nep-pol New Economics Papers
on Positive Political Economics
Issue of 2019‒05‒13
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Voting Expressively By Abhinash Borah
  2. The state and development By Evans Peter; Heller Patrick
  3. The demand for bad policy when voters underappreciate equilibrium effects By Dal Bó, Ernesto; Dal Bó, Pedro; Eyster, Erik
  4. Does Affirmative Action in Politics Hinder Performance? Evidence from India By Sabyasachi Das; Abhiroop Mukhopadhyay; Rajas Saroy
  5. From Finance to Fascism: The Real Effect of Germany’s 1931 Banking Crisis By Sebastian Doerr; Stefan Gissler; José-Luis Peydró; Hans-Joachim Voth
  6. Group Size and Political Representation Under Alternate Electoral Systems By Sugat Chaturvedi; Sabyasachi Das
  7. The Politics of CEOs By Cohen, Alma; Hazan, Moshe; Tallarita, Roberto; Weiss, David
  8. Fighting unfair trade, leveling the playing field, enforcing trade rights. The construction of trade protection in the United States and the European Union By Josue Mathieu
  9. The Effect of the Arab Spring on the Preferences for Redistribution in Egypt By Bilal El Rafhi; Alexandre Volle
  10. The financialization of mass wealth, banking crises and politics over the long run By Chwieroth, Jeffrey M.; Walter, Andrew
  11. Women legislators and economic performance By Baskaran Thushyanthan; Bhalotra Sonia; Min Brian; Uppal Yogesh
  12. Hurricanes, Climate Change Policies and Electoral Accountability By Stefano Gagliarducci; M. Daniele Paserman; Eleonora Patacchini
  13. Majority rule or dictatorship? The role of collective-choice rules in resolving social dilemmas with endogenous institutions By Liu, Manwei; van der Heijden, Eline

  1. By: Abhinash Borah (Department of Economics, Ashoka University)
    Abstract: We address a common criticism directed towards models of expressive voting that they are ad hoc in nature. To that end, we propose a foundation for expressive behavior that is based on a novel theory of social preferences under risk. Under our proposal, expressive considerations in behavior arise from the particular way in which risky social prospects are assessed by decision makers who want to interpret their choices as moral. To illustrate the scope of our framework, we use it to address some key questions in the literature on expressive voting: why, for expressive considerations, might voters vote against their self-interest in large elections and why might such elections exhibit a moral bias (Feddersen et al. 2009). Specically, we consider an electoral set-up with two alternatives and explain why, when the size of the electorate is large, voters may want to vote for the alternative they deem morally superior even if this alternative happens to be strictly less preferred, in an all-inclusive sense, than the other.
    Keywords: expressive voting, morals, social preferences, decisions under risk, voting against self-interest, moral bias of large elections
    Date: 2019–01
  2. By: Evans Peter; Heller Patrick
    Abstract: Using a comparative frame that draws on the variation of developmental trajectories in Asia from Northeast Asia to China to Southeast Asia and to India, this paper explores the changing role of the state in these countries and the contributions that the analysis of the Asian state has made to general theoretical understandings of the role states can play in promoting economic and social transformation.The emergence and evolution of the concept of the ‘developmental state’ is a central focus. The ambiguous relation between the developmental state and the politics of representation and redistribution is a second central concern. Building on region-wide comparative analysis, we examine how state structures and possibilities for state action in Asia have been shaped by geo-political context and colonial heritage.We analyse the ways in which development, defined as enhanced well-being and human flourishing, and democracy, defined as accountability to the deliberatively constructed goals of society, have been facilitated or frustrated by state structures and state action. We consider what general lessons the comparative history of the Asian state offers for development theory and policy possibilities.
    Keywords: Redistribution,State,Democracy
    Date: 2018
  3. By: Dal Bó, Ernesto; Dal Bó, Pedro; Eyster, Erik
    Abstract: Most of the political-economy literature blames inefficient policies on institutions or politicians' motives to supply bad policy, but voters may themselves be partially responsible by demanding bad policy. In this paper, we posit that voters may systematically err when assessing potential changes in policy by underappreciating how new policies lead to new equilibrium behavior. This biases voters towards policy changes that create direct benefits - welfare would rise if behavior were held constant - even if those reforms ultimately reduce welfare because people adjust behavior. Conversely, voters are biased against policies that impose direct costs even if they induce larger indirect benefits. Using a lab experiment, we find that a majority of subjects vote against policies that, while inflicting direct costs, would help them to overcome social dilemmas and thereby increase welfare. Subjects also support policies that, while producing direct benefits, create social dilemmas and ultimately hurt welfare. Both mistakes arise because subjects fail to fully anticipate the equilibrium effects of new policies. More precisely, we establish that subjects systematically underappreciate the extent to which policy changes will affect the behavior of other people, and that these mistaken beliefs exert a causal effect on the demand for bad policy.
    Keywords: voting; reform; political failure; endogenous policy; experiment
    JEL: C9 D7
    Date: 2018–04–01
  4. By: Sabyasachi Das (Department of Economics, Ashoka University); Abhiroop Mukhopadhyay (Department of Economics, Ashoka University); Rajas Saroy (Department of Economics, Ashoka University)
    Abstract: We examine how performance of elected representatives, as measured by delivery of public goods, is affected by affirmative action in elections, i.e., imposing quota in elections for one population group. We show both theoretically and empirically, using randomized electoral quotas for a caste group (OBCs) in India, that when group identities are salient and group sizes are asymmetric, affirmative action may in fact increase electoral competition and consequently, improve leader's performance. The result challenges the notion that equity promotion must necessarily come at the cost of "efficiency." It further justifies the electoral quota policy in India of targeting the jurisdictions where the group is numerous.
    Keywords: Electoral competition, Reservation, Public goods, Gram Panchayat
    Date: 2018–08
  5. By: Sebastian Doerr; Stefan Gissler; José-Luis Peydró; Hans-Joachim Voth
    Abstract: Do financial crises radicalize voters? We analyze a canonical case – Germany during the Great Depression. After a severe banking crisis in 1931, caused by foreign shocks and political inaction, radical voting increased sharply in the following year. Democracy collapsed six months later. We collect new data on pre-crisis bank-firm connections and show that banking distress led to markedly more radical voting, both through economic and non-economic channels. Firms linked to two large banks that failed experienced a bank-driven fall in lending, which caused reductions in their wage bill and a fall in city-level incomes. This in turn increased Nazi Party support between 1930 and 1932/33, especially in cities with a history of anti-Semitism. While both failing banks had a large negative economic impact, only exposure to the bank led by a Jewish chairman strongly predicts Nazi voting. Local exposure to the banking crisis simultaneously led to a decline in Jewish-gentile marriages and is associated with more deportations and attacks on synagogues after 1933.
    Keywords: financial crises, banking, Great Depression, democracy, Anti-Semitism
    JEL: E44 G01 G21 N20 P16
    Date: 2019–05
  6. By: Sugat Chaturvedi (Department of Economics, Ashoka University); Sabyasachi Das (Department of Economics, Ashoka University)
    Abstract: We examine the effect of group size of minorities on their representation in national government under majoritarian (MR) and proportional (PR) electoral systems. We first establish a robust empirical regularity using an ethnicity-country level panel data comprising 438 ethno-country minority groups across 102 democracies spanning the period 1946-2013. We show that a minority group's population share has no relation with its absolute representation in the national executive under PR but has an inverted-U shaped relation under MR. The pattern is stable over time and robust to alternate specifications. The developmental outcomes for a group proxied using stable nightlight emissions in a group's settlement area follow the same pattern. We reproduce the main results by two separate identification strategies-(i) instrumenting colony's voting system by that of the primary colonial ruler and, (ii) comparing the same ethnicity across countries within a continent. We argue that existing theoretical framework with a two group set up is not able to explain this pattern. Our proposed model incorporates the spatial distribution of multiple minority groups in a probabilistic voting model and justifies these patterns as equilibrium behavior. The data further validate a critical assumption of the model and its additional comparative static results. Our work highlights that electoral systems can have important effects on power in equality across minorities, and consequently, their well-being.
    Keywords: Electoral systems, minorities, political representation, settlement patterns
    Date: 2018–08
  7. By: Cohen, Alma; Hazan, Moshe; Tallarita, Roberto; Weiss, David
    Abstract: CEOs of public companies have influence over the political spending of their firms, which has been attracting significant attention since the Supreme Court decision in Citizens United. Furthermore, the policy views expressed by CEOs receive substantial consideration from policymakers and the public. The political preferences of CEOs, we argue, are therefore important for a full understanding of U.S. policymaking and politics. To contribute to this understanding, we provide empirical evidence on the partisan leanings of public-company CEOs. We use Federal Election Commission (FEC) records to put together a comprehensive database of the political contributions made by over 3,500 individuals who served as CEOs of S&P 1500 companies during the period 2000-2017. We find that these political contributions display substantial partisan preferences in support of Republican candidates. We identify how this pattern is related to the company's industry, geographical region, and CEO gender. To highlight the significance of CEO's partisan preferences, we show that public companies led by Republican CEOs tend to be less transparent to investors with respect to their political spending. We conclude by discussing the policy implications of our analysis.
    Keywords: CEOs; corporate political influence; Democrats; Political contributions; Political spending; Republicans
    JEL: G3 G34 G38 K2 K22
    Date: 2019–05
  8. By: Josue Mathieu
    Abstract: The PhD dissertation studies the construction of trade protection in the United States and the European Union. It focuses in particular on measures of contingent protection, comprising anti-dumping duties, countervailing duties and safeguards. The dissertation adopts a constructivist approach based on narrative analysis: broadening the conventional scope of political economy research on trade, the analysis combines the study of narratives with the concept of ‘discourse coalition’. The period under investigation spans over the period 2010-2014, covering the Obama Administration and the mandate of European Commissioner for trade Karel De Gucht. Adopting a comparative approach of the US and EU trade policy, the dissertation provides a detailed analysis of the US administration’s and the European Commission’s discourses on trade protection, and includes an analysis of a large array of other actors’ alternative, or competing constructions of contingent protection. The dissertation demonstrates that a specific type of unilateral enforcement plays an underestimated role in the construction of contingent protection. It also emphasizes that policy actors consider contingent protection as necessary to convince people that the trading system is fair; the research proposes the concept of ‘discursive embedded liberalism’ to account for this specific construction of trade protection. The research underlines elements of continuity and change, showing that many elements of the current crisis within the international trade regime were already in the making in the period under investigation.
    Keywords: international trade; unfair trade; dumping; subsidies; European Union; US trade policy; trade policy
    Date: 2019–03–19
  9. By: Bilal El Rafhi (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Alexandre Volle (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)
    Abstract: The present paper investigates the effect of the revolution occurred in January 2011 in Egypt on the Preferences of Redistribution. This shock has been an important event enhancing the freedom situation and political structure. In a first step taking into account the main determinants explaining Preferences of Redistribution displayed in literature, our results differ showing a positive impact of the religion and a negative impact of the altruistic attitude. In a second step, we rely on a diff-in-diff approach to estimate the effect of the revolution using as control group three similar countries. We find that Egyptians became much more favorable to redistribution after the Arab Spring. Moreover, the revolution effect is stronger for the poorest people and those who are interested in politics.
    Keywords: Revolution political rivalries,political situation,Redistributive preferences,Revolution,Arab spring,Freedom,Political situ- ation
    Date: 2019–02–07
  10. By: Chwieroth, Jeffrey M.; Walter, Andrew
    Abstract: The co-evolution of democratic politics and mass, financialized wealth has destabilized highly integrated financial systems and the socio-political underpinnings of neoliberal policy norms at domestic and global levels. Over the long run, it has increased the political pressure on governments to undertake bailouts during major banking crises and, by raising voters’ attentiveness to wealth losses and distributional inequities, has sharply raised the bar for government performance. The result has been more costly bailouts, greater political instability and the sustained politicization of wealth cleavages in crisis aftermaths. We underline the crucial importance and modernity of this phenomenon by showing how the high concentration of wealth in pre-1914 Britain and America among elites was associated with limited crisis interventions and surprisingly tranquil political aftermaths. By contrast, the 2007–2009 crises in both countries epitomise the political dilemmas facing elected governments in a new world of mass financialized wealth and the impact on political polarization and democratic politics. We show that these dilemmas were embryonic in the interwar period and highlight how the evolutionary forces shaping policy and political outcomes reveal the importance of time, context and the effects of long cycles in the world economy and global politics.
    Keywords: crisis; financialization; global finance; globalization; international history; political economy
    JEL: F3 G3
    Date: 2019–04–19
  11. By: Baskaran Thushyanthan; Bhalotra Sonia; Min Brian; Uppal Yogesh
    Abstract: There has been a phenomenal global increase in the proportion of women in politics in the last 20 years. While there is evidence that raising the share of women politicians has substantive impacts on the composition of government spending, there is scarcely any evidence of how it influences economic performance.We investigate this using comprehensive data on competitive elections to India’s state legislative assemblies, exploiting close elections between men and women to isolate the causal effect of legislator gender in a regression discontinuity design. We identify significantly higher growth in economic activity in constituencies that elect women. Probing mechanisms, we find evidence that women legislators are less likely to be criminal and corrupt, more efficacious, and less vulnerable to political opportunism.We find no evidence of negative spillovers to neighbouring (male-led) constituencies, consistent with net growth.
    Keywords: Economic growth,political representation,women legislators,Corruption
    Date: 2018
  12. By: Stefano Gagliarducci (Tor Vergata University, EIEF and IZA); M. Daniele Paserman (Boston University, EIEF, CEPR and IZA); Eleonora Patacchini (Cornell University, EIEF, CEPR and IZA)
    Abstract: This paper studies how politicians and voters respond to new information on the threats of climate change. Using data on the universe of federal disaster declarations between 1989 and 2014, we document that congress members from districts hit by a hurricane are more likely to support bills promoting more environmental regulation and control in the year after the disaster. The response to hurricanes does not seem to be driven by logrolling behavior or lobbysts’ pressure. The change in legislative agenda is persistent over time, and it is associated with an electoral penalty in the following elections. The response is mainly promoted by representatives in safe districts, those with more experience, and those with strong pro-environment records. Our evidence thus reveals that natural disasters may trigger a permanent change in politicians’ beliefs, but only those with a sufficient electoral strength or with strong ideologies are willing to engage in promoting policies with short-run costs and long-run benefits.
    Date: 2019
  13. By: Liu, Manwei (Tilburg University, Center For Economic Research); van der Heijden, Eline (Tilburg University, Center For Economic Research)
    Abstract: Collective-choice rules aggregate individual choices into a group choice. This study addresses the role of collective-choice rules in a social dilemma situation in which group members can repeatedly choose a combination of institutions to achieve self-governance. Specifically, we investigate three collectivechoice rules: majority voting, dictatorship and rotating dictatorship. We identify a direct and an indirect channel through which collective-choice rules may affect groups’ behavior and performance in the game. Our main findings are: (1) In terms of the direct effects, there is no evidence of a “democracy premium" (i.e., cooperation level is higher under the institutions chosen via a democratic rule than when the same institutions are chosen via a non-democratic rule). (2) In terms of the indirect effects, institutional choices produced by a fixed dictator are more stable than produced by rotating dictators. (3) Overall, groups with a fixed dictator earn the highest payoffs.
    Keywords: collective decision-making; social dilemma; institutions; majority rule; dictatorship; cooperation
    JEL: C92 D02 D71
    Date: 2019

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