nep-pol New Economics Papers
on Positive Political Economics
Issue of 2018‒11‒05
nineteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Small screen, big echo? Estimating the political persuasion of local television news bias using Sinclair Broadcast Group as a natural experiment By Antonela Miho
  2. Rent-seeking and the polarization of politics By Klingelhöfer, Jan
  3. The Politics of Attention By Li Hu; Anqi Li
  4. Women’s representation in politics: voter bias, party bias, and electoral systems By Martín Gonzalez-Eiras
  5. The Political Economy of European Asylum Policies By Drometer, Marcus; Méango, Romuald; Burmann, Martina
  6. Connecting to Power: Political Connections, Innovation, and Firm Dynamics By Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
  7. Democracy and compliance in public goods games By Gallier, Carlo
  8. The Political Economy of Transportation Investment By Edward L. Glaeser; Giacomo A.M. Ponzetto
  9. Majority Judgment vs. Approval Voting By Michel Balinski; Rida Laraki
  10. Sorting in Iterated Incumbency Contests By Nöldeke, Georg; Häfner, Samuel
  11. Does strategic commodities price respond to U.S. Partisan Conflict? Evidence from a parametric test of Granger causality in quantiles By Yong Jiang
  12. The quiet-loud-quiet politics of post-crisis consumer bankruptcy law: the case of Ireland and the Troika By Spooner, Joseph
  13. The uncovered set and the core: Cox's (1987) result revisited By Anindya Bhattacharya; Victoria Brosi; Francesco Ciardiello
  14. Corruption vs reforms: Why do voters prefer the former? By Fedotenkov, Igor
  15. Understanding Free Trade Attitudes: Evidence from Europe By Braml, Martin; Felbermayr, Gabriel
  16. Information Transmission under Increasing Political Tension – Evidence for the Berlin Produce Exchange 1887-1896 By Martin T. Bohl; Alexander Pütz; Pierre L. Siklos; Christoph Sulewski
  17. Where’s the Pork?: The Political Economy of the US Farm Bill By Weinberg, Joe
  18. Political Contributions and Land Reform Delay: The Case of South Africa By Michuda, Aleksandr
  19. Final, Unalterable (and Up for Negotiation): Federal-Provincial Transfers in Canada By Trevor Tombe

  1. By: Antonela Miho (PSE - Paris School of Economics)
    Abstract: We investigate the effect of biased local TV news on electoral outcomes using the quasi-random expansion of the U.S. media conglomerate: Sinclair Broadcast Group. We document Sinclair's pattern of bias to argue its local news programming exhibits a conservative slant since the 2004 election, though they have operated local TV stations since 1971. Using a DiD methodology through a dynamic two way fixed effect model, we argue that, conditional on a set of controls, the within county evolution of electoral outcomes would have been the same, absent the availability of a biased Sinclair major affiliate TV station. On average, we estimate that an extra year of coverage increases the presidential Republican two party vote share by .136% points within a county. Yet, we find no average effect across election years nor a complementary effect on voter turnout. We also consider the effect of Sinclair coverage by treatment cohort and given the partisan leaning of the county. Our estimates imply biased Sinclair news convinced 2.6-3.5% of its audience to vote Republican, depending on the sample considered. The totality of our results suggest that political persuasion is a dynamic process that takes time and that serves to entrench pre-existing beliefs. Our findings are robust to a series of checks, though a more precise definition of treatment may be helpful to increase the power of our strategy to detect an average global effect.
    Keywords: Broadcasting,Media,Democracy,Voting,Election,News
    Date: 2018–10–15
  2. By: Klingelhöfer, Jan
    Abstract: I present a model in which a centrist electorate leads to partisan politics and vice versa. A centrist electorate benefits from an equilibrium in which only ideological politicians are elected in so far as ideological politicians are willing to give up more rents in return for a higher chance of being reelected than centrist politicians. However, in this .partisan equilibrium only centrist voters can commit to support ideological politicians in return for low levels of rent-seeking. Consequently, the more likely the centrist voters are to be decisive in the election, the lower are the rents that are consistent with equilibrium. If partisan voters are more likely to be decisive, rents in the partisan equilibrium are larger and the equilibrium might even cease to exist. However, there is an alternative equilibrium in which only centrist politicians run for o¢ ce. The model provides a possible explanation why wee see more partisan politicians being elected in the United States in recent years although the electorate seems not more partisan than before. One implication is that a reduction of rent seeking possibilities would have the additional bene.t of less volatile and less ideological policies.
    Keywords: Accountability,Elections,Downsian Competition,Voting,Political polarization
    JEL: D72
    Date: 2018
  3. By: Li Hu; Anqi Li
    Abstract: We develop an equilibrium theory of attention and politics. In a spatial model of electoral competition where candidates have varying policy preferences, we examine what kinds of political behaviors capture voter's limited attention and how this concern in turn affects political outcomes. Following the seminal work of Downs (1957), we assume that voters are rationally inattentive and can process information about candidates' random policies at a cost proportional to entropy reduction as in Sims (1998) and Sims (2003). Two salient patterns emerge in equilibrium as we increase the attention cost or garble the news technology: first, arousing and attracting voter's attention becomes harder; second, doing so leads the varying types of the candidates to adopt extreme and exaggerated policy and issue positions. We supplement our analysis with historical accounts, and discuss its relevance in the new era featured with greater media choices and distractions, as well as the rise of partisan media and fake news.
    Date: 2018–10
  4. By: Martín Gonzalez-Eiras (University of Copenhagen; Sanz)
    Abstract: We study how electoral systems affect the presence of women in politics using a model in which both voters and parties might have a gender bias. We apply the model to Spanish municipal elections, in which national law mandates that municipalities follow one of two different electoral systems: a closed-list system in which voters pick one party-list, or an open-list system, in which voters pick individual candidates. Using a regression discontinuity design, we find that the closed-list system increases the share of women among candidates and councilors by 2.5 percentage points, and the share of women among mayors by 4.3 percentage points. Our model explains these results as mostly driven by voter bias against women. We provide evidence that supports the mechanism of the model. In particular, we show that, when two councilors almost tied in general-election votes, the one with “one more vote” is substantially more likely to be appointed mayor, but this does not happen when the most voted was female and the second was male, suggesting the presence of some voter bias. We also show that, in a subsample of municipalities with low bias — proxied by having had a female mayor in the past — the difference between the two electoral systems disappears.
    Keywords: voting, electoral systems, gender bias, regression discontinuity
    JEL: D72 J16 J71
    Date: 2018–10
  5. By: Drometer, Marcus; Méango, Romuald; Burmann, Martina
    Abstract: Despite widespread agreement that asylum policies are partly determined by political economy factors in the destination country, there is little empirical evidence on the precise linkage between those political factors and asylum policies. We shed light on this issue by examining the impact of elections and parties on first-time asylum applications. Our evidence is based on a large bilateral panel data set comprising 12 European destination countries and their 51 most relevant origin countries during the time period 2002 to 2014. Our findings suggest that the number of asylum applicants under left- and right-wing parties converges before elections and differs thereafter. This result is robust to several different specifications and suggests that both left- and right-wing cabinets choose moderate policies before an election and less moderate policies after it.
    Keywords: Electoral cycles,migration policies
    JEL: H11 D72 F22
    Date: 2018
  6. By: Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
    Abstract: Do political connections affect firm dynamics, innovation, and creative destruction? We study Italian firms and their workers to answer this question. Our analysis uses a brand-new dataset, spanning the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data; (ii) social security data on the universe of workers; (iii) patent data from the European Patent Office; (iv) the national registry of local politicians; and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: When compared to their competitors, market leaders are much more likely to be politically connected, but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity – a result that we also confirm using a regression discontinuity design. We build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity.
    JEL: D70 O3 O4
    Date: 2018–10
  7. By: Gallier, Carlo
    Abstract: I investigate if, how, and why the effect of a contribution rule in a public goods game depends on how it is implemented: endogenously chosen or externally imposed. The rule prescribes full contributions to the public good backed by a nondeterrent sanction for those who do not comply. My experimental design allows me to disentangle to what extent the effect of the contribution rule under democracy is driven by self-selection of treatments, information transmitted via the outcome of the referendum, and democracy per se. In case treatments are endogenously chosen via a democratic decision-making process, the contribution rule significantly increases contributions to the public good. However, democratic participation does not affect participants’ contribution behavior directly, after controlling for self-selection of treatments and the information transmitted by voting.
    Keywords: Laboratory experiment,public good,democracy,endogenous institutions,voting,contribution rule,compliance
    JEL: C91 D02 D72 K42
    Date: 2018
  8. By: Edward L. Glaeser; Giacomo A.M. Ponzetto
    Abstract: Will politics lead to over-building or under-building of transportation projects? In this paper, we develop a model of infrastructure policy in which politicians overdo things that have hidden costs and underperform tasks whose costs voters readily perceive. Consequently, national funding of transportation leads to overspending, since voters more readily perceive the upside of new projects than the future taxes that will be paid for distant highways. Yet when local voters are well-informed, the highly salient nuisances of local construction, including land taking and noise, lead to under-building.This framework explains the decline of urban mega-projects in the US (Altshuler and Luberoff 2003) as the result of increasingly educated and organized urban voters. Our framework also predicts more per capita transportation spending in low-density and less educated areas, which seems to be empirically correct.
    Keywords: infrastructure, political economy, transportation investment, nuisance mitigation, elections, imperfect information
    JEL: D72 D82 H54 H76 R42 R53
    Date: 2017–10
  9. By: Michel Balinski (CREST; CNRS; Ecole Polytechnique); Rida Laraki (CNRS, LAMSADE, Université Paris-Dauphine; PSL; Department of Computer Science, University of Liverpool)
    Abstract: Majority judgment (MJ) and approval voting (AV) are compared in theory and practice. Criticisms of MJ and claims that AV is superior are refuted. The two primary criticisms have been that MJ is not "Condorcet-consistent" and that it admits the "no-show" paradox. That MJ is not Condorcet-consistent is a good property shared with AV: the domination paradox shows majority rule may well err in an election between two. Whereas the no-show paradox is in theory possible with MJ it is as a practical matter impossible. For those who believe this extremely rare phenomenon is important it is proven that MJ with three grades cannot admit the no-show paradox. In contrast; AV suffers from serious drawbacks because voters can only "tick" or "approve" candidates at best only Approve or Disapprove each candidate. With AV voters cannot express their opinions adequately; experiments show that Approve is not the opposite of Disapprove; and although AV does not admit the no-show paradox it admits the very closely allied "no-show syndrome and insensitivity." Two is too few. Substantive debate must concern three or more grades.
    Keywords: Majority judgment, majority rule, approval voting, Condorcetconsistency, domination paradox, no-show paradox, no-show syndrome.
    Date: 2018–10–01
  10. By: Nöldeke, Georg; Häfner, Samuel
    Abstract: This paper analyzes incumbency contests in a large population setting. Incumbents repeatedly face different challengers, holding on to their positions until defeated in a contest. Defeated incumbents turn into challengers until they win a contest against an incumbent, thereby regaining an incumbency position. Individuals are heterogeneous as regards their payoffs from being incumbent. We consider steady-state equilibria and study how and to which extent individuals sort into the incumbency positions depending on their type. In particular, we identify sufficient conditions for positive sorting, meaning that types with higher incumbency payoffs are overrepresented among the incumbents, and show that negative rather than positive sorting may also arise in equilibrium when these conditions are violated. Further results show how incumbency rents, surplus, and sorting are affected by the frequency at which incumbency is contested.
    Keywords: Contests,Sorting,Incumbency Rents,Steady-State Equilibrium
    JEL: C72 D72 D74
    Date: 2018
  11. By: Yong Jiang
    Abstract: Currently, U.S. politics have been characterized by a high degree of partisan conflict, which has led to increasing polarization and high policy uncertainty. Given the importance of U.S. in the global commodity market, we investigate whether U.S. partisan conflict affects the price performance (returns and volatility) of two strategic commodities (oil and gold). To this end, we employ a parametric test of Granger causality in quantiles proposed by Troster (2016), which can discriminate between causality affecting the median and the tails of the conditional distribution. Meanwhile, this approach allows us to investigate whether there exist different effects of U.S. partisan conflict index on the oil market and gold market under different market conditions. The empirical results suggest that U.S. partisan conflict can affect the returns of oil and gold, with the effects cluster around the tail of the conditional distribution of returns. More specifically, the partisan conflict mainly affects the oil returns when the crude oil market is in a bearish state (lower quantiles). By contrast, partisan conflict matters for gold returns only when the gold market is in a bullish scenario (higher quantiles). In addition, for the volatility of oil and gold, the predictability of partisan conflict index virtually covers the entire distribution of volatility. This study provides valuable implications for academics, policymakers, and investors.
    Date: 2018–10
  12. By: Spooner, Joseph
    Abstract: A decade after the Global Financial Crisis, many developed economies continue to strain under excessive household debt. This article presents evidence suggesting that the failure of policymakers to enact debt relief measures may lie in the superior influence of the coordinated and concentrated financial sector over legislative processes as compared to the diffuse and disorganised interests of consumer debtors. Post-crisis popular interest in technical issues of personal insolvency law created only a narrow space of political opportunity. Soon these questions returned to the domain of technocratic actors and corporate influence. The article examines this situation through an inter-disciplinary case study of consumer bankruptcy reform in Ireland under ‘Troika’ supervision. Proposals initially billed as assisting over-indebted households developed into increasingly creditor-friendly legislation in ‘quieter’ stages of technocratic decision-making. The stark implications of these findings highlight obstacles to resolving household debt problems and consequent risks of economic and political instability
    JEL: N0
    Date: 2018
  13. By: Anindya Bhattacharya; Victoria Brosi; Francesco Ciardiello
    Abstract: In this work first it is shown that in contradiction to the well-known claim in Cox (1987) (repeated in a number of subsequent works), the uncovered set in a multidimensional spatial voting situation (under the usual regularity conditions) does not necessarily coincide with the core even when the core is singleton: in particular, the posited coincidence result, while true for an odd number of voters, may cease to be true when the number of voters is even. Then we provide a characterization result for the case with even number of voters: a singleton core is the uncovered set in this case if and only if the unique element in the core is the Condorcet winner.
    Keywords: Spatial Voting Games; Uncovered set; Core; Stable Set.
    JEL: D71 C71
    Date: 2018–10
  14. By: Fedotenkov, Igor
    Abstract: In this paper, we address the question of why voters tolerate corrupt politicians. Standard economic techniques such as expected utility maximization under uncertainty are employed. We show that a corrupt politician is less likely to institute reforms which can cause short-term losses for voters during a transitional period or lead with some probability to non-success. Voters' higher risk aversion causes an increased fear of reforms and higher tolerance for corruption. We also show that during an economic crisis the corruptionists' optimal strategy is not to institute reforms, as models with honest politicians predict, but to reduce the level of corruption. Using panel data techniques, we show that such a strategy is in line with the empirical CIS data; however, it follows with a short delay.
    Keywords: Corruption; politician; median voter; reforms; risk aversion
    JEL: D72 D73 D79 E60 I38 O43
    Date: 2018–10–18
  15. By: Braml, Martin; Felbermayr, Gabriel
    Abstract: Our paper contributes by demonstrating that public opinion on open-market policies is mainly shaped by ideology rather than by rational considerations and economic self-interest. Exploiting data on attitudes towards TTIP, Free Trade, Protectionism, and Globalization from the Eurobarometer, a comprehensive biannual survey across EU citizens, we find that individual preferences towards different trade policies can hardly be explained by variables that typically determine personal advantages of trade liberalization. Nevertheless, rational considerations follow expected patterns but are not overly relevant. Rather, we find trust variables and country-fixed-effects being predominant drivers of individual open-market attitudes. Our data also allow for a spatial analysis at the European NUTS-2 level. Performing a cross-country analysis, we find a causal relation between anti-Americanism and national TTIP approval rates. Macroeconomic performance variables contribute only to a minor extent in shaping regional and national preferences.
    Keywords: International Political Economy,Free Trade Attitudes,TTIP
    JEL: F13 F53
    Date: 2018
  16. By: Martin T. Bohl; Alexander Pütz; Pierre L. Siklos; Christoph Sulewski
    Abstract: This article studies the effects of increasing political uncertainty on the functioning of futures markets. For this purpose, we utilize a unique natural experiment, namely the discussions around and the final coming into force of the German Exchange Act of 1896. Using static and time-varying vector error correction models, the empirical analysis shows that, although early futures markets exhibit a high degree of operational efficiency, increasing political tensions were related to a declining dominance of the futures market in the price discovery process. In summary, we provide a strong illustration of the negative consequences of misplaced regulatory attempts caused by strong political interests.
    Keywords: Early commodity futures markets, Berlin Produce Exchange, Uncertainty, Price discovery, Regulation
    JEL: N23 N44 G14 G28 Q14 Q18
    Date: 2018–10
  17. By: Weinberg, Joe
    Keywords: Food and Agricultural Policy Analysis, International Trade, Research Methods/Econometrics/Stats
    Date: 2018–06–20
  18. By: Michuda, Aleksandr
    Keywords: Production Economics, Behavioral & Institutional Economics, International Development
    Date: 2018–06–20
  19. By: Trevor Tombe (University of Calgary)
    Abstract: Federal transfers are a central but ever-changing feature of Canada's federation. Despite early hopes that transfer arrangements were "a final and unalterable settlement" of provincial demands, complex economic and political pressures forced successive governments to negotiate. To explore this history and Canada's various transfer programs, I compile uniquely detailed data from Confederation to today. Explicit transfers to provincial governments are large, but more equally distributed today than throughout most of Canada's history. I also propose a uniform methodology to quantify and analyze both explicit and implicit fiscal transfers. Overall, federal tax and spending activities redistribute just under 2 per cent of Canada's GDP across provinces; but this too is less than any point in the past six decades. This data, analysis and brief historical review reveal why today's transfer programs are designed as they are, what pressures they must withstand, and what future reforms might consider.
    Date: 2018–10–22

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