nep-pol New Economics Papers
on Positive Political Economics
Issue of 2019‒06‒24
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. The impact of pre-electoral coalitions on mayoral election outcomes in Indonesia By Blane D. Lewis
  2. Introduction to Voting and the Blockchain: some open questions for economists By Dhillon, Amrita; Kotsialou, Grammateia; McBurney, Peter; Riley, Luke
  3. Voting Power and Survival: The Case of a Ruling Party By Jelnov, Artyom; Jelnov, Pavel
  4. The impact of mayor-council coalitions on local government spending, service delivery, and corruption in Indonesia By Blane D. Lewis; Adrianus Hendrawan
  5. Electoral Competition and Corruption: Theory and Evidence from India By Afridi, Farzana; Dhillon, Amrita; Solan, Eilon
  6. Hearing the Voice of the Future: Trump vs Clinton By NARITA Yusuke
  7. Coming Out in America: AIDS, Politics, and Cultural Change By Fernández, Raquel; Parsa, Sahar; Viarengo, Martina
  8. The Real Estate Transfer Tax and Government Ideology: Evidence from the German States By Manuela Krause; Niklas Potrafke
  9. Coups, Regime Transitions, and Institutional Change By Bennett, Daniel L.; Bjørnskov, Christian; Gohmann, Stephan F.
  10. Did sanctions help Putin? By Peeva, Aleksandra
  11. Sovereign debt: election concerns and the democratic disadvantage By Dhillon, Amrita; Pickering, Andrew; Sjöström, Tomas
  12. Factions, Local Accountability, and Long-Term Development: Theory and Evidence By Hanming Fang; Linke Hou; Mingxing Liu; Lixin Colin Xu; Pengfei Zhang
  13. The Urban-Rural Gap in Health Care Infrastructure – Does Government Ideology Matter? By Niklas Potrafke; Felix Rösel
  14. Does Social Media Promote Democracy? Some Empirical Evidence By Chandan K. Jha; Oasis Kodila-Tedika
  15. Political economy of redistribution between traditional and modern families By Matthew D. Rablen; Volker Meier
  16. Generational War on Inflation: Optimal Inflation Rates for the Young and the Old By FUJIWARA Ippei; HORI Shunsuke; WAKI Yuichiro

  1. By: Blane D. Lewis
    Abstract: The extent to which pre-electoral coalitions (PECs) influence executive elections in presidential systems has not been subject to rigorous empirical study. This paper uses regression discontinuity methods to identify the causal effect of PEC size on mayoral election outcomes in Indonesia. The study finds that mayoral candidates backed by PECs comprising political parties that control council seat shares exceeding first-round electoral vote thresholds are around 18-24 percentage points more likely to win those elections than their counterparts supported by smaller-sized PECs.
    Keywords: Pre-election coalitions, presidential systems, subnational elections
    JEL: C21 C31 D72
    Date: 2018
  2. By: Dhillon, Amrita (King’s College London); Kotsialou, Grammateia (King’s College London); McBurney, Peter (King’s College London); Riley, Luke (King’s College London)
    Abstract: This work discusses the potential of a blockchain based infrastructure for a decentralised online voting platform. When compared to paper based voting, online voting can vastly increase the speed that votes can be counted, expand the overall accessibility of the election system and decrease the cost of turnout. Yet despite these advantages, online voting for political office is subject to fraud at various levels due to its centralised nature. In this paper, we describe a general architecture of a centralised online voting system and detail which areas of such a system are vulnerable to electoral fraud. We then proceed to introduce the key ideas underlying blockchain technology as a decentralised mechanism that can address these problems. We discuss the advantages and weaknesses of the blockchain technology, the protocols the technology uses and what criteria a good blockchain protocol should satisfy (depending on the voting application). We argue that the decentralisation inherent in the blockchain technology could increase the public’s trust in national elections, as well as eliminate voter impersonation and double voting. We conclude with a discussion regarding how economists and social scientists can collaborate with the blockchain community in a research agenda on the design of efficient blockchain protocols and new voting systems such as liquid democracy.
    Keywords: JEL Classification:
    Date: 2019
  3. By: Jelnov, Artyom (Ariel University); Jelnov, Pavel (Leibniz University of Hannover)
    Abstract: In this article, we empirically study the survival of the ruling party in parliamentary democracies using a hazard rate model. We define survival of a crisis as being successful in a critical vote in the parliament. We develop a general probabilistic model of political crises and test it empirically. We find that during crises, parties in the parliament are likely to vote independently of each other. Thus, we receive as an empirical result what the previous voting power literature assumed.
    Keywords: voting power, coalitions, cabinet duration, Shapley-Shubik index, Rae index
    JEL: D72
    Date: 2019–05
  4. By: Blane D. Lewis; Adrianus Hendrawan
    Abstract: This study examines the impact of majority coalitions on local government spending, service delivery, and corruption in Indonesia. The investigation finds that majority coalitions, i.e. those coalitions for which participating political parties control greater than half of council seats, cause a shift in local government spending towards health sector activities and induce improvements in citizen health service access—but only for a year or two, after which the positive effects disappear. The study shows that budget fraud starts to become problematic in the last two years of the coalition’s life. Majority coalition support for the local health spending and service agenda dissipates quickly as attention turns to corrupting the budget, via increased infrastructure outlays and associated rent-seeking. We hypothesize that budget fraud serves, in part, to finance subsequent rounds of local parliamentary and executive elections.
    Keywords: majority coalitions, local government spending and service delivery, corruption, regression discontinuity, Indonesia
    JEL: H72 H75 H76
    Date: 2018
  5. By: Afridi, Farzana (Indian Statistical Institute, Delhi and IZA, Bonn); Dhillon, Amrita (Kings College London); Solan, Eilon (Tel Aviv University)
    Abstract: In developing countries with weak enforcement, there is implicitly a large reliance on re-election incentives to reduce corruption. In this paper we extend existing models of post-election accountability with pure moral hazard to incorporate heterogeneous voters. In contrast to this existing literature, we show that electoral discipline is a weak instrument for improving accountability in a majoritarian voting system. More specifically, our model predicts that not only does corruption increase with competition under some conditions, but that the only type of corruption that is responsive to electoral competition is one where voters lose private benefits from the corruption, while corruption in public goods is not responsive. Consistent with these hypotheses, novel panel data on village level audits of one of India’s largest rural public works program suggest a U-shaped relationship between electoral competition and corruption, and responsiveness of corruption only in the private benefits of the program to competition. Our findings highlight the importance of credible penalties and the need for policy interventions that reduce pilferage in the public component of welfare programs, which entail larger welfare losses to citizens.
    Keywords: Corruption, Electoral Competition, Audit, Accountability, Moral Hazard. JEL Classification: D72, D82, H75, O43, C72.
    Date: 2019
  6. By: NARITA Yusuke
    Abstract: Many countries face growing concerns that population aging may make voting and policy-making myopic. This concern begs for electoral reform to better reflect voices of the youth, such as weighting votes by voters' life expectancy. This paper predicts the effect of the counterfactual electoral reform on the 2016 U.S. presidential election. Using the American National Election Studies (ANES) data, I find that Hillary Clinton would have won the election if votes were weighted by life expectancy. I also discuss limitations due to data issues.
    Date: 2019–03
  7. By: Fernández, Raquel (New York University); Parsa, Sahar (Tufts University); Viarengo, Martina (Graduate Institute of International and Development Studies, Geneva)
    Abstract: The last few decades witnessed a dramatic change in public opinion towards gay people. This paper studies the hypothesis that the AIDS epidemic was a shock that changed the incentive to "come out" and that the ensuing process of mobilization and endogenous political process led to cultural transformation. We show that the process of change was discontinuous over time and present suggestive evidence that the 1992 presidential election followed by the "don't ask, don't tell" debate led to a change in attitudes. Using a difference-in-difference empirical strategy, we find that, in accordance with our hypothesis, the change in opinion was greater in states with higher AIDS rates. Our analysis suggests that if individuals in low-AIDS states had experienced the same average AIDS rate as a high-AIDS state, the change in their approval rate from the '70s to the '90s would have been 50 percent greater.
    Keywords: presidential elections, party politics, public opinion, LGBT attitudes, AIDS epidemic, cultural change
    JEL: J15 P16 Z13
    Date: 2019–05
  8. By: Manuela Krause; Niklas Potrafke
    Abstract: Since 2007 the German state governments have been allowed by a constitutional reform to set real estate transfer tax rates. We exploit this reform and investigate whether government ideology predicts the levels and increases in the real estate transfer tax rates. The results show that leftwing and center governments were more active in increasing the real estate transfer tax rates than rightwing governments. Many voters were disenchanted with the policies and platforms of the established German parties. Disenchantment notwithstanding, real estate transfer tax policies show that the established political parties are still prepared to offer polarized policies.
    Keywords: Real estate transfer tax, partisan politics, reform, government ideology, fiscal federalism
    JEL: D72 H20 H71 P16 R38
    Date: 2019
  9. By: Bennett, Daniel L. (Baugh Center for Entrepreneurship & Free Enterprise); Bjørnskov, Christian (Department of Economics); Gohmann, Stephan F. (Center for Free Enterprise)
    Abstract: Coups and regime transitions are events that typically are intended to change the basic institutional framework of a country. Which specific policies change and the consequences of these changes nevertheless remains largely unknown. Change after a coup or transition implies that some form of political or judiciary barrier has been erected or removed. We therefore focus on what happens to the quality of judicial institutions and political corruption around coup attempts and other types of regime transitions. We hypothesize that when coups are conducted by members of the incumbent political elite, they are likely to remove barriers to change while coup makers outside of the ruling elite are more likely to do the opposite and thus protect themselves from what remains of the elite in the political system. Using the Bjørnskov-Rode coup data, our results suggest that successful coups are associated with degradation of institutions, with successful military coups in particular having a significant negative effect. Results are more varied for civilian coups where we find indications of differences depending on whether the coup makers are part of a political elite or not.
    Keywords: Coups; Institutional Quality; Autocracy; Corruption; Judicial Constraints; Regime Transition
    JEL: O43 P16 P26
    Date: 2019–05–27
  10. By: Peeva, Aleksandra
    Abstract: Do sanctions strengthen the targeted regime? I analyze the 2014 imposition of Western sanctions on Russia and its impact on voting. The US and the EU introduced targeted measures against Russian entities and individuals related to Putin's regime. Using polling station-level data I investigate whether Putin gained relatively more support among those local constituencies which were geographically close to a sanctioned firm. I find a significant effect of targeted sanction imposition on the vote share in presidential elections between 2012 and 2018. Putin gained 1.54 percentage points at those polling stations that had a sanctioned firm in immediate vicinity. Targeted sanctions imposition also affected voter turnout. The effect on voting can be explained as rally-around-the-flag in the face of sanctions, as long as voters did not endure economic losses through a decline in some sanctioned firms' economic performance.
    Keywords: sanctions,rally-around-the-flag,voting,Russia
    JEL: D72 P26
    Date: 2019
  11. By: Dhillon, Amrita (King’s College, London); Pickering, Andrew (University of York); Sjöström, Tomas (Rutgers University)
    Abstract: We re-examine the concept of ‘democratic advantage’ in sovereign debt ratings when optimal repayment policies are time-inconsistent. If democratically elected politicians are unable to make credible commitments then default rates are inefficiently high, so democracy potentially confers a credit market disadvantage. Institutions that are shielded from political pressure may ameliorate the disadvantage by adopting a more farsighted perspective. Using a numerical measure of institutional farsightedness obtained from the Global Insight Business Risk and Conditions database, we find that the observed relationship between credit-ratings and democratic status is strongly conditional on farsightedness. With myopic institutions, democracy is associated with worsened credit ratings on average by about 3 investmentgrades. With farsighted institutions there is, if anything, a democratic advantage.
    Keywords: Sovereign debt, Default, Risk premia, Autocracy, Democracy, Institutions JEL Classification: H63, F55, D72, D82, H75, O43, C72.
    Date: 2019
  12. By: Hanming Fang; Linke Hou; Mingxing Liu; Lixin Colin Xu; Pengfei Zhang
    Abstract: We develop a theoretical model of how factional affiliation and local accountability can shape the policy choices of local officials who are concerned about political survivals, and subsequently affect the long-term local development. We provide empirical evidence in support of the theoretical predictions using county-level variations in development performance in Fujian Province in China. When the Communist armies took over Fujian Province from the Nationalist control circa 1949, communist cadres from two different army factions were assigned as county leaders. For decades the Fujian Provincial Standing Committee of the Communist Party was dominated by members from one particular faction, which we refer to as the strong faction. Counties also differed in terms of whether a local guerrilla presence had existed prior to the Communist takeover. We argue that county leaders from the strong faction were less likely to pursue policies friendly to local development because their political survival more heavily relied on their loyalty to the provincial leader than on the grassroots support from local residents. By contrast, the political survival of county leaders from the weak faction largely depended on local grassroots support, which they could best secure if they focused on local development. In addition, a guerrilla presence in a county further improved development performance either by intensifying the local accountability of the county leader, or by better facilitating the provision of local public goods beneficial to development. We find consistent and robust evidence supporting these assumptions. Being affiliated with weak factions and having local accountability are both associated with sizable long-term benefits that are evident in terms of a county’s growth and level of private-sector development, its citizens’ education levels, and their survival rates during the Great Chinese Famine. We also find that being affiliated with the strong faction and adopting pro-local policies are associated with higher likelihood of a local leader’s political survival.
    JEL: D72 H70 O1 O43
    Date: 2019–05
  13. By: Niklas Potrafke; Felix Rösel
    Abstract: Spatial inequalities in publicly provided goods such as health care facilities have substantial socioeconomic effects. Little is known, however, as to why publicly provided goods diverge among urban and rural regions. We exploit narrow parliamentary majorities in German states between 1950 and 2014 in an RD framework to show that government ideology influences the urban-rural gap in public infrastructure. Leftwing governments relocate hospital beds from rural regions. We propose that leftwing governments do so to gratify their more urban constituencies. In turn, spatial inequalities in hospital infrastructure increase, which seems to influence general and infant mortality.
    Keywords: Publicly provided goods, spatial inequalities, political business cycles, partisan politics, government ideology, health care, hospitals
    JEL: D72 H42 I18
    Date: 2019
  14. By: Chandan K. Jha (Madden School of Business, New York, USA); Oasis Kodila-Tedika (University of Kinshasa, The DRC)
    Abstract: This study explores the relationship between social media and democracy in a cross- section of over 125 countries around the world. We find the evidence of a strong, positive correlation between Facebook penetration (a proxy for social media) and democracy. We further show that the correlation between social media and democracy is stronger for low-income countries than high-income countries. Our lowest point estimates indicate that a one-standard deviation (about 18 percentage point) increase in Facebook penetration is associated with about 8-point (on a scale of 0–100) increase for the world sample and over 11 points improvement for low-income countries.
    Keywords: Democracy; Information; Facebook; Internet; Social Media
    JEL: D72 D83 O1
    Date: 2019–01
  15. By: Matthew D. Rablen; Volker Meier
    Abstract: We analyse a model in which families may either be “traditional” single-earner with caring for the child at home or “modern” double-earner households using market child care. Family policies may favour either the one or the other group, like market care subsidies vs. cash for care. Policies are determined by probabilistic voting, where allocative and distributional impacts matter, both within and across groups. Due to its impact on intragroup distribution, both types of households are likely to receive subsidies. In early stages of development where most households are traditional, implemented policies favour them, though to a small extent. Net subsidies to traditional households are highest in some intermediate stage, which may explain the implementation of cash for care policies. Such policies will be tightened again in late stages of development, where the vast majority of voters come from modern households. Finally, in an environment in which many traditional households are not entitled to vote (immigrants who have not yet obtained citizenship), redistribution toward them may be abolished and in extreme cases even replaced by net transfers to modern households.
    Keywords: redistribution, child care, subsidies, family policy, labour supply
    JEL: D13 H21 J13 J18 J22
    Date: 2019
  16. By: FUJIWARA Ippei; HORI Shunsuke; WAKI Yuichiro
    Abstract: How does a grayer society affect the political decision making regarding inflation rates? Is deflation preferred as society ages? In order to answer these questions, we compute the optimal inflation rates for the young and the old respectively and explore how they change with demographic factors, by using a New Keynesian model with overlapping generations. According to our simulation results, there indeed exists a tension between the young and the old on the optimal inflation rates. The optimal inflation rates are different between the young and the old. Also, they can be significantly different from zero, in particular, when heterogeneous impacts from inflation via nominal asset holdings are considered. The optimal inflation rates for the old can be largely negative, reflecting their positive nominal asset holdings as well as lower effective discount factor. Societal aging may exert downward pressure on inflation rates through a politico-economic mechanism.
    Date: 2019–03

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