nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒01‒06
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Employment Effects of Ethnic Politics By Amodio, Francesco; Chiovelli, Giorgio; Hohmann, Sebastian
  2. Studying More to Vote Less: Education and Voter Turnout in Italy By Harka, Elona; Rocco, Lorenzo
  3. Electoral cycles in macroprudential regulation By Müller, Karsten
  4. Radical Distrust: Are Economic Policy Attitudes Tempered by Social Trust? By Hans Pitlik; Martin Rode
  5. Citizens' trade-offs in state merger decisions: Evidence from a randomized survey experiment By Blesse, Sebastian; Heinemann, Friedrich
  6. Your Place in the World: The Demand for National and Global Redistribution By Dietmar Fehr; Johanna Mollerstrom; Ricardo Perez-Truglia
  7. Why do the poor vote for low tax rates? A (real-effort task) experiment on income redistribution. By Natalia Jimenez; Elena Molis-Bañales; Angel Solano-Garcia
  9. Support for a Universal Basic Income: A Demand-Capacity Paradox? By Parolin, Zachary; Siöland, Linus
  10. Swings, News, and Elections By Saptarshi Ghosh; Nidhi Jain; Cesar Martinelli; Jaideep Roy
  11. Stop suffering! economic downturns and pentecostal upsurge By Costa, Francisco Junqueira Moreira da; Marcantonio Junior, Angelo; Castro, Rudi Rocha de
  12. The Winner-Take-All Dilemma By Kazuya Kikuchi; Yukio Koriyama
  13. From the brady bunch to gilmore girls: The effect of household size on economic voting By Manuel E. Lago; Ignacio Lago

  1. By: Amodio, Francesco (McGill University); Chiovelli, Giorgio (Universidad de Montevideo); Hohmann, Sebastian (Stockholm School of Economics)
    Abstract: This paper studies the labor market consequences of ethnic politics in African democracies. We combine geo-referenced data from 15 countries, 32 parliamentary elections, 62 political parties, 243 ethnic groups, 2,200 electoral constituencies, and 400,000 individuals. We implement a regression discontinuity design that compares individuals from ethnicities connected to parties at the margin of electing a local representative in the national parliament. We find that having a local ethnic politician in parliament increases the likelihood of being employed by 2-3 percentage points. We hypothesize that this effect originates from strategic interactions between ethnic politicians and traditional leaders, the latter retaining the power to allocate land and agricultural jobs in exchange for votes. The available evidence supports this hypothesis. First, the employment effect is concentrated in the historical homelands of ethnicities with strong pre-colonial institutions. Second, individuals from connected ethnicities are more likely to be employed in agriculture, and in those countries where customary land tenure is officially recognized by national legislation. Third, they are also more likely to identify traditional leaders as partisan, and as being mainly responsible for the allocation of land. Evidence shows that ethnic politics shapes the distribution of productive resources across sectors and ethnic groups.
    Keywords: ethnic politics, employment, democracy, traditional leaders, Africa
    JEL: J15 J70 O10 P26 Q15
    Date: 2019–12
  2. By: Harka, Elona (University of Padova); Rocco, Lorenzo (University of Padova)
    Abstract: We use Italian municipality data on education and voter participation in national elections to estimate the effect of schooling on voter turnout. By adopting a fixed effect instrumental variable identification strategy, we find that education reduces voter turnout, more so in municipalities with higher income, lower social capital, which experienced political misconduct in the past and have low institutional quality. Analysis with individual data confirms these results. We discuss several mechanisms to rationalize our findings ranging from the opportunity cost of time to disaffection and civic protest.
    Keywords: voter turnout, education, Italy, protest
    JEL: I20 I26 D72
    Date: 2019–12
  3. By: Müller, Karsten
    Abstract: Do politics matter for macroprudential policy? I show that changes to macroprudential regulation exhibit a predictable electoral cycle in the run-up to 221 elections across 58 countries from 2000 through 2014. Policies restricting mortgages and consumer credit are systematically less likely to be tightened before elections during credit booms and economic expansions. Consistent with theories of opportunistic political cycles, this pattern is stronger when election outcomes are uncertain or in countries where political interference is more likely. In contrast to monetary policy, I find limited evidence that central banks are uniquely insulated from political cycles in macroprudential policy. These results suggest that political pressures may limit the ability of regulators to “lean against the wind.” JEL Classification: G18, G21, G28, D72, D73, P16
    Keywords: central bank independence, electoral cycles, macroprudential regulation, political economy, regulatory cycles
    Date: 2019–12
  4. By: Hans Pitlik; Martin Rode
    Abstract: Debates about the appropriate role of markets and governments are often shaped by sharply contrasting opinions. Based on individual data from the World Values Survey and the European Values Study for up to 190,000 respondents in a sample of 68 democratic countries, we find that social trust is associated with tempered attitudes regarding government intervention and redistribution. Results corroborate ideas from socio-psychological research that trusting people have personality attributes which work towards a moderation on politically divisive topics. Complementary to the existing literature on political polarisation, this opens the possibility that trusting societies may be superior at implementing controversial policy reforms because social trust reduces the probability of extreme attitude formation.
    Keywords: Social trust, polarisation, policy attitudes, preference formation
    Date: 2019–12–18
  5. By: Blesse, Sebastian; Heinemann, Friedrich
    Abstract: Voters dealing with jurisdictional merger decisions face a trade-off between economies of scale and preference costs. Larger jurisdictions may offer cost advantages, yet the downside is that policies in larger units may be less aligned to voter preferences. Our study is the first to provide evidence on this trade-off on the individual level in an experimental set-up. For this purpose, we designed a randomized survey experiment and inquired about preferences on state mergers on a representative sample of the German population. In line with the decentralization theorem, the support for mergers increases with cost savings and falls with preference costs measured as political alignment, respectively. The effects of the cost treatments on merger support are lower for respondents from states that are actually discussed as merger candidates. Effects are also weaker for citizens who have a positive view of their own political participation under the status quo.
    Keywords: state-level mergers,optimal design of federations,economies of scale,political representation,survey experiment,decentralization theorem
    JEL: H11 H77
    Date: 2019
  6. By: Dietmar Fehr; Johanna Mollerstrom; Ricardo Perez-Truglia
    Abstract: Some of today’s most heated policy debates about Brexit, trade wars, climate change abatement, and migration involve redistribution of resources within a given country (national redistribution) and between countries (global redistribution). Yet, theories and evidence on preferences for redistribution have focused almost exclusively on national redistribution. In this paper, we study preferences for global redistribution. The workhorse model in political economy predicts that individuals who are higher up in the national income distribution are less supportive of national redistribution than those who are lower. Applied to the global arena, the model predicts that individuals who are richer in the global income distribution will be less supportive of global redistribution. We test this hypothesis using a two-year, face-to-face survey of a representative sample of German households. We show that respondents are misinformed about their positions in the national and global income distributions, and we provide novel evidence that those misperceptions are meaningful. Consistent with previous studies, we find support for the political economy model in the national arena: the correlational and experimental estimates indicate that the demand for national redistribution decreases with national relative income. However, the political economy model does not hold in the global arena: support for global redistribution does not depend on global relative income.
    JEL: C83 C91 D63 D83 D91 H23
    Date: 2019–12
  7. By: Natalia Jimenez (Department of Economics, Universidad Pablo de Olavide & Middlesex University); Elena Molis-Bañales (Departamento de Teoria e Historia Economica, University of Granada & Globe); Angel Solano-Garcia (Departamento de Teoria e Historia Economica, University of Granada & Globe)
    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 high-skilled 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: 2019–12
  8. By: Francisco González-Gómez (Department of Applied Economics. University of Granada; and Water Research Institute, Spain); Andrés J. Picazo-Tadeo (Department of Applied Economics II. University of Valencia; and Joint Research Group INTECO, Spain); Marta Suárez-Varela (Department of Economic Structure and Development Economics. Autonomous University of Madrid, Spain)
    Abstract: One of the forms of intervention in public services that lie beyond market forces is price control. While such regulation is justified by the need to achieve social goals, empirical evidence has shown that it is often used by politicians for electoral gain. This paper looks for evidence of opportunistic political behaviour in urban water pricing. Using data for 119 large Spanish cities covering the period 1998-2015, we find strong empirical evidence of the influence of the electoral cycle on water pricing insofar as price increases are significantly lower in the years preceding municipal elections than in non-pre-election years. Furthermore, outsourcing water service provision does not mitigate the relationship between the electoral cycle and water pricing. This result could be explained by incomplete transfer of control rights when the urban water service is outsourced, which allows politicians to use their right to supervise water tariffs to their advantage.
    Keywords: Electoral cycle; privatization; political opportunism; quantitative analysis; Spain; urban water pricing
    JEL: C23 D72 L33 L95
    Date: 2019–12
  9. By: Parolin, Zachary (Columbia University); Siöland, Linus (University of Antwerp)
    Abstract: Debate around a universal basic income (UBI) tends to focus on the economic and social implications of the policy proposal. Less clear, however, are the factors influencing support for a UBI. Using the 2016 European Social Survey, we investigate how trade union membership and left political ideology (central to power resources theory) and attitudes towards immigrants’ access to welfare benefits (central to welfare state chauvinism) affect individual support for a UBI. We also investigate how country-level differences in levels of social spending moderate individual-level UBI support. Results suggest that in countries where social spending is low, welfare state chauvinism and power resources theory have little effect in explaining support for a UBI. Where spending is high, chauvinism and power resources can explain individual-level support. These tensions form a demand-capacity paradox: countries which are presumably least equipped to implement a UBI see the most broad-based support for the policy.
    Date: 2019–01–15
  10. By: Saptarshi Ghosh (Indian Institute of Technology Bombay); Nidhi Jain (Shiv Nader University); Cesar Martinelli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Jaideep Roy (University of Bath)
    Abstract: Can public mood swings that make all voters undergo ideological shifts towards a policy, hurt the electoral performance of that policy? The answer has an interesting connection with the operations of an apolitical, viewership- maximizing dominant media. The media chooses news quality about funda- mental uncertainties. Ex-ante preferences and news quality affect the voters’ value for information and viewership, influencing ex-post policy preferences and votes. We find that public mood swings in a policy’s favor can hurt its electoral performance by affecting the news quality, crowding out the mass ideological gain that initiates the favorable swing.
    Keywords: Mood swings, Media coverage, Media viewership, Elections
    JEL: D02 D72 D82
    Date: 2019–12
  11. By: Costa, Francisco Junqueira Moreira da; Marcantonio Junior, Angelo; Castro, Rudi Rocha de
    Abstract: This paper estimates the effects of economic downturns on the expansion of Pentecostal Evangelicalism in Brazil. We find that regions more exposed to economic distress experienced a persistent rise both in Pentecostal affiliation and in the vote share of candidates connected to Pentecostal churches in national legislative elections. Once elected, these politicians carried out an agenda with greater emphasis on issues that are sensitive to fundamental religious principles. These results uncover a direct link between economic distress and a sustained entrenchment of more fundamentalist religious groups in a contemporary democracy.
    Date: 2019–12
  12. By: Kazuya Kikuchi; Yukio Koriyama
    Abstract: This paper considers collective decision-making when individuals are partitioned into groups (e.g., states or parties) endowed with voting weights. We study a game in which each group chooses an internal rule that specifies the allocation of its weight to the alternatives as a function of its members' preferences. We show that under quite general conditions, the game is a Prisoner's Dilemma: while the winner-take-all rule is a dominant strategy, the equilibrium is Pareto dominated. We also show asymptotic Pareto dominance of the proportional rule. Our numerical computation for the US Electoral College verifies the sensibility of the asymptotic results.
    Date: 2019–06
  13. By: Manuel E. Lago; Ignacio Lago
    Abstract: This article examines how household structure affects evaluations of personal economic conditions. We argue that moderate or mid-range responses when individuals are asked about their personal financial situation are more likely in multi-person households than in one-person households. Using data from the American National Election Studies from 1966 to 2016, we find that personal financial experiences are a very good heuristic for the assessment of national economic conditions. More importantly, we show that personal economic experiences are endogenous to household size. The aggregation of personal economic evaluations within households reduces the variation across household members, and therefore it is harder for an individual to say that her personal financial situation is good or bad in multi-person households. The main implication of our analysis is that economic voting in advanced societies is expected to be stronger in one-person households and over time, given the downward trend in the average number of household members.
    Keywords: economic voting; household size; personal finance experience; sociotropic voting; U.S. presidential elections.
    JEL: H77
    Date: 2019–12

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