nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒04‒27
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Impact of Information on Voters Perceptions and Electoral Behavior: A Randomized Controlled Experiment By Bruno Carvalho; Claudia Custodio; Benny Geys; Diogo Mendes; Susana Peralta
  2. Do EU Fiscal Rules Support or Hinder Counter-Cyclical Fiscal Policy? By Martin Larch; Eloise Orseau; Wouter Van Der Wielen
  3. Parents, Infants, and Voter Turnout By Angela Cools
  4. Stop invasion! The electoral tipping point in anti-immigrant voting. By Massimo Bordignon; Matteo Gamalerio; Edoardo Slerca; Gilberto Turati
  5. Connecting to Power: Political Connections, Innovation, and Firm Dynamics By Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
  6. Political Networks across the Globe By Commander, Simon; Poupakis, Stavros
  7. The political economy of economic policy in Iraq By Hamilton, Alexander
  8. Does trust associate with political regime? By Daniel Horn; Hubert Kiss Janos; Sára Khayouti
  9. Globalization for Sale By Michael Blanga Gubbay; Paola Conconi; Mathieu Parenti
  10. Female Political Representation and Substantive Effects on Policies: A Literature Review By Hessami, Zohal; Lopes da Fonseca, Mariana

  1. By: Bruno Carvalho; Claudia Custodio; Benny Geys; Diogo Mendes; Susana Peralta
    Abstract: We study the impact of information about central government on voters’ perception of government performance and subsequent voting behavior. We randomly expose voters to media articles with positive, neutral or negative information about government policy actions prior to the 2017 Portuguese local elections. We find that treated voters update their perceptions about the incumbent. This update is more pronounced among voters exposed to negative news (negativity bias), first-time voters, and individuals who report a lower interest in politics. We do not find evidence of an average treatment effect on voting behaviour. However, we find that, when exposed to negative information, initially undecided voters are more likely to cast a blank vote, to abstain or to vote for opposition parties. Overall, our findings suggest that voters’ sensitivity to information is heterogeneous and depends on the level of education and political awareness.
    Keywords: Media, Information; Negativity Bias; Performance Perception; Local Elections
    JEL: D72 D83 H11 H70
    Date: 2020–04
  2. By: Martin Larch; Eloise Orseau; Wouter Van Der Wielen (European Commission - JRC)
    Abstract: Rather than stabilising aggregate demand, discretionary fiscal policy tends to amplify cyclical fluctuations of output. The commonly accepted reasons are political economy and uncertainty. In the EU, the pro-cyclical nature of discretionary fiscal policy has also been associated with the commonly agreed fiscal rules, which, for some observers, unduly limit the scope for stabilising output. Using panel data covering close to 50 EU and non-EU countries, we provide evidence that the uncertainty around output gap estimates is not a convincing explanation for pro-cyclical policies. Discretionary measures remain ill-timed from a stabilisation perspective even when observable and politically more meaningful indicators of the cycle are used. We also show that deviations from fiscal rules and the accumulation of government debt foster pro-cyclical fiscal policy. Lawmakers can run discretionary fiscal policy measures based on political economy considerations up to a point. Once debt grows too high, they are forced to implement fiscal consolidation measures regardless of the cycle. More generally, there is no fiscal rule, which, if consistently ignored, safeguards the opportunity to stabilise output with discretionary fiscal policy measures. Complying with fiscal rules that are designed to keep a steady course in the face of cyclical fluctuation is conducive to counter-cyclical fiscal policy making.
    Keywords: fiscal policy, fiscal rules, fiscal stabilisation, counter-cyclical policy, dynamic panel models
    JEL: C23 E61 E62 H30 H60
    Date: 2020–04
  3. By: Angela Cools (Department of Economics, Davidson College)
    Abstract: Despite evidence that infants affect families' economic and social behaviors, little is known about how young children influence their parents' political engagement. I show that U.S. women with an infant during an election year are 3.5 percentage points less likely to vote than women without children; men with an infant are 2.3 percentage points less likely to vote. Suggesting that this e ect may be causal, I find no significant decreases in turnout the year before parents have an infant. Using a triple-di erence approach, I then show that vote-by-mail systems mitigate the negative association between infants and mothers' turnout.
    Keywords: voter turnout, gender gap, life transitions
    JEL: D10 D72 J13
    Date: 2020–04
  4. By: Massimo Bordignon (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Matteo Gamalerio; Edoardo Slerca; Gilberto Turati
    Abstract: Why do anti-immigrant political parties have more success in areas that host fewer immigrants? Using regression discontinuity design, structural breaks search methods and data from a sample of Italian municipalities, we show that the relationship between the vote shares of anti-immigrant parties and the share of immigrants follows a U-shaped curve, which exhibits a tipping-like behavior around a share of immigrants equal to 3.35 %. We estimate that the vote share of the main Italian anti-immigrant party (Lega Nord) is approximately 6 % points higher for municipalities below the threshold. Using data on local labor market characteristics and on the incomes of natives and immigrants, we provide evidence which points at the competition in the local labor market between natives and immigrants as the more plausible explanation for the electoral success of anti-immigrant parties in areas with low shares of immigrants. Alternative stories find less support in the data.
    Keywords: Migration, extreme-right parties, anti-immigrant parties, populism, tipping point, regression discontinuity design.
    JEL: D72 J61 R23
    Date: 2020–03
  5. By: Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
    Abstract: How do political connections affect firm dynamics, innovation, and creative destruction? To answer this question, we build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model generates a number of theoretical testable predictions and highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity. We test the predictions of our model using a brand-new dataset on Italian firms and their workers. Our dataset spans the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data, (ii) social security data on the universe of workers, (iii) patent data from the European Patent Office, (iv) the national registry of local politicians, and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: when compared to their competitors, market leaders are much more likely to be politically connected but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity—a result that we also confirm using a regression discontinuity design.
    Keywords: political connections; productivity; innovation; firm dynamics; creative destruction
    JEL: O30 O43
    Date: 2020–04–17
  6. By: Commander, Simon (IE Business School, Altura Partners); Poupakis, Stavros (University of Oxford)
    Abstract: Political networks are an important feature of the political and economic landscape of countries. Despite their ubiquity and significance, information on such networks has proven hard to collect due to a pervasive lack of transparency. However, with the advent of big data and artificial intelligence, major financial services institutions are now actively collating publicly available information on politically exposed persons and their networks. In this study, we use one such data set to show how network characteristics vary across political systems. We provide results from more than 150 countries and show how the format of the network tends to reflect the extent of democratisation of each country. We also outline further avenues for research using such data.
    Keywords: political networks, rent-seeking, democratic consolidation
    JEL: D72 H11 P26 P36 N44
    Date: 2020–03
  7. By: Hamilton, Alexander
    Abstract: Since 2003, despite an abundance of resources and a more pluralistic political settlement, Iraq’s economic reform process has failed to take off. This paper explores the link between the evolution and consolidation of Iraq’s post-2003 political settlement and the way this has impacted the incentives decision-makers face when implementing economic policy. Paradoxically, the fact that the settlement has accommodated more groups than its repressive predecessor has not resulted in more inclusive, long-term oriented and programmatic economic decision-making. This is because the inclusion of more (elite) groups reflects the fact that more actors can now generate violence if they are not placated with state-generated rents. Consequently, Iraq’s political transition has exacerbated incentives for decision-makers to pursue more short-termist policies that have diverted resources away from long-term productive investments and reconstruction, and towards a focus on satisfying ethnic and religious clientelist networks. Transitioning away from this modus operandi will require patient and opportunistic economic reforms that slowly create new pressures on political actors to support the delivery of public goods and a policy environment more conducive to private sector growth.
    JEL: N0
    Date: 2020–03
  8. By: Daniel Horn (Centre for Economic and Regional Studies and Corvinus University of Budapest); Hubert Kiss Janos (Centre for Economic and Regional Studies and Corvinus University of Budapest); Sára Khayouti (University of Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands)
    Abstract: Since trust correlates with economic development and in turn economic development associates with political regime, we conjecture that there may be a relationship between trust and political regime. We investigate if trust aggregated on the country level correlates with the political regime. We do not find any significant association, with or without taking into account other factors (e.g. regional location, economic development, geographic conditions, culture) as well.
    Keywords: political regime, trust
    JEL: D02 D12
    Date: 2020–02
  9. By: Michael Blanga Gubbay; Paola Conconi; Mathieu Parenti
    Abstract: We study the role of firms in the political economy of trade agreements. Using detailed information from lobbying reports filed under the Lobbying Disclosure Act, we find that virtually all firms that lobby on free trade agreements (FTAs) support their ratification. Moreover, relative to non-lobbying firms, lobbying firms are larger, and more likely to be engaged in international trade and to operate in comparative advantage sectors. To rationalize these findings, we develop a model in which heterogeneous firms decide whether to lobby and how much to spend in favor or against a proposed FTA. We show that the distributional effects are asymmetric: the winners from the FTA have higher stakes in the agreement than the losers, which explains why only pro-FTA firms select into lobbying. The model also delivers predictions on the intensive margin of lobbying. In line with these predictions, we find that firms spend more supporting agreements that generate larger potential gains in terms of the extent of the reduction of tariffs on their final goods and intermediate inputs, the depth of the agreement, and the export and sourcing potential of the FTA partners and when politicians are less likely to be in favor of ratification.
    Keywords: Trade agreements; endogeneous lobbying; heterogeneous firms
    JEL: F13 F53 F61
    Date: 2020–04
  10. By: Hessami, Zohal (Ruhr University Bochum); Lopes da Fonseca, Mariana (University of St. Gallen)
    Abstract: The share of women in political offices has increased considerably over the past few decades in almost every country in the world. Does this matter for policy outcomes? This is the first paper to provide a literature review on the substantive effects of female representation on policies. In developing countries, the increase in female political representation has caused a better provision of public goods, especially with regard to education and health. In developed countries, higher female representation has not affected public policies as measured by spending patterns. However, more recent evidence shows that female representation has induced changes in parliamentary deliberations and specific policy choices (e.g. more public child care) that may not be reflected in the observable composition of public spending. Finally, higher female representation has improved institutional quality by reducing corruption and rent-extraction by those in power.
    Keywords: female politicians, gender, political selection, policy preferences, policy choices
    JEL: D78 H00 J16 J18
    Date: 2020–04

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