nep-pol New Economics Papers
on Positive Political Economics
Issue of 2019‒02‒04
eighteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Incumbency Disadvantage of Political Parties: The Role of Policy Inertia and Prospective Voting By Chatterjee, Satyajit; Eyigungor, Burcu
  2. Priority Roads: the Political Economy of Africa's Interior-to-Coast Roads By Roberto Bonfatti; Yuan Gu; Steven (S.) Poelhekke
  3. Dancing with Donald: Polarity in the 2016 Presidential Election By Robert Chuchro; Kyle D'Souza; Darren Mei
  5. Do Dictatorships Affect People's Long Term Beliefs and Preferences? : An Empirical Assessment of the Latin American Case By Matías Brum
  6. Political Representation and the Provision of Public Goods: Theory and Evidence from Ethiopia By Teferi Mergo; Alain-Desire Nimubona; Horatiu Rus
  7. The Myth of Political Reason - The Moral and Emotional Foundations of Political Cognition and US Politics By Wilson, Ryan
  8. Well-being, political decentralisation and governance quality in Europe By Andrés Rodríguez-Pose; Vassilis Tselios
  9. The political economy of trade and migration: evidence from the U.S. Congress By Conconi, Paola; Facchini, Giovanni; Steinhardt, Max F.; Zanardi, Maurizio
  10. Agent Orange: Trump, Soft Power, and Exports By Andrew K. Rose
  11. Collective Emotions and Protest Vote By Carlo Altomonte; Gloria Gennaro; Francesco Passarelli
  12. Asymmetric Yardstick Competition: Traditional Procurement versus Public-Private Partnerships By Giuseppe Di Liddo; Annalisa Vinella
  13. Linear voting rules By Hans Peter Grüner; Thomas Tröger
  14. Further evidence of the relationship between social transfers and income inequality in OECD countries By Giorgio D'Agostino; Luca Pieroni; Margherita Scarlato
  15. On Societies Choosing Social Outcomes, and their Memberships: Internal Stability and Consistency By Bergantiños, Gustavo; Massó, Jordi; Neme, Alejandro
  16. I Read the News Today, Oh Boy: The Effect of Crime News Coverage on Crime Perception and Trust By Velásquez, Daniel; Medina, Santiago; Yamada, Gustavo; Lavado, Pablo; Núñez, Miguel; Alatrista, Hugo; Morzan, Juandiego
  17. Time preferences and political regimes: Evidence from reunified Germany By Friehe, Tim; Pannenberg, Markus
  18. The Deterrent Effect of an Anti-Minaret Vote on Foreigners’ Location Choices By Slotwinski, Michaela; Stutzer, Alois

  1. By: Chatterjee, Satyajit (Federal Reserve Bank of Philadelphia); Eyigungor, Burcu (Federal Reserve Bank of Philadelphia)
    Abstract: We document that postwar U.S. elections show a strong pattern of “incumbency disadvantage": If a party has held the presidency of the country or the governorship of a state for some time, that party tends to lose popularity in the subsequent election. To explain this fact, we employ Alesina and Tabellini's (1990) model of partisan politics, extended to have elections with prospective voting. We show that inertia in policies, combined with sufficient uncertainty in election outcomes, implies incumbency disadvantage. We find that inertia can cause parties to target policies that are more extreme than the policies they would support in the absence of inertia and that such extremism can be welfare reducing.
    Keywords: rational partisan model; incumbency disadvantage; policy inertia; prospective voting; median voter
    JEL: D72 H50
    Date: 2019–01–24
  2. By: Roberto Bonfatti (University of Padova; University of Nottingham); Yuan Gu (Vrije Universiteit Amsterdam); Steven (S.) Poelhekke (University of Auckland; Vrije Universiteit Amsterdam)
    Abstract: Africa's interior-to-coast roads are well suited to export natural resources, but not to support regional trade. Are they the optimal response to geography and comparative advantage, or the result of suboptimal political distortions? We investigate the political determinants of road paving in West Africa across the 1965-2012 period. Controlling for geography and the endogeneity of democratization, we show that autocracies tend to connect natural resource deposits to ports, while the networks expanded in a less interior-to-coast way in periods of democracy. This result suggests that Africa's interior-to-coast roads are at least in part the result of suboptimal political distortions.Africa's interior-to-coast roads are well suited to export natural resources, but not to support regional trade. Are they the optimal response to geography and comparative advantage, or the result of suboptimal political distortions? We investigate the political determinants of road paving in West Africa across the 1965-2012 period. Controlling for geography and the endogeneity of democratization, we show that autocracies tend to connect natural resource deposits to ports, while the networks expanded in a less interior-to-coast way in periods of democracy. This result suggests that Africa's interior-to-coast roads are at least in part the result of suboptimal political distortions.
    Keywords: political economy; democracy; infrastructure; natural resources; development
    JEL: P16 P26 D72 H54 O18 Q32
    Date: 2019–01–27
  3. By: Robert Chuchro; Kyle D'Souza; Darren Mei
    Abstract: In almost every election cycle, the validity of the United States Electoral College is brought into question. The 2016 Presidential Election again brought up the issue of a candidate winning the popular vote but not winning the Electoral College, with Hillary Clinton receiving close to three million more votes than Donald Trump. However, did the popular vote actually determine the most liked candidate in the election? In this paper, we demonstrate that different voting policies can alter which candidate is elected. Additionally, we explore the trade-offs between each of these mechanisms. Finally, we introduce two novel mechanisms with the intent of electing the least polarizing candidate.
    Date: 2019–01
  4. By: Rostislav Turovsky (National Research University Higher School of Economics); Marina Sukhova (National Research University Higher School of Economics)
    Abstract: This research analyzes the differences between municipal elections in large and medium-sized Russian cities (more than 100,000 citizens) and federal elections to representative bodies for the period from 2003 to 2018. The empirical evidence includes 210 municipal electoral campaigns in 119 cities and 4 federal legislative campaigns for comparison. We examine these differences using the notion of the party system nationalization, which is measured by comparing turnout and voting for political parties at different territorial levels in the same cities, and by party system inflation (with the use of the effective number of parties – an index that allows a comparison of election competitiveness at different administrative levels). Most of the cases are midterm municipal elections held separately between the federal campaigns. However, we draw special attention to the differences when federal and municipal campaigns overlap. The results showed some progress in the process of the nationalization of the Russian party system which is indicated by the rapprochement of the degree of competitiveness in the federal and municipal elections and, later, by the likeliness of electoral preferences at different territorial levels.
    Keywords: federal elections, municipal campaigns, electoral support, turnout, competitiveness, the effective number of parties, party system nationalization, party system inflation.
    JEL: D72
    Date: 2018
  5. By: Matías Brum (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: Does the political regime experienced during youth have long lasting effects on political beliefs and preferences? I exploit time and country variation in political regimes in Latin America using data from the 1995 to 2010 Latinobarometer and find that exposure to non-democratic regimes during youth reduces subsequent preference for democracy, satisfaction with democracy and confidence in institutions. These results suggest exposure to dictatorships during formative years permanently eroded democratic values. Exposure to non-democratic regimes also aspects self-location in an ideology scale, reducing identification with the Right and increasing identification with the Left; which suggests dictatorships also shaped the political orientation of voters.
    Keywords: Dictatorships, preference formation, Latin America
    JEL: D72 P16 Z13
    Date: 2018–12
  6. By: Teferi Mergo (Department of Economics, University of Waterloo); Alain-Desire Nimubona (Department of Economics, University of Waterloo); Horatiu Rus (Department of Economics, University of Waterloo)
    Abstract: While the salience of ethnicity as a factor in ruling coalition formation in African politics has been documented in the literature, less is known about its impact on various ethnic groups' economic outcomes. We construct a simple political economy model to illustrate a way in which investments in public goods in ethnic-based polities may depend on the quality of the ethnic groups' political representation with the federal government. We then exploit a natural experiment that took place in Ethiopia, following the institution of an ethnic federalism in the country in 1995. Using a Difference-in-Difference estimation strategy on repeated cross-sectional data constructed from Censuses and Welfare Monitoring Surveys, we confirm that better political representation improves access to public goods. In Ethiopia's ethnic-based federation, the quality of political representation varies across ethnic regions depending on whether their populations belong or not to the ruling ethnic group at the federal level. Along this line, we found that access to public goods has improved faster in the politically dominant Tigray region than in the other regions. Similarly, the hierarchy of public goods access rates' in different ethnic regions is consistent with the proximity of the political elites from different regions to the center of political power in the country. We also found that the regional disparities in terms of access to public goods are more pronounced in rural areas than in urban areas.
    JEL: H41 P16 O10 O55
    Date: 2019–01
  7. By: Wilson, Ryan
    Abstract: The current ascendancy of right-wing populists across western democracies is a concerning trend, and so far, the left has not managed to mount an effective counterstrategy to arrest its momentum. Much of the rhetoric of these right-wing populists has focused on evoking fear and suspicion, verging on hatred, of outsiders and fellow countrymen and women with opposing political ideologies, to great effect. The importance of understanding why certain rhetoric is effective cannot be understated, and the works of George Lakoff, Jonathan Haidt, and Drew Westen that illuminate the moral and emotional factors behind how individuals interpret and respond to inputs of a political nature are reviewed and synthesised. Individuals' underlying moral mental structures and the emotional responses that they can trigger must be understood in order to generate political messaging that resonates strongly with its target audience and consequently increases the likelihood of their actuation to vote. The recent phenomenon of individualisation, stemming from the current era of reflexive modernity is analysed within the context of divergent conservative and liberal moral matrices, and is found to be disproportionately ailing the liberal side of politics. In delineating the key elements of liberal and conservative morality, the existence of liberal moral tenets that are discordant with longstanding liberal communitarian ideals were revealed. In contrast, conservative morality appears to exhibit an inherent coherence that may contribute to conservatism's resilience in the face of reflexive modernity and disparate policy priorities of its constituents. The importance of understanding the moral and emotional foundations of political cognition is emphasised not only for its potential to bolster the efficacy of left-wing political parties, but also to provide an avenue by which the increasing hostility across the political spectrum can be subdued.
    Date: 2019
  8. By: Andrés Rodríguez-Pose; Vassilis Tselios
    Abstract: The well-being and welfare of their citizens through a fair and efficient distribution of these public goods and services. However, ?who? delivers these goods and services and ?how well? they are delivered are essential in determining outcomes in terms of well-being. Drawing on data from the European Social Survey database, this paper uses Amartya Sen?s social welfare index framework ? accounting for the trade-off between the maximization of public sector resources and an equitable distribution of these resources ? to examine the influence of political decentralisation (?who? delivers the resources) and whether this influence is moderated by governance quality (?how well? they are delivered) on individual subjective well-being. The findings of the econometric analysis reveal that decentralisation does not always lead to higher well-being, as the benefits of political decentralisation are highly mediated by the quality of national governance. In countries with high governance quality, political decentralisation results in a greater satisfaction with health provision, while in lower quality governance countries, a more decentralized government can increase the overall satisfaction with life, the economy, government, democracy and the provision of education, but not necessarily with health-related services.
    Keywords: well-being, political decentralisation, quality of governance, Europe, European Social Survey
    JEL: I31 H70 H11
    Date: 2019–01
  9. By: Conconi, Paola; Facchini, Giovanni; Steinhardt, Max F.; Zanardi, Maurizio
    Abstract: We systematically examine the drivers of U.S. congressmen's votes on trade and migration reforms since the 1970's. Standard trade theory suggests that reforms that lower barriers to goods and migrants should have similar distributional effects, hurting low-skilled U.S. workers while benefiting high-skilled workers. In line with this prediction, we find that House members representing more skilled labor abundant districts are more likely to support both trade and migration liberalization. Still, important differences exist: Democrats favor trade reforms less than Republicans, while the opposite is true for immigration reforms; welfare state considerations and network effects shape support for immigration, but not for trade.
    Keywords: trade reforms; immigration reforms; roll-call votes
    JEL: F1 F22
    Date: 2018–08
  10. By: Andrew K. Rose
    Abstract: A country’s exports rise when its leadership is approved by other countries. I show this using a standard gravity model of bilateral exports, a panel of data from 2006 through 2017, and an annual Gallup survey which asks people in up to 157 countries whether they approve of the job performance of the leadership of China, Germany, Russia, the United Kingdom and the United States. Holding other things constant, a country’s exports are higher if its leadership is approved by the importer; ‘soft power’ promotes exports. The soft power effect is statistically and economically significant; a one percent increase in leadership approval raises exports by around two-thirds of a percent. This effect is reasonably robust, and different measures of soft power deliver similar results. I conservatively estimate that the >20 percentage point decline in foreign approval of American leadership between 2016 (the final year of Obama’s presidency) and 2017 (Trump’s first year) lowered American exports by at least $3 billion.
    JEL: F14 F59
    Date: 2019–01
  11. By: Carlo Altomonte; Gloria Gennaro; Francesco Passarelli
    Abstract: We leverage on important findings in social psychology to build a behavioral theory of protest vote. An individual develops a feeling of resentment if she loses income over time while richer people do not, or if she does not gain as others do, i.e. when her relative deprivation increases. In line with the Intergroup Emotions Theory, this feeling is amplified if the individual identifies with a community experiencing the same feeling. Such a negative collective emotion, which we define as aggrievement, fuels the desire to take revenge against traditional parties and the richer elite, a common trait of populist rhetoric. The theory predicts higher support for the protest party when individuals identify more strongly with their local community and when a higher share of community members are aggrieved. We test this theory using longitudinal data on British households and exploiting the emergence of the UK Independence Party (UKIP) in Great Britain in the 2010 and 2015 national elections. Empirical findings robustly support theoretical predictions. The psychological mechanism postulated by our theory survives the controls for alternative non-behavioral mechanisms (e.g. information sharing or political activism in local communities).
    Keywords: electoral behaviour, protest vote, populism, relative deprivation, community cohesion, UK Independence Party
    JEL: A00
    Date: 2019
  12. By: Giuseppe Di Liddo; Annalisa Vinella
    Abstract: We investigate yardstick competition between local jurisdictions in which pure rent-seeking incumbents undertake an identical infrastructure project choosing be- tween two contractual arrangements with different financing profiles, namely traditional procurement (TP) and public-private partnership (PPP). We show that a mixed regime, in which TP is used in one jurisdiction and PPP in the other, is likely to arise when projects are mildly lucrative, and/or jurisdictions have a moderate fiscal capacity. We find that, in the mixed equilibrium, incumbents provide different levels of public services, face different probabilities of re-election, and obtain different rents. The adoption of different forms of project governance permits incumbents to disguise themselves and undermine voters' ability to assess their performances. Therefore, yardstick competition is hindered, even if jurisdictions display identical revenue capacities.
    Keywords: political yardstick competition, rent seeking, infrastructure projects, traditional procurement, public-private partnership
    JEL: D72 H77
    Date: 2019
  13. By: Hans Peter Grüner; Thomas Tröger
    Abstract: How should a society choose between two social alternatives if participation in the decision process is voluntary and costly and monetary transfers are not feasible? Considering symmetric voters with private valuations, we show that it is utilitarian-optimal to use a linear voting rule: votes get alternativedependent weights, and a default obtains if the weighted sum of votes stays below some threshold. Standard quorum rules are not optimal. We develop a perturbation method to characterize equilibria in the case of small participation costs and show that leaving participation voluntary increases welfare for linear rules that are optimal under compulsory participation.
    JEL: D72 D82
    Date: 2018–01
  14. By: Giorgio D'Agostino; Luca Pieroni; Margherita Scarlato
    Abstract: In this paper, we have revised the estimates of the e ect of social transfers on income in- equality. We have accounted for reverse causality using an instrumental variable derived by a theoretical model, which identi es the main driver of social transfers from the interaction between electoral system and coalition or party winning the elections, and have estimated in the OECD countries that a 1% increase of the share of social transfers reduces the income in- equality by half a percentage point. This result appears to be robust to di erent components of expenditure, alternative model speci cations and falsi cation tests. Only countries with a high corruption level seems to make this empirical regularity questionable; our estimates show that bureacratic ineciencies by corruption are identi ed as responsible of the bene t lacks of social transfers on economic inequality.
    Keywords: Welfare policy; Social spending; Income inequality; Instrumental variable esti- mation.
    JEL: H53 I38 C26
    Date: 2019–01
  15. By: Bergantiños, Gustavo; Massó, Jordi; Neme, Alejandro
    Abstract: We consider a society whose members have to choose not only an outcome from a given set of outcomes but also the subset of agents that will remain members of the society. We study the extensions of approval voting, plurality voting, Borda methods and Condorcet winners to our setting from the point of view of their consistency and internal stability properties.
    Keywords: Internal Stability; Consistency; Efficiency; Anonymity, Neutrality; Participation
    JEL: C78
    Date: 2019–01–25
  16. By: Velásquez, Daniel (Universidad del Pacifico); Medina, Santiago (Universidad del Pacifico); Yamada, Gustavo (Universidad del Pacifico); Lavado, Pablo (Universidad del Pacifico); Núñez, Miguel (Universidad del Pacifico); Alatrista, Hugo (Universidad del Pacifico); Morzan, Juandiego (Universidad del Pacifico)
    Abstract: Crime perception has increased in Peru in recent years, as in other developing and developed countries, in spite of the reduction in crime victimization figures. Our hypothesis is that the news industry is in part responsible for such developments. Using a novel database of written news, we identify short-term deviations from the long-term trend in the coverage of crime news at the province level and estimate the effect of news media on crime perception. We measure coverage as a function of the area an article occupies in cm2. Peruvians are great consumers of written news. For instance, Trome, a Peruvian gazette, is the most read Spanish-language newspaper in the world. We find that a spike of negative crime news increases people's perception about the probability of being a crime victim. We find the opposite for positive crime news. However, the effect per cm2 of negative news is more than three times larger than the effect of positive news in absolute value, signaling a potential asymmetry in the revision of people's expectations. We show that these changes in perception are smaller for recent crime victims than for non-victims and that women's perception is less sensitive to positive crime news. We also explore how these perception changes are transmitted to the political landscape and how individuals distribute accountability and reward between different political institutions.
    Keywords: expectation, crime, newspaper, information
    JEL: D83 D84 L82
    Date: 2018–12
  17. By: Friehe, Tim; Pannenberg, Markus
    Abstract: We use the separation and later reunification of Germany after World War II to show that a political regime shapes time preferences of its residents. Using two identification strategies, we find that former residents of the German Democratic Republic exhibit a significantly less pronounced present bias when compared to former residents of the Fed- eral Republic of Germany, whereas measures of patience are statistically indistinguishable. Interpreting the years spent under the regime as a proxy for treatment intensity yields consistent results. Moreover, we present evidence showing that present bias predicts choices in the domains of health, finance, and education, thereby illustrating lasting repercussions of a regime's in uence on time preferences.
    Keywords: Time preferences,Political regime,Germany,Natural experiment,SOEP
    JEL: D02 D12
    Date: 2019
  18. By: Slotwinski, Michaela; Stutzer, Alois
    Abstract: In a national ballot in 2009, Swiss citizens surprisingly approved an amendment to the Swiss constitution to ban the further construction of minarets. The ballot outcome manifested reservations and anti-immigrant attitudes in regions of Switzerland which had previously been hidden. We exploit this fact as a natural experiment to identify the causal effect of negative attitudes towards immigrants on foreigners’ location choices and thus indirectly on their utility. Based on a regression discontinuity design with unknown discontinuity points and administrative data on the population of foreigners, we find that the probability of their moving to a municipality which unexpectedly expressed stronger reservations decreases initially by about 40 percent. The effect is accompanied by a drop of housing prices in these municipalities and levels off over a period of about 5 months. Moreover, foreigners in high-skill occupations react relatively more strongly highlighting a tension when countries try to attract well-educated professionals from abroad.
    Keywords: attitudes,foreigners,location choice,popular initiative,regression discontinuity design
    JEL: D83 J61 R23 Z13
    Date: 2019

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