nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒07‒20
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Fake News, Voter Overconfidence, and the Quality of Democratic Choice By Melis Kartal; Jean-Robert Tyran
  2. Unbundling Polarization By Canen, Nathan; Kendall, Chad; Trebbi, Francesco
  3. Terrorist Attacks, Cultural Incidents and the Vote for Radical Parties: Analyzing Text from Twitter By Giavazzi, Francesco; Iglhaut, Felix; Lemoli, Giacomo; Rubera, Gaia
  4. Welfare-improving misreported polls By Felipe R. Durazzo; David Turchick
  5. Positive Spillovers from Negative Campaigning By Galasso, Vincenzo; Nannicini, Tommaso; Nunnari, Salvatore
  6. Structural Reforms and Elections: Evidence from a World-Wide New Dataset By Alesina, Alberto F; Furceri, Davide; Ostry, Jonathan D.; Papageorgiou, Chris; Quinn, Dennis
  7. Does Party Competition Affect Political Activism? By Hager, Anselm; Hensel, Lukas; Hermle, Johannes; Roth, Christopher
  8. Private Credit under Political Influence: Evidence from France By Delatte, Anne-Laure; Matray, Adrien; Pinardon-Touati, Noémie
  9. Inequality, macroeconomic performance and political polarization: A panel analysis of 20 advanced democracies By Proaño Acosta, Christian; Peña, Juan Carlos; Saalfeld, Thomas
  10. The Political Economy of Populism By Guriev, Sergei; Papaioannou, Elias
  11. Racial Diversity, Electoral Preferences, and the Supply of Policy: the Great Migration and Civil Rights By Calderon, Alvaro; Fouka, Vasiliki; Tabellini, Marco
  12. Economic Crisis, General Laws, and the Mid-Nineteenth-Century Transformation of American Political Economy By Naomi R. Lamoreaux; John Joseph Wallis
  13. The Political Scar of Epidemics By Aksoy, Cevat Giray; Eichengreen, Barry; Saka, Orkun

  1. By: Melis Kartal (Vienna University of Economics and Business); Jean-Robert Tyran (Department of Economics, University of Copenhagen, Denmark)
    Abstract: This paper studies, theoretically and experimentally, the effects of overconfidence and fake news on information aggregation and the quality of democratic choice in a common interest setting. We theoretically show that overconfidence exacerbates the adverse effects of widespread misinformation (i.e., fake news). We study extensions that allow for partisan biases, targeted misinformation intended to move public opinion in a specific direction, and correlated news signals (due to for example media ownership concentration). In our experiment, voters are exposed to correct news or misinformation. The extent to which a subject is likely to observe correct news depends on their cognitive ability. Absent overconfidence, more cognitively able subjects are predicted to vote while less able subjects are predicted to abstain, and information is predicted to aggregate well. We provide evidence that overconfidence induces misinformed subjects to vote excessively, thereby severly undermining information aggregation.
    Keywords: behavioral political economy, voting, misinformation, Dunning-Kruger effect
    JEL: D72 D83 D91
  2. By: Canen, Nathan; Kendall, Chad; Trebbi, Francesco
    Abstract: This paper investigates the determinants of political polarization, a phenomenon of increasing relevance in Western democracies. How much of polarization is driven by divergence in the ideologies of politicians? How much is instead the result of changes in the capacity of parties to control their members? We use detailed internal information on party discipline in the context of the U.S. Congress - whip count data for 1977-1986 - to identify and structurally estimate an economic model of legislative activity in which agenda selection, party discipline, and member votes are endogenous. The model delivers estimates of the ideological preferences of politicians, the extent of party control, and allows us to assess the effects of polarization through agenda setting (i.e. which alternatives to a status quo are strategically pursued). We find that parties account for approximately 40 percent of the political polarization in legislative voting over this time period, a critical inflection point in U.S. polarization. We also show that, absent party control, historically significant economic policies would have not passed or lost substantial support. Counterfactual exercises establish that party control is highly relevant for the probability of success of a given bill and that polarization in ideological preferences is more consequential for policy selection, resulting in different bills being pursued.
    Keywords: Ideology; Political parties; Political Polarization; US Congress
    JEL: D72 P48
    Date: 2020–01
  3. By: Giavazzi, Francesco; Iglhaut, Felix; Lemoli, Giacomo; Rubera, Gaia
    Abstract: We study the role of perceived threats from cultural diversity induced by terrorist attacks and a salient criminal event on public discourse and voters' support for far-right parties. We first develop a rule which allocates Twitter users in Germany to electoral districts and then use a machine learning method to compute measures of textual similarity between the tweets they produce and tweets by accounts of the main German parties. Using the dates of the aforementioned exogenous events we estimate constituency-level shifts in similarity to party language. We find that following these events Twitter text becomes on average more similar to that of the main far-right party, AfD, while the opposite happens for some of the other parties. Regressing estimated shifts in similarity on changes in vote shares between federal elections we find a significant association. Our results point to the role of perceived threats on the success of nationalist parties.
    Keywords: National elections; Political parties; social media; Terrorism; Text Analysis
    JEL: C45 D72 H56
    Date: 2020–02
  4. By: Felipe R. Durazzo; David Turchick
    Abstract: An often-heard criticism about electoral pollsters is that they might misreport pre-election poll results. We show that this can happen even in the absence of partisan motives, but purely for reputational ones. By underreporting the expected number of supporters of the most preferred candidate, the pollster is able to induce an election result more in line with its report. By doing so, not only victory chances of the most preferred candidate in society rise above 50%, but also total election costs are reduced, thus yielding welfare gains. Our model also allows for the accommodation of both the underdog effect (a feature of pivotal voting models) and the apparently inconsistent bandwagon effect, in the sense that the latter may be an illusion on the part of an observer who disregards the possibility of nontruthful polls. All of these results hold even as the electorate size grows without bound.
    Keywords: costly voting; pivotal voting model; pre-election polls; misreporting; bandwagon effect
    JEL: C70 C72 D72 C46
    Date: 2020–07–09
  5. By: Galasso, Vincenzo; Nannicini, Tommaso; Nunnari, Salvatore
    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; field experiment; Political Advertisement; randomized controlled trial; Survey Experiment
    JEL: C90 D72 M37
    Date: 2020–01
  6. By: Alesina, Alberto F; Furceri, Davide; Ostry, Jonathan D.; Papageorgiou, Chris; Quinn, Dennis
    Abstract: We assemble two unique databases. One is on reforms in domestic finance, external finance, trade, product markets and labor markets, which covers 90 advanced and developing economies from 1973 to 2014. The other is on electoral results and timing of elections. In the 66 democracies considered in the paper, we show that liberalizing reforms engender benefits for the economy, but they materialize only gradually over time. Partly because of this delayed effect, and possibly because voters are impatient or do not anticipate future benefits, liberalizing reforms are costly to incumbents when implemented close to elections. We also find that the electoral effects depend on the state of the economy at the time of reform: reforms are penalized during contractions; liberalizing reforms undertaken in expansions are often rewarded. Voters seem to attribute current economic conditions to the reforms without gully internalizing the delay that it takes for reforms to bear fruit.
    Keywords: Capital Account; current account; elections; employment protection; Finance; Labor market; Product market; reform; regulation; Trade
    JEL: D72 J65 L43 L51 O43 O47 P16
    Date: 2020–01
  7. By: Hager, Anselm (University of Oxford); Hensel, Lukas (University of California, Berkeley and IZA); Hermle, Johannes (Humboldt-Universität zu Berlin); Roth, Christopher (University of Warwick)
    Abstract: Does party competition affect political activism? This paper studies the decision of party supporters to join political campaigns. We present a framework that incorporates supporters’ instrumental and expressive motives and illustrates that party competition can either increase or decrease party activism. To distinguish between these competing predictions, we implemented a field experiment with a European party during a national election. In a seemingly unrelated party survey, we randomly assigned 1,417 party supporters to true information that the canvassing activity of the main competitor party was exceptionally high. Using unobtrusive, real-time data on party supporters’ canvassing behavior, we find that treated respondents are 30 percent less likely to go canvassing. To investigate the causal mechanism, we leverage additional survey evidence collected two months after the campaign. Consistent with affective accounts of political activism, we show that increased competition lowered party supporters’ political self-efficacy, which plausibly led them to remain inactive.
    Keywords: Party Activism ; Electoral Competition ; Field Experiment ; Campaigns
    Date: 2020
  8. By: Delatte, Anne-Laure; Matray, Adrien; Pinardon-Touati, Noémie
    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: local government financing; moral suasion; politics and banking
    JEL: G21 G30 H74 H81
    Date: 2020–02
  9. By: Proaño Acosta, Christian; Peña, Juan Carlos; Saalfeld, Thomas
    Abstract: This paper investigates the macroeconomic and social determinants of voting behavior, and especially of political polarization, in 20 advanced countries using annual data ranging from 1970 to 2016 and covering 291 parliamentary elections. Using a panel estimation approach and rolling regressions, our analysis indicates that a significant change in the link between income inequality and political polarization appears to have taken place over the last twenty years. Indeed, we find that both average inequality, measured by the post-tax Gini coefficient, as well as the bottom 10%income share are statistically linked to the recent success of far-right parties, while the top 10% or top 20% incomes shares are not. The link of income inequality and political polarization thus seems to be based on the deterioration of the relative economic position especially of the poorest fraction of the population. Furthermore, we find no empirical support for the notion that social and economic globalization has led to an increase in the popularity of far-right parties.
    Keywords: Income Inequality,Political Polarization,Globalization,Economic Voting Behavior
    JEL: P16 D6 D72 O15
    Date: 2020
  10. By: Guriev, Sergei; Papaioannou, Elias
    Abstract: We synthesize the literature on the recent rise of populism. First, we go over definitional aspects and present descriptive evidence on the increased support for populists in the past decades. Second, we discuss the role of secular economic factors related to the growth in cross-border trade and automation. Third, we review studies analyzing the role of the recent crisis, connect them to historical work looking at the Great Depression, and discuss likely mechanisms. Fourth, we discuss studies investigating non-economic determinants of populism, identity politics and cultural backlash. Fifth, we go over studies on the role of online media. Sixth, we go over works on the role of immigration and the refugee crisis that entail both economic and cultural consequences. Seventh, we discuss preliminary evidence on the implications of the recent rise of populism. We conclude outlining the scope for further theoretical and empirical research.
    Date: 2020–02
  11. By: Calderon, Alvaro; Fouka, Vasiliki; Tabellini, Marco
    Abstract: How does the racial composition of local constituencies affect voters' preferences and politicians' behavior? We study the effects of one of the largest episodes of internal migration in US history, the 1940-1970 Great Migration of African Americans, on both demand for racial equality and supply of civil rights legislation. We predict black inflows by interacting historical settlements of southern born blacks across northern counties with differential emigration rates from different southern states after 1940. We find that black in-migration increased support for the Democratic Party and encouraged grassroots activism. Data on pro-civil rights demonstrations and historical surveys reveal that segments of the white electorate, such as Democrats and union members, supported blacks' struggle for racial equality. At the same time, backlash against civil rights erupted among Republicans and whites more exposed to racial mixing of their neighborhoods. Mirroring the responses of the electorate, Congress members representing areas more exposed to black in-migration became more supportive of civil rights legislation. Such average effects, however, mask substantial heterogeneity, as Democratic and Republican legislators became, respectively, more liberal and more conservative on racial issues. Taken together, our findings suggest that, under certain conditions, cross-race coalitions can emerge, but also that changes in the composition of the electorate can polarize both voters and politicians.
    Keywords: civil rights; diversity; Great Migration; race
    JEL: D72 J15 N92
    Date: 2020–01
  12. By: Naomi R. Lamoreaux; John Joseph Wallis
    Abstract: Before the middle of the nineteenth century most laws enacted in the United States were special bills that granted favors to specific individuals, groups, or localities. This fundamentally inegalitarian system provided political elites with important tools that they could use to reward supporters, and as a result, they were only willing to modify it under very special circumstances. In the early 1840s, however, a major fiscal crisis forced a number of states to default on their bonded debt, unleashing a political earthquake that swept this system away. Starting with Indiana in 1851, states revised their constitutions to ban the most common types of special legislation and, at the same time, mandate that all laws be general in their application. These provisions dramatically changed the way government and the economy worked and interacted, giving rise to the modern regulatory state, interest-group politics, and a more dynamic form of capitalism.
    JEL: K1 K2 N4 N41
    Date: 2020–06
  13. By: Aksoy, Cevat Giray; Eichengreen, Barry; Saka, Orkun
    Abstract: What will be political legacy of the Coronavirus pandemic? We find that epidemic exposure in an individual's impressionable years (ages 18 to 25) has a persistent negative effect on confidence in political institutions and leaders. We find similar negative effects on confidence in public health systems, suggesting that the loss of confidence in political leadership and institutions is associated with healthcare related policies at the time of the epidemic. In line with this argument, our results are mostly driven by individuals who experienced epidemics under weak governments with less capacity to act against the epidemic, disappointing their citizens. We provide evidence of this mechanism by showing that weak governments took longer to introduce policy interventions in response to the COVID-19 outbreak. These results imply that the Coronavirus may leave behind a long-lasting political scar on the current young generation ("Generation Z").
    Date: 2020–06–16

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