nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒03‒23
seven papers chosen by
Eugene Beaulieu
University of Calgary

  1. General or Central Government? Empirical Evidence on Political Cycles in Budget Composition Using New Data for OECD Countries By Niklas Potrafke
  2. Does the Winner Take It All? Redistributive Policies and Political Extremism By Gianmarco Daniele; Amedeo Piolatto; Willem Sas
  3. Palm oil and the politics of deforestation in Indonesia By Cisneros Tersitsch, Marco Elías; Kis-Katos, Krisztina; Nuryartono, Nunung
  4. Terrorist Attacks, Cultural Incidents and the Vote for Radical Parties: Analyzing Text from Twitter By Francesco Giavazzi; Felix Iglhaut; Giacomo Lemoli; Gaia Rubera
  5. Conditional Political Budget Cycles: A Reconsideration of the Role of Economic Development By Kyriacou, Andreas P.; Okabe, Tomohito; Roca-Sagalés, Oriol
  6. Income Taxation and the Diversity of Consumer Goods: A Political Economy Approach By Renaud Bourlès; Michael Dorsch; Paul Maarek
  7. Religion, Politics, and Judicial Independence: Theory and Evidence By Sultan Mehmood; Avner Seror

  1. 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, budget composition, partisan politics, government ideology, electoral cycles, OECD countries, panel data models
    JEL: D72 D78 E60 H30 H50 C23 P16
    Date: 2020
  2. By: Gianmarco Daniele; Amedeo Piolatto; Willem Sas
    Abstract: In this paper, we argue that regional heterogeneity of underlying fundamentals -such as economic history, geography or natural resources- can lead to extreme voting in federal systems of government. The outcome of higher-level (federal) policies often depends on these fundamentals, meaning some regions will always benefit from the policy whilst others lose out. In our model, voters have an incentive to stack this kind of redistribution in their favour, using the regional ties of politicians as a strategic link. The median voter therefore elects federal representatives that are extremely protective of their own region's interests. We find that the incentive to select such a tough negotiator survives the pressure to belong to the ruling coalition. We test our predictions by looking at the performance of parties at national and European Parliament elections since 1990. We indeed observe that such strategic voting behaviour is U-shaped on the "losing-winning from the policy" dimension. Our online survey provides further evidence.
    Keywords: strategic delegation, interregional redistribution, political extremism, federalism, bargaining, coalitions, EU elections, euroscepticism, populism
    JEL: H6 H71 H74 H77
    Date: 2020–02
  3. By: Cisneros Tersitsch, Marco Elías; Kis-Katos, Krisztina; Nuryartono, Nunung
    Abstract: This paper studies the interactions between political and economic incentives to foster forest conversion in Indonesian districts. Using a district-level panel data set from 2001 to 2016, we analyze variation in remotely sensed forest loss and forest fires as well as measures of land use licensing. We link these outcomes to economic incentives to expand oil palm cultivation areas as well as political incentives arising before idiosyncratically-timed local mayoral elections. Empirical results document substantial increases in deforestation and forest fires in the year prior to local elections. Additionally, oil palm plays a crucial role in driving deforestation dynamics. Variations in global market prices of palm oil are closely linked to deforestation in areas which are geo-climatically best suited for growing oil palm and they amplify the importance of the political cycle. We thus find clear evidence for economic and political incentives reinforcing each other as drivers of forest loss and land conversion for oil palm cultivation.
    Keywords: deforestation,palm oil,local election cycles,Indonesia
    JEL: O13 Q15 Q56 P16
    Date: 2020
  4. 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.
    JEL: C45 D72 H56
    Date: 2020–03
  5. By: Kyriacou, Andreas P.; Okabe, Tomohito; Roca-Sagalés, Oriol
    Abstract: We revisit work that has indicated that the presence and strength of Political Budget Cycles depends on a range of conditioning factors. We focus on the mediating effect of economic development. Our results, based on a sample of up to 67 developing and developed countries over the period 1995 to 2016, indicate that budget cycles emerge in countries with a GDP per capita below a threshold ranging from 21,000 to 25,000 U.S. dollars. To explain this we suggest that GDP per capita may be capturing for the effect of time preference. Specifically, in relatively poorer countries, high discount rates will lead voters to value immediate consumption over the future costs from fiscally irresponsible policies. This goes beyond previous explanations of budget cycles based on voters with short memories who underestimate the costs of expansionary policies, voters with little experience with democracy or voters who are poorly informed about the competence or policy preferences of political candidates.
    Keywords: Political budget cycles, conditional effect, economic development, time preference
    JEL: D72 H62 O10
    Date: 2020–03
  6. By: Renaud Bourlès (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Michael Dorsch (CEU - Central European University); Paul Maarek (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - UP2 - Université Panthéon-Assas - Sorbonne Universités)
    Abstract: After‐tax income inequality has risen since the mid‐1990s, as increases in market income inequality have not been offset by greater fiscal redistribution. We argue that the substantial increase in the diversity of consumer goods has mitigated mounting political pressures for redistribution. Within a probabilistic voting framework, we demonstrate that if the share of diversified goods in the consumption bundle increases sufficiently with income, then an increase in goods diversity can reduce the political equilibrium tax rate. Focusing on OECD countries, we find empirical support for both the model's micro‐political foundations and the implied relation between goods diversity and fiscal policy outcomes.
    Keywords: Redistribution,Probabilistic voting,Variety,Non-homothetic preferences,Panel data
    Date: 2019–07
  7. By: Sultan Mehmood (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Avner Seror (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    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
    Date: 2020–02–13

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.