nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒06‒22
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. Comparative Politics with Intraparty Candidate Selection By Sahuguet, Nicolas
  2. Salience and Accountability: School Infrastructure and Last-Minute Electoral Punishment By Ajzenman, Nicolas; Durante, Ruben
  3. Choosing an Electoral Rule By Bol, Damien; Blais, André; Coulombe, Maxime; Laslier, Jean-François; Pilet, Jean-Benoit
  4. Policy trusts in public policy in the Slovak Republic By Marcel Lincényi; Jaroslav Čársky
  5. Housing and voting in Germany: Multi-level evidence for the association between house prices and housing tenure and party outcomes, 1980-2017 By Beckmann, Paul; Fulda, Barbara; Kohl, Sebastian
  6. Did the 2017 Tax Reform Discriminate against Blue State Voters? By David Altig; Alan Auerbach; Patrick Higgins; Darryl Koehler; Laurence Kotlikoff; Ellyn Terry; Victor Ye
  7. Partisanship and Fiscal Policy in Economic Unions: Evidence from U.S. States By Gerald A. Carlino; Thorsten Drautzburg; Robert P. Inman; Nicholas Zarra
  8. Pandemics Change Cities: Municipal Spending and Voter Extremism in Germany, 1918-1933 By Kristian S. Blickle
  9. The Political Economy of Foreign Direct Investment to Developing Countries By Harish, Nikki; Plouffe, Michael
  10. Public Opinion on Central Banks when Economic Policy is Uncertain By Klodiana Istrefi; Anamaria Piloiu

  1. By: Sahuguet, Nicolas
    Abstract: We develop a two-stage model in which parties select candidates before the election. Elections are under first-past-the-post (FPTP) or closed-list proportional representation (PR). Selection is competitive or non-competitive. With non-competitive selection, candidate effort is higher under FPTP. With competitive selection, effort is higher under PR. Under PR, competition motivates candidates to exert effort to be selected (as under FPTP) and to be ranked higher on the list. Empirical studies comparing electoral rules should consider how parties organize, to avoid omitted variable bias. The results also suggest that electoral rules influence how parties organize.
    Keywords: Candidate selection; Comparative politics; Contests; Electoral rule; Party Lists. proportional representation; party organization
    JEL: C72 D72
    Date: 2020–05
  2. By: Ajzenman, Nicolas; Durante, Ruben
    Abstract: Can seemingly unimportant factors influence voting decisions by making certain issues salient? We study this question in the context of Argentina's 2015 presidential elections by examining how the quality of the infrastructure of the school where citizens were assigned to vote influenced their voting choice. Exploiting the quasi-random assignment of voters to ballot stations located in different public schools in the City of Buenos Aires, we find that individuals assigned to schools with poorer infrastructure were significantly less likely to vote for Mauricio Macri, the incumbent mayor then running for president. The effect is larger in low-income areas - where fewer people can afford private substitutes to public education - and in places where more households have children in school age. The effect is unlikely to be driven by information scarcity, since information on public school infrastructure was readily available to parents before elections. Rather, direct exposure to poor school infrastructure at the time of voting is likely to make public education - and the poor performance of the incumbent - more salient.
    Keywords: Education; Elections; Electoral Punishment; Public Infrastructure; Salience
    JEL: D72 D83 D90 I25
    Date: 2020–05
  3. By: Bol, Damien (Université de Montréal); Blais, André; Coulombe, Maxime; Laslier, Jean-François; Pilet, Jean-Benoit
    Abstract: Citizens are increasingly involved in the design of democratic institutions, for instance via referendums. If they support the institution that best serves their self-interest, the outcome inevitably advantages the largest group and disadvantages minorities. In this paper, we challenge this pessimistic view with an original lab experiment in France and Great Britain. In the first phase, experimental subjects experience elections under plurality and approval voting. In the second phase, they decide which rule they want to use for extra elections. The treatment is whether they do or do not have information to determine where their self-interest lies before deciding. We find that self-interest shapes people’s decisions, but so do intrinsic egalitarian values that subjects have outside of the lab. The implications are: (1) people have consistent ‘value-driven preferences’ for electoral rules, and (2) putting them in a situation of uncertainty leads to an outcome that reflects these values.
    Date: 2020–06–05
  4. By: Marcel Lincényi (Alexander Dubček University of Trenčín); Jaroslav Čársky (Alexander Dubček University of Trenčín)
    Abstract: The research study offers an analysis of public opinion of citizens of the Slovak Republic focused on trust in politics and politicians, while the authors try to look for possibilities of increasing the political participation of Slovaks. Among other things, the analysis of public opinion showed that citizens of the Slovak Republic are not active in political participation. Most of the polled Slovaks do not try to influence politics other than by participating in elections, with only a third of those polled actively participating in the elections. Demanded citizens are not satisfied with the current state of the political scene in Slovakia, as well as with the current investigation of political cases. Research has also shown that Slovaks would be willing to participate in elections on a regular basis in cases where ordinary people care about politicians or if politicians are honest and reliable people who deliver on promises, (such as no-policy politics.
    Keywords: Slovak Republic,politics,public opinion,political culture,active participation,trust
    Date: 2020–03–30
  5. By: Beckmann, Paul; Fulda, Barbara; Kohl, Sebastian
    Abstract: Traditional predictors of election outcomes in Germany are increasingly losing their explanatory power. Rather than new cultural divides, this paper introduces the idea of housing cleavages, i.e., homeownership versus tenancy and high-price versus low-price areas, drawing on macro data for electoral districts and urban neighborhoods from the last three elections (2009-2017) in combination with Immoscout24 ad price data and microdata from the ALLBUS survey (1980-2016). Although, due to its low homeownership rate and conservative house price development, Germany represents a least-likely case for housing to be of importance, we find housing effects beyond traditional predictors. Generally, we find that high house prices, house price increases, and homeownership are positively associated with voting for center-right parties and voter turnout, while social tenancy is associated with votes for the left, but these effects weaken over time due to embourgeoisement effects. Beyond this expected left-right distinction between tenants and wealthier homeowners, we also find outliers along two other dimensions. First, there are center-periphery effects that housing can better capture than simple geographical divisions; second, house prices contain a populist dimension, for example when skyrocketing rents increase votes for the urban left or regions where house prices lag behind benefit the AfD. The paper argues against the more causal self-interest and socialization theories of the influence of housing on voting and instead suggests considering housing as an important socioeconomic proxy to explain political outcomes.
    Keywords: ALLBUS,Germany,homeownership,voter turnout,voting,Deutschland,Wahlbeteiligung,Wählen,Wohneigentum
    Date: 2020
  6. By: David Altig (Federal Reserve Bank of Atlanta); Alan Auerbach (University of California at Berkeley); Patrick Higgins (Federal Reserve Bank of Atlanta); Darryl Koehler (Economic Security Planning Inc.); Laurence Kotlikoff (Boston University); Ellyn Terry (Federal Reserve Bank of Atlanta); Victor Ye (Boston University)
    Abstract: The Tax Cut and Jobs Act of 2017 (TCJA) made significant changes to corporate and personal federal income taxation, including limiting the SALT (state and local property, income and sales taxes) deductibility to $10,000. States with high SALT tend to vote Democratic. This paper estimates the differential effect of the TCJA on red- and blue-state taxpayers and investigates the importance of the SALT limitation to this differential. We calculate the effect of permanent implementation of the TCJA on households using The Fiscal Analyzer: a life-cycle, consumption-smoothing program incorporating all major federal and state fiscal policies. We find that the average percentage increase in remaining lifetime spending under the TCJA is 1.6 percent in red states versus 1.3 percent in blue states. Among the richest 10 percent of households, this differential is larger. Rich households in red states enjoyed a 2.0 percent increase compared to a 1.2 percent increase among the rich in blue-state households. This gap is driven almost entirely by the limitation on the SALT deduction. Excluding the SALT limitation from the TCJA results in a spending gain of 2.6 percent for rich red-state households compared to 2.7 percent for rich blue-state households.
    Keywords: fiscal policy, elections, Tax Cuts and Jobs Act, resource distribution, federal tax reform, state and local taxes, life cycle model
    JEL: D31 D72 E62 H20 H22 H71
    Date: 2019–04
  7. By: Gerald A. Carlino; Thorsten Drautzburg; Robert P. Inman; Nicholas Zarra
    Abstract: In economic unions the fiscal authority consists not of one, but many governments. We analyze whether partisanship of state-level politicians affects federal policies, such as fiscal stimulus in the U.S. Using data from close elections, we find partisan differences in the marginal propensity to spend federal transfers: Republican governors spend less. This partisan difference has tended to increase with measures of polarization. We quantify the aggregate effects in a New Keynesian model of Republican and Democratic states in a monetary union: Lowering partisan differences to levels prevailing during less polarized times increases the transfer multiplier by 0.30. The observed changes in the share of Republican governors lead to variation in the multiplier of 0.20 in the model. Local projection methods support this prediction.
    Keywords: partisanship; flypaper effect; intergovernmental transfers; fiscal multiplier; monetary union; regression discontinuity.
    JEL: C24 E62 F45 H72 H77
    Date: 2020–06–01
  8. By: Kristian S. Blickle
    Abstract: We merge several historical data sets from Germany to show that influenza mortality in 1918-1920 is correlated with societal changes, as measured by municipal spending and city-level extremist voting, in the subsequent decade. First, influenza deaths are associated with lower per capita spending, especially on services consumed by the young. Second, influenza deaths are correlated with the share of votes received by extremist parties in 1932 and 1933. Our election results are robust to controlling for city spending, demographics, war-related population changes, city-level wages, and regional unemployment, and to instrumenting influenza mortality. We conjecture that our findings may be the consequence of long-term societal changes brought about by a pandemic.
    Keywords: influenza; pandemic; municipal spending; voter extremism; COVID-19
    JEL: H3 H4 I15 N14
    Date: 2020–05–01
  9. By: Harish, Nikki; Plouffe, Michael (University College London)
    Abstract: This handbook chapter provides an introduction to foreign direct investment (FDI) and presents and overview of the political-economy issues relating to FDI in the developing world. The chapter discusses FDI in terms of the OLI framework and firm heterogeneity before surveying domestic governance concerns and closing with a discussion of global FDI governance in the context of the investment treaty regime.
    Date: 2018–06–14
  10. By: Klodiana Istrefi; Anamaria Piloiu
    Abstract: This paper investigates whether uncertainty about economic policy plays a role in shaping the credibility and reputation of the central bank in the eyes of the public. In particular, we look at the effect of policy uncertainty for the dynamics of citizens’ opinion, being trust, satisfaction or confidence, in the European Central Bank, the Bank of England and the Bank of Japan. Estimating Bayesian VARs for the period 1999-2014, we find that shocks to economic policy uncertainty induce economic contractions and relatively sharp deterioration in trust or satisfaction measures, which in general take longer than economic growth to rebuild.
    Keywords: Policy Uncertainty; Central Banks; Public Opinion; Structural VAR.
    JEL: E02 E31 E58 E63 P16
    Date: 2020

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