nep-pol New Economics Papers
on Positive Political Economics
Issue of 2018‒10‒29
fourteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Immigration and Electoral Support for the Far-Left and the Far-Right By Edo, Anthony; Giesing, Yvonne; Öztunc, Jonathan; Poutvaara, Panu
  2. Quality of Politicians and Electoral System. Evidence from a Quasi-experimental Design for Italian Cities By Marco Alberto De Benedetto
  3. What is wrong with IRV? By Stensholt, Eivind
  4. Brothers or Invaders? How Crisis-driven Migrants Shape Voting Behavior By Sandra Rozo; Juan F. Vargas
  5. Constitutional rules as determinants of social infrastructure By Theo S. Eicher; Cecilia García-Peñalosa; David J. Kuenzel
  6. Unified Tests for a Dynamic Predictive Regression By Fan (Sam) Wang
  7. The Race to the Base By Bernhardt, Dan; Buisseret, Peter; Hidir, Sinem
  8. The Political Economy of Debt and Entitlements By Laurent Bouton; Alessandro Lizzeri; Nicola Persico
  9. How do politics affect economic sentiment? The effects of uncertainty and policy preferences By Osterloh, Steffen
  10. Capital Controls and Electoral Cycles By Nicolas Gavoille; Katharina Hofer
  11. Strictly sincere best responses under approval voting and arbitrary preferences By Carlos Alós-Ferrer; Johannes Buckenmaier
  12. Do sanctions reduce the military spending in Iran? By Sajjad. F. Dizaji; Mohammad Reza Farzanegan
  13. The political economy of monetary solidarity: revisiting the Euro experiment By Schelkle, Waltraud
  14. Guns, Environment, and Abortion: How Single-Minded Voters Shape Politicians' Decisions By Laurent Bouton; Paola Conconi; Francisco Pino; Maurizio Zanardi

  1. By: Edo, Anthony; Giesing, Yvonne; Öztunc, Jonathan; Poutvaara, Panu
    Abstract: Immigration has become one of the most divisive political issues in the United States, the United Kingdom, France and several other Western countries. We estimate the impact of immigration on voting for far-left and far-right candidates in France, using panel data on presidential elections from 1988 to 2017. To derive causal estimates, we instrument more recent immigration flows by past settlement patterns in 1968. We find that immigration increases support for far-right candidates and has no robust effect on far-left voting. The increased support for far-right candidates is driven by low educated immigrants from non-Western countries.
    Keywords: Voting,Immigration,Political economy
    JEL: D72 F22 J15 P16
    Date: 2018
  2. By: Marco Alberto De Benedetto (Birkbeck, University of London)
    Abstract: We study the effect of the electoral system on the quality of politicians, measured by the average educational attainment, at the local level in Italy over the period 1994-2017. Since 1993, municipalities below 15,000 inhabitants vote with a single-ballot system, whereas cities above 15,000 inhabitants threshold are subject to a double ballot.Exploiting the discontinuous policy change nearby the population cut-off we have implemented a RDD and found that runoff elections lead to a decrease in the educational attainment of local politicians by about 2% compared to years of schooling of politicians in municipalities voting with a single-ballot scheme.We speculate that the negative effect is driven by the different selection process of candidates adopted by political parties between runoff and single-ballot system. Findings are similar when we use alternative measures of quality of politicians related both to the previous occupation and to previous political experience, and when we control for different measures of political closeness.
    JEL: C31 D72 I20 J42
    Date: 2018–10
  3. By: Stensholt, Eivind (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: Struggles over the single-seat preferential election method IRV, Instant Runoff Voting, (a.k.a. AV, Alternative Vote or RCV, Ranked-Choice Voting) go on in many arenas: legislatures, courts, websites, and scholarly journals. Monotonicity failures, i.e. elections (preference distributions) that may allow the startling tactical voting of Pushover or its reverse, has come to the forefront. An analysis of 3-candidate elections concludes that monotonicity failures, while not rare, are hard to predict and risky to exploit; it also explains the scarcity of evidence for effects on election results. A more unfortunate possibility is the No-Show accident; the number of ballots with preference order XYZ grows beyond a critical size and cause Z to win instead of Y. An analysis concludes that this must happen often enough to justify a modification of the rules. Pictograms and constellation diagrams are visualization tools that organize the set of possible elections efficiently for the analysis, which obtains explicit classification of elections where Pushover or a No-Show accident may occur or may already have occurred, and of bounds for the number of voters that must be involved. The analysis takes place in close contact with two frameworks for preferential election methods, one mathematical and one legal/political; these frameworks are themes for two survey sections.
    Keywords: Instant Runoff Voting; Monotonicity failures; No-Show accident; Pictograms; Constellation Diagrams
    JEL: C00 D72
    Date: 2018–10–22
  4. By: Sandra Rozo; Juan F. Vargas
    Abstract: Several studies have documented negative political attitudes toward immigration among local voters. By examining how episodes of crisis-driven internal and international migration affect electoral as well as socioeconomic outcomes across municipalities in Colombia, we explore whether these attitudes are explained by self-interest or sociotropic motives. Self-interested voters care primarily about the impact of migration inflows on their personal socioeconomic well-being. Sociotropic voters, in contrast, view migrants as a threat to local cultural or social norms and display in-group bias. We take advantage of the fact that both internal migrants (displaced by the armed conflict in Colombia) and international migrants (driven by economic and political downturns in neighboring Venezuela) disproportionately locate in municipalities with early settlements of individuals from their place of origin and find that, while internal migration inflows do not lead to negative electoral results for the incumbent party, international migration reduces support for incumbents and increases support for right-wing candidates. Further, we find that once we control for migration-affected proxies for individual welfare, the electoral effects of international migration are largely unchanged, but those of the internal displacement shock disappear. Taken together, these findings are consistent with a scenario in which political attitudes are driven by sociotropic motives when reacting to international migration and by self-interest when reacting to internal forced migration. This asymmetry has the potential to inform policy responses aimed at maximizing the net benefits of migration.
    Keywords: Migration, Electoral Outcomes, Political Economy, Colombia
    JEL: D72 F2 O15 R23
    Date: 2018–10–18
  5. By: Theo S. Eicher; Cecilia García-Peñalosa; David J. Kuenzel (Economics Department, Wesleyan University)
    Abstract: A sizable literature has established the positive impact of social infrastructure on economic development, but the determinants of social infrastructure itself have yet to be fully explored. Competing theories suggest a variety of political institutions as driving forces of social infrastructure, but the empirical literature has been hampered by the small set of available proxies, many of which are broadly defined. We leverage a new, comprehensive dataset that codes political institutions directly from countries’ constitutions. By employing a statistical methodology that is designed to juxtapose candidate regressors associated with many competing theories, we test each individual political institution's effect on social infrastructure. Our results show that constitutional rules pertaining to executive constraints as well as to the structure of electoral systems are crucial for the development of high-quality social infrastructure. We also find that the determinants of social infrastructure are much more fundamental than previously thought: not only the general structure of electoral systems matter, but also highly detailed aspects such as limits on campaign contributions and the freedom to form parties. Moreover, the granularity of our data allows us to highlight the profound effect of basic human rights on social infrastructure, a dimension which has not been explored in the literature to date.
    Keywords: Constitutions, Institutions, Social infrastructure, Bayesian Model Averaging
    JEL: O47 D72 E60 H00
    Date: 2018–06
  6. By: Fan (Sam) Wang (Department of Economics, University of Kansas)
    Abstract: This study uses duration analysis to investigate whether the occurrence and the outcome of presidential elections can affect the timing of turning points of the U.S. stock market cycle. Results suggest that political alignment between the White House and the Congress (political control) plays an important role in the timing of turning points relative to the elections. Specifically, our estimates show that the increased hazard for a bear market prior to an election predicted by our Hypothesis One is only found to be significant when political control is absent or when the incumbent is a Republican. However, the predicted rise in the hazard for a bull market in the period immediately after an election is not found in our data. In fact, the estimates reveal a smaller probability for a market peak to occur in the post-election period than at other times if the party of president elected did not control the Congress. A further examination of the post-election effects provides evidence that is consistent with our Hypothesis Two that there is no difference in the likelihood of a peak or trough after the election of a Democratic president as compared to other times. Furthermore, the estimates show that market troughs are less likely to occur in the wake of a Republican presidential victory than at other times and political control attenuates this post-Republican effect. Finally, although the implied post-Republican surge in the hazard for a bull market is not found in our data, political control does seem to boost the hazard for a bull market after an election of a Republican.
    Date: 2018–10
  7. By: Bernhardt, Dan (Department ofEconomics, University of Illinois and University of Warwick); Buisseret, Peter (Harris School of Public Policy, University of Chicago); Hidir, Sinem (Department of Economics, University of Warwick)
    Abstract: We study multi-district legislative elections between two office-seeking parties when the election pits a relatively strong party against a weaker party ; when each party faces uncertainty about how voter preferences will evolve during the campaign; and, when each party cares not only about winning a majority, but also about its share of seats in the event that it holds majority or minority status. When the initial imbalance favoring one party is small, each party targets the median voter in the median district, in pursuit of a majority. When the imbalance is moderate, the advantaged party continues to hold the centre-ground, but the disadvantaged party retreats to target its core supporters; it does so to fortify its minority share of seats in the likely event that it fails to secure a majority. Finally, when the imbalance is large, the advantaged party advances toward its opponent, raiding its moderate supporters in pursuit of an outsized majority.
    JEL: D72
    Date: 2018
  8. By: Laurent Bouton (Department of Economics, Georgetown University); Alessandro Lizzeri; Nicola Persico
    Abstract: We present a political-economic model of total government obligations-debt and entitlements. In our model, both are tools by which temporarily powerful groups extract resources from groups that will be powerful: debt transfers resources across periods; entitlements directly target the future allocation of resources. We prove four results. First, debt and entitlements are strategic substitutes: constraining one increases the other. Second, it is sometimes beneficial to relax a constraint on debt, and always to limit but not eliminate entitlements. Third, debt and entitlements respond in opposite ways to political instability. Finally, polarization can cause joint growth of debt and entitlements.
    Keywords: Government debt, entitlement programs, fiscal rules, political economy
    JEL: D72 E62 H60
    Date: 2018–10–19
  9. By: Osterloh, Steffen
    Abstract: Expectations of consumers and investors are drivers of consumption and investment, and consequently the business cycle. In this paper, we study whether these expectations, as proxied by economic sentiment indicators, are affected by the political environment. First, we study the impact of political uncertainty related to elections and weak governments. Surprisingly, we do not find evidence for a negative effect of uncertainty on consumer and business sentiment. On the contrary, our results suggest that consumer confidence even increases in the forefront of elections. This increase is most pronounced in situations where consumers perceive the economic situation as bad, which suggests that positive expectation effects outweigh the negative uncertainty effects. Second, we study the effect of the political preferences of governments on economic sentiment. As measure of political preferences, we use data on party preferences derived from the content analysis of election manifestos. Our results suggest that during the reign of governments whose platforms support economic orthodox policies, such as fiscal consolidations, consumer and, to a lesser extent, business is subdued. Conversely, consumer confidence increases when governments focus on the strengthening of institutions, whereas business sentiment reacts positively to governments highlighting technology and infrastructure.
    Keywords: economic sentiment,uncertainty,ideology,political economy,panel data
    JEL: E60 H11 P16
    Date: 2018
  10. By: Nicolas Gavoille (Stockholm School of Economics in Riga (SSE Riga)); Katharina Hofer (Swiss Institute for Empirical Research, University of St.Gallen)
    Abstract: This paper studies the relation between the evolution of capital controls and electoral cycles. We exploit a dataset containing detailed information on the level of restrictions on capital flows for 98 countries on an annual base from 1995 to 2015, constructed by Fernandez et al. (2016). First, we find that restrictions are more likely to increase during an election year. Elections prove to be more closely related to changes in capital controls than any economic variable. Second, these changes are driven pre- dominantly by restrictions on capital outflows and on relatively liquid asset categories. Third, changes tend to occur after elections rather than before. Finally, capital controls increase by more if the new government is more leftist or less liberal than its predecessor, and more electoral uncertainty is related to higher restrictions on capital flows. Overall, these results suggests that theories examining the cyclical properties of capital controls should also consider electoral cycles.
    Date: 2018–08
  11. By: Carlos Alós-Ferrer; Johannes Buckenmaier
    Abstract: Approval voting allows voters to support as many candidates as they wish. One advantage of the method is that voters have weak or no incentives to vote insincerely. However, the exact meaning of this statement depends on how the voters' preferences over candidates are extended to sets. We show that, under a combination of standard, well-established assumptions on the extended preferences, voters will always have a strictly sincere best response (that is, a best response ballot such that every approved candidate is strictly preferred to every disapproved one) given the ballots of other voters. The result holds for arbitrary preferences over candidates, allowing for indifferences but covering the extreme cases of dichotomous or strict preferences. As a corollary, we show that the classical strategy-proofness result for the case of dichotomous preferences on alternatives (Brams and Fishburn, 1978) holds for a larger class of preferences on sets than originally assumed.
    Keywords: Approval voting, manipulation, preferences among sets, strict sincerity
    JEL: C72 D71 D72
    Date: 2018–10
  12. By: Sajjad. F. Dizaji (Tarbiat Modares University); Mohammad Reza Farzanegan (University of Marburg)
    Abstract: This study focuses on short and long-term effects of sanctions on military spending in Iran. Utilizing the annual data from 1960 to 2017 and the auto regressive distributed lag (ARDL) model, we show that the increasing intensity of sanctions dampen the military budget of Iran. By separating unilateral sanctions (where only the United States sanctions Iran) and multilateral sanctions (where, the United States acts in conjunction with other countries to sanction Iran), we show that only the latter class of sanctions have a statistically significant and negative impact on military spending of Iran. The negative effects of the multilateral sanctions on military budget are observed in both the short and long run time horizons. The results remain robust when controlling for other determinants of military spending such as gross domestic product (GDP), oil rents, trade openness, population, quality of political institutions, military expenditure of the Middle East region, non-military spending of government and the war period with Iraq.
    Keywords: sanctions; military spending; Iran; ARDL
    Date: 2018
  13. By: Schelkle, Waltraud
    Abstract: The euro is a unique experiment in monetary history: a group of rather different countries adopted voluntarily a common currency, and the supranational central bank is deliberately separated from national fiscal institutions. Every member state had good reasons to take the risk of joining this experiment of a monetary pool of diverse countries. However, the experiment has so far been rather disappointing. A political-economic paradox can explain why the member states could agree only on a dangerously limited form of fiscal risk sharing. These limitations materialised in the recent financial and euro area crisis, in which the rescue of insolvent banks remained a task for each member state even though financial market integration had contributed to making domestic banking systems too big for most of them. But the elements of insurance that have been institutionalised in the monetary union also came to the fore in the crisis: notably the cross-border payments system TARGET sustained the euro area as a trade and payments area. The banking union has made risk sharing in the common currency area more robust. But the risk of fiscal overstretch is still real and calls for further reforms.
    JEL: J1
    Date: 2018–09–11
  14. By: Laurent Bouton (Department of Economics, Georgetown University); Paola Conconi; Francisco Pino; Maurizio Zanardi
    Abstract: We study how electoral incentives affect policy choices on secondary issues, which only minorities of voters care intensely about. We develop a model in which office and policy motivated politicians choose to support or oppose regulations on these issues. We derive conditions under which politicians flip-flop, voting according to their policy preferences at the beginning of their terms, but in line with the preferences of single-issue minorities as they approach re-election. To assess the evidence, we study U.S. senators’ votes on gun control, environment, and reproductive rights. In line with our model’s predictions, election proximity has a pro-gun effect on Democratic senators and a pro-environment effect on Republican senators. These effects only arise for non-retiring senators, who represent states where the single-issue minority is of intermediate size. Also in line with our theory, election proximity has no impact on senators’ decisions on reproductive rights, because of the presence of single-issue minorities on both sides.
    Keywords: Electoral incentives, Environment, Gun control, Reproductive Rights.
    JEL: D72 I18 Q00
    Date: 2018–10–18

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