nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒06‒15
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Information Disclosure in Elections with Sequential Costly Participation By Dmitriy Vorobyev
  2. Electoral Intermediaries By Gallego, Jorge; Li, Christopher; Wantchekon, Leonard
  3. On the political economy of income taxation By Berliant, Marcus; Gouveia, Miguel
  4. Election Systems, the “Beauty Premium” in Politics, and the Beauty of Dissent By Niklas Potrafke; Marcus Rösch; Heinrich Ursprung
  5. Is heightened political uncertainty priced in stock returns? Evidence from the 2014 Scottish independence referendum By Julia Darby; Jun Gao; Siobhan Lucey; Sheng Zhu
  6. The Relationship between In-Person Voting, Consolidated Polling Locations, and Absentee Voting on Covid-19: Evidence from the Wisconsin Primary By Chad D. Cotti; Bryan Engelhardt; Joshua Foster; Erik T. Nesson; Paul S. Niekamp
  7. Influential News and Policy-making By Vaccari, Federico
  8. Understanding Free Trade Attitudes: Evidence from Europe By Martin Braml; Gabriel Felbermayr
  9. Extreme events, ex post renegotiation and vagueness of campaign promises By Elena Manzoni

  1. By: Dmitriy Vorobyev (Graduate School of Economics and Management, Ural Federal University, Yekaterinburg, Russia; CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences, Prague, Czech Republic)
    Abstract: Electoral legislation varies across countries and within countries over time, and across different types of elections in terms of how it allows publication of intermediate election results including turnout and candidates’ vote shares during an election day. Using a pivotal costly voting model of elections in which voters have privately observed preferences between two candidates and act sequentially, I study how different rules for disclosing information about the actions of early voters affect the actions of later voters, and how they ultimately impact voter and candidate welfare. Comparing three rules observed in real life elections (no disclosure, turnout disclosure and vote count disclosure), I find that vote count disclosure dominates the other two rules in terms of voter welfare. I further show that each of the rules can provide a candidate with either the greatest or the least chance to win, depending on the candidate’s ex-ante support.
    Keywords: voting, participation, information disclosure
    JEL: D71 D72 D83
    Date: 2020–05
  2. By: Gallego, Jorge; Li, Christopher; Wantchekon, Leonard
    Abstract: Democratic elections increasingly involve political intermediaries (e.g. grassroots organizations or political brokers). We develop a model of electoral competition in which candidates must decide between brokers (patronage) and grassroots organizations. Our model shows that patronage is more likely when public offices are relatively more “valuable” for brokers. Moreover, setups that constrain candidates from funding grassroots campaigns and weaken ties between politicians and citizens make patronage more likely. We show that patronage negatively affects citizens’ welfare, as winning brokers turned civil servants undermine the quality of governments. Finally, our model explores the role of policy deliberation in curbing patronage politics.
    Keywords: Patronage; Intermediaries; Clientelism; Elections
    JEL: D70 D72
    Date: 2020–05
  3. By: Berliant, Marcus; Gouveia, Miguel
    Abstract: The literatures dealing with voting, optimal income taxation, implementation, and pure public goods are integrated here to address the problem of voting over income taxes and public goods. In contrast with previous articles, general nonlinear income taxes that affect the labor-leisure decisions of consumers who work and vote are allowed. Uncertainty plays an important role in that the government does not know the true realizations of the abilities of consumers drawn from a known distribution, but must meet the realization-dependent budget. Even though the space of alternatives is infinite dimensional, conditions on primitives are found to assure existence of a majority rule equilibrium when agents vote over both a public good and income taxes to finance it.
    Keywords: Voting; Income taxation; Public good
    JEL: D72 D82 H21 H41
    Date: 2020–05–31
  4. By: Niklas Potrafke; Marcus Rösch; Heinrich Ursprung
    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 trategically 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: D72 J45 J70
    Date: 2020
  5. By: Julia Darby (Department of Economics, University of Strathclyde); Jun Gao (Department of Economics, University College Cork, Ireland); Siobhan Lucey (Department of Economics, University College Cork, Ireland); Sheng Zhu (Department of Economics and Centre for Investment Research, University College Cork, Ireland)
    Abstract: We contribute to a growing literature on economic and financial impacts of political uncertainty by assessing whether heightened uncertainty associated with an important political event is priced into stock returns. Our particular study looks at the period surrounding the 2014 Scottish Independence Referendum, although we argue that our approach and findings have wider relevance to assessing impacts of other political events, including Brexit. Using company data and portfolio-level analysis we document significant variation in returns and demonstrate that uncertainty betas help predict the cross-sectional dispersion of returns. These findings are robust to inclusion of controls (standard risk factors), but no longer hold when a Scottish specific uncertainty measure is replaced with UK-wide measures of either economic policy uncertainty or stock market uncertainty, adding support to the hypothesis that our findings are driven by referendum related uncertainty. We conclude that heightened political uncertainty was priced during the period surrounding the referendum, i.e. that uncertainty averse investors succeeded in gaining compensation for holding the volatile stocks of Scottish headquartered companies.
    Keywords: Political uncertainty, stock market volatility
    JEL: E65 G12 G18 P16
    Date: 2019–09
  6. By: Chad D. Cotti; Bryan Engelhardt; Joshua Foster; Erik T. Nesson; Paul S. Niekamp
    Abstract: On April 7, 2020, Wisconsin held a major election for state positions and presidential preferences for both major parties. News reports showed pictures of long lines of voters due to fewer polling locations and suggested that the election may further the spread of the SARS-CoV-2 virus. A contract-tracing analysis by the Wisconsin Department of Health identified 52 confirmed cases of COVID-19 to in-person voting, but no research has conducted a broader analysis of the extent to which in-person voting increased the number of COVID-19 cases. We use county level data on voting and COVID-19 tests to connect the election to the spread of the SARS-CoV-2 virus. We find a statistically and economically significant association between in-person voting and the spread of COVID-19 two to three weeks after the election. Furthermore, we find the consolidation of polling locations, and relatively fewer absentee votes, increased positive testing rates two to three weeks after the election. Our results offer estimates of the potential increased costs of in-person voting as well as potential benefits of absentee voting during a pandemic.
    JEL: D72 H75 I1 I18
    Date: 2020–05
  7. By: Vaccari, Federico
    Abstract: To counter misinformation, regulators can exercise control over the costs that media outlets incur for misreporting policy-relevant news, e.g. by imposing fines. This paper analyzes the welfare implications of those types of interventions that affect misreporting costs. I study a model of strategic communication between an informed media outlet and an uninformed voter, where the outlet can misreport information at a cost. The alternatives available to the voter are endogenously championed by two competing candidates before communication takes place. I find that there is no clear nexus between the voter's welfare and informational distortions: interventions that benefit the voter might be associated with more misreporting activity and persuasion; relatively low misreporting costs yield full revelation but minimize the voter's welfare because they induce large policy distortions. Interventions that increase misreporting costs never harm the voter, but lenient measures might be wasteful. Electoral incentives distort the process of regulation itself, resulting in sub-optimal interventions that are detrimental to the voter's welfare.
    Keywords: fake news, misreporting, media, policy-making, election, regulation
    JEL: D72 D82 D83 L51
    Date: 2020–05–16
  8. By: Martin Braml; Gabriel Felbermayr
    Abstract: Our paper shows that individual preferences for open-market policies are mainly shaped by trust in institutions and not economic self-interest. On the basis of the Eurobarometer, a comprehensive semiannual survey that monitors public opinion in EU Member States, we exploit data on attitudes towards the Transatlantic Trade and Investment Partnership (TTIP), free trade, protectionism, and globalization. We find that preferences for open-market trade policies cannot be sufficiently explained by variables that, according to classical trade theory, typically determine personal advantages. Nevertheless, rational considerations follow expected patterns, in particular when individuals express strong preferences. A spatial analysis at the European NUTS-2 level shows that measures of regional trade exposure and other macroeconomic determinants serve as well-suited predictors for the substantial cross-regional variation in the support for globalization. Country specific narratives are predominant drivers of individual open-market attitudes.
    Keywords: International political economy, globalization, free trade attitudes
    JEL: F13 F53 F68
    Date: 2020
  9. By: Elena Manzoni (Department of Economics (University of Verona))
    Abstract: The paper considers the effect of extreme ex-post realizations of the state of the world on implemented policies. I model a unilateral renegotiation process through which the elected politician may deviate from his set of promised policies, as long as the majority of voters are as well off. I show that the possibility of renegotiation decreases ex-ante discretion of the candidates and increases their ex-post one. Moreover, in the presence of convex costs of renegotiation, extremist candidates are more constrained ex-ante, but may implement extremist policies ex post.
    Keywords: Unilateral renegotiation, discretion, electoral campaigns
    JEL: D72 C72
    Date: 2020–06

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