nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒01‒20
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. One strike and you’re out! The Master Lever’s effect on senatorial policy-making By Olga Gorelkina; Ioanna Grypari; Erin Hengel
  2. Social Connectivity, Media Bias, and Correlation Neglect By Denter, Philipp; Dumav, Martin; Ginzburg, Boris
  3. Fiscal Illusion and Progressive Taxation with Retrospective Voting By Abatemarco, Antonio; Dell'Anno, Roberto
  4. Political Costs of Tax-Based Consolidations By Chuling Chen; Era Dabla-Norris; Jay Rappaport; Aleksandra Zdzienicka
  5. Stop Suffering! Economic Downturns and Pentecostal Upsurge By Costa, Francisco J M; Junior, Angelo Marcantonio; Rocha, Rudi
  6. Populist strategy of Polish political parties By Natalia Str?k
  7. Democracy in America at work: the history of labor’s vote in corporate governance By McGaughey, Ewan
  8. State Legislative Ideology & the Preemption of City Ordinances: The Case of Worker Rights Laws By Goodman, Christopher B
  9. Yes, The Medium Matters: How Facebook and Twitter boost Populism in Europe By Piergiuseppe Fortunato; Marco Pecoraro
  10. Oil Discoveries and Protectionism By Rick Van der Ploeg; Fidel Perez-Sebastian; Ohad Raveh
  11. Are Political and Charitable Giving Substitutes? Evidence from the United States By Maria Petrova; Ricardo Perez-Truglia; Andrei Simonov; Pinar Yildirim
  12. All Keynesian Now? Public Support for Countercyclical Government Borrowing By Barnes, Lucy; Hicks, Timothy
  13. Do Fiscal Rules Cause Fiscal Discipline Over the Electoral Cycle? By Kodjovi M. Eklou; Marcelin Joanis

  1. By: Olga Gorelkina; Ioanna Grypari; Erin Hengel
    Abstract: We investigate the impact a straight-ticket voting option—a.k.a. the Master Lever—has on U.S. senators’ roll-call voting records in Congress. Using a difference-in-differences framework, we find the Master Lever leads to a 3–6 percent rightward shift in senators’ policy positions. The effect is largely driven by the Republican party. To interpret our results, we analyse the Master Lever’s impact on electoral incentives and outcomes. Our findings suggest that ballot design has a non-negligible impact on policy-making. They also imply that electoral outcomes in moderate to right-leaning Master Lever states may be especially vulnerable to right-wing, non-partisan voters.
    Keywords: Ballot Design, Elections, Political Positions, U.S. Senate
    JEL: D72 N42
    Date: 2019–08
  2. By: Denter, Philipp; Dumav, Martin; Ginzburg, Boris
    Abstract: We propose a model of political persuasion in which a biased newspaper aims to convince voters to vote for the government. Each voter receives the newspaper's report, as well as an independent private signal. Voters then exchange this information on social media and form posterior beliefs, neglecting correlation among signals. An increase in connectivity increases the newspaper's bias if voters are ex ante predisposed to vote against the government, and reduces the bias if they are predisposed in favour of the government. While more precise independent signals reduce the newspaper's optimal bias, the bias remains positive even when connectivity becomes large. Thus, even with a large number of social connections, the election produces an inefficient outcome with positive probability, implying a failure of the Condorcet jury theorem.
    Keywords: social media; media bias; correlation neglect; Bayesian persuasion; voting; deliberation
    JEL: D72 D83 P16
    Date: 2019–12–13
  3. By: Abatemarco, Antonio; Dell'Anno, Roberto
    Abstract: We consider the tax progressivity decision of a rent‐maximizing government when voters’ perceptions of the tax price of public goods are biased by cognitive anomalies (i.e., fiscal illusion), and the electorate opts for re‐appointing or for dismissing the incumbent according to a retrospective voting logic. Given electoral and constitutional constraints, we show that the design of the tax system can be sensibly affected by fiscal illusion within the population of voters. Specifically, we find that (i) the tax system is more (less) progressive when taxes and public expenditures are perceived less (more), and (ii) an increase in the median voter’s income may positively or negatively affect tax progressivity depending on the nature (pessimistic or optimistic) of fiscal illusion. The impact of fiscal illusion on tax progressivity is validated by econometric analysis.
    Keywords: fiscal illusion; tax progressivity; median voter; cognitive anomalies
    JEL: D63 D72 E62 H23 H3
    Date: 2019–09–12
  4. By: Chuling Chen; Era Dabla-Norris; Jay Rappaport; Aleksandra Zdzienicka
    Abstract: This paper studies the impact of tax-based consolidations on reelection outcomes. Using a granular database of tax-based consolidations for a panel of 10 OECD countries over the last 40 years, we find that tax reforms are politically costly but some reforms are costlier than others. Measures aimed primarily at reducing existing deficits and debt are costlier than tax consolidation policies for improving long-term growth prospects. Electoral costs are particularly high for broad-based indirect tax and corporate tax reforms. Voters tend to penalize governments less if tax consolidations are announced early in the government’s term or if the government has a strong political mandate. Favorable economic conditions increase public support for tax-based consolidations. Personal income tax reforms are electorally salient if the reforms are frontloaded, announced during recessions, and in less progressive tax systems.
    Date: 2019–12–27
  5. By: Costa, Francisco J M (FGV EPGE Brazilian School of Economics and Finance); Junior, Angelo Marcantonio; Rocha, Rudi
    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: 2019–11–01
  6. By: Natalia Str?k (Jagiellonian University)
    Abstract: With the rise of populism, its concept and the very idea of populism have been developing in recent years. This research aims to critically analyse the difference between political parties that are of populist nature and those only using populist strategies in their activities. The already existing literature on populist parties and populist leaders who defeated their political opponents in the last elections is already abundant. However, an impasse regarding the concept of populist strategy is yet to be analysed. Through a qualitative collective case studies, the methodological framework of the research aims to analyse Polish political parties? strategies used during election campaign. Data are sourced from political parties programs, speeches, modus operandi, communications, and publications. The aim of the study is to develop a better understanding of the concept of populist strategy within the current political climate, and the issue of emerging illiberal democracies in Europe. The presentation will focus on the three aspects of populism: antiestablishment sentiments, artificial social divisions between ?us and the others, and appeal to the will of the people.
    Keywords: populism, election strategy, Polish political parties
    JEL: D72 E65 H11
    Date: 2019–10
  7. By: McGaughey, Ewan (King's College, London)
    Abstract: Can there be democracy in America at work? The historical division between democracy in politics and hierarchy in the economy is under strain. Hierarchical interests in the economy are shifting their model of power into politics, and yet a commitment to revive the law is resurgent. Central examples are the proposed Accountable Capitalism Act, Reward Work Act, Workplace Democracy Acts, and Employees’ Pension Security Acts. They would create a right for employees to elect 40% of directors on $1 billion company boards, a right for employees to elect one-third of directors on other listed company boards, and require one-half employee representation on single-employer pension plans. All challenge long held myths: that labor’s involvement in corporate governance is foreign to American tradition, that when codified in law labor voice is economically inefficient, that the legitimate way to have voice in the economy is by buying stocks, or that labor voice faces insurmountable legal obstacles. This article shows these myths are mistaken by exploring the history and evidence from 1861. The United States has one of the world’s strongest traditions of democracy at work. Economic democracy has not been more widespread primarily because it was suppressed by law. Americans favor voice at work, while asset managers who monopolize shareholder votes with ‘other people’s money’ enjoy no legitimacy at all. The article concludes that, even without federal government, and by recreating themselves as laboratories of democracy and enterprise, states can adapt the current proposals and rebuild a living law. (2019) 42 Seattle University Law Review 697.
    Date: 2018–10–10
  8. By: Goodman, Christopher B (Northern Illinois University)
    Abstract: This article discusses the influence of state legislative ideology on the legislative preemption of local ordinances in the area of worker rights. States define the powers of local governments within their purview and states may use this power to restrict local governments from pursuing certain policies. Using data on state legislative activity and ideology from 1993 to 2016, I find within-state increases in legislative ideology, indicating increased legislative conservatism, associated with an increased risk of preempting local government policy, all else equal. This finding is robust to a number of alternate specifications and hypotheses. Ideology appears to play an important role in the decision to involve the state in the affairs of local governments.
    Date: 2019–02–01
  9. By: Piergiuseppe Fortunato; Marco Pecoraro
    Abstract: This paper examines how socio-economic characteristics, changes in the technology of political communication and their interactions affect the sentiments of the electorate and favor the spread of populist ideas in Europe. Using both European-wide and national surveys we find a significant association between exposure to online political activity and diffusion of populist ideas such as Euroscepticism only among less educated and economically vulnerable individuals. We also show that it is not the use of the internet per se that matters but the specific use of social networks for political activity.
    Keywords: Populism, Euroscepticism, Internet, Social Networks, Education
    JEL: D72 N34 L82 L86 Z13
    Date: 2020–01
  10. By: Rick Van der Ploeg; Fidel Perez-Sebastian; Ohad Raveh
    Abstract: Can oil discovery shocks affect the demand for protectionism? A two-period model of Dutch disease indicates that if the tradable sector is politically dominant then an oil discovery induces protectionism. If the economy is also credit constrained, this effect is intensified upon discovery, but partially reversed when oil revenues start to flow. We test these predictions using detailed bilateral tariff data that cover 96 products in 155 countries over the period 1988-2012, and worldwide discoveries of giant oil and gas fields. Our identification strategy rests on the exogeneity of the timing of discoveries. We find that an oil discovery increases tariffs during pre-production years and decreases tariffs in the years to follow yet to a lesser extent, most notably in capital scarce economies with a relatively dominant tradable sector. Our baseline estimates indicate that a giant oil field discovery induces a rise of approximately 15% in the average tariff over the course of 10 years; this increase is about 1.8 times larger during the pre¬production period when the oil discovery represents a pure news shock.
    Keywords: Oil discoveries, protectionism, capital scarcity, Dutch disease, political economy, trade policy, news shocks
    JEL: Q32 F13 O24
    Date: 2019–12–19
  11. By: Maria Petrova; Ricardo Perez-Truglia; Andrei Simonov; Pinar Yildirim
    Abstract: We provide evidence that individuals substitute between political contributions and charitable contributions. We document these findings using micro data from the American Red Cross and from the Federal Election Commission. As a source of causal identification, we exploit exogenous shocks to charitable and political giving. First, we show that foreign natural disasters, which are positive shocks to charitable giving, crowd out political giving. Second, we show that political advertisement campaigns, which are positive shocks to political giving, crowd out charitable giving. Our evidence suggests that individuals give to political and charitable causes to satisfy similar needs. Our findings also suggest that some of the drivers of charitable giving, such as other-regarding preferences, may be driving political giving too.
    JEL: D64 H84
    Date: 2020–01
  12. By: Barnes, Lucy (University College London); Hicks, Timothy (University College London)
    Abstract: In the wake of the 2008 financial crisis, macroeconomic policy returned to the political agenda, and the influence of Keynesian ideas about fiscal stimulus rose (and then fell) in expert circles. Much less is known, however, about whether and when Keynesian prescriptions for countercyclical spending have any support among the general public. We use a survey experiment, fielded twice, to recover the extent to which UK respondents hold such countercyclical attitudes. Our results indicate that public opinion was countercyclical — Keynesian — in 2016. We then use Eurobarometer data to estimate the same basic parameter for the population for the period 2010-2017. The observational results validate our experimental findings for the later period, but also provide evidence that the UK population held procyclical views at the start of the period. Thus, there appear to be important dynamics in public opinion on a key macroeconomic policy issue.
    Date: 2018–10–15
  13. By: Kodjovi M. Eklou; Marcelin Joanis
    Abstract: This paper estimates the causal effect of fiscal rules on political budget cycles in a sample of 67 developing countries over the period 1985–2007. We exploit the geographical pattern in the adoption of fiscal rules to isolate an exogenous source of variation in the adoption of national fiscal rules. Based on a diffusion argument, we use the number of other countries in a given subregion that have fiscal rules in place to predict the probability of having them at the country level. We find that in election years with fiscal rules in place, public consumption is reduced by 1.6 percentage point of GDP as compared to election years without these rules. This impact is equivalent to a reduction by a third of the volatility of public consumption in our sample. Furthermore, the effectiveness of these rules depends on their type, their institutional design, whether they have been in place for a long time and finally on the degree of competitiveness of elections.
    Date: 2019–12–27

This nep-pol issue is ©2020 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.