nep-pol New Economics Papers
on Positive Political Economics
Issue of 2018‒10‒22
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. Analyzing the impacts of socio-economic factors on French departmental elections with CODA methods By Nguyen, T.H.A; Laurent, Thibault; Thomas-Agnan, Christine; Ruiz-Gazen, Anne
  2. Inequality and Extremist Voting: Evidence from Germany By Dorn, Florian; Fuest, Clemens; Immel, Lea; Neumeier, Florian
  3. Dissolution Power, Confidence Votes, and Policymaking in Parliamentary Democracies By Becher, Michael
  4. Exit, Voice and Political Change: Evidence from Swedish Mass Migration to the United States By Karadja, Mounir; Prawitz, Erik
  5. Analysis of Individual Renewable Energy Support: An Enhanced Model By Vladimir Udalov
  6. Who Uses Commercial Lobbying Firms By Eric Richert; Brittany Feor; Blair Long
  7. Fiscal Decentralization and Government Size: The Role of Democracy By Mo Qiao; Siying Ding; Yongzheng Liu
  8. Democratic development and credit : “Democracy doesn`t come Cheap” But at least credit to its corporations will be By Delis, Manthos D.; Hasan, Iftekhar; Ongena, Steven
  9. Fiscal Decentralization and Government Size: The Role of Democracy By Junxue Jia; Siying Ding; Yongzheng Liu
  10. Immigration and Nationalism: The Importance of Identity By Francesco Flaviano Russo

  1. By: Nguyen, T.H.A; Laurent, Thibault; Thomas-Agnan, Christine; Ruiz-Gazen, Anne
    Abstract: The proportions of votes by party on a given subdivision of a territory form a vector called composition (mathematically, a vector belonging to a simplex). It is interesting to model these proportions and study the impact of the characteristics of the territorial units on the outcome of the elections. In the political economy literature, such regression models are generally restricted to the case of two political parties. In the statistical literature, there are regression models adapted to share vectors including CODA models (for COmpositional Data Analysis), but also Dirichlet models, Student models and others. Our goal is to use CODA regression models to generalize political economy models to more than two parties. The models are _tted on French electoral data of the 2015 departmental elections.
    Keywords: political economy; compositional regression models
    JEL: C46 D72 P16
    Date: 2018–10
  2. By: Dorn, Florian; Fuest, Clemens; Immel, Lea; Neumeier, Florian
    Abstract: This paper studies the impact of economic inequality on political polarization. Using a unique dataset covering different measures of regional income inequality as well as federal and state election outcomes at the county level in Germany, we investigate whether inequality influences the share of votes for right-wing and left-wing extremist parties using instrumental variable estimation. Our results suggest that an increase in income inequality has a sizeable influence on the support for extremist parties. The poorer a county is compared to the national average, the higher is the share of votes both nationalist and leftist parties receive. Our findings thus indicate that the rise in economic inequality may be a threat to political stability.
    Keywords: Inequality,political polarization,extremist voting,Germany
    JEL: C26 D31 D63 D72 R1 C26 D31 D63 D72 R1
    Date: 2018
  3. 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
  4. By: Karadja, Mounir (Department of Economics); Prawitz, Erik (Research Institute of Industrial Economics (IFN))
    Abstract: We study the political effects of mass emigration to the United States in the 19th century using data from Sweden. To instrument for total emigration over several decades, we exploit severe local frost shocks that sparked an initial wave of emigration, interacted with within-country travel costs. Our estimates show that emigration substantially increased the local demand for political change, as measured by labor movement membership, strike participation and voting. Emigration also led to de facto political change, increasing welfare expenditures as well as the likelihood of adopting more inclusive political institutions.
    Keywords: Migration; Political change; Labor mobility; Economic history
    JEL: D72 J61 P16
    Date: 2018–10–08
  5. By: Vladimir Udalov (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: This paper investigates an intergenerational conflict arising from renewable energy support. Using a politico-economic overlapping generations (OLG) model, it can be shown that older individuals unambiguously lose from renewable energy support and therefore vote to keep it at a minimum level. In contrast, younger individuals face ambiguous effects arising from renewable energy support. In the short run, they also lose from a negative consumption effect. In the long run, however, younger individuals benefit from a positive environmental effect. Renewable energy support also generates both positive and negative effects on consumption. The voting outcome is determined through a political process, whereby political parties converge to platforms that maximize the aggregate welfare of the electorate. Zusammenfassung: Dieses Papier untersucht einen Generationenkonflikt, der aufgrund der Förderung erneuerbarer Energien entsteht. Unter Verwendung eines einfachen polit-ökonomischen Modells sich überlappender Generationen kann gezeigt werden, dass die älteren Individuen durch die Förderung erneuerbarer Energien eindeutig schlechter gestellt werden und deshalb für ein minimales Niveau der Förderung stimmen. Im Gegensatz dazu sind die jungen Individuen mit einem nicht eindeutigen Effekt konfrontiert. In der kurzen Frist werden sie durch die Förderung erneuerbarer Energien genauso wie die älteren Individuen schlechter gestellt werden. Allerdings profitieren sie in der langen Frist von einem positiven Umwelteffekt und stehen unter bestimmten Bedingungen auch einem positiven Konsumeffekt gegenüber. Aus diesem Grund wählen sie ein höheres Niveau der Förderung. Das Abstimmungsergebnis wird im Rahmen eines politischen Prozesses bestimmt, wobei die politischen Parteien zu einer Plattform konvergieren, die aggregierte Wohlfahrt der Wählerschaft maximiert.
    Keywords: overlapping generations, generational conflict, environmental policy, renewable energy, voting
    JEL: Q54 Q29 D60 D90 H23 D72
    Date: 2018–06
  6. By: Eric Richert (Queen's University); Brittany Feor (Queen's University); Blair Long (Queen's University)
    Abstract: This paper explains the type of interest groups that use commercial lobbyists and the types of groups that lobby directly or are excluded from access to politicians. The main results provide evidence that commercial lobbying and donations by these firms to politicians can improve policy outcomes by increasing the number of groups that the politician can trust. Special interest groups come up with policy proposals that may be good or bad for society. They also get a benefit of having their idea implemented regardless of its overall social benefit so cannot be trusted to present their policy only when it is good for society. We show that repeated interaction with a policy maker can incentivize truthful communication. Therefore, interest groups working on highly salient issues or who work on issues with mostly high social benefits, can lobby alone, while interest groups who work on less salient issues or are less reputable need to use a commercial lobbyist to be trusted by the politician. Finally, firms of the lowest quality or salience are excluded from influencing the policy maker.
    Keywords: Commercial Lobbying, Political Access, Strategic Communication, Repeated Contracts
    JEL: D72 D83 H11 P16
    Date: 2018–10
  7. By: Mo Qiao (Peking University); Siying Ding (Renmin University of China & Indiana University Bloomington); Yongzheng Liu (Renmin University of China)
    Abstract: This paper examines how the level of democracy in a country affects the relationship between fiscal decentralization and government size. We argue that political regimes, proxied by their democracy levels, are important for different decentralization theories to predict the impact of fiscal decentralization on government size. We test this argument using cross-country data from 76 developed and developing countries during 1972–2013. We find strong and robust evidence that fiscal decentralization is negatively associated with government size and that a higher level of democracy tends to mitigate the negative impact of fiscal decentralization. Therefore, our study contributes to the literature by offering a novel insight on mixed results regarding the relationship between fiscal decentralization and government size in the literature.
    Date: 2018–09
  8. By: Delis, Manthos D.; Hasan, Iftekhar; Ongena, Steven
    Abstract: Does democratization reduce the cost of credit? Using global syndicated loan data from 1984 to 2014, we find that democratization has a sizeable negative effect on loan spreads: a one-point increase in the zero-to-ten Polity IV index of democracy shaves at least 19 basis points off spreads, but likely more. Reversals to autocracy hike spreads more strongly. Our findings are robust to the comprehensive inclusion of relevant controls, to the instrumentation with regional waves of democratization, and to a battery of other sensitivity tests. We thus highlight the lower cost of loans as one relevant mechanism through which democratization can affect economic development.
    JEL: G21 G30 P16 P26 P27 P47
    Date: 2018–10–11
  9. By: Junxue Jia (Renmin University of China); Siying Ding (Renmin University of China & Indiana University Bloomington); Yongzheng Liu (Renmin University of China)
    Abstract: China initiated a major decentralization reform in recent years to simultaneously improve tax autonomy and scal transfers toward county governments. We use an instrumental variables strategy and a county-level panel dataset for years 1995-2014 to examine the incentive eects of the reform. We nd that the reform signicantly reduced tax enforcement of the county governments, for which the result appears to be driven by the opposing incentive eects of the increased local tax autonomy and scal transfers. In particular, while the reform motivated county governments to improve tax enforcement by enhancing local tax autonomy, it dampened local tax enforcement because of the increased scal transfers. Our ndings provide support to the argument in the decentralization literature that improving local tax autonomy, compared to increasing scal transfers, is a more eective way to nance local governments while strengthening local scal discipline.
    Date: 2018–09
  10. By: Francesco Flaviano Russo (Università di Napoli Federico II and CSEF)
    Abstract: Increased immigration in Italy has been coupled with a change in the composition of the stock of immigrants by nationality. Migrants that come from different coun- tries and cultures bring with them different languages, habits, norms, religions and, in general, interact differently with the local population, thereby generating different re- sponses to immigration. I study the relationship between this changes in the identity of the migrants and the electoral outcomes in Italy computing several measures of distance between immigrants and natives with respect to the language spoken, to religion and to genetic factors that, being correlated with the vertical transmission of norms and values, proxy for a wide range of both cultural and individual traits. I find that the increased distance between immigrants and natives is associated with more votes for nationalist, anti-immigration political parties.
    Keywords: Elections, Culture, Language, Religion.
    JEL: D72 J61
    Date: 2018–10–13

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