nep-pol New Economics Papers
on Positive Political Economics
Issue of 2019‒11‒11
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Partisan Bias in Inflation Expectations By Oliver Bachmann; Klaus Gründler; Niklas Potrafke; Ruben Seiberlich
  2. Your Vote is (no) Secret! How Low Voter Density Harms Voter Anonymity and Biases Elections in Italy By Mauro Caselli; Paolo Falco
  3. Economic Insecurity and the Rise of the Right By Walter Bossert; Andrew E. Clark; Conchita D'Ambrosio; Anthony Lepinteur
  4. Voting Expressively By Abhinash Borah
  5. Facebook's Algorithms, Fake News, and Taiwan's 2018 Local Elections By Chen, Yi-Ning Katherine; Wen, Chia-Ho Ryan
  6. Policy Inertia, Election Uncertainty and Incumbency Disadvantage of Political Parties By Chatterjee, Satyajit; Eyigungor, Burcu
  7. The Politics of Flat Taxes By Carroll, Daniel R.; Dolmas, James; Young, Eric R.
  8. Moral Universalism and the Structure of Ideology By Benjamin Enke; Ricardo Rodríguez-Padilla; Florian Zimmermann
  9. Media Attention and Strategic Timing in Politics: Evidence from U.S. Presidential Executive Orders By Milena Djourelova; Ruben Durante
  10. Feddersen and Pesendorfer meet Ellsberg By Matthew Ryan
  11. Does Affirmative Action in Politics Hinder Performance? Evidence from India By Sabyasachi Das; Abhiroop Mukhopadhyay; Rajas Saroy
  12. Group Size and Political Representation Under Alternate Electoral Systems By Sugat Chaturvedi; Sabyasachi Das
  13. Attacking the weak or the strong? An experiment on the targets of parochial altruism By Varaine, S.; Benslimane, I.; Magni-Berton, R.; Crosetto, P.
  14. Does Social Media Promote Democracy? Some Empirical Evidence By Chandan K. Jha; Oasis Kodila-Tedika
  15. Populism-What Next? A First Look at Populist Walking-Stick Economies By Christopher Ball; Andreas Freytag; Miriam Kautz
  16. Trade Wars: Nobody Expects the Spanish Inquisition By Bekkers, Eddy; Francois, Joseph; Rojas-Romagosa, Hugo

  1. By: Oliver Bachmann; Klaus Gründler; Niklas Potrafke; Ruben Seiberlich
    Abstract: We examine partisan bias in inflation expectations. Our dataset includes inflation expectations of the New York Fed’s Survey of Consumer Expectations over the period June 2013 to June 2018. The results show that inflation expectations were 0.46 percentage points higher in Republican-dominated than in Democratic-dominated US states when Barack Obama was US president. Compared to inflation expectations in Democratic-dominated states, inflation expectations in Republican-dominated states declined by 0.73 percentage points when Donald Trump became president. We employ the Blinder-Oaxaca decomposition method to disentangle the extent to which political ideology and other individual characteristics predict inflation expectations: around 25% of the total difference between inflation expectations in Democratic-dominated versus Republican-dominated states is based on how partisans respond to changes in the White House’s occupant (partisan bias). The results also corroborate the belief that voters’ misperceptions of economic conditions decline when the president belongs to the party that voters support.
    Keywords: inflation expectation, partisan bias, political ideology, voters’ perceptions, Blinder-Oaxaca, US president
    JEL: C13 D72 E31 P44
    Date: 2019
  2. By: Mauro Caselli; Paolo Falco
    Abstract: Italian voters are assigned to a specific polling station according to their address. After an election, candidates know how many votes they received in each polling station. When the number of voters per polling stations is low and candidates are many, this jeopardises the secrecy of voting and candidates can more easily detect deviations from pre-electoral pledges. Exploiting variation in the number of voters per polling station across cities and over time, combined with rich data on politicians in office in all Italian municipalities between 1989 and 2015, we estimate the effect of voter density on the probability of re-election for local politicians. We find that when the number of voters per polling station is lower (and secrecy is at greater risk), incumbents have a higher probability of re-election. The analysis addresses the potential endogeneity of voter density. The results are stronger in regions with lower social capital and worse institutions.
    Date: 2019
  3. By: Walter Bossert; Andrew E. Clark; Conchita D'Ambrosio; Anthony Lepinteur
    Abstract: Economic insecurity has attracted growing attention in social, academic and policy circles. However, there is no consensus as to its precise definition. Intuitively, economic insecurity is multi-faceted, making any comprehensive formal definition that subsumes all possible aspects extremely challenging. We propose a simplified approach, and characterize a class of individual economic-insecurity measures that are based on the time profile of economic resources. We then apply our economic-insecurity measure to data on political preferences. In US, UK and German panel data, and conditional on current economic resources, economic insecurity is associated with both greater political participation (support for a party or the intention to vote) and notably more support for parties on the right of the political spectrum. We in particular find that economic insecurity predicts greater support for both Donald Trump before the 2016 US Presidential election and the UK leaving the European Union in the 2016 Brexit referendum.
    Keywords: Economic index numbers, Insecurity, Political participation, Conservatism, Right-leaning political parties, Trump, Brexit
    JEL: D63 D72 I32
    Date: 2019–10
  4. By: Abhinash Borah (Department of Economics, Ashoka University)
    Abstract: We address a common criticism directed towards models of expressive voting that they are ad hoc in nature. To that end, we propose a foundation for expressive behavior that is based on a novel theory of social preferences under risk. Under our proposal, expressive considerations in behavior arise from the particular way in which risky social prospects are assessed by decision makers who want to interpret their choices as moral. To illustrate the scope of our framework, we use it to address some key questions in the literature on expressive voting: why, for expressive considerations, might voters vote against their self-interest in large elections and why might such elections exhibit a moral bias (Feddersen et al. 2009). Speciï¬ cally, we consider an electoral set-up with two alternatives and explain why, when the size of the electorate is large, voters may want to vote for the alternative they deem morally superior even if this alternative happens to be strictly less preferred, in an all-inclusive sense, than the other.
    Keywords: expressive voting, morals, social preferences, decisions under risk, voting against self-interest, moral bias of large elections
    Date: 2019–01
  5. By: Chen, Yi-Ning Katherine; Wen, Chia-Ho Ryan
    Abstract: This explorative study examines how Facebook's News Feed, fear of missing out (FOMO), news literacy, experience of fake news, disappointment at local election results, trust in the News Feed, and perceptions of algorithms affect users' attitude toward Facebook as a political news source and fake news regulations. After collecting 1453 valid online feedbacks, we find that the experiences of forwarding and receiving fake news play different roles. The experience of forwarding fake news raises trust in the News Feed and perceived risks of algorithmic biases (untruthfulness), while the experience of receiving fake news undermines trust and increases risk perceptions of algorithmic biases (both untruthfulness and decontexualisation). In addition, trust and risk perceptions of algorithmic biases significantly predict subjects' support for fake news regulations and preferred methods of such regulations. Lastly, FOMO, habitual usage, and tablet usage are evident predictors of fake news experiences and disappointment at the election results.
    Keywords: algorithm,disinformation,fake news,FOMO,Taiwan elections
    Date: 2019
  6. By: Chatterjee, Satyajit (Federal Reserve Bank of Philadelphia); Eyigungor, Burcu (Federal Reserve Bank of Philadelphia)
    Abstract: We document that postwar U.S. elections show a strong pattern of “incumbency disadvantage”: If a party has held the presidency of the country or the governorship of a state for some time, that party tends to lose popularity in the subsequent election. We show that this fact can be explained by a combination of policy inertia and unpredictability in election outcomes. A quantitative analysis shows that the observed magnitude of incumbency disadvantage can arise in several different models of policy inertia. Normative and positive implications of policy inertia leading to incumbency disadvantage are explored.
    Keywords: rational partisan model; policy inertia; incumbency disadvantage; election uncertainty; prospective voting
    JEL: D72 H50
    Date: 2019–10–24
  7. By: Carroll, Daniel R. (Federal Reserve Bank of Cleveland); Dolmas, James (Federal Reserve Bank of Dallas); Young, Eric R. (Federal Reserve Bank of Cleveland)
    Abstract: We study the political determination of flat tax systems using a workhorse macroeconomic model of inequality. There is significant variation in preferred tax policy across the wealth and income distribution. The majority voting outcome features (i) zero labor income taxation, (ii) simultaneous use of capital income and consumption taxation, and (iii) essentially zero transfers. This policy is supported by a coalition of low- and middle-wealth households. Zero labor income taxation is supported by households with below average wealth, while the middle-wealth households prefer to keep the transfer (and thus other tax rates) low. We also show that the outcome is sensitive to assumptions about the voting power of household groups, the degree of wealth and income mobility, and the forward-looking nature of votes.
    Keywords: Political Economy; Essential Set; Voting; Inequality; Incomplete Markets;
    JEL: D52 D72 E62
    Date: 2019–09–25
  8. By: Benjamin Enke; Ricardo Rodríguez-Padilla; Florian Zimmermann
    Abstract: Throughout the Western world, people’s policy preferences are correlated across domains in a strikingly similar fashion. Based on a simple model, we propose that what partly explains the particular internal structure of political ideology is heterogeneity in moral universalism: the extent to which an individual’s altruism and trust remain constant as social distance increases. In representative surveys with 15,000 respondents, we measure universalism using structured choice tasks. In the data, heterogeneity in universalism descriptively explains a substantial share of desired government spending levels for welfare, affirmative action, environmental protection, foreign aid, health care, military, border control, and law enforcement. Moreover, the canonical left-right divide on issues such as the military or redistribution reverses depending on whether participants evaluate more or less universalist versions of these policies. These patterns hold in the United States, Australia, Germany, France, and Sweden, but not outside the West. We confirm the idea of higher universalism among the Western political left by estimating the universalism of U.S. regions using large-scale donation data and linking this measure to local vote shares.
    Date: 2019
  9. By: Milena Djourelova; Ruben Durante
    Abstract: Do politicians tend to adopt unpopular policies when the media and the public are distracted by other events? We examine this question by analyzing the timing of the signing of executive orders (EOs) by U.S. presidents over the past four decades. We find robust evidence that EOs are more likely to be signed on the eve of days when the news are dominated by other important stories that can crowd out coverage of EOs. Crucially, this relationship only holds in periods of divided government when unilateral presidential actions are more likely to be criticized by a hostile Congress. The effect is driven by EOs that are more likely to make the news and to attract negative publicity, particularly those on topics on which president and Congress disagree. Finally, the timing of EOs appears to be related to predictable news but not to unpredictable ones, which suggests it results from a deliberate and forward-looking PR strategy.
    Keywords: mass media, political accountability, presidential powers, strategic timing
    JEL: D02 D72 H11 L82
    Date: 2019–11
  10. By: Matthew Ryan (School of Economics, Auckland University of Technology)
    Abstract: The Condorcet Jury Theorem formalises the “wisdom of crowds”: binary decisions made by majority vote are asymptotically correct as the number of voters tends to infinity. This classical result assumes like-minded, expected utility maximising voters who all share a common prior belief about the right decision. Ellis (2016) shows that when voters have ambiguous prior beliefs – a (closed, convex) set of priors – and follow maxmin expected utility (MEU), such wisdom requires that voters’ beliefs satisfy a “disjoin posteriors” condition: difference private signals lead to posterior sets with disjoint interiors. Both the original theorem and Ellis’s generalisation assume symmetric penalties for wrong decisions. If, as in the jury context, errors attract asymmetric penalties, then it is natural to consider voting rules that raise the hurdle for the decision carrying the heavier penalty for error (such as conviction in jury trials). In a classical model, Feddersen and Pesendorfer (1998) have shown that, paradoxically, raising this hurdle may actually increase the likelihood of the more serious error. In particular, crowds are not wise under the unanimity rule: the probability of the more serious error does not vanish as the crowd size tends to infinity. We show that this “Jury Paradox” persists in the presence of ambiguity, whether or not juror beliefs satisfy Ellis’s “disjoint posteriors” condition. We also characterise the strictly mixed equilibria of this model and study their properties. Such equilibria cannot exist in the absence of ambiguity but may exist for arbitrarily large jury size when ambiguity is present. In addition to “uninformative” strictly mixed equilibria, analogous to those exhibited by Ellis (2016), there may also exist strictly mixed equilibria which are “informative” about voter signals.
    Date: 2019–09
  11. By: Sabyasachi Das (Department of Economics, Ashoka University); Abhiroop Mukhopadhyay (Indian Statistical Institute, Delhi); Rajas Saroy (Indian Statistical Institute, Delhi)
    Abstract: We examine how performance of elected representatives, as measured by delivery of public goods, is affected by affirmative action in elections, i.e., imposing quota in elections for one population group. We show both theoretically and empirically, using randomized electoral quotas for a caste group (OBCs) in India, that when group identities are salient and group sizes are asymmetric, affirmative action may in fact increase electoral competition and consequently, improve leader’s performance. The result challenges the notion that equity promotion must necessarily come at the cost of “efficiency.†It further justiï¬ es the electoral quota policy in India of targeting the jurisdictions where the group is numerous
    Keywords: Electoral competition, Reservation, Public goods, Gram Panchayat
    Date: 2018–08
  12. By: Sugat Chaturvedi (Indian Statistical Institute, Delhi); Sabyasachi Das (Department of Economics, Ashoka University)
    Abstract: We examine the effect of group size of minorities on their representation in national government under majoritarian (MR) and proportional (PR) electoral systems. We ï¬ rst establish a robust empirical regularity using an ethnicity-country level panel data comprising 438 ethno-country minority groups across 102 democracies spanning the period 1946–2013. We show that a minority group’s population share has no relation with its absolute representation in the national executive under PR but has an inverted-U shaped relation under MR. The pattern is stable over time and robust to alternate speciï¬ cations. The developmental outcomes for a group proxied using stable nightlight emissions in a group’s settlement area follow the same pattern. We reproduce the main results by two separate identiï¬ cation strategies—(i) instrumenting colony’s voting system by that of the primary colonial ruler and, (ii) comparing the same ethnicity across countries within a continent. We argue that existing theoretical framework with a two group set up is not able to explain this pattern. Our proposed model incorporates the spatial distribution of multiple minority groups in a probabilistic voting model and justiï¬ es these patterns as equilibrium behavior. The data further validate a critical assumption of the model and its additional comparative static results. Our work highlights that electoral systems can have importanteffectsonpowerinequalityacrossminorities, andconsequently, theirwell-being.
    Keywords: Electoral systems, minorities, political representation, settlement patterns
    Date: 2018–08
  13. By: Varaine, S.; Benslimane, I.; Magni-Berton, R.; Crosetto, P.
    Abstract: Studies on parochial altruism have insofar focused on the causes leading individuals to attack any out-group on the behalf of one’s group. Yet, we have no clue to understand why parochial altruists target specific groups, such as big firms in some contexts and refugees in other contexts. The present paper introduces an experiment to analyse the conditions under which individuals costly attack strong versus weak out-groups. In our study, 300 participants played a repeated Inter-group Prisonner Dilemma (IPD) involving multiple groups and inter-group differences in resources. The results show that individuals have a basic preference for targeting strong out-groups, but that attacks decrease when the inequality in destructive capacity between groups is high. Besides, individuals target weak out-groups when they are threatening their in-group status. Decisions in the game correlate with participants’ political ideology and social dominance orientation. Overall, the results give clues to understand historical variations in the targets of political violence.
    JEL: C92 D74 H41
    Date: 2019
  14. By: Chandan K. Jha (New York, USA); Oasis Kodila-Tedika (Kinshasa, Democratic Republic of Congo)
    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: Christopher Ball; Andreas Freytag; Miriam Kautz
    Abstract: The recent rise in populist governments has led to much work on the question “why now?”. Our work takes the next logical step by asking “what next?”. That is, given populists in power, what should we expect to be the economic consequences of populist regimes. To answer this, we characterize populist economic policies and argue that they generate an inverted J-curve effect, which we term a “walking stick” effect, in macro-level data, specifically GDP and inflation. To test this claim, we construct a unique data set on 13 Latin American countries from 1976 to 2012 and incorporate more modern and nuanced definitions of populism. Our contribution is both to test the walking stick claim and to present a novel dataset for studying the economic effects of populism. We find compelling evidence for our walking stick hypothesis in both GDP per capita and inflation, suggesting that the answer to “what next” is that we will see on average short-run booms followed by declines under populist regimes.
    Keywords: populism, Latin America, business cycle, political economy
    JEL: E39 E60 H11 N16
    Date: 2019
  16. By: Bekkers, Eddy; Francois, Joseph; Rojas-Romagosa, Hugo
    Abstract: This paper assesses the utility of economic theory of rational trade wars to predict such events or to prescribe courses of action to control their consequences. Trade wars are fundamentally political events whose causes are almost completely political and whose consequences are to a significant degree also political. Contemporary economic theory has developed during a uniquely peaceful and liberal period in world history, affecting how economists have thought about trade conflicts, leaving the profession unprepared to provide serious analysis or advice.
    Date: 2019–10–17

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