nep-pol New Economics Papers
on Positive Political Economics
Issue of 2018‒10‒15
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Why do voters elect less qualified candidates? By Mizuno, Nobuhiro; Okazawa, Ryosuke
  2. Does Immigration Decrease Far-Fight Popularity? Evidence from Finnish Municipalities By Jakub Lonsky
  4. Migration, Political Institutions, and Social Networks By Batista, Catia; Seither, Julia; Vicente, Pedro C.
  5. Gender and Dynastic Political Recruitment By Folke, Olle; Rickne, Johanna; Smith, Daniel M.
  6. Unbundling Polarization By Nathan Canen; Chad Kendall; Francesco Trebbi
  7. UK Political Cycle and the Effect on National House Prices: An Exploratory Study By Bismark Aha; David.M Higgins; Timothy Lee
  8. Does Political Influence Distort Banking Regulation? Evidence from the US By Panagiota Papadimitri; Fotios Pasiouras; Gioia Pescetto; Ansgar Wohlschlegel
  9. Vote trading in power-sharing systems: A laboratory investigation By Nikolas Tsakas; Dimitrios Xefteris; Nicholas Ziros
  10. Corruption, Government Subsidies, and Innovation: Evidence from China By Lily Fang; Josh Lerner; Chaopeng Wu; Qi Zhang
  11. Who Votes for Medicaid Expansion? Lessons from Maine’s 2017 Referendum By David A. Matsa; Amalia R. Miller
  12. Majority Choice of Taxation and Redistribution in a Federation By Stephen Calabrese; Dennis Epple; Richard Romano

  1. By: Mizuno, Nobuhiro; Okazawa, Ryosuke
    Abstract: Voters sometimes vote for seemingly less qualified candidates; the winners of elections are sometimes less competent than the losers in light of candidates' observable characteristics such as their past careers. To explain this fact, we develop a political agency model with repeated elections in which a voter elects a policy maker among candidates with different competency (valence) levels. We show that politicians' competency relates negatively with political accountability when the challenger in the future election is likely to be incompetent. When this negative relation exists, voters prefer to elect an incompetent candidate if they emphasize politicians' policy choices over their competency. The negative relation between competency and accountability is possible because voters cannot commit to future voting strategies. Furthermore, voters' private information about how they evaluate candidates' competency generates a complementary mechanism leading to the negative relation between competency and accountability. This mechanism implies that voters' anti-elitism can be rational ex post even if it is groundless in the first place.
    Keywords: Candidates' competency, Political agency, Repeated elections, Private information, Signaling
    JEL: D72 D82
    Date: 2018–09–27
  2. By: Jakub Lonsky
    Abstract: Across Europe, far-right parties have made signi ficant electoral gains in recent years, posing aserious threat to the European integration process. Their anti-immigration stance is consideredone of the main factors behind their success. Yet, the causal evidence on how immigrationaffects far-right voting is still relatively scarce. Using data from Finland, this paper studiesthe effect of immigration on voting for the far-right Finns Party on a local level. Exploiting aconvenient setup for a shift-share instrument, I find that one percentage point increase in theshare of foreign citizens in municipality decreases Finns Party's vote share by 3.4 percentagepoints. A placebo test using pre-period data confi rms this effect is not driven by persistenttrends at the municipality level. The far-right votes lost to immigration are captured by the twopro-immigration parties. In addition, immigration is found to increase voter turnout while theprotest vote remains unaffected. Turning to potential mechanisms, the negative effect is onlypresent in municipalities with high initial exposure to immigrants. Moreover, I provide someevidence for welfare-state channel as a plausible mechanism behind the main result.
    Date: 2018–01
  3. By: Marco Alberto De Benedetto; Maria De Paola (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria)
    Abstract: We study the effect of term limits on voter turnout in local Italian elections. Since 2014 the Italian law allows mayors in municipalities with a population size lower than 3,000 inhabitants to re-run for a third term, whereas mayors in cities with a number of residents above the cutoff still face a two-term limit. The introduction of the reform permits us to implement a difference-in-discontinuities design exploiting the before/after with the discontinuous policy change. We find that voters negatively react to the introduction of the reform and in particular electoral participation decreases by about 5 percentage points in municipalities eligible to the treatment compared to municipalities in the control group. This negative effect is essentially driven by a decrease in the political competition. We also find that relaxing term limits does not improve the quality of politicians running for election.
    Keywords: Diff-in-discontinuities, Voter Turnout, Political Competition
    JEL: C21 D72 H70
    Date: 2018–10
  4. By: Batista, Catia (Universidade Nova de Lisboa); Seither, Julia (Universidade Nova de Lisboa); Vicente, Pedro C. (Universidade Nova de Lisboa)
    Abstract: What is the role of international migrants and, specifically, migrant networks in shaping political attitudes and behavior in migrant sending countries? Our theoretical framework proposes that migration might change individual social identities and thus stimulate intrinsic motivation for political participation, while it may also improve knowledge about better quality political institutions. Hence, international migration might increase political awareness and participation both by migrants and by other individuals in their networks. To test this hypothesis, we use detailed data on different migrant networks (geographic, kinship, and chatting networks), as well as several different measures of political participation and electoral knowledge (self-reports, behavioral, and actual voting measures). These data were purposely collected around the time of the 2009 elections in Mozambique, a country with substantial emigration to neighboring countries – especially South Africa - and with one of the lowest political participation rates in the region. The empirical results show that the number of migrants an individual is in close contact with via regular chatting significantly increases political participation of residents in that village – more so than family links to migrants. Our findings are consistent with both improved knowledge about political processes and increased intrinsic motivation for political participation being transmitted through migrant networks. These results are robust to controlling for self-selection into migration as well as endogenous network formation. Our work is relevant for the many contexts of South-South migration where both countries of origin and destination are recent democracies. It shows that even in this context there may be domestic gains arising from international emigration.
    Keywords: international migration, social networks, political participation, information, diffusion of political norms, governance
    JEL: D72 D83 F22 O15
    Date: 2018–08
  5. By: Folke, Olle (Department of Government); Rickne, Johanna (SOFI, Stockholm University); Smith, Daniel M. (Department of Government)
    Abstract: Throughout history and across countries, women appear more likely than men to enter politics at the heels of a close relative or spouse. We provide a theoretical explanation for this dynastic bias in gender representation that integrates political selection with informational inequalities across social groups. Legislator-level data from twelve democracies and candidate-level data from Ireland and Sweden support the idea that dynastic ties help women overcome a vote disadvantage in elections, and that the quality of predecessors may be more relevant in the recruitment of female successors than their male counterparts. Moreover, the role of informational inequalities in explaining the dynastic bias in gender representation is empirically supported by a declining gap over time, and following the introduction of a gender quota in Sweden.
    Keywords: Dynasties; Gender representation; Gender quota; Sweden; Ireland
    JEL: D72
    Date: 2018–09–17
  6. By: Nathan Canen; Chad Kendall; Francesco Trebbi
    Abstract: This paper investigates the determinants of political polarization, a phenomenon of increasing relevance in Western democracies. How much of polarization is driven by divergence in the ideologies of politicians? How much is instead the result of changes in the capacity of parties to control their members? We use detailed internal information on party discipline in the context of the U.S. Congress – whip count data for 1977-1986 – to identify and structurally estimate an economic model of legislative activity where agenda selection, party discipline, and member votes are endogenous. The model delivers estimates of the ideological preferences of politicians, the extent of party control, and allows us to assess the effects of polarization through agenda setting (i.e. which alternatives to a status quo are strategically pursued). We find that parties account for approximately 40 percent of the political polarization in legislative voting over this time period, a critical inflection point in U.S. polarization. We also show that, absent party control, historically significant economic policies, including Debt Limit bills, the Social Security Amendments of 1983, and the two Reagan Tax Cuts of 1981 and 1984 would have not passed or lost substantial support. Counterfactual exercises establish that party control is highly relevant for the probability of success of a given bill and that polarization in ideological preferences is instead more consequential for policy selection, resulting in different bills being pursued.
    JEL: P16 P48
    Date: 2018–09
  7. By: Bismark Aha; David.M Higgins; Timothy Lee
    Abstract: Over the last two decades, many developed countries have experienced notable changes in house prices. This exploratory study considers if house price movements in the UK can be linked to the political cycle as governments realise homeowners represent a large portion of the voter base and their voting decisions could be influenced by the magnitude and direction of house price changes. Specifically, the study investigates whether house prices behave differently before and after elections and under different political regimes. To examine this relationship, the study analyzed quarterly UK national house price data since 1960, along with data on the results of UK parliamentary elections during the same period. Over this period, real UK house prices increased by an average of 2.83% per annum. While there is no evidence that house prices in the UK behave significantly differently under different political parties, it is evident that house prices perform much better in the last year before an election, compared to the first year after an election. House prices increased by 5.2% per annum, on the average, in the last year before an election compared to 1.0% per annum in the first year following an election. As this research clearly identifies major variations in house price performance around election times, residential property investment decisions should take into consideration the political cycle.
    Keywords: Housing Market; Political Studies; Property Cycles; Residential house prices; United Kingdom
    JEL: R3
    Date: 2018–01–01
  8. By: Panagiota Papadimitri (Portsmouth Business School); Fotios Pasiouras (Montpellier Business School); Gioia Pescetto (Portsmouth Business School); Ansgar Wohlschlegel (Portsmouth Business School)
    Abstract: This study examines the interplay between political influence and regulatory decisionmaking in the US banking industry. In particular, we assess whether elected officials with power in Congress impact regulatory decision making in the banking industry. Political influence is captured by whether a bank is headquartered in a state where an elected official holds a chair position on a congressional committee related to the banking and financial services industry. As a proxy for regulatory decisions, we take into account formal regulatory enforcement actions issued against US commercial banks over the period 2000-2015. We find an inverse relationship between our political influence variable and enforcement likelihood. In general, the results are robust to the use of alternative model specifications and the restriction of our sample. However, we find that various bank and environmental characteristics are important conditional factors.
    Keywords: Political influence, Congressional Committees, Banking supervision, Enforcement actions
    JEL: G21 G28
    Date: 2018–10–08
  9. By: Nikolas Tsakas; Dimitrios Xefteris; Nicholas Ziros
    Abstract: In theory, decentralized vote trading in power-sharing systems promotes: a) efficiency, by assigning greater decision-making power to individuals that care a lot about the election’s outcome, and b) dispersion of benefits, since even individuals that have little interest about the electoral result can profit by selling their votes. We experimentally test these intuitions in the laboratory and find that, indeed, allowing real subjects to trade votes for money in such systems increases collective welfare, and substantially redistributes it towards those that are less concerned about the election. Importantly, these findings hold true under alternative trading institutions, thus, reinforcing their empirical relevance.
    Keywords: vote trading; power sharing; experiment; collective welfare
    JEL: D72
    Date: 2018–10
  10. By: Lily Fang; Josh Lerner; Chaopeng Wu; Qi Zhang
    Abstract: Governments are important financiers of private sector innovation. While these public funds can ease capital constraints and information asymmetries, they can also introduce political distortions. We empirically explore these issues for China, where a quarter of firms’ R&D expenditures come from government subsidies. Using a difference-in-differences approach, we find that the anticorruption campaign that began in 2012 and the departures of local government officials responsible for innovation programs strengthened the relationship between firms’ historical innovative efficiency and subsequent subsidy awards and depressed the influence of their corruption-related expenditures. We also examine the impact of these changes: subsidies became significantly positively associated with future innovation after the anti-corruption campaign and the departure of government innovation officials.
    JEL: G28 H25 O32
    Date: 2018–09
  11. By: David A. Matsa; Amalia R. Miller
    Abstract: In November 2017, Maine became the first state in the nation to vote on a key provision of the Affordable Care Act: the expansion of Medicaid. We analyze local voting results to identify characteristics of areas that support Medicaid expansion. Support is strongly correlated with voter education. Places with more bachelor’s degree holders more often vote in favor, whereas those with more associate’s degree graduates vote against. Other patterns are consistent with economic self-interest. Conditional on education rates, areas with more uninsured individuals who would qualify for expanded coverage tend to vote in favor, while those with more high-income individuals vote against. Also conditional on education rates, greater hospitals employment is associated with support for expansion, but the presence of other health professionals, whose incomes might decrease from expansion, is associated with less support. Extrapolating from Maine to other states, our model predicts that hypothetical referendums on Medicaid expansion would pass in five of the 18 states that had not yet expanded Medicaid coverage.
    JEL: D72 I13 I23
    Date: 2018–09
  12. By: Stephen Calabrese; Dennis Epple; Richard Romano
    Abstract: We provide a model with a federal government and multiple local governments, the former with power to levy an income tax for redistribution, and the latter choosing a local income tax, property tax, lump-sum tax or subsidy, and a local public good. Policy is set by majority choice at each tier of government by households that differ by income and ability to move across communities. We provide sufficient conditions for existence of equilibrium and examine its properties. Central findings are federal income distribution, little local redistribution, and local preference for property taxation over income taxation to fund local public goods.
    JEL: H2 H7 H71
    Date: 2018–09

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