nep-pol New Economics Papers
on Positive Political Economics
Issue of 2019‒09‒02
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. An Experiment in Candidate Selection By Katherine Casey; Abou Bakarr Kamara; Niccoló Meriggi
  2. Intertemporal Evidence on the Strategy of Populism By Gennaro, Gloria; Lecce, Giampaolo; Morelli, Massimo
  3. The Political Economy of the Prussian Three-class Franchise By Becker, Sascha O.; Hornung, Erik
  4. Runoff Elections in the Laboratory By Bouton, Laurent; Gallego, Jorge; Llorente-Saguer, Aniol; Morton, Rebecca
  5. The role of political instability and corruption on foreign direct investment in the MENA region By Aloui, Zouhaier
  6. The Effect of Handicaps on Turnout for Large Electorates: An Application to Assessment Voting By Gersbach, Hans; Mamageishvili, Akaki; Tejada, Oriol
  7. The Three Meaningful Votes: Voting on Brexit in the British House of Commons By Aidt, T.; Grey, F.; Savu, A.
  8. The Rise of the “No Party” in England By Aidt, T.; Rauh, C.
  9. Political settlement and the politics of legitimation in countries undergoing democratisation: Insights from Tanzania By Rasmus Hundsbaek Pedersen; Thabit Jacob
  10. Gender Differences in Giving and the Anticipation-about-giving in Dictator Games By Subhasish M. Chowdhury; Philip J. Grossman; Joo Young Jeon
  11. Pockets of effectiveness: The contributions of critical political economy and state theory By Giles Mohan
  12. Do Local Governments Represent Voter Preferences? Evidence from Hospital Financing under the Affordable Care Act By Victoria Perez; Justin M. Ross; Kosali I. Simon
  13. Corruption and Economic Growth: New Empirical Evidence By Klaus Gründler; Niklas Potrafke
  14. Stress-Testing the Runoff Rule in the Laboratory By Nikolas Tsakas; Dimitrios Xefteris
  15. Measuring the Rise of Economic Nationalism By Monica de Bolle; Jeromin Zettelmeyer
  16. Winning Coalitions in Plurality Voting Democracies By Rene van den Brink; Dinko Dimitrov; Agnieszka Rusinowska

  1. By: Katherine Casey; Abou Bakarr Kamara; Niccoló Meriggi
    Abstract: Are ordinary citizens or political party leaders better positioned to select candidates? While the direct vote primary system in the United States lets citizens choose, it is exceptional, as the vast majority of democracies rely instead on party officials to appoint or nominate candidates. Theoretically, the consequences of these distinct design choices on the selectivity of the overall electoral system are unclear: while party leaders may be better informed about candidate qualifications, they may value traits—like party loyalty or willingness to pay for the nomination—at odds with identifying the best performer. To make progress on this question, we partnered with both major political parties in Sierra Leone to experimentally vary how much say ordinary voters, as opposed to party officials, have in selecting Parliamentary candidates. We find evidence that more democratic selection procedures increase the likelihood that parties select the candidate most preferred by voters, favor candidates with stronger records of local public goods provision, and alter the allocation of payments from potential candidates to party officials.
    JEL: D72 H1 P16
    Date: 2019–08
  2. By: Gennaro, Gloria; Lecce, Giampaolo; Morelli, Massimo
    Abstract: Do candidates use populism to maximize the impact of political campaigns? Is the supply of populism strategic? We apply automated text analysis to all available 2016 US Presidential campaign speeches and 2018 midterm campaign programs using a continuous index of populism. This novel dataset shows that the use of populist rhetoric is responsive to the level of expected demand for populism in the local audience. In particular, we provide evidence that current U.S. President Donald Trump uses more populist rhetoric in swing states and in locations where economic insecurity is prevalent. These findings were confirmed when the analysis was extended to recent legislative campaigns wherein candidates tended towards populism when campaigning in stiffly competitive districts where constituents are experiencing high levels of economic insecurity. We also show that pandering is more common for candidates who can credibly sustain anti-elite positions, such as those with shorter political careers. Finally, our results suggest that a populist strategy is rewarded by voters since higher levels of populism are associated with higher shares of the vote, precisely in competitive districts where voters are experiencing economic insecurity.
    Keywords: American Politics; Electoral Campaign; populism; Text Analysis
    JEL: D7
    Date: 2019–06
  3. By: Becker, Sascha O.; Hornung, Erik
    Abstract: Did the Prussian three-class franchise, which politically over-represented the economic elite, affect policy-making? Combining MP-level political orientation, derived from all roll call votes in the Prussian parliament (1867â??1903), with constituency characteristics, we analyze how local vote inequality, determined by tax payments, affected policy-making during Prussia's period of rapid industrialization. Contrary to the predominant view that the franchise system produced a conservative parliament, higher vote inequality is associated with more liberal voting, especially in regions with large-scale industry. We argue that industrialists preferred self-serving liberal policies and were able to coordinate on suitable MPs when vote inequality was high.
    Keywords: Elites; inequality; political economy; Prussia; Three-class Franchise
    JEL: D72 N43 N93 P26
    Date: 2019–08
  4. By: Bouton, Laurent; Gallego, Jorge; Llorente-Saguer, Aniol; Morton, Rebecca
    Abstract: We study experimentally the properties of the majority runoff system and compare them to the ones of plurality rule, in the setup of a divided majority. Our focus is on Duverger's famous predictions that the plurality rule leads to a higher coordination of votes on a limited number of candidates than the majority runoff rule. Our experiments show that, in contradiction with Duverger's predictions, coordination forces are strong in majority runoff elections. We indeed observe similar levels of coordination under both rules, even when sincere voting is an equilibrium only under majority runoff. Our results suggest that the apparent desire to coordinate, and not vote sincerely, under the majority runoff rule is to some extent not rational. Finally, we find insignificant differences between runoff and plurality systems in terms of both electoral outcomes and welfare. This is so exactly because coordination forces are strong under both rules. But, this does not mean that the two rules are equally socially desirable. Majority runoff rule entails an additional cost: second rounds that take place frequently.
    Keywords: Laboratory experiments; Majority Runoff; Multicandidate Elections; Plurality
    JEL: C92 D70
    Date: 2019–06
  5. By: Aloui, Zouhaier
    Abstract: The interest of this paper is to show the influence of political instability and corruption on foreign direct investment and its different effects among MENA countries. Political instability and corruption are highlighted as a risk factor for the foreign investor who generates several costs for economic activity and remains a major determinant of FDI. The combination of political instability and corruption contributes to the revolution in these countries such as Tunisia, Egypt, Libya and weak economic integrations in general explain the low attractiveness of MENA countries for foreign investors. It is widely argued that good governance is an important factor of FDI. With the exception of studies of corruption, however, empirical research on the link between governance and FDI is limited, particularly in the context of MENA countries. Corruption and political instability are the governance indicators that seem to have the greatest impact on foreign direct investment (FDI). An increase in FDI has the greatest effect on development in politically stable regimes. Studies of corruption and its relation to foreign direct investment (FDI) have yielded mixed results; some have found that corruption discourages FDI, but others have found the opposite. The study covers the MENA region for the period 1996-2016. Using the panel data technique and the results obtained indicate a negative relationship between political instability and foreign direct investment and between corruption and FDI.
    Keywords: political instability, corruption, foreign direct investment, MENA countries.
    JEL: F21 K23 K42
    Date: 2019–08–26
  6. By: Gersbach, Hans; Mamageishvili, Akaki; Tejada, Oriol
    Abstract: We analyze the effect of handicaps on turnout. A handicap is a difference in the vote tally between alternatives that strategic voters take as predetermined when they decide whether to turn out for voting. Handicaps are implicit in many existing democratic procedures. Within a costly voting framework with private values, we show that turnout incentives diminish considerably across the board if handicaps are large, while low handicaps yield more mixed predictions. The results extend beyond the baseline model - e.g. by including uncertainty and behavioral motivations - and can be applied to the optimal design of Assessment Voting. This is a new voting procedure where (i) some randomly-selected citizens vote for one of two alternatives, and the results are published; (ii) the remaining citizens vote or abstain, and (iii) the final outcome is obtained by applying the majority rule to all votes combined. If the size of the first voting group is appropriate, large electorates will choose the majority's preferred alternative with high probability and average participation costs will be moderate or low.
    Keywords: Turnout - Referenda - Elections - Pivotal voting - Private value
    JEL: C72 D70 D72
    Date: 2019–08
  7. By: Aidt, T.; Grey, F.; Savu, A.
    Abstract: Why do politicians rebel and vote against the party line when high stakes bills come to the floor of the legislature? We leverage the three so-called Meaningful Votes that took place in the British House of Commons between January and March 2019 on the Withdrawal Agreement that the Conservative government had reached with the European Union to address this question. The Withdrawal Agreement was decisively defeated three times and a major revolt amongst Conservative backbench Members of Parliament (MPs) was instrumental in this. We find that three factors influenced their rebellion calculus: the MP’s own preference, constituency preferences and career concerns. Somewhat paradoxically, the rebellion within the Conservative Party came from MPs who had supported Leave in the 2016 Brexit referendum and from MPs elected in Leave leaning constituencies.
    Keywords: BREXIT, roll call votes, rebellions, party discipline, party coherence, House of Commons
    JEL: D72
    Date: 2019–08–19
  8. By: Aidt, T.; Rauh, C.
    Abstract: We document a remarkable increase over the past two and a half decades in the fraction of people in England feeling close to no party – the rise of the “no party” – which, today, is close to constituting an absolute majority. We develop a new method to distinguish between age, period, and cohort effects based on individual longitudinal survey data and we show that the rise of the “no party” is driven much more by a secular trend (period effects) than by generation replacement (cohort effects). We show that the increase in “no party” supporters and in their turnout behavior can explain 80% of the observed decline in election turnout in England over the period. A detailed investigation of the dynamics of party identification shows that party political disengagement has become more persistent over time.
    Keywords: Age-Period-Cohort Effects, Party Identification, Democracy, England, Secular Disengagement Hypothesis
    JEL: D72
    Date: 2019–08–16
  9. By: Rasmus Hundsbaek Pedersen; Thabit Jacob
    Abstract: In recent decades, reforms have been introduced in developing countries to promote economic transformation, democracy and the rule of law, but their implementation has often been undermined by structural factors. This is a key insight of the political settlement analysis which has unpacked the sorts of intra-elite relations instrumental in choosing policies and their modes of implementation. However, this analysis is less clear regarding the role of elections and popular legitimacy. This paper aims to explain contemporary forms of power and legitimacy in greater detail. Using Tanzania as a critical case study, we demonstrate that, in the context of democratisation, the country’s political elites are increasingly attempting to earn popular legitimacy. Earlier attempts to earn popular legitimacy through the expansion of social services to the rural majority were radicalised when a new president came to power in 2015. He campaigned on a platform of reversing years of domination by business and political elites. He later crafted a series of nationalist narratives and attacks on private investors to bolster his legitimacy in the eyes of the wider population. This implies a more prominent role for populations in developing countries than is often acknowledged. We also suggest that, in the context of democratisation, analyses of legitimacy should include two more dimensions: first, a political elite’s relationship with its political opponents; and, secondly, international recognition. We therefore argue that legitimacy should be analysed as a source of power in its own right, in line with force and rents.
    Date: 2019
  10. By: Subhasish M. Chowdhury (Department of Economics, University of Bath); Philip J. Grossman (Department of Economics, Monash University); Joo Young Jeon (Department of Economics, University of Reading)
    Abstract: Research on altruistic payoffs and the related payoff anticipation and related gender differences is limited. Using data from Chowdhury & Jeon (2014) who vary a common show-up fee and incentivize recipients to anticipate the amount given in a dictator game, we find that the show-up fee has a positive effect on dictator giving for both genders. While female dictators are more generous than males, male recipients anticipate higher amounts than the amount male dictators give. The show-up fee affects the social-type of female dictators, and the anticipation about dictator social-type by the male recipients.
    Keywords: dictator-game; altruism; anticipatory-belief; gender
    JEL: C91 D64 D84 J16
    Date: 2019–08–26
  11. By: Giles Mohan
    Abstract: The pockets of effectiveness (PoEs) debates and political settlements literature are rooted in particular forms of political economy analysis. At one level, this is a positive contribution to the mainstream development policy literature, and allows us to characterise political systems and their power relations, as well as forcing us to pay close attention to the dynamics of state institutions. Yet, these literatures are disconnected from a tradition of more critical political economy analysis and state theory. This brief review is a first attempt to connect these bodies of theory, largely in an African context. We find some promising new (and old) avenues of inquiry to connect critical political economy to PoE work, largely in terms of various meso-level theories of how states function, which move us away from all-encompassing metatheories of the state. Such meso-level theories enable us to theorise the more fine-grained and developmentally positive institutions that constitute PoEs, since much of the meta-theory tends to be both broad brush as well as causally pessimistic, insofar as African states are rarely seen to engender positive developmental outcomes. These meso-level theories can also be more easily elaborated methodologically, which is vital, since most of the claims about state capacity and function require contextual empirical analysis.
    Date: 2019
  12. By: Victoria Perez; Justin M. Ross; Kosali I. Simon
    Abstract: A mainstream motivation for decentralized government is to enable public service investments to better align with political preferences that may differ by geographical region. This paper examines how political preferences determine local government provision of hospital services. We find that local governments in areas more supportive of public insurance expansion responded to such state action by increasing expenditures on hospitals, whereas those in areas that voted against such expansions used the savings to reduce property taxes. This finding suggests that local government financial responses indeed align with political preferences.
    JEL: H71 H72 I1 I11
    Date: 2019–07
  13. By: Klaus Gründler; Niklas Potrafke
    Abstract: The nexus between corruption and economic growth has been examined for a long time. Many empirical studies measured corruption by the reversed Transparency International’s Perception of Corruption Index (CPI) and ignored that the CPI was not comparable over time. The CPI is comparable over time since the year 2012. We employ new data for 175 countries over the period 2012-2018 and re-examine the nexus between corruption and economic growth. The cumulative long-run effect of corruption on growth is that real per capita GDP decreased by around 17% when the reversed CPI increased by one standard deviation. The effect of corruption on economic growth is especially pronounced in autocracies and transmits to growth by decreasing FDI and increasing inflation.
    Keywords: Perceived corruption, economic growth, panel data
    JEL: C23 H11 K40 O11
    Date: 2019
  14. By: Nikolas Tsakas; Dimitrios Xefteris
    Abstract: When a majority of voters has common values, but private information, then the runoff rule always admits an equilibrium that aggregates information strictly better than the best equilibrium of the plurality rule. But there are cases in which the plurality rule supports equilibria that are strictly better compared to certain undominated equilibria of the runoff rule. Is there any risk with applying the runoff rule in these situations? We conduct a laboratory experiment and we show that the runoff rule consistently delivers better outcomes than the plurality rule even in such unfavorable scenarios. This establishes that the superiority of the runoff rule over the plurality rule in empirical settings outperforms its theoretical advantages.
    Keywords: runoff voting; plurality rule; information aggregation; Condorcet jury theorem; experiment
    JEL: D72
    Date: 2019–08
  15. By: Monica de Bolle (Peterson Institute for International Economics); Jeromin Zettelmeyer (Peterson Institute for International Economics)
    Abstract: Since the mid-2000s, the platforms of major political parties in both advanced and emerging-market economies have increasingly emphasized policies that stress national sovereignty, reject multilateralism, and seek to advance national interests through measures that come at the expense of foreign interests. This paper documents this shift by evaluating the policy platforms of the largest political parties (about 55 in total) in the Group of Twenty (G-20) countries with regard to trade policy, foreign direct investment (FDI), immigration, and multilateral organizations. Preference shifts with respect to industrial policy, competition policy, and macroeconomic populism are also examined. In advanced economies, the biggest shifts were toward restrictions on immigration and trade and toward macroeconomic populism. In emerging-market economies, the largest preference shifts were toward industrial policies favoring specific sectors, macroeconomic populism, and industrial concentration. Trade protectionism and skepticism toward multilateral organizations and agreements have increased in both advanced and emerging-market economies. As of 2018, economic policy preferences in emerging-market economies were more nationalist and less liberal than in advanced countries, but the gap has narrowed. Right-wing parties tend to be more nationalist than left-wing parties in the areas of immigration restrictions, FDI restrictions, and antimultilateralism, but there is no significant difference with respect to trade protectionism.
    Keywords: nationalism, populism, capitalism, trade policy, industrial policy, protectionism
    JEL: F5 F1 F2
    Date: 2019–08
  16. By: Rene van den Brink (Vrije Universiteit Amsterdam); Dinko Dimitrov (Saarland University); Agnieszka Rusinowska (Paris School of Economics)
    Abstract: We study the issue of assigning weights to players that identify winning coalitions in plurality voting democracies. For this, we consider plurality games which are simple games in partition function form such that in every partition there is at least one winning coalition. Such a game is said to be precisely supportive if it is possible to assign weights to players in such a way that a coalition being winning in a partition implies that the combined weight of its members is maximal over all coalitions in the partition. A plurality game is decisive if in every partition there is exactly one winning coalition. We show that decisive plurality games with at most four players, majority games with an arbitrary number of players, and almost symmetric decisive plurality games with an arbitrary number of players are precisely supportive. Complete characterizations of a partition's winning coalitions are provided as well.
    Keywords: plurality game, plurality voting, precise support, simple game in partition function form, winning coalition
    JEL: C71 D62 D72
    Date: 2019–08–26

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