nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒09‒28
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Heterogeneous Price of a Vote: Evidence from Multiparty Systems, 1993-2017 By Yasmine Bekkouche; Julia Cage; Edgard Dewitte
  2. Voting over a Distributed Ledger: An interdisciplinary perspective By Dhillon, Amrita; Kotsialou, Grammateia; McBurney, Peter; Riley, Luke
  3. Rewarding Allegiance: Political Alignment and Fiscal Outcomes in Local Government By Christa N. Brunnschweiler; Samuel Kwabena Obeng
  4. Trade in Trash: A Political Economy Approach By James H. Cassing; Ngo Van Long
  5. Risk Perception Through the Lens of Politics in the Time of the COVID-19 Pandemic By John Manuel Barrios; Yael V. Hochberg
  6. Do citizens hold business accountable for greenwashing by demanding more government intervention? By Kolcava, Dennis
  7. Left Behind Voters, Anti-Elitism and Popular Will By Benoit Crutzen; Dana Sisak; Otto Swank
  8. Racial Sympathy and Support for Capital Punishment: A Case Study in Concept Transfer By Hannan, Kellie; Cullen, Francis T.; Butler, Leah C.; Graham, Amanda; Burton, Alexander L.; Burton, Velmer S. Jr.
  9. How Do Voters Evaluate the Age of Politicians? By Charles McCLEAN; ONO Yoshikuni
  10. Get beyond policy uncertainty: Evidence from political connections By Hua Cheng; Kishore Gawande; Steven Ongena; Shusen Qi
  11. Hard Brexit ahead: breaking the deadlock By Gabriel J. Felbermayr; Clemens Fuest; Hans Gersbach; Albrecht O. Ritschl; Marcel Thum; Martin T. Braml; Martin Braml
  12. Public debt rule breaking by time-inconsistent voters By Arawatari, Ryo; Ono, Tetsuo
  13. Does the quality of political institutions matter for the effectiveness of environmental taxes? An empirical analysis on CO2 emissions By Donatella Baiardi; Simona Scabrosetti
  14. The Recent Political Situation in Ethiopia and Rapprochement with Eritrea By Amsalu K. Addis; Simplice A. Asongu; Zhu Zuping; Hailu Kendie Addis; Eshetu Shifaw
  15. The Long Shadow of Slavery: The Persistence of Slave Owners in Southern Law-Making By Bellani, Luna; Hager, Anselm; Maurer, Stephan
  16. The Role of Economic Uncertainty in Rising Populism in the EU By Giray Gozgor

  1. By: Yasmine Bekkouche (Ecole d'Économie de Paris - Paris School of Economics (PSE)); Julia Cage (Département d'économie); Edgard Dewitte (Département d'économie)
    Abstract: What is the impact of campaign spending on votes? Does it vary across election types, political parties or electoral settings? Estimating these effects requires comprehensive data on spending across candidates, parties and elections, as well as identification strategies that handle the endogenous and strategic nature of campaign spending in multiparty systems. This paper provides novel contributions in both of these areas. We build a new comprehensive dataset of all French legislative and UK general elections over the 1993-2017 period. We propose new empirical specifications, including a new instrument which relies on the fact that candidates are differentially affected by regulation on the source of funding on which they depend the most. We find that an increase in spending per voter consistently improves candidates’ vote share, both at British and French elections, and that the effect is heterogeneous depending on the party. In particular, we show that spending by far-right candidates has much lower returns than spending by other parties, and that this can be partly explained by the social stigma attached to far-right voting. Our findings help reconcile the conflicting results of the existing literature, and improve our understanding of why campaigns matter.
    Date: 2020–07
  2. By: Dhillon, Amrita; Kotsialou, Grammateia; McBurney, Peter; Riley, Luke
    Abstract: This work discusses the potential of a blockchain based infrastructure for a decentralised online voting platform. When compared to paper based voting, online voting can vastly increase the speed that votes can be counted, expand the overall accessibility of the election system and decrease the cost of turnout. Yet despite these advantages, online voting for political office is subject to fraud at various levels due to its centralised nature. In this paper, we describe a general architecture of a centralised online voting system and detail which areas of such a system are vulnerable to electoral fraud. We then proceed to introduce the key ideas underlying blockchain technology as a decentralised mechanism that can address these problems. We discuss the advantages and weaknesses of the blockchain technology, the protocols the technology uses and what criteria a good blockchain protocol should satisfy (depending on the voting application). We argue that the decentralisation inherent in the blockchain technology could increase the public's trust in national elections, as well as eliminate voter impersonation and double voting. We conclude with a discussion regarding how economists and social scientists can collaborate with the blockchain community in a research agenda on the design of efficient blockchain protocols and new voting systems such as liquid democracy.
    Date: 2020–08–29
  3. By: Christa N. Brunnschweiler (University of East Anglia); Samuel Kwabena Obeng (University of East Anglia)
    Abstract: We examine how local governments’ political alignment with central government affects subnational fiscal outcomes. In theory, alignment could be rewarded with more intergovernmental transfers, or swing voters in unaligned constituencies could be targeted instead. We analyze data from Ghana, which has a complex decentralized system: District Chief Executives (DCEs) are centrally-appointed local administrators loyal to the ruling party, while district MPs may belong to another party. A formula for transfer distribution aims to limit the influence of party politics. Using a new dataset for 1994-2014 and a regression discontinuity design, we find that despite this system, districts with aligned MP and DCE receive more transfers, have higher district expenditure, and more internally generated funds. Results are strongest for a subsample of constant districts over the period, suggesting that municipal fragmentation has weakened political alignment effects. We also show strong electoral cycle effects, and find a crowd-in effect for Ghanaian districts.
    Keywords: fiscal federalism, political alignment, flypaper effect, Ghana, regression discontinuity
    JEL: H7 D72 H87 O55
    Date: 2020–08–10
  4. By: James H. Cassing; Ngo Van Long
    Abstract: We study how the opportunity to trade in trash might influence the equilibrium outcome when the tax on the externality is determined by a political economy process. In our model, individuals have heterogeneous preferences for environmental quality, and there is a leakage when funds are transferred from the pressure groups to the politicians. When hard-core environmentalists and capitalists are organized interest groups while moderate environmentalists are not organized, we find that the politically chosen tax on the externality is below the optimal Pigouvian level. The opportunity to export waste in unlimited quantities, but at a price, is not the environmentalists’ panacea and does not eliminate political social tension and suboptimal results.
    Keywords: trade in trash, interest groups, externalities, environmental lobby, political economy, trade and environment
    JEL: F18 D72
    Date: 2020
  5. By: John Manuel Barrios (University of Chicago - Booth School of Business); Yael V. Hochberg (Rice University and NBER)
    Abstract: Even when Ñ objectively speaking Ñ death is on the line, partisan bias still colors beliefs about facts. We use data on internet searches as well as proprietary data on county-level average daily travel distance and visits to non-essential businesses from a large sample of U.S. smartphones at the daily level and show that the higher the percentage of Trump voters in a county, holding all else equal, the lower the perception of risk associated with the COVID-19 virus and the lower the level of social distancing behavior exhibited. As Trump vote share rises, individuals search less for information on the virus, they search less for information about unemployment benefits, and they exhibit lower reductions in both their daily distance traveled and their visits to non-essential businesses. Risk perceptions in areas with high Trump vote shares increase in these areas only after 3/9/20, when it was announced that COVID-19 had struck the Conservative Political Action Committee meetings and conservative politicians were self-quarantined, suggesting that their risk perceptions are affected not by changes in fundamental underlying risk, but rather by political-related interpretations of the risk. These patterns persist even in the face of state-level mandates to close schools and non-essential businesses and to Òstay home-work safe,Ó and reverse only when the White House releases federal social distancing guidelines on March 16th. This differential is present even in the face of similar levels of ability to telework and in the presence of higher levels of older population at risk. Our results suggest that political partisanship may play a role in determining risk perceptions in a pandemic, with potentially significant externalities for public health outcomes. Relying solely on compliance with voluntary suggested measures in the presence of different political views on the crisis may have limited effectiveness; instead, enforcement may be required to successfully flatten the curve.
    Keywords: Risk Perceptions, COVID-19, Political Partisanship, Polarization, Pandemics
    JEL: D8 I1 P16 L82
    Date: 2020
  6. By: Kolcava, Dennis
    Abstract: Environmental policy in many Western democracies relies on voluntary environmental action by the private sector. This policy mode is strongly contested though. Proponents of introducing government regulation argue that voluntary corporate environmental action is rarely more than “greenwashing”. Can policymakers rely on public opinion to hold firms accountable for (lacking) contributions to environmental goods? I argue that greenwashing accusations reduce citizens’ confidence in both the effectiveness of voluntary environmental action by firms and the alignment of firms’ economic interest and environmental protection. Furthermore, I propose, that citizens’ support for government intervention increases in response to firms being accused of greenwashing. I test this argument in a survey experiment (N=2112) on a sample representative of the Swiss voting population. The analysis shows that accusing firms of greenwashing changes how citizens perceive voluntary environmental action by firms. This, however, does not translate into shifts in citizens’ regulatory preferences.
    Date: 2020–08–10
  7. By: Benoit Crutzen (Erasmus School of Economics); Dana Sisak (Erasmus School of Economics); Otto Swank (Erasmus School of Economics)
    Abstract: Two common characteristics of populism are anti-elitism and favoring popular will over expertise. The recent successes of populists are often attributed to the common people, the majority of voters, being left behind by mainstream parties. This paper shows that the two characteristics of populism are responses to the common people being left behind. We develop a model that highlights two forces behind electoral success: numbers and knowledge. Numbers give the common people an electoral advantage, knowledge the elite. We show that electoral competition may lead parties to cater to the elites interest, creating a left-behind majority. Next, we identify conditions under which a left-behind majority encourages entry by a party offering an anti-elite platform. Finally, we identify conditions under which parties follow the opinion of the common people when that group would benefit from parties relying on experts.
    Keywords: Electoral competition, Populism, Pandering, Information
    JEL: D72 D83
    Date: 2020–09–08
  8. By: Hannan, Kellie; Cullen, Francis T.; Butler, Leah C.; Graham, Amanda (Georgia Southern University); Burton, Alexander L.; Burton, Velmer S. Jr.
    Abstract: Beliefs about race, especially racial resentment, are key predictors of public support for capital punishment and punitiveness generally. Drawing on a conceptual innovation by political scientist Jennifer Chudy, we explore the utility of transferring into criminology her construct of racial sympathy—or Whites’ concern about Blacks’ suffering. First, across three data sets, we replicate Chudy’s finding that racial sympathy and resentment are empirically distinct constructs. Second, based on a national-level 2019 YouGov survey (n = 760 White respondents) and consistent with Chudy’s thesis, racial sympathy is then shown to be significantly related to the race-specific view that capital punishment is discriminatory but not support for the death penalty or harsher courts. Racial sympathy also is positively associated with advocacy of rehabilitation as the main goal of prison. Notably, in all models, racial resentment has robust effects, increasing punitive sentiments. Taken together, the results suggest that racial sympathy is a concept that can enrich criminologists’ study of how race shapes crime policy preferences in the United States and beyond.
    Date: 2020–06–18
  9. By: Charles McCLEAN; ONO Yoshikuni
    Abstract: Elected officials tend to be older than most of the constituents they represent. Is this because voters generally prefer older politicians over younger ones? We investigate this question by conducting two novel survey experiments in Japan where we ask respondents to evaluate the photos of hypothetical candidates for mayor, and then alter candidate faces using artificial neural networks to make them appear as if they are younger or older, while keeping their facial structure and contours intact. Contrary to the observed candidate pool for mayors, the voters in our experiments disliked elderly candidates the most, but viewed younger candidates as equally favorable as middle-aged candidates. We also find that younger and middle-aged voters view candidates from their age group more favorably than others, whereas older voters do not, and that all voters use age as a heuristic for a candidate's issue emphases and traits. We then provide evidence for the external validity of our results using new data on actual mayoral elections. Together, these findings suggest that it is supply-side factors rather than voter demand that explain the shortage of younger politicians in public office.
    Date: 2020–08
  10. By: Hua Cheng (Nankai University - School of Finance; University of Texas at Austin); Kishore Gawande (University of Texas at Austin); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)); Shusen Qi (Xiamen University - School of Management)
    Abstract: Although policy uncertainty has drawn regulators’ attention in the aftermath of the global financial crisis, little is known on how to alleviate its adverse effects. In this paper, we examine the role of political connections in mitigating the detrimental impact of policy uncertainty on banks. Our estimates show that banks are more cautious when facing policy uncertainty, but that the effect is partially alleviated when banks are politically connected. For an increase of one standard deviation in policy uncertainty, connected banks maintain a loss provision to loan volume ratio that is almost seven percent lower compared to their unconnected peers. These findings are robust to a geographical regression discontinuity setting, as well as to a placebo test. Lastly, the mitigating role of political connections is driven mainly by smaller banks and periods of stricter banking regulations.
    Keywords: Policy uncertainty; Political connections; Bank risk-taking
    JEL: G21 G28 H70
    Date: 2020–05
  11. By: Gabriel J. Felbermayr; Clemens Fuest; Hans Gersbach; Albrecht O. Ritschl; Marcel Thum; Martin T. Braml; Martin Braml
    Abstract: Negotiations between the EU and the UK have reached deadlock, with the positions of the UK (no backstop, no single market, no customs union, no dependence on the ECJ), Ireland (backstop, no hard border) and the EU (backstop, indivisibility of the four freedoms, no cherry-picking) all being mutually exclusive. In the current stage of negotiations (or lack of, as the EU insists there will be no re-opening of talks) a hard Brexit is the only possible equilibrium. From a game theoretical perspective, the backstop is inacceptable for any British government as it permanently manifests only one sub-game perfect equilibrium, which is the backstop itself. Conversely, a time limitation on the backstop is unacceptable for the EU, as it risks manifesting another sub-game perfect equilibrium, which is hard Brexit. There­fore, neither renegotiation of the backstop nor elections or the extension of the withdrawal period of Article 50 TFEU can break the deadlock. A first-best solution, which from a trade perspective would be the continuation of UK membership in a reformed EU, is beyond the scope of this analysis. We instead take Brexit as given and discuss terms that limit its political and economic damage. We focus on the contentious issues only; we do not elaborate on the provisions of the Withdrawal Agreement itself, for which a settlement has been reached that appears to be satisfactory for both sides. Because the core debate revolves around the backstop and the issue of a possible border between the Northern Ireland and the Republic of Ireland, we mostly deal with trade policy arrangements.
    Date: 2019
  12. By: Arawatari, Ryo; Ono, Tetsuo
    Abstract: This study considers how present-biased preferences influence public debt policy when a violation of debt rules is possible. To address this issue, the study extends the framework of Bisin, Lizzeri, and Yariv (American Economic Review 105, (2015), 1711--1737) by allowing for rule breaking with extra costs, and we show that rule breaking occurs when a country exhibits a strong present bias. We further extend the model by introducing a political process for determining the debt rule, and we show that a polarization of debt rules emerges between countries with high and low degrees of present bias.
    Keywords: Debt ceilings; Present bias; Public debt.
    JEL: D72 D78 H62 H63
    Date: 2019–10–19
  13. By: Donatella Baiardi (Dipartimento di Scienze Economiche ed Aziendali, University of Parma, Italy; Rimini Centre for Economic Analysis); Simona Scabrosetti (Dipartimento di Giurisprudenza, University of Pavia, Italy; Carlo F. Dondena Centre for Research on Social Dynamics and Public Policies, Università Bocconi, Italy)
    Abstract: We empirically investigate the existence of the Environmental Kuznets Curve (EKC) focusing on a sample of 39 countries in the period 1996-2014. Using an interaction model, we also analyze whether the effectiveness of environmental taxes in reducing CO2 emissions depends on the quality of political institutions. Our results show that the inverted U-shaped relationship between environmental stress and economic development holds independently of the quality of political institutions and environment related taxes. Moreover, an increase in the environmental tax revenue has the expected reducing effect on environmental degradation only in countries with more consolidated democratic institutions, higher civil society participation and less corrupt governments. Our findings also show that the effects on environmental stress of revenue neutral shifts to different tax sources depend not only on the quality of political institutions, but also on the kind of externality the policymaker aims at correcting.
    Keywords: Environmental tax revenue, Environmental tax mix, Environmental Kuznets Curve, CO2 emissions
    JEL: H23 P16 Q50 Q53 Q38
    Date: 2020–09
  14. By: Amsalu K. Addis (Fuzhou University, Fuzhou, China); Simplice A. Asongu (Yaoundé, Cameroon); Zhu Zuping (Fuzhou University, Fuzhou, China); Hailu Kendie Addis (Bahir Dar, Ethiopia); Eshetu Shifaw (Wollo, Ethiopia)
    Abstract: The aim of this article is designed to provide an overview of the historical and contemporary relations between Ethiopia and Eritrea as well as to examine the recent geopolitical situation and the perception of local people in Ethiopia. This paper is mainly based on secondary data analysis of the available secondary information and news reports, online articles, academic literature, interviews and discussions. The war between Ethiopia and Eritrea brought political, economic and social security threats to the Horn of Africa. Although the economy in Ethiopia is at the developing stage, recent protests have shaken the country to its core. Since 2015, anti-government protests have been triggered over freedom of the press, land rights, under-represented seats in the coalition parties, and horizontal inequality in economic, political and social affairs among ethnic groups across the country. In this study, it is established that the unrestrained political circumstance of the current regime has created dissension and violence among the public, and thus led to escalating political, economic and security crises in the country. If this issue is not rectified quickly, the peace in the country may be jeopardised. Another issue is that although Ethiopia-Eritrea rapprochement is appreciated, the agreement between the two leaders and their foreign policy orientation is still unclear.
    Keywords: Ethiopia, Eritrea, Protest, Amhara, Oromo, State of emergency, EPRDF
    Date: 2020–01
  15. By: Bellani, Luna (University of Konstanz); Hager, Anselm (University of Konstanz); Maurer, Stephan (University of Konstanz)
    Abstract: This paper documents the persistence of the Southern slave owning elite in political power after the end of the American Civil War. We draw on a database of Texan state legislators between 1860 and 1900 and link them to their or their ancestors' slaveholdings in 1860. We then show that former slave owners made up more than half of nearly each legislature's members until the late 1890s. Legislators with slave owning backgrounds differ systematically from those without, being more likely to represent the Democratic party and more likely to work in an agricultural occupation. Regional characteristics matter for this persistence, as counties with higher soil suitability for growing cotton on average elect more former slave owners.
    Keywords: wealth inequality, elites and development, US South, intergenerational persistence, slavery
    JEL: D72 J62 N31 H4
    Date: 2020–08
  16. By: Giray Gozgor
    Abstract: This paper examines the impact of economic uncertainty shocks on the populist voting behavior in the panel dataset of 24 European Union (EU) countries for the period from 1980 to 2020. In so doing, we focus on the shares of total populism, right-wing populism, and left-wing populism votes as well as a new indicator of economic uncertainty, so-called, the “World Uncertainty Index (WUI).” Using the fixed-effects, bias-corrected least-squares dummy variable (LSDVC), and Instrumental Variables (IV) estimations, we show that a higher level of the WUI is positively related to total populism and right-wing populist voting behavior. The baseline results remain consistent when we deal with potential issues of endogeneity, to address omitted variable bias, and to exclude the outliers.
    Keywords: populist attitudes in the European Union, voting behaviour, right-wing populism, left-wing populism, uncertainty shocks, economic policy uncertainty
    JEL: D72 D81 C33
    Date: 2020

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