nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒06‒08
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Strategic Voting in Two-Party Legislative Elections By Hughes, Niall
  2. On the Structure of the Political Party System in Indian States, 1957 - 2013 By J. Stephen Ferris; Bharatee Bhusana Dash
  3. Election systems, the “beauty premium” in politics, and the beauty of dissent By Niklas Potrafke; Marcus Rösch; Heinrich Ursprung
  4. Gender voting gap in the dawn of urbanization: evidence from a quasi-experiment with Greek special elections By Georgios Efthyvoulou; Pantelis Kammas; Vassilis Sarantides
  5. Political Parties and Policy Outcomes. Do Parties Block Reforms? By Dotti, Valerio
  6. Electoral Democracy at Work By Askenazy, Philippe; Breda, Thomas
  7. Accountability and Grand Corruption By Cesar Martinelli
  8. Local Trade Shocks and the Nationalist Backlash in Political Attitudes: Panel Data Evidence from Great Britain By Nils D. Steiner; Philipp Harms
  9. Political Competition and State Capacity Evidence from a Land Allocation Program in Mexico By Leopoldo Fergusson, Horacio Larreguy y Juan Felipe Riañostate capacity, political competition, land allocation; Horacio Larreguy; Juan Felipe Riaño
  10. From Finance to Fascism By Doerr, Sebastian; Gissler, Stefan; Peydró, José-Luis; Voth, Hans-Joachim
  11. The political economy of negotiating international carbon markets By Arvaniti, Maria; Habla, Wolfgang

  1. By: Hughes, Niall
    Abstract: It is commonly thought that in an election with two parties there can be no strategic voting - voters simply vote for their preferred candidate. In this paper, I show that strategic voting comes to the fore in legislative elections with multiple policy dimensions. In sharp contrast to single-district elections, the intensity of a voter’s preference on each dimension is irrelevant for her voting decision. Instead, she votes solely based on the dimension which is most likely to be pivotal in the legislature. Anticipating this behaviour, candidates put forward a different set of policies than they would in a single-district election. For large elections I show that the implemented policy bundle: (a) is uniquely pinned down by voter preferences, (b) is preferred by a majority of districts on each dimension, (c) is a Condorcet winner, if one exists. These properties are not guaranteed in a single-district election. Furthermore, I show that (i) parliamentary systems generate superior policies to presidential systems and (ii) voter polarisation affects outcomes in single-district elections but not legislative elections.
    Keywords: Strategic Voting, Legislative Elections, Multi-dimensional Policy, Pivotal Voting, Plurality Rule, Large Elections
    JEL: C72 D72 D78
    Date: 2020–04–30
  2. By: J. Stephen Ferris (Department of Economics, Carleton University); Bharatee Bhusana Dash (Xavier School of Economics, Xavier University)
    Abstract: What accounts for the large and ever-changing number of political parties that contest Indian state elections? In this paper we examine this question by testing an equilibrium model of political party numbers where the number of parties depend on the average size of state constituencies, voter turnout, the heterogeneity of the state’s electorate, constitutional and legislative rules that directly affect party numbers and per capita state incomes while controlling for a series of discrete political events that have influenced political parties. The analysis compares this model with one explaining the effective number of parties (ENP) and extends the analysis to consider the effect of political factors such as the openness and competitiveness of the upcoming election on the timing of the decision of political parties to enter and exit (and thus the rate of political party turnover). The analysis is further extended by allowing the level of development to interact with their party structures.
    Keywords: number of political parties; Indian states; entry and exit of political partie; ENP; fixed effects poisson panel estimation
    JEL: D72 D73 P16 H70
    Date: 2020–05–06
  3. By: Niklas Potrafke (University of Munich); Marcus Rösch (Erasmus University Rotterdam); Heinrich Ursprung (University of Konstanz)
    Abstract: We ask three questions. First, do election systems differ in how they translate physical attractiveness of candidates into electoral success? Second, do political parties strategically exploit the “beauty premium” when deciding on which candidates to nominate, and, third, do elected MPs use their beauty premium to reap some independence from their party? Using the German election system that combines first-past-the-post election with party-list proportional representation, our results show that plurality elections provide more scope for translating physical attractiveness into electoral success than proportional representation. Whether political parties strategically use the beauty premium to optimize their electoral objectives is less clear. Physically attractive MPs, however, allow themselves to dissent more often, i.e. they vote more often against the party line than their less attractive peers.
    Keywords: attractiveness of politicians, safe district, party strategies, electoral success, electoral system
    JEL: J70 D72 J45
    Date: 2020–05–24
  4. By: Georgios Efthyvoulou; Pantelis Kammas; Vassilis Sarantides
    Abstract: The electoral law of 31 May 1952 extended the voting rights to all adult women in Greece. This paper examines the impact of womenÕs enfranchisement on party vote shares by employing a unique dataset of 385 communities located in seven prefectures in Greece where by-elections took place in 1953 and 1954 (for strictly exogenous reasons). To estimate causal effects, we exploit the observed heterogeneity in the proportion of women in the electorate across communities as the identifying source of variation, and employ a difference-in-differences design that holds unobserved local characteristics fixed. Our results provide strong evidence in favour of the Òtraditional gender voting gapÓ (women voting more conservatively compared to men) in the urban prefecture of Thessaloniki, and no evidence of gender voting differences in the remaining (six) predominantly rural prefectures of our sample. Our results also reveal that the existence of a gender voting gap is highly conditional upon the proportion of economically inactive women; that is, women tend to vote for right parties when they are outside of the labour force. Interestingly, when we account for this conditionality, a suffrage-induced pro-right shift can also be observed in communities outside Thessaloniki. Building on the economic bargaining models of the family, we argue that, in an economic environment characterized by limited demand for female labour force participation, women support more vigorously the sanctity and the strength of family values and tend to vote more conservatively compared to men.
    Keywords: womenÕs suffrage; political preferences; womenÕs labour market participation
    Date: 2020–03
  5. By: Dotti, Valerio
    Abstract: I propose a model of legislative bargaining among endogenous political parties over multiple policy dimensions. I provide a characterization of (i) the partition of the legislature into parties, (ii) the policy reforms that parties propose (if any), and (iii) the policy outcome attained from these proposals. I show that - depending on the position of the status quo - either (1) the presence of parties does not affect the policy outcome and a median voter theorem holds, or (2) a party representing legislators with extreme and opposite political views - i.e., a coalition of extremes - can successfully block reforms that would be feasible if parties did not exist. Lastly, I show that the extent to which the existence of parties can increase the set of possible policy reforms is severely limited or null.
    Keywords: Multidimensional policy space, Political parties, Policy reforms
    JEL: C71 D72
    Date: 2019–10–23
  6. By: Askenazy, Philippe (CNRS); Breda, Thomas (Paris School of Economics)
    Abstract: We show that an institutional change designed expressly to heighten competition for the provision of union services can have a substantial effect on unionization and employment relations. We study a French reform of 2008 that introduced mandatory elections for representation of workers at firm, industry and national levels, putting an end to the oligopoly held until then by five historically established unions. Exploiting random variation in the reform's date of application in different private sector workplaces, we find that the reform increased union membership by around 8 percentage points and employers' trust in unions by 45 percent of a standard deviation. The reform also increased workers' trust in unions and the frequency of labor conflicts in manufacturing. Taken together, the results suggest that regular free elections can be an effective way to foster participation in unions and workers' ability to voice concerns, while at the same time making unions more legitimate bargaining partners for employers.
    Keywords: union representativeness, democracy, unionization, social capital
    JEL: J51 J52 J58
    Date: 2020–05
  7. By: Cesar Martinelli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: We propose a model of political careers and electoral accountability, in an environment in which politicians may take bribes at different stages of their careers, and in which politicians actions are only imperfectly observed by voters. Our model throws light on relatively unexplored dynamic effects of corruption on politician selection. In particular, we show that the expectation of promotion to higher office may motivate some politicians to behave worse at the latest stages of their careers, thus setting off a trade-off between providing incentives for good behavior at lower office and selecting better politicians for higher office. We also show that the optimal design of rewards for higher office has a simple bang-bang structure-optimal rewards focus either on stamping corruption at lower office, or on improving selection at the higher office. If rewards are set optimally, a more intense competition for higher office benefits voters, but better quality of information about bribe-taking does not unambiguously benefit voters.
    Date: 2020–05
  8. By: Nils D. Steiner (Johannes Gutenberg University); Philipp Harms (Johannes Gutenberg University)
    Abstract: Is opposition to globalization rooted in economic transformations caused by international trade? To contribute to the ongoing debate on this question, we propose a “nationalist backlash” thesis and test it with panel data on individual political attitudes. We argue that individuals living in regions suffering from stronger import competition develop more nationalist attitudes as part of a broad counter-reaction to globalization. Our analysis of data from the British Household Panel Study (BHPS) finds that respondents from regions exposed to higher imports from low-wage countries – in particular, China – turn more critical of EU membership and international cooperation. Moreover, on an affective level, their nationalist sentiments increase. In contrast, there is no evidence that regional trade shocks cause economic policy orientations to shift leftwards. We thus document a direct individual-level response to import shocks in the form of rising nationalist attitudes that helps to explain these shocks’ aggregate electoral consequences in terms of increased vote shares for the radical right.
    Keywords: China shock; globalization; import competition; international trade; nationalism; political attitudes; EU support; panel data.
    JEL: C90 D01 D90 D91
    Date: 2020–05–22
  9. By: Leopoldo Fergusson, Horacio Larreguy y Juan Felipe Riañostate capacity, political competition, land allocation; Horacio Larreguy; Juan Felipe Riaño
    Abstract: Abstract We develop a model of the politics of state capacity building undertaken by incumbent parties that have a comparative advantage in clientelism rather than in public goods provision. The model predicts that, when challenged by opponents, clientelistic incumbents have the incentive to prevent investments in state capacity. We provide empirical support for the model’s implications by studying policy decisions by the Institutional Revolutionary Party (PRI) that affected local state capacity across Mexican municipalities and over time. Our difference-in-differences and instrumental variable identification strategies exploit a national shock that threatened the Mexican government’s hegemony in the early 1960s. The intensity of this shock, which varied across municipalities, was partly explained by severe droughts that occurred during the 1950s.
    Keywords: state capacity, political competition, land allocation
    JEL: D72 D73 Q15
    Date: 2020–05–22
  10. By: Doerr, Sebastian; Gissler, Stefan; Peydró, José-Luis; Voth, Hans-Joachim
    Abstract: Do financial crises radicalize voters? We study Germany’s banking crisis of 1931, when two major banks collapsed and voting for radical parties soared. We collect new data on bank branches and firm-bank connections of 5,610 firms. Incomes plummeted in cities affected by the bank failures; connected firms curtailed payrolls. Nazi votes surged in locations exposed to Danatbank, led by a Jewish manager – but not in those suffering from the other bank’s failure. Unobservables or pre-trends do not explain the results. Danatbank’s collapse boosted Nazi support, especially in cities with deep-seated anti-Semitism, suggesting a synergy between cultural and economic channels.
    Keywords: financial crises,political extremism,populism,anti-Semitism,Great Depression
    JEL: E44 G01 G21 N20 P16
    Date: 2020
  11. By: Arvaniti, Maria; Habla, Wolfgang
    Abstract: International carbon markets are frequently propagated as an efficient instrument for reducing CO2 emissions. We argue that such markets, despite their desirable efficiency properties, might not be in the best interest of governments who are guided by strategic considerations in negotiations. We identify the circumstances under which governments benefit or are harmed by cooperation in the form of an international market. Our results challenge the conventional wisdom that an international market is most beneficial for participating countries when they have vastly diverging marginal abatement costs; rather, it may be more promising to negotiate agreements with non-tradable emissions caps.
    Keywords: cooperative climate policy,political economy,emissions trading,linking of permit markets,strategic delegation,strategic voting
    JEL: D72 H23 H41 Q54 Q58
    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.