nep-pol New Economics Papers
on Positive Political Economics
Issue of 2019‒05‒27
seven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Hurricanes, Climate Change Policies and Electoral Accountability By Stefano Gagliarducci; M. Daniele Paserman; Eleonora Patacchini
  2. Busy Doing Nothing – Why Politicians Implement Ineffcient Policies By Gustafsson, Anders
  3. Political Entrenchment and GDP Misreporting By Ho Fai Chan; Bruno S. Frey; Ahmed Skali; Benno Torgler
  4. Do fiscal rules constrain political budget cycles? By Bram Gootjes; Jakob de Haan; Richard Jong-A-Pin
  5. Influence of US Presidential Terms on S&P500 Index Using a Time Series Analysis Approach By Gil-Alana, Luis A.; Mudida, Robert; Yaya, OlaOluwa S; Osuolale, Kazeem; Ogbonna, Ephraim A
  6. Peer Effects in Legislative Voting By Nikolaj Harmon; Raymond Fisman; Emir Kamenica
  7. Extreme Lobbyists and Policy Convergence By Hirata, Daisuke; Kamada, Yuichiro

  1. By: Stefano Gagliarducci (CEIS & DEF University of Rome "Tor Vergata", EIEF and IZA); M. Daniele Paserman (Boston University, NBER, 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.
    Keywords: U.S. Congress, Hurricanes, Legislative Activity.
    JEL: D70 D72 H50 Q54
    Date: 2019–05–17
  2. By: Gustafsson, Anders (The Ratio Institute)
    Abstract: A substantial body of literature suggests that politicians are blocked from implementing efficient reforms that solve substantial problems because of special interest groups or budget constraints. Despite the existing mechanisms that block potentially efficient reforms, real-world data show that a large number of new programs and policies are implemented every year in developed countries. These policies are often selective and considered to be fairly inefficient by ex post evaluation, and they tend to be small in size and scope. With this background, this paper studies the reasons why a rational politician would implement an inefficient public policy that is intended to obfuscate the difficulties in achieving reforms. The paper uses a simple competence signaling model that suggests that if an effective reform is impossible, engaging in strategic obfuscation through an inefficient program increases the probability of winning a re-election compared to doing nothing at all. This is because an inefficient reform does not lead voters to believe that the politician is incompetent, which a lack of action risks doing. Intentional inefficiency aiming to obfuscate the difficulty of efficient reforms can therefore complement the previous theories’ explanations of political failure.
    Keywords: Special Interest Groups; Reforms; Inefficiency; Strategic Obfuscation
    JEL: D72 H11 L82 P16
    Date: 2019–05–13
  3. By: Ho Fai Chan; Bruno S. Frey; Ahmed Skali; Benno Torgler
    Abstract: By examining discrepancies between officially reported GDP growth figures and the actual economic growth implied by satellite-based night time light (NTL) density, we investigate whether democracies manipulate officially reported GDP figures, and if so, whether such manipulation pays political dividends. We find that the over-reporting of growth rates does indeed precede increases in popular support, with around a 1% over-statement associated with a 0.5% increase in voter intentions for the incumbent. These results are robust to allowing the elasticity of official GDP statistics to NTL to be country specific, as well as accounting for the quality of governance, and checks and balances on executive power.
    Keywords: Manipulation; political entrenchment; electoral cycles; trust; popular support; GDP; night lights
    JEL: D72 D73 O43
    Date: 2019–05
  4. By: Bram Gootjes; Jakob de Haan; Richard Jong-A-Pin
    Abstract: We examine whether fiscal rules constrain incumbent governments to use fiscal policy for re-election purposes. Using data on fiscal rules provided by the IMF for a sample of 77 (advanced and developing) countries over the 1984-2015 period, we find that after the Global Financial Crisis political budget cycles occur only in countries with weak fiscal rules. This conclusion is robust for the inclusion of other conditioning factors for political budget cycles identified in the literature (such as media freedom, the presence of checks and balances, and the maturity of democracy) and for controlling for the potential endogeneity of fiscal rules.
    Keywords: political budget cycles; fiscal policy; fiscal rules
    JEL: E62 H62
    Date: 2019–05
  5. By: Gil-Alana, Luis A.; Mudida, Robert; Yaya, OlaOluwa S; Osuolale, Kazeem; Ogbonna, Ephraim A
    Abstract: This paper examines the influence of US presidential terms on the stock market by focusing on the S&P500 index. Fractional integration techniques, which are more general than other standard methods, are used and the results obtained produce interesting findings. It was found that during the second presidential terms, stock markets are less efficient and present higher degrees of persistence in their volatilities. This is observed independently of the political affiliations of the president in power. The volatility, in general, reflects the spillover of economic excesses at the end of the first presidential term when seeking re-election into the second term in office. Expansionary monetary and fiscal policies at the end of the first term may create disequilibria in the economy which are amplified in the second term through a transmission mechanism resulting in contractionary interventionist policies in a situation where no incentive for re-election exists by the incumbent
    Keywords: emocratic party; Fractional integration; Republican party; Stocks; US Presidential terms
    JEL: C22 H54
    Date: 2019–03
  6. By: Nikolaj Harmon (University of Copenhagen); Raymond Fisman (Boston University); Emir Kamenica (University of Chicago)
    Abstract: We exploit seating rules in the European Parliament to identify peer effects in legislative voting. Sitting adjacently leads to a 7 percent reduction in the overall likelihood that two Members of the European Parliament (MEPs) from the same party differ in their vote, but peer effects are markedly stronger among women, among MEP pairs from the same country, and in close votes. Using variation in seating across the two venues of the Parliament (Brussels and Strasbourg), we also show that peer effects are persistent: MEPs who have sat together in the past are less likely to disagree even when they are not seated adjacently.
    Keywords: seating, influence, European Parliament
    JEL: D72 D73 F53 P16
    Date: 2018–08
  7. By: Hirata, Daisuke; Kamada, Yuichiro
    Abstract: We consider a two-candidate election model with campaign contributions. In the first stage of the game, each of two candidates chooses a policy position. In the second stage, each of n lobbyists chooses the amount of contribution to each candidate. The winning probability of each candidate depends on the total amount of contributions that she raised from the lobbyists. In any equilibrium of our model, only extreme lobbyists contribute at any subgame, and the policies converge on the unique equilibrium path. Our results suggest that extreme lobbyists and their contributions do not necessarily cause policies to diverge.
    Keywords: Interest groups, campaign contributions, Hotelling model
    JEL: C72 D72 D78
    Date: 2019–05

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