nep-pol New Economics Papers
on Positive Political Economics
Issue of 2019‒08‒12
eighteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Never Forget the First Time: The Persistent Effects of Corruption and the Rise of Populism in Italy By Arnstein Aassve; Gianmarco Daniele; Marco Le Moglie
  2. Electoral Democracy at Work By Philippe Askenazy; Thomas Breda
  3. Separation of Powers with Ideological Parties By Álvaro Forteza; Juan S. Pereyra
  4. Competitive Elections, Incumbency Advantage,and Accountability By Jan Klingelhöfer
  5. The Geography of Dictatorship and Support for Democracy By Maria Angelica Bautista; Felipe Gonzalez; Luis R. Martınez; Pablo Munoz; Mounu Prem
  6. Personal or partisan incumbency advantage? Evidence from an electoral reform in Italy By Marco Alberto De Benedetto
  7. Condorcet efficiency of general weighted scoring rules under IAC: indifference and abstention By Mostapha Diss; Eric Kamwa; Issofa Moyouwou; Hatem Smaoui
  8. Robust Information Aggregation Through Voting By Rune Midjord; Tomás Rodríguez Barraquer; Justin Mattias Valasek
  9. A supply-demand model of the size of public sector and Wagner's law By Fedotenkov, Igor; Idrisov, Georgy
  10. The method of Enestr\"om and Phragm\'en for parliamentary elections by means of approval voting By Rosa Camps; Xavier Mora; Laia Saumell
  11. How Polarized are Citizens? Measuring Ideology from the Ground-Up By Draca, Mirko; Schwarz, Carlo
  12. The Base of Party Political Support in Ireland: An Update By David (David Patrick) Madden
  13. Foreign direct investment & petty corruption in Sub-Saharan Africa: An empirical analysis at the local level By Donaubauer, Julian; Kannen, Peter; Steglich, Frauke
  14. Education, Political Discontent, and Emigration Intentions: Evidence from a Natural Experiment in Turkey By Z. Eylem Gevrek; Pinar Kunt; Heinrich Ursprung
  15. Sharing a government By Jaume Ventura
  16. On the political economy of state corporate tax reforms in the U.S. By Kakpo, Eliakim
  17. The impact women's leadership in local Governments: The case of Spain By Maria Teresa Balaguer-Coll; Mariya Ivanova-Toneva
  18. Are Politically Connected Firms More Likely to Export? By Yu Ri KIM; TODO Yasuyuki

  1. By: Arnstein Aassve; Gianmarco Daniele; Marco Le Moglie
    Abstract: The paper studies the long term impact of corruption on trust towards institutions. Previous studies have demonstrated that exposure to corruption may lower institutional trust in the short run. Whether those short term effects translate into a persistent effect is not known. We study the onset of a corruption shock that took place in Italy between 1992 and 1994. Using recent data from the Trustlab project, coordinated by the OECD, we find that young first time voters exposed to the corruption scandal still today, 25 years later, exert significantly lower institutional trust. A follow up survey reveals that their exposure to corruption also affected their current voting behavior and political preferences. In particular, those young first time voters exposed to the corruption were more likely to vote for populist parties at the 2018 national elections and to have less favourable attitudes towards immigrants and refugees.
    Keywords: Corruption, Institutional trust, Populism, First-time voter, Italy
    JEL: P16 D72 D73
    Date: 2018
  2. By: Philippe Askenazy (CMH - Centre Maurice Halbwachs - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique); Thomas Breda (PSE - Paris School of Economics, 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)
    Abstract: We evaluate the short- to medium-run effects on unionization and employers' and workers' trust in unions, of an important reform of French employment relations in 2008. This reform made the conditions for union recognition more liberal and democratic after 2008 in private firms with 11 employees or more. The law gave equal chances to all unions to be recognized for bargaining, putting an end to the quasi-monopoly given to five historical unions until then. The law also introduced votes and minimal electoral requirements to obtain union recognition. These new regulations only became fully effective at the first firms' work councils elections happening after January 1st, 2009. Those elections occur within each firm according to a pre-defined frequency - usually every four years -, so that election dates only depend on former election dates, and can be considered as quasi-random with respect to the application date of the new law, at least in firms that are old enough. The identification thus relies on a regression discontinuity design in which the running variable is the firms' work councils election date: we compare in early 2011 firms that had those elections just before or just after January 1st, 2009. We find that the democratic rules introduced in 2008 quickly improved employers' satisfaction and trust towards unions by around 45% of a standard deviation. Union coverage and membership at the establishment level also increased strongly due to the reform and work stoppages became more likely. Together, these results suggest that the introduction of electoral democracy in French firms managed to improve workers' participation in unions and their ability to voice concerns while also improving employers' opinions of unions.
    Keywords: Union Representativeness,Democracy,Unionization,Social Capital
    Date: 2019–07
  3. By: Álvaro Forteza (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Juan S. Pereyra (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: Separation of powers with checks and balances (SP) is usually regarded as a key institution complementing elections in the control of elected officials. However, some analysts and many politicians also warn that excessive checks on the executive in the presence of polarization may lead to political inaction. We present a political agency model with ideological parties where citizens and politicians care about rents (the valence issue) and policy (a positional issue). We show that SP unambiguously raises voters welfare in highly-polarized non-competitive political environments, because it strengthens both discipline and selection without causing political gridlock (voters can grant the executive the legislative majorities needed to enact reforms). SP also raises voters’ welfare if elections are very effective at disciplining first period incumbents. However, SP may reduce it if most rents go undetected and reformis not a first order issue.
    Keywords: Political agency, separation of powers, checks and balances
    JEL: D72 E69 P16
    Date: 2019–08
  4. By: Jan Klingelhöfer (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan)
    Abstract: I present a model of repeated electoral competition between two parties. Parts of the electorate vote retrospectively and consider the amount of rent-seeking by the incumbent party, while the prospective voters follow probabilistic party preferences when casting their votes. I show that it is possible to distinguish the effects of incumbency advantage and electoral punishment on the minimum level of rent-seeking that is consistent with equilibrium. As long as there is electoral punishment for excessive rent-seeking, a larger incumbency advantage increases accountability by decreasing the minimum amount of rent-seeking consistent with equilibrium. The reason is that the larger the incumbency advantage is, the more important is the result of the next election for all future election outcomes. Consequently, the incumbent party is willing to give up more rent-seeking opportunities to improve its electoral prospects.
    Keywords: Incumbency Advantage, Accountability, Competitive Elections, Probabilistic voting, Rent-seeking
    JEL: D72
    Date: 2019–07
  5. By: Maria Angelica Bautista (University of Chicago); Felipe Gonzalez (Pontificia Universidad Catolica de Chile); Luis R. Martınez (University of Chicago); Pablo Munoz (University of California - Berkeley); Mounu Prem (Universidad del Rosario)
    Abstract: We show that proximity to military bases during the Pinochet dictatorship in Chile (1973-1990) exposed civilians to more state repression and led to (i) stronger electoral opposition to Pinochet and (ii) a long-lasting strengthening of democratic values. Our empirical strategy exploits the location of military bases during the many decades of democratic rule before the military coup, which we show is unrelated to pre-coup electoral outcomes. We find that residents of counties housing these bases both registered and voted “No†to Pinochet’s continuation in power at higher rates in the crucial 1988 plebiscite that bolstered the democratic transition. These counties also experienced more civilian deaths and forced disappearances during the dictatorship, indicating that increased exposure to repression affected voters' behavior. After democratization, residents of these counties who were exposed to the military coup report greater support for democracy in surveys, but there are no persistent effects on electoral outcomes.
    Keywords: Chile,dictatorship, repression, democratization, human rights
    JEL: D72 N46
    Date: 2019–08
  6. By: Marco Alberto De Benedetto (University of Messina; Birkbeck, University of London)
    Abstract: We analyze the incumbency advantage using a large data set on Italian municipal elections held from 1993 to 2011. We first apply a non-parametric Sharp Regression Discontinuity Design comparing parties that barely win an election to those that barely lose, exploiting the fact that partisan incumbency status changes discontinuously at the threshold of margin of victory of zero. In order to disentangle the personal incumbency advantage from the partisan effect, we rely on a reform that introduced mayoral term limit, and exploit the exogenous change on the incumbency status of mayors keeping the partisan incumbency status constant. We find that the incumbency advantage is essentially driven by the personal effect. The results are robust to different specifications and estimation strategies with excellent balance in observable characteristics. Also, the effect of interest seems to be larger in magnitude for municipalities located in the South of Italy compared to northern municipalities.
    Keywords: Incumbency Status, Political Participation, Sharp RDD, Term Limit
    JEL: C7 D8 O3 K4
    Date: 2019–05
  7. By: Mostapha Diss (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Eric Kamwa (LC2S - Laboratoire caribéen de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UA - Université des Antilles); Issofa Moyouwou (MASS - Université de Yaoundé I [Yaoundé]); Hatem Smaoui (CEMOI - Centre d'Économie et de Management de l'Océan Indien - UR - Université de La Réunion)
    Abstract: In an election, individuals may sometimes abstain or report preferences that include ties among candidates. How abstention or ties within individual preferences impact the performances of voting rules is a natural question addressed in the literature. We reconsider this question with respect to one of the main characteristics of a voting rule: its Condorcet efficiency; that is the conditional probability that the rule selects a Condorcet winner assuming that one exists. We explore the impact of both ties and abstention on the Condorcet efficiency of the whole class of weighted scoring rules in three-candidate elections under the Impartial Anonymous Culture assumption. It appears in general that the possibility of indifference or abstention increases or decreases the Condorcet efficiency of weighted scoring rules depending of the rule in consideration or the probability distribution on the set of observable voting situations.
    Date: 2019–07–28
  8. By: Rune Midjord; Tomás Rodríguez Barraquer; Justin Mattias Valasek
    Abstract: Numerous theoretical studies have shown that information aggregation through voting is fragile. We consider a model of information aggregation with vote-contingent payoffs and generically characterize voting behavior in large committees. We use this characterization to identify the set of vote-contingent payoffs that lead to a unique outcome that robustly aggregates information. Generally, it is not sufficient to simply reward agents for matching their vote to the true state of the world. Instead, robust and unique information aggregation can be achieved with vote-contingent payoffs whose size varies depending on which option the committee chooses, and whether the committee decision is correct.
    Keywords: information aggregation, voting, vote-contingent payoffs
    JEL: D71 D72
    Date: 2019
  9. By: Fedotenkov, Igor; Idrisov, Georgy
    Abstract: In this paper, we develop a supply-demand model for the public sector, measured as governments' tax revenues divided by GDP. We use a political equilibrium with a rule of majority. The model takes into account inefficiencies caused by taxes and includes costs associated with public goods provision to consumers. We show that the size of the public sector depends on the median voter's income, size of population, costs associated with taxpaying, and quality of institutions, which reflect costs of public goods provision. The estimates for the OECD countries (2000-2017), using dynamic panel model techniques, are in line with the theoretical predictions; however, they do not confirm Wagner's law. Our estimates suggest that the size of the government sector grows as income increases, but at a slower rate. We show that the quality of institutions matters: a more effective government raises the share of public sector; better regulations, which permit and promote private sector development, reduce it.
    Keywords: Size of public sector; tax burden; median voter; Wagner's law; political equilibrium
    JEL: D60 D72 H30 H41 I38 P16 P43 P48
    Date: 2019–07–09
  10. By: Rosa Camps; Xavier Mora; Laia Saumell
    Abstract: We study a method for proportional representation that was proposed at the turn from the nineteenth to the twentieth century by Gustav Enestr\"om and Edvard Phragm\'en. Like Phragm\'en's better-known iterative minimax method, it is assumed that the voters express themselves by means of approval voting. In contrast to the iterative minimax method, however, here one starts by fixing a quota, i.e. the number of votes that give the right to a seat. As a matter of fact, the method of Enestr\"om and Phragm\'en can be seen as an extension of the method of largest remainders from closed lists to open lists, or also as an adaptation of the single transferable vote to approval rather than preferential voting. The properties of this method are studied and compared with those of other methods of the same kind.
    Date: 2019–07
  11. By: Draca, Mirko (University of Warwick and Centre for Economic Performance, LSE); Schwarz, Carlo (University of Warwick and Centre for Competitive Advantage in the Global Economy (CAGE))
    Abstract: Strong evidence has been emerging that major democracies have become more politically polarized, at least according to measures based on the ideological positions of political elites. We ask: have the general public (‘citizens’) followed the same pattern? Our approach is based on unsupervised machine learning models as applied to issueposition survey data. This approach firstly indicates that coherent, latent ideologies are strongly apparent in the data, with a number of major, stable types that we label as: Liberal Centrist, Conservative Centrist, Left Anarchist and Right Anarchist. Using this framework, and a resulting measure of ‘citizen slant’, we are then able to decompose the shift in ideological positions across the population over time. Specifically, we find evidence of a ‘disappearing center’ in a range of countries with citizens shifting away from centrist ideologies into anti-establishment ‘anarchist’ ideologies over time. This trend is especially pronounced for the US.
    Keywords: Polarization ; Ideology ; Unsupervised Learning
    JEL: D72 C81
    Date: 2019
  12. By: David (David Patrick) Madden
    Abstract: A recent paper by Madden used concentration indices to examine the bases of party support in Ireland in the 2011 election. This note updates this work to incorporate the 2016 election using the latest wave of ESS data. The results show that in terms of the bases of party supports many of the features of the “earthquake election” of 2011 remain, in particular the widely differing support bases for Fine Gael and Sinn Fein. Concentration indices with respect to income show little change from the 2011 election. However, there is some evidence that the support base for Fianna Fail in 2016 was older and less well-educated than in 2011, with the change in support base for Fine Gael over the same period a mirror image.
    Keywords: Party support; Social base; Concentration index
    Date: 2019–07
  13. By: Donaubauer, Julian; Kannen, Peter; Steglich, Frauke
    Abstract: Inspired by a recent and ongoing debate about whether foreign direct investment (FDI) represents a blessing for or an impediment to economic, social, and political development in FDI host countries this paper addresses two issues: Does the presence of foreign investors impact the occurrence of petty corruption? If so, what are the main underlying mechanisms? Geocoding an original firm-level dataset and combining it with georeferenced household survey data, this is a first attempt to analyze whether the presence of foreign investors is associated with changes in local corruption around foreign-owned production facilities in 19 Sub-Saharan African countries. Applying an estimation strategy that explores the spatial and temporal variation in the data, we find strong and consistent evidence that the presence of foreign firms increases bribery among people living nearby. When examining two potential channels, we find no support that FDI-induced economic activity leads to more corruption. In contrast, the results provide evidence that FDI affects corruption via norm transmission.
    Keywords: FDI,corruption,georeferenced data,Sub-Saharan Africa
    JEL: D1 F21 F23 O12
    Date: 2019
  14. By: Z. Eylem Gevrek; Pinar Kunt; Heinrich Ursprung
    Abstract: We exploit the 1997 school reform that increased compulsory schooling from 5 to 8 years to investigate the causal effect of education on emigration intentions. Our IV estimates indicate that an additional year of schooling increases the probability of reporting the intention to emigrate by 24 percentage points. Moreover, we provide evidence that the identified effect of education on emigration intentions does not operate through financial dissatisfaction but rather through displeasure at a bleak political environment that better educated people are more keenly aware of.
    Keywords: education, migration, political discontent
    JEL: I21 I25 I31
    Date: 2019
  15. By: Jaume Ventura
    Abstract: This paper develops a simple theoretical framework to study a set of regions, each with its own regional government, who share a union or central government. These governments must decide whether to implement or discard a large number of projects that produce local beneÖts for the region that implements them, and externalities for the rest of the regions. Conáict or disagreement arises since di§erent regions value projects di§erently. The classic assignment problem consists of deciding who decides these projects, either the union or the regional governments. It is well known that regional governments are insensitive to externalities. The key observation here is that the union government is insensitive to local benefits. Thus, each government maximizes only a piece of the value of projects, and disregards the other one. This observations leads to simple and clear rules for solving the assignment problem.
    Keywords: European integration, centralization and decentralization, public goods, externalities, fiscal federalism.
    JEL: D72 D79 F15 F55 H77
    Date: 2019–07
  16. By: Kakpo, Eliakim
    Abstract: This paper discusses the political economy of U.S. state corporate tax reforms. Using a unique dataset of state effective corporate tax rates over the period 1969-2015, I observe that business tax changes are associated with tax competition, swings in economic cycles, and left-right political ideology. In contrast, long-term debt and budgetary pressures do not correlate with state corporate tax policies. Moreover, I document a regional heterogeneity and notice a slowdown in state tax changes after the Federal Reform Act of 1986. These findings matter for the empirics of corporate tax incidence, which is increasingly concerned with the endogeneity between tax reforms and other economic developments.
    Keywords: Tax reform, Tax competition, Tax incidence, State public debt, State budget
    JEL: H71 H72 H73
    Date: 2018–08
  17. By: Maria Teresa Balaguer-Coll (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); Mariya Ivanova-Toneva (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain)
    Abstract: The main objective of this paper is to analyse whether the gender of the mayor and the municipal council members affects compliance with the principles of budgetary stability and financial sustainability contained in Organic Law 2/2012 on Budgetary Stability and Financial sustainability. We find that in Spanish local governments during the period 2013–2016, the leadership of women mayors contributes to improving the financial situation of the local government. In particular, the presence of women mayors governing with a high proportion of female councillors increases the probability of compliance with regulations on budgetary stability, financial sustainability and the legal debt limit. Thus, the Law for Effective Equality of Women and Men favours compliance with the Law on Budgetary Stability and Financial Sustainability. In addition, the results show that in pre electoral periods, women mayors are less likely to employ strategies designed to enhance their re election chances.
    Keywords: women mayors, gender quotas, budgetary stability, financial sustainability, law, municipalities
    JEL: H70 H74 J16
    Date: 2019
  18. By: Yu Ri KIM; TODO Yasuyuki
    Abstract: Political connection may facilitate firms' exporting activities particularly in developing countries, because politically connected firms may be more likely to receive informational and financial support, allowing them to overcome barriers to export. We test this hypothesis using a unique, firm-level dataset from traditional apparel and textile clusters in the Red River Delta Region in Northern Vietnam. We find that political connection of certain types increases the chance of receiving valuable information or financial support from the government. Moreover, those firms which have access to information from the government have higher chances of being direct exporters. However, firms which receive financial support from the government are not necessarily engaged in exporting activities. Although politically connected firms are more willing to export, they do not necessarily engage in more exporting activities than firms without such connections. These results suggest that the misallocation of information and financial resources to politically connected but insufficiently productive firms leads to a failure in the promotion of exporting activities. In contrast, political connection increases the chance of importing materials and parts, possibly because high productivity is necessary for exporting, but not importing.
    Date: 2019–07

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