatilities are reduced by higher income growth rates, volatility at the constituency level is found to be somewhat more sensitive to growth rates. Examination of the periodicity of income growth’s impact finds that the growth rate in the final year of governance has a stronger effect on volatility than does the average income growth rate arising over the entire election cycle. We also find that vote switching responds more to negative rather than positive growth changes and, by decomposing volatility, find that growth changes affect internal vote shifting more than between established parties and new comers. More generally the responsiveness of volatility to set of economic and political characteristics of the state suggests that theories of economic voting have an important role to play in understanding electoral outcomes and hence the process of development
    Keywords: Vote volatility, Economic voting, Indian States, Political business cycle, growth asymmetries
    JEL: D72 O11 O43 R11
    Date: 2018–06–28
  4. By: Baiba Witajewska-Baltvilka
    Abstract: The paper studies the factors that shape party issue competition on climate change and environmentalism. It covers the quantitative study on political parties' positions in 22 European countries during electoral campaigns between 1990 and 2016, as well as two case studies: Polish electoral campaign in 2011 and German electoral campaign in 2013. The paper concludes that more favourable public opinion towards environment, lower socio-economic inequality and weaker trade unions are associated with high party competition on climate change and environmentalism.
    Keywords: party competition, issue salience, climate change, environmentalism, elections
    JEL: C33 Q50 Q58
    Date: 2018–09
  5. By: Ferreira García, José Luis; Rubio-Castaño, Carmen; Hidalgo-Pérez, Manuel
    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.
    Date: 2018–09
  6. By: Bharatee Bhusana Dash (National Institute of Public Finance and Policy, (NIPFP) New Delhi, India); J. Stephen Ferris (Department of Economics, Carleton University); Stanley L. Winer (Department of Economics, Carleton University)
    Abstract: We consider alternative methods of measuring the competitiveness of a majoritarian electoral system in the context of an analysis of Indian State elections. Our analysis highlights a number of weaknesses in the construction and interpretation of commonly used measures such as the effective number of parties, the first versus second place vote margin and safe seats, while presenting these and their proposed alternatives for 14 major Indian states from 1952 to 2009. The alternative indexes we present are based in part on ideas that are longstanding in the literature but have not been fully adopted within the Indian context. These indexes incorporate vote volatility, allow for multi-party competition at the constituency level, and adjust for asymmetry among parties of safe seats in the legislature. We argue that these newly computed indexes capture distinct but related dimensions of electoral competition better than do the extant commonly used measures. The analysis of these indexes is then extended to consider the role of caste, class, regionalism and level of development to reveal interesting patterns of commonality and difference in electoral competition across the states.
    Keywords: electoral competitiveness, effective number of parties and Tpartyness, volatility adjusted vote margins, asymmetry adjusted safe seats, Indian states, caste and class
    JEL: A12 D02 D72 O1
    Date: 2018–07–07
  7. By: Dorje C. Brody; David M. Meier
    Abstract: Over the past three years it has become evident that fake news is a danger to democracy. However, until now there has been no clear understanding of how to define fake news, much less how to model it. This paper addresses both these issues. A definition of fake news is given, and two approaches for the modelling of fake news and its impact in elections and referendums are introduced. The first approach, based on the idea of a representative voter, is shown to be suitable to obtain a qualitative understanding of phenomena associated with fake news at a macroscopic level. The second approach, based on the idea of an election microstructure, describes the collective behaviour of the electorate by modelling the voting preferences of individual members of the electorate. It is shown through a simulation study that the mere knowledge that pieces of fake news may be in circulation goes a long way towards mitigating the impact of fake news.
    Date: 2018–09
  8. By: J. Stephen Ferris (Department of Economics, Carleton University); Stanley L. Winer (Department of Economics, Carleton University); Derek Olmstead (Department of Economics, Carleton University)
    Abstract: The effective number of political parties (ENP) in a first-past-the-post single member (SMP) electoral system is analyzed as a dynamic process whereby the tournament nature of the election contest induces excessive entry and sunk entry costs promote persistence even as Duverger-Demsetz type political competition works to winnow unsuccessful minor candidates and parties. The result is a fringe of ever changing marginal parties circulating in long run equilibrium. The factors hypothesized to affect the entry and exit of candidates and parties are analyzed first using an auto-regressive distributed lag (ARDL) model whose advantage is that it allows the separation of an evolving long run equilibrium from short run variations in response to transitory changes in conditioning variables and the process of converging back to the long run equilibrium. The possibility that the short run adjustment process is asymmetric either for parties or candidates is tested using panel estimation techniques.The results are consistent with an observed time path that incorporates slower adjustment to positive as opposed to negative shocks. Variations in the size and trend of both the long and short run are then examined for ENP’s ability to predict changes in the competitiveness of the Canadian federal electoral system.
    Keywords: Expected number of political parties, entry and exit, Duverger’s Law, asymmetric adjustment, ARDL and NARDL modeling
    JEL: D72 C41 C24
    Date: 2018–02–15
  9. 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
    Date: 2017
  10. By: Vitalik Buterin; Zoe Hitzig; E. Glen Weyl
    Abstract: We propose a design for philanthropic or publicly-funded seeding to allow (near) optimal provision of a decentralized, self-organizing ecosystem of public goods. The concept extends ideas from Quadratic Voting to a funding mechanism for endogenous community formation. Individuals make public goods contributions to projects of value to them. The amount received by the project is (proportional to) the square of the sum of the square roots of contributions received. Under the "standard model" this yields first best public goods provision. Variations can limit the cost, help protect against collusion and aid coordination. We discuss applications to campaign finance, open source software ecosystems, news media finance and urban public projects. More broadly, we offer a resolution to the classic liberal-communitarian debate in political philosophy by providing neutral and non-authoritarian rules that nonetheless support collective organization.
    Date: 2018–09
  11. By: Davide Romelli (Trinity College Dublin)
    Abstract: What accounts for the worldwide changes in central bank design over the past four decades? Using a new dataset on central bank institutional design, this paper investigates the timing, pace and magnitude of reforms in a sample of 154 countries over the period 1972-2017. I construct a new dynamic index of central bank independence and show that initial reforms that increase the level of independence, as well as a regional convergence, represent important drivers of changes in central bank design. Similarly, an external pressure to reform, such as an IMF loan program, also increases the likelihood of reforms, while political factors or crises episodes have little impact. These results are robust to controlling for the direction and size of reforms, alternative indices of central bank independence and estimation strategies.
    Keywords: central banks, central bank independence, central bank governance, legislative reforms.
    JEL: E58 G28 N20 P16
    Date: 2018–09
  12. By: Timothy Besley; Hannes Mueller
    Abstract: This paper looks at the case for executive constraints in a world of imperfect electoral accountability and policy risk. It develops a model in which policy can be subject to judicial oversight by an imperfectly informed judiciary. Limiting discretion can be good for reducing risk but can worsen incentives creating a non-trivial trade-off for voters. We argue that this is always resolved in favor of executive constraints when looking at the worst case scenario meaning that executive constraints are best justified as a form of robust control.
    Keywords: political institutions, robust control, checks and balances, elections, executive constraints, uncertainty
    JEL: E02 O43 D02 D60 D72
    Date: 2018–09
  13. By: Fuchs, Andreas; Müller, Angelika
    Abstract: Almost half of the world's states provide bilateral development assistance. While previous research takes the set of donor countries as exogenous, this article is the first to explore the determinants of aid donorship. We hypothesize that democratic institutions reduce poor countries' likelihood to initiate aid giving. On the contrary, the leadership of poor authoritarian regimes face fewer constraints that would hinder these governments to reap the benefits of a development aid program despite popular opposition. To test our expectations, we build a new global dataset on aid donorship since 1945 and apply an instrumental-variables strategy that exploits exogenous variation in regional waves of democratization. Our results confirm that the likelihood of a democratic country to start aid giving is more responsive to income than it is the case for authoritarian countries. Overall, democracies are - if anything - less rather than more likely to engage in aid giving.
    Keywords: foreign aid,Official Development Assistance,aid donorship,aid institutions,new donors,democracy,selectorate theory
    JEL: F35 H11 H87 O19 P33
    Date: 2018
  14. By: Francesco Vona (Observatoire français des conjonctures économiques)
    Abstract: Political acceptability is an essential issue in choosing the appropriate climate policy. Sociologists and behavioral scientists recognize the importance of selecting environmental policies that have broad political support, while economists compare different instruments first based on their efficiency and then by assessing their distributional impacts and thus the political acceptability of such policies. I argue that the large economic losses potentially ascribed to climate policies, especially job losses, can have substantial impacts on the willingness to vote for these policies. In aggregate, the costs of these losses are significantly smaller than the benefits; both in terms of health and labor market outcomes, but the losses are concentrated in specific areas, sectors and social groups that are already exposed to other shocks, such as automation and trade shocks. This setting conjures a collective action problem that is amplified by declining political participation, de-unionization and localized contextual effects. Key policy insight: ■ Climate policies are perceived as extremely harmful for employment because of their high incidence on communities and sectors that already damaged by other shocks. ■ Excessive levels of labour market inequalities are detrimental for the political acceptability of climate policies, thus fighting inequality can have beneficial effects for climate change. ■ Policymakers should be more careful in distinguishing between small and large distributional effects of climate policies, and their consequences on their political acceptability
    Keywords: Climate policies; Employment impacts; Inequality and distributional Impacts; Collective action problems; Amplification mechanisms; Political acceptability
    Date: 2018–05
  15. By: Francesco Salsano (Birkbeck, University of London; Università di Milano)
    Abstract: The paper is an extension of the Gabillon and Martimort model (2004), which studies how the independence of the institution in charge of monetary policy may stabilize inflationary fluctuations due to political uncertainty when the economy is characterized by lobbies that seek to promote their own interests to the detriment of the general interests of society.
    Keywords: Monetary Policy, Central Bank, Partisan politics
    JEL: E58 L51
    Date: 2018–07

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