nep-pol New Economics Papers
on Positive Political Economics
Issue of 2019‒10‒28
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. #EleNão: Economic crisis, the political gender gap, and the election of Bolsonaro By Laura Barros; Manuel Santos Silva
  2. What are the best quorum rules? A laboratory Investigation By Aguiar-Conraria, Luís; Magalhães, Pedro C.; Vanberg, Christoph A.
  3. Tariffs and Politics: Evidence from Trump’s Trade Wars By Fetzer, Thiemo; Schwarz, Carlo
  4. Social Status Concerns and the Political Economy of Publicly Provided Private Goods By Jana Friedrichsen; Tobias König; Tobias Lausen
  5. Why do the poor vote for low tax rates? A (real-effort task) experiment on income redistribution. By Natalia Jiménez Jiménez; Elena Molis; Ángel Solano García
  6. Particularism, dominant minorities and institutional change By Raouf Boucekkine; Rodolphe Desbordes; Paolo Melindi-Ghidi
  7. Public debt rule breaking by time-inconsistent voters By Arawatari, Ryo; Ono, Tetsuo
  8. Passports for Sale: The Political Economy of Conflict and Cooperation in a Meta-Club By Konrad, Kai A.; Rees, Ray
  9. Do Expert Panelists Herd? Evidence from FDA Committees By Melissa Newham; Rune Midjord

  1. By: Laura Barros (University of Goettingen / Germany); Manuel Santos Silva (University of Goettingen / Germany)
    Abstract: After more than one decade of sustained economic growth, accompanied by falling poverty and inequality, Brazil has been hit by an economic recession starting in 2014. This paper investigates the consequences of this labor market shock for the victory of far-right Jair Bolsonaro in the 2018 presidential election. Using a shiftshare approach and exploring the differential effects of the recession by gender and race, we show that heterogeneity in exposure to the labor demand shock by the different groups is a key factor explaining the victory of Bolsonaro. Our results show that male-specific labor market shocks increase support for Bolsonaro, while female-specific shocks have the opposite effect. Interestingly, we do not find any effect by race. We hypothesize that, once facing economic insecurities, men feel more compelled to vote for a figure that exacerbates masculine stereotypes, as a way of compensating for the loss in economic status. Women, on the other hand, when confronted with economic shocks and the prospect of Bolsonaro’s election, respond by rejecting his political agenda in favor of a more pro-social platform.
    Keywords: economic shocks, populism, gender, voter participation
    JEL: D72 J16 J23 P16 R23
    Date: 2019–08–15
  2. By: Aguiar-Conraria, Luís; Magalhães, Pedro C.; Vanberg, Christoph A.
    Abstract: Many political systems with direct democracy mechanisms have adopted rules preventing decisions from being made by simple majority rule. The device most commonly added to majority rule in national is a quorum requirement. The two most common are the participation and the approval quora. Such rules are a response to three major concerns: the legitimacy of the referendum outcome, its representativeness (the concern with the outcome representing the will of the whole electorate), and protection of minorities regarding issues that should demand a broad consensus. Guided by a pivotal voter model, we conduct a laboratory experiment to investigate the performance of different quora in reaching such goals. We introduce two main innovations in relation to previous work on the topic. First, part of the electorate goes to the polls out of a sense of civic duty. Second, we test the performance of a different quorum, the rejection quorum, recently proposed in the literature. We conclude that, depending on the preferred criterion, either the approval or the rejection quorum is to be preferred.
    Keywords: election design; participation quorum; approval quorum; laboratory experiment
    Date: 2019–10–16
  3. By: Fetzer, Thiemo (University of Warwick and CAGE, Department of Economics); Schwarz, Carlo (University of Warwick and CAGE, Department of Economics)
    Abstract: We use the recent trade escalation between the US,China, the European Union (EU), Canada and Mexico to study whether retaliatory tariffs are politically targeted. Using aggregate and individual-level data we find evidence that the retaliatory tariffs disproportionally targeted areas that swung to Trump in 2016, but not to other Republican candidates. We propose a novel simulation approach to construct counterfactual retaliation responses. This allows us to both quantify the extent of political targeting and assess the general feasibility. Further, the counterfactual retaliation responses allow us to shed light on the potential trade-offs between achieving a high degree of political targeting and managing the risks to ones own economy. China, while being constrained in its retaliation design, appears to put large weight on achieving maximal political targeting. The EU seems successful in maximizing the degree of political targeting, while at the same time minimizing the potential damage to its own economy and consumers.
    Keywords: trade war ; tariff ; targeting ; political economy ; elections ; populism
    JEL: F13 F14 F16 F55 D72
    Date: 2019
  4. By: Jana Friedrichsen; Tobias König; Tobias Lausen
    Abstract: We analyze the political economy of the public provision of private goods when individuals care about their social status. Status concerns motivate richer individuals to vote for the public provision of goods they themselves buy in markets: a higher provision level attracts more individuals to the public sector, enhancing the social exclusivity of market purchases. Majority voting may lead to a public provision that only a minority of citizens use. Users in the public sector may enjoy better provision than users in the private system. We characterize the coalitions that can prevail in a political equilibrium.
    Keywords: In-kind provision, Status preferences, Majority voting
    JEL: H42 D72
    Date: 2019
  5. By: Natalia Jiménez Jiménez (Departamento de Economía, Métodos Cuantitativos e Historia Económica, University Pablo de Olavide.); Elena Molis (Department of Economic Theory and Economic History, University of Granada.); Ángel Solano García (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: The main purpose of this paper is to shed some light on the voting behavior of low-income voters over income redistribution. To this end, we test a model based on Meltzer and Richard’s (1981) framework through a lab experiment in which individuals vote over two exogenous tax rates and their pre-tax income is determined according to their performance in a real-effort task. We classify individuals into highskilled and low-skilled participants according to their performance in a tournament at the beginning of the experiment. We find that a large proportion of low-skilled workers vote for the lowest tax rate (the one that gives them the lowest payoff), especially when the alternative tax rate is very high. However, this proportion is significantly reduced in treatments in which the subjects are given extra information about how the tax operates in redistributing income. This result suggests that the lack of information about the role of taxes in income redistribution may be an important factor in explaining the counter-intuitive voting behavior of low-income voters over income redistribution. We also find that both the prospect of upward mobility and the belief in the negative effect of taxes on productivity make low-income voters support low tax rates, especially when the alternative tax rate is very high.
    Keywords: income inequality, income redistribution, voting, taxation, real-effort task.
    JEL: C92 D72 H30 J41
    Date: 2019–10–11
  6. By: Raouf Boucekkine (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, IMéRA - Institute for Advanced Studies - Aix-Marseille University, UCL IRES - Institut de recherches économiques et sociales - UCL - Université Catholique de Louvain); Rodolphe Desbordes (UCL IRES - Institut de recherches économiques et sociales - UCL - Université Catholique de Louvain, SKEMA Business School - Université Côte d'Azur); Paolo Melindi-Ghidi (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique, UPN - Université Paris Nanterre)
    Abstract: We develop a theory of institutional transition from dictatorship to minority dominant-based regimes. We depart from the standard political transition framework à la Acemoglu-Robinson in four essential ways: (i) population is heterogeneous, there is a minority/majority split, heterogeneity being generic, simply reflecting subgroup size; (ii) there is no median voter in the post-dictatorship period, political and economic competition is favorable to the minority (fiscal particularism); (iii) (windfall) resources are introduced, and (iv) we distinguish between labor income and resources, and labor supply is endogenous. We first document empirically fiscal particularism, its connection with resource endowment, and the impact of both on revolutionary bursts. Second, we construct a full-fledged model incorporating the four characteristics outlined above. We show, among others, that polarization is a sufficient condition for revolutions, while resource rents are not: they do matter though when polarization is low. In agreement with our empirical facts, countries engaging in revolutions tend to be slightly less resource-rich than other countries. We also outline the interplay between resource rents, polarization and labor market conditions at the dawn of institutional change. Our theory is appropriate to understand the institutional dynamics in highly homogeneous resource-rich countries, which after post-independence autocratic regimes, turn to be dominated by minorities, Algeria being the paradigmatic case.
    Keywords: labor market,resources,political transition,minority/majority,fiscal particularism,dominant minority
    Date: 2019–10–14
  7. By: Arawatari, Ryo; Ono, Tetsuo
    Abstract: This study considers how present-biased preferences influence public debt policy when a violation of debt rules is possible. To address this issue, the study extends the framework of Bisin, Lizzeri, and Yariv (American Economic Review 105, (2015), 1711--1737) by allowing for rule breaking with extra costs, and we show that rule breaking occurs when a country exhibits a strong present bias. We further extend the model by introducing a political process for determining the debt rule, and we show that a polarization of debt rules emerges between countries with high and low degrees of present bias.
    Keywords: Debt ceilings; Present bias; Public debt.
    JEL: D72 D78 H62 H63
    Date: 2019–10–16
  8. By: Konrad, Kai A. (Max Planck Institute for Tax Law and Public Finance); Rees, Ray (University of Munich)
    Abstract: Some of the member states of the European Union sell citizenship or residence to wealthy foreign investors. We analyse these "golden-passport" programs as a study in the political economy of conflict and cooperation in an international meta-club. Seen through the lens of club goods theory, the EU is a club of nations, each of which can be interpreted as itself a club. Each single nation reserves the right to govern the admission of new individual members into its own club, and new members automatically benefit from the EU wide meta-club good. We characterize the unique equilibrium when individual clubs that may differ in membership size are free to choose the terms on which they admit members, and evaluate it from the point of view of the wellbeing of the set of clubs as a whole. We identify club size and benefits as well as differences in cost externalities as the key determinants. We also consider how the set of clubs as a whole can respond to the economic inefficiency problems such a situation creates.
    Keywords: club of clubs, membership rights, European Union, quotas
    JEL: F15 F53 H77
    Date: 2019–10
  9. By: Melissa Newham; Rune Midjord
    Abstract: We develop a structural model to address the question whether, and to what extent, expert panelists engage in herd behavior when voting on important policy questions. Our data comes from FDA advisory committees voting on questions concerning the approval of new drug applications. We utilize a change in the voting procedure from sequential to simultaneous voting to identify herding. Estimates suggest that around half of the panelists are willing to vote against their private assessment if votes from previous experts indicate otherwise and, on average, 9 percent of the sequential votes are actual herd-votes. Temporary committee members are more prone to herding than regular (standing) members. We find that simultaneous voting improves information aggregation given our estimates.
    Keywords: Herd behavior, expert committees, structural estimation, FDA, public health
    JEL: D72 D82 D83 D91 I10 I18
    Date: 2019
  10. By: Maksim Gladyshev (National Research University Higher School of Economics)
    Abstract: Correct aggregation of individual preferences into collective one is central problem of nowadays Social Choice theory. After the Arrow’s and Gibbard–Satterthwaite impossibility theorems it became clear that our desire to justify an electoral procedure is doomed to failure. At the same time a lot of scholars continued exploring different properties of existing voting rules and constructing the new ones. Contemporary research in this area explore two main properties of aggregation procedures — their degree of manipulability and computational complexity of manipulation. Quantitative evaluations of these properties tend to be main criteria of voting procedure selection. But last decades it turned out that another threat for theory of voting is incompatibilities and unexpected outcomes of different kind, usually called paradoxes. This article provides complete systematization of voting paradoxes known for today. We also presented an attempt to formulate a complete proof of the (in)stability of seven most common used voting rules to paradoxes of any type, which had not been undertaken before. Our results show that different voting procedures are qualitatively different in the sense of vulnerability to voting paradoxes which makes reasonable to propose additional criteria of voting procedure selection and opens the gate for further quantitative research.
    Keywords: Social choice, elections, voting behavior, paradoxes, voting procedures
    JEL: D7
    Date: 2019

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