nep-pol New Economics Papers
on Positive Political Economics
Issue of 2019‒03‒11
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. On the political economy of income taxation By Berliant, Marcus; Gouveia, Miguel
  2. Priority roads: The political economy of Africa's interior-to-coast roads By Roberto Bonfatti; Yuan Gu; Steven Poelhekk
  3. Conformity and truthful voting under different voting rules By Bernardo Moreno; Maria del Pino Ramos-Sosa; Ismael Rodriguez-Lara
  4. Cohesive Institutions and Political Violence By Thiemo Fetzer; Stephan Kyburz
  5. Growing up in the Iran-Iraq War and Preferences for Strong Defense By Mohammad Reza Farzanegan; Hassan F. Gholipour
  6. Protection for Sale with Price Interactions andIncomplete Pass-Through By Barbara Annicchiarico; Enrico Marvasi
  7. The Political Economy of Higher Education Finance: How Information and Design Affect Public Preferences for Tuition By Lergetporer, Philipp; Woessmann, Ludger
  8. Inter-municipal cooperation in administrative tasks– the role of population dynamics and elections By Ivo Bischoff; Eva Wolfschuetz
  9. Political connections and firm pollution behaviour : An empirical study By Deng, Yuping; Wu, Yanrui; Xu, Helian
  10. War and the Rise of Parliaments By Leandro de Magalhaes; Francesco Giovannoni
  11. Foreign influence and domestic policy By Toke S. Aidt; Facundo Albornoz; Esther Hauk
  12. Analysis of Approval Voting in Poisson Games By François Durand; Antonin Macé; Matias Nunez

  1. By: Berliant, Marcus; Gouveia, Miguel
    Abstract: The literatures dealing with voting, optimal income taxation, implementation, and pure public goods are integrated here to address the problem of voting over income taxes and public goods. In contrast with previous articles, general nonlinear income taxes that affect the labor-leisure decisions of consumers who work and vote are allowed. Uncertainty plays an important role in that the government does not know the true realizations of the abilities of consumers drawn from a known distribution, but must meet the realization-dependent budget. Even though the space of alternatives is infinite dimensional, conditions on primitives are found to assure existence of a majority rule equilibrium when agents vote over both a public good and income taxes to finance it.
    Keywords: Voting; Income taxation; Public good
    JEL: D72 D82 H21 H41
    Date: 2019–03–04
  2. By: Roberto Bonfatti; Yuan Gu; Steven Poelhekk
    Abstract: Africa's interior-to-coast roads are well suited to export natural resources, but not to support regional trade. Are they the optimal resourse 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
    Date: 2019
  3. By: Bernardo Moreno (Departamento de Teoría e Historia Econñomica, Universidad de Málaga.); Maria del Pino Ramos-Sosa (Departamento de Economia, Universidad Loyola Andalucia.); Ismael Rodriguez-Lara (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: We induce conformity in a binary-decision voting game in which one of the options require certain support (majority, supermajority or unanimity) to be the adopted decision. We consider heterogenous types of voters in that each of them prefer a different outcome in the voting game. We demonstrate theoretically that truthful voting is the unique equilibrium without conformity for each possible voting rule. Introducing conformity enlarges the set of equilibria, which includes voting profiles in which agents do not necessarily vote for their preferred option. If we account for the presence of non-conformist honest voters that vote truthfully for their preferred option, truthful voting is more pervasive for conformist voters in equilibrium. In our setting, the effects of conformity and honest voters on the likelihood of voting truthfully depend on the voting rule that determines whether or not voters are in a decisive group to implement one of the decisions. We provide empirical support for our theoretical predictions by means of a laboratory experiment. Our findings indeed suggest an interplay between the voting rule and the willingness to conform.
    Keywords: truthful voting, conformity, honest voters, voting rules, experimental evidence.
    JEL: C91 C92 D71 D72
    Date: 2019–03–05
  4. By: Thiemo Fetzer (University of Warwick,; Pearson Institute at the University of Chicago; CEPR); Stephan Kyburz (Center for Global Development)
    Abstract: Can institutionalized transfers of resource rents be a source of civil conflict? Are cohesive institutions better at managing conflicts over distribution? We exploit exogenous variation in revenue disbursements to local governments and use new data on local democratic institutions in Nigeria to answer these questions. There is a strong link between rents and conflict far away from the location of the resource. Conflict over distribution is highly organized, involving political militias, and concentrated in the extent to which local governments are non-cohesive. Democratically elected local governments significantly weaken the causal link between rents and political violence. Elections produce more cohesive institutions, and vastly limit the extent to which distributional conflict between groups breaks out following shocks to the rents. Throughout, we confirm these findings using individual level survey data.
    Keywords: conflict, ethnicity, natural resources, political economy, commodity prices
    JEL: Q33 O13 N52 R11 L71
    Date: 2019–02–07
  5. By: Mohammad Reza Farzanegan (Philipps-Universitaet Marburg,); Hassan F. Gholipour (Swinburne University of Technology)
    Abstract: The purpose of this study is to examine the effect of individuals’ memories of the Iran-Iraq war (1980-1988) during early adulthood (18-25 years) on their preference for strong national defense forces and their willingness to fight for Iran (in the event of another war). Using the World Value Survey (WVS) data, we provide evidence that Iranians who experienced the war during early adulthood give top priority to strong defense forces. However, we find that there is no significant association between individuals’ memories of the war during early adulthood and their willingness to fight for Iran. The results are robust, controlling for a set of individuals’ socioeconomic and political characteristics.
    Keywords: Preferences for defense; Iran-Iraq war; Impressionable years hypothesis; Beliefs
    JEL: H56 P16 Z13
    Date: 2019
  6. By: Barbara Annicchiarico; Enrico Marvasi
    Abstract: We extend the protection for sale model of Grossman and Helpman (1994) by introducing a general model of monopolistic competition with variable markups and incomplete pass-through. We show that the structure of protection emerging in the political equilibrium not only depends on the weight attached by the government to consumer welfare when making its policy decision, but also on the degree of market power of firms and on the terms-of-trade variations due to the degree of pass-through. Our results highlight the importance of preferences in shaping the structure of protection and are consistent with the occurring of protectionism also in unorganized industries.
    Keywords: Protection for Sale; Monopolistic Competition; Incomplete Pass-Through; Endogenous Markups.
    JEL: F12 F13
    Date: 2019
  7. By: Lergetporer, Philipp (ifo Institute at the University of Munich); Woessmann, Ludger (ifo and LMU Munich)
    Abstract: Public preferences for charging tuition are important for determining higher education finance. To test whether public support for tuition depends on information and design, we devise several survey experiments in representative samples of the German electorate. The electorate is divided, with a slight plurality opposing tuition. Providing information on the university earnings premium raises support for tuition by 7 percentage points, turning the plurality in favor. The opposition-reducing effect persists two weeks after treatment. Information on fiscal costs and unequal access does not affect public preferences. Designing tuition as deferred income-contingent payments raises support by 16 percentage points, creating a strong majority favoring tuition. The same effect emerges when framed as loan payments. Support decreases with higher tuition levels and increases when targeted at non-EU students.
    Keywords: tuition; higher education; political economy; survey experiments; information; earnings premium; income-contingent loans; voting;
    JEL: I22 H52 D72 D83
    Date: 2019–02–27
  8. By: Ivo Bischoff (University of Kassel); Eva Wolfschuetz (University of Kassel)
    Abstract: We analyze the factors driving the emergence of inter-municipal cooperation (IMC) in tasks of internal administration in West-Germany between 2001 and 2014. In line with the Institutional Collective Action Approach, we find similarities in political ideology to foster cooperation. Cost pressure drives IMC. Given substantial cost hysteresis in administrative tasks, we expect IMC to be more frequent among shrinking municipalities. Our results supports this notion. However, there is no evidence that municipalities make use of complementarities from divergent population dynamics. We apply a hazard model that allows us to analyze the timing of IMC arrangements. We find state subsidies for IMC are an important driving force behind IMC. IMC agreements are less likely to emerge in election years when municipalities face low cost pressure while the opposite is true for municipalities with high cost pressure.
    Keywords: Inter-municipal cooperation, public administration, elections, hazard model, Germany, survey
    JEL: H77 D72
    Date: 2019
  9. By: Deng, Yuping; Wu, Yanrui; Xu, Helian
    Abstract: A firm's top manager and a government official may be connected due to special circumstances. This social relationship or political connection may provide industrial polluters with protection or a “pollution shelter” which could lead to severe environmental deterioration. This paper aims to examine the link between political connections and firms’ pollution discharges by using Chinese data. Empirical results show that political connections are the institutional origin for firms to adopt strategic pollution discharges. Government officials who are young, of low education, promoted locally and in office for a relatively long time are more likely to build political connections with polluters. This phenomenon results in inadequate enforcement of regulation and emission control. The pollution discharges of politically connected firms also vary considerably due to firm heterogeneity. This study also shows that pollution shelter effects caused by political connections are more obvious in the central and western regions, prefecture cities and capital-intensive industries.
    JEL: Q51 L20 O12
    Date: 2019–02–27
  10. By: Leandro de Magalhaes; Francesco Giovannoni
    Abstract: We consider the development of political institutions in Europe between 1350 and 1700 AD. In particular, we propose a model which links the i) frequency of calling of Parliament and ii) the transition (or absence of such transitions) to "Rule by Parliament" (i.e. Constitutional Monarchy) with the risks associated with particular battles and the underlying economic relationship between monarchs and the commercial elites. We test the model's predictions with a dataset we compile for England, France, Portugal and Spain that includes yearly parliamentary activity, major battles and measures of economic activity. We find support for two predictions of the model. Firstly, we provide empirical evidence that Parliaments are more likely to be called in years in which a) the country suffers a territorial defeat - our proxy for a high-risk war; and b) agriculture output is relatively low - our proxy for the resources available to the monarch that are not constrained by the commercial elites. We also discuss a case study for each of the countries in our dataset that links the model's results with the development (or lack) of transitions to Rule by Parliament.
    Keywords: Political Transitions; Wars; Glorious Revolution; Commitment; Parliament; Autocracy; Democracy.
    Date: 2019–02–20
  11. By: Toke S. Aidt; Facundo Albornoz; Esther Hauk
    Abstract: In an interconnected world, economic and political interests inevitably reach beyond national borders. Since policy choices generate external economic and political costs, foreign state and non-state actors have an interest in influencing policy actions in other sovereign countries to their advantage. Foreign influence is a strategic choice aimed at internalizing these externalities and takes many forms. We distinguish three broad types of intervention strategies, (i) voluntary agreement interventions between the intervening foreign power and the target country, (ii) policy interventions based on rewarding or sanctioning the target country to obtain a specific change in policy and (iii) instiutional interventions aimed at influencing the policy choice by changing the political institutions in the target country, (with or without a cival war). We propose a unifying theoretical framework to understand when and which form of foreign influence is chosen and use it to organize and evaluate the new political economics literature on foreign influence along with work in cognate disciplines. Foreign intervention plays a more important role for a proper understanding of domestic policy choices, for institutional dynamics and for internal conflict than is commonly acknowledged in both empirical and theoretical research.
    Keywords: Foreign influence, international agreements, institutions, aid, sanctions, conflict
    Date: 2019
  12. By: François Durand (Nokia Bell Labs [Espoo], LINCS - Laboratory of Information, Network and Communication Sciences - Inria - Institut National de Recherche en Informatique et en Automatique - Institut Mines-Télécom [Paris] - Sorbonne Université); Antonin Macé (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - La plante et son environnement - CNRS - Centre National de la Recherche Scientifique - INA P-G - Institut National Agronomique Paris-Grignon - UP11 - Université Paris-Sud - Paris 11 - INRA - Institut National de la Recherche Agronomique); Matias Nunez (LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We analyze Approval Voting in Poisson games endowing voters with private values over three candidates. We firsts how that any stable equilibrium is discriminatory: one candidate is commonly regarded as out of contention. We fully characterize stable equilibria and divide them into two classes. In direct equilibria, best responses depend only on ordinal preferences. In indirect equilibria, preference intensities matter. Counter-intuitively, any stable equilibrium violates the ordering conditions, a set of belief restrictions used to derive early results in the literature. We finally use Monte-Carlo simulations to estimate the prevalence of the different sorts of equilibria and their likelihood to elect a Condorcet winner.
    Keywords: Approval voting,Poisson games,Stable equilibria,Monte-Carlo simulations
    Date: 2019–03

This nep-pol issue is ©2019 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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