nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒03‒02
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Geography of Dictatorship and Support for Democracy By MariÌ a AngeÌ lica Bautista; Felipe GonzaÌ lez; Luis R. MartiÌ nez; Pablo Muñoz; Mounu Prem
  2. General or Central Government? Empirical Evidence on Political Cycles in Budget Composition Using New Data for OECD Countries By Niklas Potrafke
  3. Salience and Accountability: School Infrastructure and Last-Minute Electoral Punishment By Nicolás Ajzenman; Ruben Durante
  4. Consensus and Ideology in Courts: an Application to the Judicial Committee of the Privy Council By Sofia Amaral-Garcia; Lucia Dalla Pellegrina; Nuno Garoupa
  5. Religion, Politics, and Judicial Independence: Theory and Evidence By Sultan Mehmood; Avner Seror
  6. Cohesive Institutions and Political Violence By Thiemo Fetzer; Stephan Kyburz
  7. Terrorist Attacks, Cultural Incidents and the Vote for Radical Parties: Analyzing Text from Twitter By Francesco Giavazzi; Felix Iglhaut; Giacomo Lemoli; Gaia Rubera
  8. Resource rents, political rights and civil liberties By Robert Breunig; Anthony Wiskich; Chris Wokker
  9. A economia da política reabilitada: a formação e as controvérsias da teoria dos ciclos político-econômicos By Rafael Galvão de Almeida
  10. Minority Protection in Voting Mechanisms - Experimental Evidence By Dirk Engelmann; Hans Peter Gruener; Timo Hoffmann; Alex Possajennikov
  11. The Capitol Since the Nineteenth Century: Political Polarization and Income Inequality in the United States By Rajashri Chakrabarti; Matthew Mazewski
  12. Property Rights, Political Connections, and Corporate Investment By Miao,Meng; Tang,Dragon Yongjun; Xu,L. Colin
  13. Debiasing preferences over redistribution: An experiment By Christian Thoeni; Bruno Deffains; Romain Espinosa
  14. Power infrastructure and income inequality: evidence from Brazilian state-level data using dynamic panel data models By Victor Medeiros; Rafael S. M. Ribeiro
  15. 'Should We Call it Middle Class?' Economic and Political Stakes of the Middle Income Group Expansion in Vietnam By Jean-Philippe Berrou; Matthieu Clément; François Combarnous; Dominique Darbon; Kim Sa Le; Eric Rougier
  16. The Political Economy of Multilateral Lending to European Regions By Zareh Asatryan; Annika Havlik

  1. By: MariÌ a AngeÌ lica Bautista (University of Chicago, Harris School of Public Policy); Felipe GonzaÌ lez (Pontificia Universidad CatoÌ lica de Chile, Instituto de EconomiÌ a); Luis R. MartiÌ nez (University of Chicago, Harris School of Public Policy); Pablo Muñoz (University of California Berkeley, Department of Economics); Mounu Prem (Universidad del Rosario, Department of Economics)
    Abstract: We study whether exposure to the military dictatorship of Augusto Pinochet in Chile (1973-1990) affected political attitudes and behavior, exploiting the plausibly exogenous location of military bases shortly before the coup that brought Pinochet to power. We show that residents of counties housing military bases both registered to vote and voted “No†to Pinochet’s continuation in power at higher rates in the crucial 1988 plebiscite that bolstered the democratic transition. Counties with military bases also experienced substantially more civilian deaths during the dictatorship, suggesting that increased exposure to repression is an important mechanism driving the larger rates of political participation and regime opposition. Evidence from survey responses and elections after democratization shows that military presence led to long-lasting support for democracy without changing political ideologies or electoral outcomes.
    Keywords: dictatorship, repression, democratization, human rights JEL Classification: D72, N46
    Date: 2019–03
  2. By: Niklas Potrafke
    Abstract: Previous studies used general government data to examine whether national governments’ electoral motives and ideology influenced budget composition in OECD countries. General government data includes, however, the state and local level. Using new data for general and central government over the period 1995–2016, I reexamine political cycles in budget composition. The results suggest that, both at the general and central government level, leftwing governments spent more on education and less on public services than rightwing governments. Defense expenditure was somewhat lower under leftwing than rightwing governments and in election years; especially in federal states. Effects of government ideology on the individual expenditure categories are larger at the central than general government level. Scholars need to re-examine results on ideology-induced effects that have been derived from general government data where central government data should have been used.
    Keywords: General and central government, panel data models, OECD countries, electoral cycles, government ideology, partisan politics, budget composition
    JEL: D72 D78 E60 H30 H50 C23 P16
    Date: 2020
  3. By: Nicolás Ajzenman; Ruben Durante
    Abstract: Can seemingly unimportant factors influence voting decisions by making certain issues salient? We study this question in the context of Argentina 2015 presidential elections by examining how the quality of the infrastructure of the school where citizens were assigned to vote influenced their voting choice. Exploiting the quasi-random assignment of voters to ballot stations located in different public schools in the city of Buenos Aires, we find that individuals assigned to schools with poorer infrastructure were significantly less likely to vote for Mauricio Macri, the incumbent mayor then running for president. The effect is larger in low-income areas - where fewer people can afford private substitutes to public education - and in places where more households have children in school age. The effect is unlikely to be driven by information scarcity, since information on public school infrastructure was readily available to parents before elections. Rather, direct exposure to poor school infrastructure at the time of voting is likely to make public education - and the poor performance of the incumbent – more salient.
    Keywords: Elections, Salience, Electoral Punishment, Public Infrastructure, Education.
    JEL: D72 D83 I25 D90
    Date: 2020–02–20
  4. By: Sofia Amaral-Garcia; Lucia Dalla Pellegrina; Nuno Garoupa
    Abstract: This article argues that judges suppress dissent when it is costly to do so, and that the cost of dissent depends on the political dimension of the issue broached. It contends that judges who disagree may nevertheless try to safeguard integrity and legitimacy in political disputes by presenting a public impression of unity. We muster evidence from the United Kingdom, specifically, votes from the Judicial Committee of the Privy Council (JCPC) between 1998 and 2011. We demonstrate through statistical analysis that judges are likelier to suppress dissent in devolution cases, which are more political in character, than in Commonwealth appeals, which are more mundane in nature. We find that while consensus on domestic issues reflects the absence of conflict between judicial ideologies, judges have stronger conflicting positions on issues concerning devolution, but tend to suppress their propensity to dissent. This finding confirms that the Court wants to appear cohesive to give an image of greater authority on decisions of predominantly political content.
    Date: 2020–02
  5. By: Sultan Mehmood (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France); Avner Seror (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France)
    Abstract: Most enlightenment philosophers argued that the separation between Church and State would prevent capture of resources by one state religion. We formalize and test a theory that addresses a different danger. We demonstrate that a reduction in the separation between Church and State can be corrosive to political institutions, especially the Judiciary. We show that religious leaders use their high legitimacy to gain political office, and become particularly abusive politicians, misusing their political authority to undermine the independence of the Judiciary. We provide a theoretical framework and estimate the structural equations of our theory using data from Pakistan. Our empirical strategy exploits the plausibly exogenous timing of a military coup to provide causal evidence for the key predictions of our theory.
    Keywords: religion, judicial independence, elections, economic development
    JEL: K10 K40 Z12 D72
    Date: 2020–02
  6. By: Thiemo Fetzer (University of Warwick); Stephan Kyburz (Center for Global Development)
    Abstract: Can institutionalized transfers of resource rents be a source of civil conflict? Are cohesive institutions better in managing distributive conflicts? We study these questions exploiting exogenous variation in revenue disbursements to local governments together with new data on local democratic institutions in Nigeria. We make three contributions. First, we document the existence of a strong link between rents and conflict far away from the location of the actual resource. Second, we show that distributive conflict is highly organized involving political militias and concentrated in the extent to which local governments are non-cohesive. Third, we show that democratic practice in form having elected local governments significantly weakens the causal link between rents and political violence. We document that elections (vis-a-vis appointments), by producing more cohesive institutions, vastly limit the extent to which distributional conflict between groups breaks out following shocks to the available rents. Throughout, we confirm these findings using individual level survey data.
    Keywords: conflict, ethnicity, natural resources, political economy, commodity prices JEL Classification: Q33, O13, N52, R11, L71
    Date: 2018–06
  7. By: Francesco Giavazzi; Felix Iglhaut; Giacomo Lemoli; Gaia Rubera
    Abstract: We study the role of perceived threats from cultural diversity induced by terrorist attacks and a salient criminal event on public discourse and voters’ support for far-right parties. We first develop a rule which allocates Twitter users in Germany to electoral districts and then use a machine learning method to compute measures of textual similarity between the tweets they produce and tweets by accounts of the main German parties. Using the dates of the aforementioned exogenous events we estimate constituency-level shifts in similarity to party language. We find that following these events Twitter text becomes on average more similar to that of the main far-right party, AfD, while the opposite happens for some of the other parties. Regressing estimated shifts in similarity on changes in vote shares between federal elections we find a significant association. Our results point to the role of perceived threats on the success of nationalist parties.
    Date: 2020
  8. By: Robert Breunig; Anthony Wiskich; Chris Wokker
    Abstract: Using data for the 2005-2017 period, we consider the effects of resource rents on the sub-components of Freedom House’s measures of Political Rights and Civil Liberties. Higher resource rents lead to a deterioration in Political Pluralism and Participation, but do not affect other sub-components. We also consider the relationship between resource rents and aggregate measures of Political Rights and Civil Liberties between 1975 and 2015. We find no evidence that resource rents affect Political Rights or Civil Liberties. We demonstrate why our results contrast with previous literature.
    Keywords: Resource rents, human rights, state stability, civil liberties
    JEL: C33 D72 D73
    Date: 2020–02
  9. By: Rafael Galvão de Almeida (Cedeplar-UFMG)
    Abstract: Research in political business cycles is part of a larger program related to the economic analysis of politics with a macroeconomic focus, named New Political Macroeconomics. This article explores the historical evolution of the political business cycle literature, starting from the early writers on the topic (Kalecki, 1943; Åkerman, 1947). It then highlights the importance of Nordhaus (1975) for the theory. Elaborating the first theoretical model with empirical verification for the political business cycle, Nordhaus transformed a problem that was usually seen as microeconomic into a macroeconomic issue. Research flourished for a while, but the model underwent criticism because of its assumptions about voters, lack of definitive empirical verification, and because it did not conform to the tenets of rational expectations, thus causing interest in PBC models to wane. The latter went through a comeback after adapting to rational expectations (Rogoff, Siebert, 1988), and the formalization of conditional political business cycle models “solved” the problem of empirical verification, by arguing that political business cycles need specific conditions to happen. The paper concludes by reaffirming the importance of political business cycle models in creating a tradition that allowed the analysis with macroeconomic tools the issues of collective decision-making, previously a domain solely microeconomic.
    Keywords: political business cycle; political economy; public choice; new political macroeconomics; William Nordhaus
    Date: 2020–02
  10. By: Dirk Engelmann (Humboldt University Berlin); Hans Peter Gruener (University of Mannheim); Timo Hoffmann (University Erlangen-Nuremberg); Alex Possajennikov (University of Nottingham)
    Abstract: Under simple majority voting an absolute majority of voters may choose policies that are harmful to minorities. It is the purpose of sub- and super-majority rules to protect legitimate minority interests. We study how voting rules are chosen under the veil of ignorance. In our experiment, individuals choose voting rules for given distributions of gains and losses that can arise from a policy, but before learning their own valuation of the policy. We find that subjects on average adjust the voting rule in line with the skewness of the distribution. As a result, a higher share of the achievable surplus can be extracted with the suggested rules than with exogenously given simple majority voting. The rule choices, however, imperfectly reflect the distributions of benefits and costs, in expectation leading to only 63% of the surplus being extracted. Both under-protection and over-protection of minorities contribute to the loss. Voting insincerely leads to a further surplus loss of 5-15%. We classify subjects according to their rule choices and show that most subjects’ rule choices follow the incentives embedded in the distributions. For a few participants, however, this is not the case, which leads to a large part of the surplus loss.
    Keywords: Voting, Experiment
    Date: 2020–02
  11. By: Rajashri Chakrabarti; Matthew Mazewski
    Abstract: Even the most casual observer of American politics knows that today?s Republican and Democratic parties seem to disagree with one another on just about every issue under the sun. Some assume that this divide is merely an inevitable feature of a two-party system, while others reminisce about a golden era of bipartisan cooperation and hold out hope that a spirit of compromise might one day return to Washington. In this post, we present evidence that political polarization?or the trend toward more ideologically distinct and internally homogeneous parties?is not a recent development in the United States, although it has reached unprecedented levels in the last several years. We also show that polarization is strongly correlated with the extent of income inequality, but only weakly associated with the rate of economic growth. We offer several tentative explanations for these relationships, and discuss whether all forms of polarization are created equal.
    Keywords: Inequality; DW Nominate; Dyfunctionality; Polarization
    JEL: H00 E2
  12. By: Miao,Meng; Tang,Dragon Yongjun; Xu,L. Colin
    Abstract: Despite the literature on rural land property rights, studies on urban land property rights are rare. This paper studies the impact of an urban land titling program on firm investment. It finds that the program leads to increased investment rate for titling firms, and the positive effect holds only for politically connected firms. The effects are likely causal, because they are more pronounced for firms that are more likely to benefit from strengthened property rights. Connected titling firms experienced fewer disputes than nonconnected titling firms after the program, and the results remain robust when using instrumental variable estimation.
    Keywords: Judicial System Reform,Common Property Resource Development,Social Policy,Regulatory Regimes,Legislation,Legal Products,Legal Reform,Agricultural Economics,Cultural Heritage&Urban Revitalization,Foreign Trade Promotion and Regulation,Trade Law,De Facto Governments,Democratic Government,Public Sector Administrative&Civil Service Reform,Public Sector Administrative and Civil Service Reform
    Date: 2019–08–12
  13. By: Christian Thoeni; Bruno Deffains; Romain Espinosa
    Abstract: We study the manipulation of preferences over redistribution. Previous work showed that preferences over redistribution are malleable by the experience of success or failure in a preceding real-effort task. We manipulate the information subjects receive about the importance of chance relative to effort in determining success. We investigate the effect of this manipulation on (i) subjects’ redistribution choices affecting third parties, and (ii) preferences for redistributive taxation. Our results show that informing the subjects about the relative importance of chance after the real-effort task does not mitigate the self-serving bias in redistribution choices. Only providing full information
    Keywords: Redistribution, Self-serving bias, Debiasing, Experiment
    Date: 2020–02
  14. By: Victor Medeiros (Federal University of Minas Gerais); Rafael S. M. Ribeiro (Federal University of Minas Gerais)
    Abstract: A broad literature has indicated the essential role of power infrastructure in reducing income inequality. However, it is uncertain whether this relationship remains in scenarios with heterogeneities in terms of provision, quality, and access to electricity. This article intends to contribute to the literature by evaluating, in light of the Brazilian reality, how provision, quality, and the interaction between these two characteristics affects income inequality. To account for possible reverse causality problems, we apply the Generalized Method of Moments (GMM) estimators with different specifications to verify the robustness of our estimates. In a scenario where the vast majority of the population has access to electricity, our findings indicate that an expansion in power provision reduces income inequality. Nonetheless, the higher the power infrastructure quality, the smaller the returns of a growing power supply to the reduction of inequality, thus suggesting that richer populations tend to benefit the most from improvements in power quality.
    Keywords: power infrastructure; income inequality; infrastructure heterogeneities; Brazil; econometrics
    JEL: H54 D31 C21 R11
    Date: 2020–02
  15. By: Jean-Philippe Berrou (LAM - Les Afriques dans le monde - CNRS - Centre National de la Recherche Scientifique); Matthieu Clément (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); François Combarnous (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Dominique Darbon (LAM - Les Afriques dans le monde - CNRS - Centre National de la Recherche Scientifique); Kim Sa Le; Eric Rougier (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Middle class expansion in formerly poor countries has become the focus point of business groups, development banks and national governments over the latter decade. By naturalizing an income group into a social class with political agency, they misapprehend what exactly are these "people in the middle" and what exactly are their margins of influence on the economy and public policies. By combining microeconomic data on economic and social characteristics of middle income earners taken from the national representative living conditions survey and primary data on subjective perceptions of a representative sample of middle class household heads, we find that the Vietnamese middle-income earners (1) now represent a significant share of the population, (2) are strongly heterogeneous in terms of income, occupation and status, (3) comprises a large share of highly vulnerable households facing high individual risks uncovered by social protection, (4) is not a significant source of political change
    Date: 2019
  16. By: Zareh Asatryan; Annika Havlik
    Abstract: We study the political economy of allocation decisions within a major state investment bank. Our focus is the European Investment Bank (EIB) - "The Bank of the EU" - which is the largest multilateral lending (and borrowing) institution in the world. We collect (and make available) information on the regions of origin of about 500 national representatives at the EIB's Board of Directors - the decisive body for loan approvals - since its foundation in 1959 and show that a representative's appointment increases the probability of her sub-national region receiving a loan by about 17 percentage points. This "home-bias" effect is driven by large loans financing infrastructure projects. We provide several pieces of evidence, which are consistent with the hypothesis that home-bias lending may lead to resource misallocation, however we cannot conclusively demonstrate this case of economic inefficiency.
    Date: 2020

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