nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒05‒18
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. High Finance, Political Money, and the U.S. Congress: A Quantitative Assessment of the Campaign to Roll Back Dodd-Frank By Thomas Ferguson; Paul Jorgenson; Jie Chen
  2. Positive Spillovers from Negative Campaigning By Vincenzo Galasso; Tommaso Nannicini; Salvatore Nunnari
  3. Corruption Experiences and Attitudes to Political, Interpersonal, and Domestic Violence By Gillanders, Robert; van der Werff, Lisa
  4. Private Credit under Political Influence: Evidence from France By Anne-Laure Delatte; Adrien Matray; Noémie Pinardon-Touati
  5. Market income inequality, left-wing political parties, and redistribution in Latin America By Branko MILANOVIC
  6. Political referenda and investment: evidence from Scotland By Azqueta-Gavaldon, Andres
  7. Explaining Governors' Response to the COVID-19 Pandemic in the United States By Baccini, Leonardo; Brodeur, Abel
  8. Moral reputation and political selection in a decentralized democracy: Theory and evidence from India By Prasenjit Banerjee; Vegard Iversen; Sandip Mitra; Antonio Nicolò; Kunal Sen
  9. Attitude towards Immigrants: Evidence from U.S. Congressional Speeches By Bose, Neha

  1. By: Thomas Ferguson (Institute for New Economic Thinking); Paul Jorgenson (University of Texas Rio Grande Valley); Jie Chen (UMass Boston)
    Abstract: The extent to which governments can resist pressures from organized interest groups, and especially from finance, is a perennial source of controversy. This paper tackles this classic question by analyzing votes in the U.S. House of Representatives on measures to weaken the Dodd-Frank financial reform bill in the years following its passage. To control as many factors as possible that could influence floor voting by individual legislators, the analysis focuses on representatives who originally cast votes in favor of the bill but then subsequently voted to dismantle key provisions of it. This design rules out from the start most factors normally advanced by skeptics to explain vote shifts, since these are the same representatives, belonging to the same political party, representing substantially the same districts. Our panel analysis, which also controls for spatial influences, highlights the importance of time-varying factors, especially political money, in moving representatives to shift their positions on amendments such as the “swaps push out†provision. Our results suggest that the links between campaign contributions from the financial sector and switches to a pro-bank vote were direct and substantial: For every $100,000 that Democratic representatives received from finance, the odds they would break with their party’s majority support for the Dodd-Frank legislation increased by 13.9 percent. Democratic representatives who voted in favor of finance often received $200,000–$300,000 from that sector, which raised the odds of switching by 25–40 percent.
    Keywords: banking and financial regulation, political economy, financial crisis, political parties, political money.
    JEL: G20 L5 N22 D72 G38 P16 K22
    Date: 2020–01
  2. By: Vincenzo Galasso; Tommaso Nannicini; Salvatore Nunnari
    Abstract: Negative advertising is frequent in electoral campaigns, despite its ambiguous effectiveness: negativity may reduce voters’ evaluation of the targeted politician but have a backlash effect for the attacker. We study the effect of negative advertising in electoral races with more than two candidates with a large scale field experiment during an electoral campaign for mayor in Italy and a survey experiment in a fictitious mayoral campaign. In our field experiment, we find a strong, positive spillover effect on the third main candidate (neither the target nor the attacker). This effect is confirmed in our survey experiment, which creates a controlled environment with no ideological components nor strategic voting. The negative ad has no impact on the targeted incumbent, has a sizable backlash effect on the attacker, and largely benefits the idle candidate. The attacker is perceived as less cooperative, less likely to lead a successful government, and more ideologically extreme. Keywords: Electoral Campaign, Political Advertisement, Randomized Controlled Trial, Field Experiment, Survey Experiment. JEL Codes: D72, C90, M37.
    Date: 2020
  3. By: Gillanders, Robert; van der Werff, Lisa
    Abstract: It is well understood that corruption can change the incentives to engage in political violence. However, the scope for corruption to change attitudes towards the permissibility of violence has received less attention. Drawing on Moral Foundations Theory, we argue that experiences of corruption in the social environment are likely to shape individual attitudes towards violent behavior. Using data from the Afrobarometer, we document a statistically significant and sizable relationship between an individual’s experience of paying bribes and their attitudes to political, interpersonal, and domestic violence. These relationships are evident for both men and women and, with the exception of women’s attitudes to domestic violence, are robust to the inclusion of variables capturing the local incidence of corruption, local norms regarding violence, and a proxy for the local incidence of violence with the community. We find that corruption is associated with permissive attitudes to violence even after controlling for the perceived legitimacy of the police and courts.
    Keywords: Corruption; Bribery; Violence; Political Violence; Revenge; Domestic Violence; sub-Saharan Africa
    JEL: D73 D74 J16 O1
    Date: 2020–04–29
  4. By: Anne-Laure Delatte; Adrien Matray; Noémie Pinardon-Touati
    Abstract: Formally independent private banks change their supply of credit to the corporate sector for the constituencies of contested political incumbents in order to improve their reelection prospects. In return, politicians grant such banks access to the profitable market for loans to local public entities among their constituencies. We examine French credit registry data for 2007--2017 and find that credit granted to the private sector increases by 9%--14% in the year during which a powerful incumbent faces a contested election. In line with politicians returning the favor, banks that grant more credit to private firms in election years gain market share in the local public entity debt market after the election is held. Thus we establish that, if politicians can control the allocation of rents, then formal independence does not ensure the private sector's effective independence from politically motivated distortions.
    Keywords: politics and banking;moral suasion;local government financing
    JEL: G21 G30 H74 H81
    Date: 2020–04
  5. By: Branko MILANOVIC
    Abstract: The paper uses household-level data from more than 200 household income surveys from 20 Latin American and Caribbean countries to explore the (revised) median voter hypothesis and the political determinants of the recent decrease of Latin American inequality. We find that more unequal market-income countries, and greater market-income inequality within a given country, are associated with greater pro-poor redistribution, although such redistribution is rather weak in Latin America compared to the economically advanced countries. We also find that more pro-left political orientation of national legislatures has been associated with greater redistribution. We thus argue that there are political roots to the recent decrease of inequality in Latin America.
    Keywords: Amérique latine
    JEL: Q
    Date: 2019–06–12
  6. By: Azqueta-Gavaldon, Andres
    Abstract: We present evidence that referenda have a significant, detrimental outcome on investment. Employing an unsupervised machine learning algorithm over the period 2008-2017, we construct three important uncertainty indices underlying reports in the Scottish news media: Scottish independence (IndyRef)-related uncertainty; Brexit-related uncertainty; and Scottish policy-related uncertainty. Examining the relationship of these indices with investment on a longitudinal panel of 3,589 Scottish firms, the evidence suggests that Brexit-related uncertainty associates more strongly than IndyRef -related uncertainty to investment. Our preferred specification suggests that a one standard-deviation increase in Brexit uncertainty foreshadows a reduction in investment by 8% on average in the following year. Besides we find that the uncertainty associated with the Scottish referendum for independence while negligible at the aggregate level, relates more strongly with the investment of listed firms as well as those operating on the border with England. In addition, we present evidence of greater sensitivity to these indices among firms that are financially constrained or whose investment is to a greater degree irreversible. JEL Classification: C80, D80, E22, E66, G18, G31
    Keywords: investment, machine learning, political uncertainty, textual-data
    Date: 2020–05
  7. By: Baccini, Leonardo (McGill University); Brodeur, Abel (University of Ottawa)
    Abstract: What is the response of US governors to the COVID-19 pandemic? In this research note, we explore the determinants of implementing stay-at-home orders, focusing on governors' characteristics. In our most conservative estimate, being a Democratic governor increases the probability of implementing a stay-at-home order by more than 50 percent. Moreover, we find that the probability of implementing a statewide stay-at-home order is about 40 percent more likely for governors without a term limit than governors with a term limit. We also find that Democratic governors and governors without a term limit are significantly faster to adopt statewide orders than Republican governors and governors with a term limit. There is evidence of politics as usual in these unusual times.
    Keywords: COVID-19, pandemic, ideology, governors, United States
    JEL: H51 I15 P16
    Date: 2020–04
  8. By: Prasenjit Banerjee; Vegard Iversen; Sandip Mitra; Antonio Nicolò; Kunal Sen
    Abstract: What motivates individuals to become politicians? This is an important question in decentralized democracies, where local politicians play a key role in public goods provision. However, and in emerging economies, bureaucratic hurdles and administrative failures introduce uncertainty about the returns to a politician's effort towards public goods provision. This paper presents a theoretical enquiry of political selection in the presence of such uncertainty.
    Keywords: Politician, experiments, intrinsic motivation, reputation, India
    Date: 2020
  9. By: Bose, Neha (University of Warwick)
    Abstract: Immigration and attitudes towards immigration have been key features in economic development and political debate for decades. It can be hard to disentangle true beliefs about immigrants even where we have seemingly strong evidence such as the voting records of politicians. This paper builds an "immigration corpus" consisting of 24,351 U.S. congressional speeches relevant to immigration issues between 1990-2015. The corpus is used to form two distinct measures of attitude towards immigrants - one based on sentiment (or valence) and one based on the concreteness of language. The lexical measures, particularly sentiment, show systematic variation over time and across states in a manner consistent with the history and experiences of immigrants in the USA. The paper also computes a speaker specific measure of sentiment towards immigrants which is found to be a significant positive predictor of voting behaviour with respect to immigration related bills. Applying a Latent Dirichlet Allocation (LDA) topic modelling algorithm provides further insight into how different topics (such as border security or national security) have risen and fallen in importance over time in the face of key events such as 9/11.
    Date: 2020

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.