nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒08‒10
fifteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Expressive voting and its costs By Vincent Pons; Clémence Tricaud; Vestal Mcintyre
  2. Convergence and divergence in dynamic voting with inequality By Guilmi, Corrado Di; Galanis, Giorgos
  3. Too many Voters to Fail: Influencing and Political Bargaining for Bailouts By Schilling, Linda Marlene
  4. Electoral Competition with Fake News By Grossman, Gene M.; Helpman, Elhanan
  5. Ground work vs. social media: how to best reach voters in French municipal elections? By Vincent Pons; Vestal Mcintyre
  6. A vote for Europe? The 2019 EP elections from the voters' perspective By Grande, Edgar; Vidal, Guillem
  7. How Do Voters Respond to Welfare vis-à-vis Public Good Programs? An Empirical Test for Clientelism By Pranab Bardhan; Sandip Mitra; Dilip Mookherjee; Anusha Nath
  8. Never-ending reformism from above and dissatisfaction from below: The paradox of Moroccan post-spring politics By Cavatorta, Francesco; Merone, Fabio
  9. Paying them to hate US: The effect of U.S. military aid on anti-American terrorism, 1968-2014 By Dimant, Eugen; Krieger, Tim; Meierrieks, Daniel
  10. Political Ownership By Timm Betz; Amy Pond
  11. Title of Paper: Diversity, Immigration, and Redistribution By Alesina, Alberto F; Stantcheva, Stefanie
  12. Democracy, Redistribution, and Inequality: Evidence from the English Poor Law By Jonathan Chapman
  13. Voting Up? The Effects of Democracy and Franchise Extension on Human Stature By Alberto Batinti; Joan Costa-Font; Timothy J. Hatton
  14. Legitimizing Policy By Chen, Daniel L.; Michaeli, Moti; Spiro, Daniel
  15. The Populist Economic Policy Paradigm: Early Peronism as an Archetype By Emilio Ocampo

  1. By: Vincent Pons (Harvard Business School - Harvard University [Cambridge], National Bureau of Economic Research - National Bureau of Economic Research); Clémence Tricaud (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, X - École polytechnique); Vestal Mcintyre (Harvard Kennedy School - Harvard Kennedy School)
    Abstract: Voters who support a candidate with little or no chance of winning face a choice: whether to express their true preference, vote for their preferred candidate, and risk wasting their vote; or vote strategically for a second-best candidate who is more likely to be in a position to win. To explore this tradeoff, this study focuses on French parliamentary and local elections, in which the top two candidates always qualify for the second round, and others also qualify if they get a number of voters higher than 12.5 percent of registered citizens. Results show that third candidates who qualify for the second round tend to prefer staying in the race rather than dropping out. Many of the third candidates' supporters then act expressively and vote for them instead of their second-best candidate among the top two. The study finds this disproportionally harms the candidate ideologically closest to the third and often causes their defeat. This behavior by voters and candidates likely affects the results of many elections beyond those in the study, including European elections and other proportional elections, where voters face similar trade-offs. The results call for ideologically similar parties to reach agreements limiting the number of candidates or lists that are competing, and for the adoption of voting systems in which electoral outcomes are less distorted by voters' and candidates' failure to act strategically.
    Date: 2019–05
  2. By: Guilmi, Corrado Di (Economics Discipline Group, University of Technology Sydney, Australia, and Centre for Applied Macroeconomic Analysis, Australian National University, Canberra, Australia.); Galanis, Giorgos (Goldsmiths, University of London, UK, and Centre for Applied Macroeconomic Analysis, Australian National University.)
    Abstract: The original formulation of the median voter theorem predicts parties’ political convergence in a static setup, under two key assumptions : voters preferences being fixed and parties being opportunistic (purely office-motivated). Drawing on recent empirical findings about the evolution of voters’ political preferences, this paper verifies whether the median voter theorem’s results hold when (i) the control variables that influence voters’ preferences endogenously evolve over time, and (ii) parties are not opportunistic. We present a dynamic two-party voting model in which voters’ preferences evolve over time depending on observable common factors and unobservable idiosyncratic characteristics. In such a setting, the convergence of parties’ platforms to the centre is a special case within a range of results that include instability and equilibria at one of the extremes. Moreover, convergence of parties’ platforms is achieved not as the result of electoral strategies, but when neither party has enough support to pursue its agenda.
    Keywords: median voter ; dynamic voting ; political preferences JEL codes: C62 ; D72 ; E71
    Date: 2020
  3. By: Schilling, Linda Marlene
    Abstract: The paper provides a novel theory of how banks not only exploit but also cause being perceived as 'too big to fail'. Bank creditors are also voters. Economic voting prompts politicians to grant bailouts given a bank failure. The bank's capital structure acts as a tool to impact the electoral vote and thus the bail-out by changing the relative group size of voters who favor as opposed to voters who object the bailout. The creditors' anticipation of high bailouts, in return, allows the bank to reduce funding costs today, by this maximizing revenues.
    Keywords: bail-outs; Capital Structure; Corporate Finance; Economic voting; influencing; political economy
    JEL: D72 G3 P16
    Date: 2019–12
  4. By: Grossman, Gene M.; Helpman, Elhanan
    Abstract: Misinformation pervades political competition. We introduce opportunities for political can- didates and their media supporters to spread fake news about the policy environment and perhaps about parties'positions into a familiar model of electoral competition. In the baseline model with full information, the parties'positions converge to those that maximize aggregate welfare. When parties can broadcast fake news to audiences that disproportionately include their partisans, policy divergence and suboptimal outcomes can result. We study a sequence of models that impose progressively tighter constraints on false reporting and characterize situa- tions that lead to divergence and a polarized electorate.
    Keywords: Electoral Competition; fake news; policy positions
    JEL: D78
    Date: 2019–12
  5. By: Vincent Pons (Harvard Business School - Harvard University [Cambridge], National Bureau of Economic Research - National Bureau of Economic Research); Vestal Mcintyre (Harvard Kennedy School - Harvard Kennedy School)
    Abstract: Platforms such as Twitter and Facebook are widely considered important, if controversial, channels for candidates and parties around the world to communicate with citizens and win votes. While political parties in France make less use of social media than in the U.S. and other Western democracies, there is disagreement of how it will affect French democracy. But discussions of the promise and peril of social media's role in elections may miss a higher-order issue: what limited evidence exists suggests that outreach via social media has little effect on voting behavior. By contrast, a series of studies show that face-to-face canvassing has a strong potential to mobilize and persuade voters. These findings give grounds for parties to increase their canvassing efforts, and for the government to enact policies that ease the way for citizens to participate in elections.
    Date: 2020–02
  6. By: Grande, Edgar; Vidal, Guillem
    Abstract: In this paper we analyze the 2019 EP elections from the voters' perspective. It is based on a novel post-electoral survey covering five North West European countries: Austria, Germany, France, Sweden and the UK. In particular we address the following questions: How important were the lead candidates in the election campaign? Which issues were most important for voters? How do these issues relate to voters' political preferences and ideological orientations? Our findings show that the Spitzenkandidaten process failed to effectively connect European party groups with their voters. Moreover, our analysis reveals that voters had clear issue priorities, which reflected, to a considerable extent, the new cleavage structure which has been shaping party competition in North West European countries in the last two decades.
    Keywords: European Union,EP elections,lead candidates,public opinion,cleavages
    Date: 2020
  7. By: Pranab Bardhan; Sandip Mitra; Dilip Mookherjee; Anusha Nath
    Abstract: This paper examines allocation of benefits under local government programs in West Bengal, India to isolate patterns consistent with political clientelism. Using household survey data, we find that voters respond positively to private welfare benefits but not to local public good programs, while reporting having benefited from both. Consistent with the voting patterns, shocks to electoral competition induced by exogenous redistricting of villages resulted in upper-tier governments manipulating allocations across local governments only for welfare programs. Through the lens of a hierarchical budgeting model, we argue that these results provide credible evidence of the presence of clientelism rather than programmatic politics, and how this distorts the allocation of government programs both within and across villages.
    Keywords: Welfare programs; Public goods; Clientelism; Voting
    JEL: H40 O10 H76 P48 H75
    Date: 2020–07–08
  8. By: Cavatorta, Francesco; Merone, Fabio
    Abstract: For scholars, policy-makers and casual observers, there is no doubt that Morocco has undergone an impressive transformation process since Mohammed VI came to power in 1999. The country projects an image of liberal-democratic modernity and socio-economic progress that the international community is happy to go along with. But at the heart of Moroccan modernization lies a glaring paradox: despite two decades of reforms, the dissatisfaction of ordinary citizens with the way the system works has been consistently high, and a number of socio-economic and political indicators do not support the regime's claim that the country has democratised or is democratising. This article examines the country's political system through the reformist process - political, economic and social - that began in the 2000s, continued with the constitutional changes of 2011 and culminated with the two PJD-led governments that followed the parliamentary elections of 2011 and 2016. In particular, this study examines the reformist drive in the context of the inter-paradigm debate between democratisation and authoritarian resilience. We employ four criteria to determine to what extent Morocco has democratised: the accountability of decision-makers, the participation of a plurality of voices in the formulation of policies, the degree of individual freedoms and the protection of human rights. This article concludes that the reformist process is simply a narrative the regime has adopted to fend off international criticism and to reconfigure domestic institutions. The fundamentally authoritarian nature of the regime has not changed, and the dominant institutional role that the monarch - unelected and unaccountable - plays undermines all claims of democratisation.
    Date: 2020
  9. By: Dimant, Eugen; Krieger, Tim; Meierrieks, Daniel
    Abstract: Does U.S. military aid make the United States safer? To answer this question, we collect data on 173 countries between 1968 and 2014. Exploiting quasi-random variation in the global patterns of U.S. military aid, our paper is the first to provide causal estimates of the effect of U.S. military aid on anti-American terrorism. We find that higher levels of military aid led to an increased likelihood of the recipient country to produce anti-American terrorism. For our preferred instrumental-variable specification, doubling U.S. military aid increases the risk of anti-American terrorism by 4.4 percentage points. Examining potential transmission channels, we find that more U.S. military aid leads to more corruption and exclusionary policies in recipient countries. Consistent with a theoretical argument developed in this paper, these results indicate that the inflow of military aid induces rent-seeking behavior, which in turn encourages terrorism by groups that suffer from reduced economic and political participation as a consequence of rent-seeking. These groups direct their dissatisfaction against the United States as the perceived linchpin of an unfavorable status quo in the recipient country.
    Keywords: U.S. military aid,anti-American terrorism,transnational terrorism,instrumental variable estimation
    JEL: D74 F35
    Date: 2020
  10. By: Timm Betz (TUM School of Governance and Hochschule für Politik, Technical University of Munich); Amy Pond (Texas A&M University)
    Abstract: Political connections provide substantial benefits to firms. We emphasize the ownership of firms as an important channel through which political connections operate, and identify a resulting link between turnover in the political leadership and turnover in the ownership of firms: Political turnover prompts newly politically connected individuals to take, and disconnected individuals to cede, ownership of firms. This pattern should be more pronounced among firms with more immobile assets, because these are more vulnerable to government policy and have more to gain from political connections. Moreover, firms that experience changes to ownership, caused by political turnover, should pay less taxes. Analyses of firm-level data on the owners of companies in 68 middle-income countries are consistent with the theory.
    Keywords: firm ownership, political turnover, political connections, political risk, policy uncertainty, corruption
    JEL: P14 P16 P26 P48 H1 H13
    Date: 2020–07
  11. By: Alesina, Alberto F; Stantcheva, Stefanie
    Abstract: This paper provides a simple conceptual framework that captures how different perceptions, attitudes, and biases about immigrants or minorities can shape preferences for redistribution and reviews the empirical evidence on the effects of increasing racial diversity and immigration on support for redistribution.
    Keywords: diversity; Immigration; inequality; race; redistribution; social preferences
    JEL: H21 J15 P16
    Date: 2019–12
  12. By: Jonathan Chapman (Division of Social Science)
    Abstract: This paper tests whether inequality mediates the effect of democratization on government redistribution. An 1894 democratic reform to councils that provided social insurance in Britain is used as the treatment event in a difference-in-difference analysis. The reform removed institutional features- a graduated franchise, property qualifications, the absence of a secret ballot, and the participation of unelected magistrates- that helped landowners seize control of spending on poor relief after the 1832 Great Reform Act. The results support theories arguing that inequality strengthens elite opposition to democratization: more unequal districts experienced greater increases in government expenditure following the democratic reform.
    Date: 2020–06
  13. By: Alberto Batinti; Joan Costa-Font; Timothy J. Hatton
    Abstract: We study the welfare effects of the spread of democratic institutions and the extension of voting rights in 15 European countries since the middle of the nineteenth century. We exploit within-country variation in average height by birth cohort in conjunction with a new instrumental variable strategy, alongside an event study. We find robust evidence of an effect of the expansion in the quality of democracy on human stature. We estimate that the transition to democracy increased average male heights by 0.7 to 1 cm, equivalent to a one-decade average increase in stature across cohorts. Including the extension of the franchise to women, increases the effect on average stature to about 1.7 cm. The effect is driven by the influence of political participation and contestation on equality and access to health services. Our results are robust to a range of additional statistical tests.
    Keywords: height, democracy, transition, voting rights expansions, franchise, inequality, political contestation
    JEL: H1 J18
    Date: 2020–04
  14. By: Chen, Daniel L.; Michaeli, Moti; Spiro, Daniel
    Abstract: In many settings of political bargaining over policy, agents care not only about getting their will but also about having others approve the chosen policy thus giving it more weight. What is the effect on the bargaining outcome when agents care about such legitimacy of the policy? We study this question theoretically and empirically. We show that the median-voter theorem holds in groups that are ideologically very cohesive and in groups with extreme ideological disagreement. However, in groups with intermediate ideological disagreement, the median-voter theorem does not hold. This is since, on the individual level, ideological disagreement with the median has a non-monotonic effect on the policy. We test our model in a natural experimental setting—U.S. appeals courts—where causal identification is based on random assignment of judges into judicial panels, each consisting of three judges who rule on a case. Here judges care about legitimacy of the policy they write because a norm of consensus prevails and because increased legitimacy reduces the likelihood of the judicial case to be heard by the Supreme Court. The predicted pattern of how policies depend on the participants’ ideologies are corroborated by our empirical tests.
    JEL: D7 K0 Z1
    Date: 2020–07
  15. By: Emilio Ocampo
    Abstract: Before Hugo Chavez burst into the political scene in Venezuela, Argentina’s Juan Peron (1895- 1974) was considered the quintessential Latin American populist leader. He ruled Argentina from mid 1943 until September 1955 and between 1973 and 1974 and his political party has been in power two thirds of the time since the reestablishment of democracy in 1983. Perón’s economic policies between 1946 and 1949 are also considered archetypical. The Peronist economic policy paradigm (PEPP) emphasized income redistribution and a fiscally induced expansion of aggregate demand at the expense of productivity and allocative efficiency. Although the ideological roots of Peronism can be directly traced back to Fascism, when it came to his economic policies, Perón claimed to have been inspired by FDR’s New Deal and Keynes’s General Theory. However, in mosts respects, in their early stage, Peronist economic policies resemble more those proposed by Sir Oswald Mosley (1896-1980) in 1930. This paper describes the PEPP, its implementation and results and evaluates several hypothesis regarding its intellectual roots.
    Keywords: Peronism, Fascism, Economic Policy, Argentina
    JEL: B00 B29 E60 E65 N14 N16 O23 P40 B29 E60 E65 N14 N16 O23 P40 P47
    Date: 2020–06

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