nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒10‒05
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. A Political Economy Model of the Ganges Pollution Cleanup Problem By Batabyal, Amitrajeet; Beladi, Hamid
  2. Why Beauty Matters: Candidates' Facial Appearance and Electoral Success By ONO Yoshikuni; ASANO Masahiko
  3. Agricultural Comparative Advantage and Legislators’ Support for Trade Agreements By Amodio, Francesco; Baccini, Leonardo; Chiovelli, Giorgio; Di Maio, Michele
  4. Economic Shocks and Populism: The Political Implications of Reference-Dependent Preferences By Fausto Panunzi; Nicola Pavoni; Guido Tabellini
  5. Delay and dilution in the implementation of environmental norms: business groups and the regulation of car emissions in Switzerland in the 1970s–1980s By Pitteloud, Sabine
  6. A Political Model of Trust By Marina Agranov; Ran Eilat; Konstantin Sonin
  7. Generational Distribution of Fiscal Burdens: A Positive Analysis By Uchida, Yuki; Ono, Tetsuo
  8. GOLFING WITH TRUMP: Social capital, decline, inequality, and the rise of populism in the US By Andres Rodriguez-Pose; Neil Lee; Cornelius Lipp
  9. How Does Kompromat Affect Politics? A Model of Transparency Regimes By Monika Nalepa; Konstantin Sonin
  10. The Evolution of First-Generation Immigrants' Political Preferences in Western Europe By Gonnot, Jérôme
  11. Abstentions and Social Networks in Congress By Marco Battaglini; Valerio Leone Sciabolazza; Eleonora Patacchini
  12. Immigration Policy and Hispanics' Willingness to Run for Office By Amuedo-Dorantes, Catalina; Bucheli, Jose R.
  13. After Eastern German State Elections 2019: Germany Facing Serious Politico-Economic Problem By Paul J.J. Welfens
  14. Does cohesion policy reduce EU discontent and Euroscepticism? By Andres Rodriguez-Pose; Lewis Dijkstra;
  15. Political Instability and Birth Outcomes: Evidence from the 1981 Military Coup in Spain By Aparicio Fenoll, Ainoa; Gonzalez, Libertad
  16. Political Scandal: A Theory By Wioletta Dziuda; William G. Howell

  1. By: Batabyal, Amitrajeet; Beladi, Hamid
    Abstract: We study pollution cleanup in the Ganges in Varanasi, India. Voters elect politicians and elected politicians decide how much pollution to clean up. Between the two time periods, there is an election. Politicians are sincere or insincere. The marginal cost of public funds ζ measures how efficiently elected politicians transform tax receipts into pollution cleanup. Voters have identical per period utility functions. We ascertain the equilibrium outcome and per period voter welfare. Second, we show that an increase in ζ reduces the equilibrium pollution cleanup and voter welfare. Third, an insincere politician can delay the revelation of his insincerity. We show that a critical value of ζ,ζ^*, exists such that the insincere incumbent separates and loses the election if and only if ζ>ζ^* and that he pools and is re-elected otherwise. Finally, we note that an increase in ζ can raise voter welfare when politicians are more likely to be insincere.
    Keywords: Ganges River, Politician, Pollution Cleanup, Uncertainty, Voting
    JEL: D72 Q52
    Date: 2020–01–09
  2. By: ONO Yoshikuni; ASANO Masahiko
    Abstract: Why do better-looking candidates gain more votes in elections? Existing research shows that candidates' facial appearance—perceived beauty, in particular—affects the fate of their election outcomes. Yet, little is known about the mechanisms by which the beauty of candidates creates a premium in elections. To solve this puzzle, we ran a survey that asked around 1,500 people to subjectively evaluate more than 400 real candidates' facial appearance, including beauty. We then conducted a survey experiment with about 3,000 people that explored the effects of candidate beauty on voter perceptions. Our findings demonstrate that neither candidates' facial expression nor the impressions they impart on the viewer, such as smiling, competence and trustworthiness, hinder the positive influence of perceived beauty of the candidates on election outcomes. We find that the beauty of the candidates attracts the attention of voters and alters voters' impressions of the candidates' prospects of winning the election, suggesting that voters' incentives to seek information and get on the bandwagon are driving them to support good-looking candidates.
    Date: 2020–09
  3. By: Amodio, Francesco; Baccini, Leonardo; Chiovelli, Giorgio; Di Maio, Michele
    Abstract: Does comparative advantage explain legislators’ support for trade liberalization? We use data on potential crop yields as determined by weather and soil characteristics to derive a new, plausibly exogenous measure of comparative advantage in agriculture for each district in the US. Evidence shows that comparative advantage in agriculture predicts how legislators vote on the ratification of preferential trade agreements in Congress. We show that legislators in districts with high agricultural comparative advantage are more likely to mention that trade agreements are good for agriculture in House floor debates preceding roll-call votes on their ratifications. Individuals living in the same districts are also more likely to support free trade. Our analysis and results contribute to the literature on the political economy of trade and its distributional consequences, and to our understanding of the economic determinants of legislators voting decisions.
    Keywords: Comparative Advantage, Trade Liberalization, Politicians, US
    JEL: D72 F14 Q17
    Date: 2020–07–14
  4. By: Fausto Panunzi; Nicola Pavoni; Guido Tabellini
    Abstract: This paper studies electoral competition over redistributive taxes between a safe incumbent and a risky opponent. As in prospect theory, economically disappointed voters bcome risk lovers, and hence are intrinsically attracted by the more risky candidate. We show that, after a large adverse economic shock, the equilibrium can display policy divergence: the more risky candidate proposes lower taxes and is supported by a coalition of very rich and very disappointed voters, while the safe candidate proposes higher taxes. This can explain why new populist parties are often supported by economically dissatisfied voters and yet they run on economic policy platforms of low redistribution. We show that survey data on the German SOEP are consistent with our theoretical predicions on voters' behavior.
    Keywords: international taxation, multinational firms, financial statement income, book-tax conformity
    JEL: H25 M41
    Date: 2020
  5. By: Pitteloud, Sabine
    Abstract: During the last decade, we have witnessed increased public concern about vehicle emissions and growing frustration with political inaction and businesses’ preference for the status quo. This paper offers a historical perspective on this debate by shedding light on the political struggle that occurred around the implementation of new regulations reducing air pollution caused by motor vehicles in Switzerland in the 1970s. Relying on archival material from the Swiss Federation of Commerce and Industry and the Federal Archives, the paper analyzes the processes of dilution and delay that characterized these regulations, and the complex interplay of various influences both in Switzerland and at the European level that contributed to this political outcome.
    Keywords: Environmental norms, Vehicle emissions, Lobbying, Business history, Switzerland
    JEL: N54 N84 F64 K32 D72
    Date: 2020
  6. By: Marina Agranov (Caltech - Division of Humanities and Social Sciences); Ran Eilat (Ben-Gurion University - Department of Economics); Konstantin Sonin (University of Chicago - Harris School of Public Policy)
    Abstract: We analyze a simple model of political competition, in which the uninformed median voter chooses whether to follow or ignore the advice of the informed elites. In equilibrium, information transmission is possible only if voters trust the elitesÕ endorsement of potentially biased candidates. When inequality is high, the elitesÕ informational advantage is minimized by the votersÕ distrust. When inequality reaches a certain threshold, the trust, and thus the information transmission, breaks down completely. Finally, the size of the elite forming in equilibrium depends on the amount of trust they are able to maintain.
    Keywords: trust, inequality, political economy, cheap talk, information club
    JEL: D72 D83
    Date: 2020
  7. By: Uchida, Yuki; Ono, Tetsuo
    Abstract: This study presents a political economy model with overlapping generations to analyze the effects of population aging on fiscal policy formation and the resulting distribution of fiscal burden across generations. The analysis shows that increased political power of the old, arising from population aging, leads to (i) an increase in the ratio of labor income tax revenue to GDP and the ratio of debt to GDP, and (ii) an increase in the ratio of capital income tax revenue to GDP in countries with high degrees of preferences for public goods, but an initial decrease followed by an increase in this ratio in countries with low degrees of preferences for public goods.
    Keywords: Generational burden; Overlapping generations; Political economy; Population aging; Public debt
    JEL: D70 E24 E62 H60
    Date: 2020–09–09
  8. By: Andres Rodriguez-Pose; Neil Lee; Cornelius Lipp
    Abstract: In 2000 Robert Putnam forecast that United States (US) democracy was at risk from the twin challenges of declining civic engagement and rising interpersonal inequality. Sixteen years later, his predictions were vindicated by the election of Donald Trump as president of the US. This paper analyses the extent to which the election of Donald Trump was related to levels of social capital and interpersonal inequalities and posits a third alternative: that the rise in vote for Trump in 2016 was the result of long-term economic and population decline in areas with strong social capital. This hypothesis is confirmed by the econometric analysis conducted for counties across the US. Long-term declines in employment and population – rather than in earnings, salaries, or wages – in places with relatively strong social capital propelled Donald Trump to the presidency. By contrast, low social capital and high interpersonal inequality were not connected to a surge in support for Trump. These results are robust to the introduction of control variables and different inequality measures. The analysis also shows that the discontent at the base of the Trump margin is not just a consequence of the 2008 crisis but had been brewing for a long time. Places in the US that remained cohesive but witnessed an enduring decline are no longer bowling alone, they are golfing with Trump.
    Keywords: Populism, social capital, inequality, economic and demographic decline, Donald Trump, counties, US
    JEL: D31 D72 O15 R11
    Date: 2020–09
  9. By: Monika Nalepa (University of Chicago); Konstantin Sonin (University of Chicago)
    Abstract: Why are transparency regimes so rare? When some politicians have something to conceal, why would their opponents not press for transparency? To analyze transitional justice, we build a model that explains why uncompromised politicians might avoid a transparency regime, which could signal to the voters that they are clean. We model the interaction between an incumbent, an opposition leader, a strategic blackmailer, and voters who know that the opposition politician may be compromised. The incumbent can implement a transparency regime, which would force out a compromised opponent and thus make blackmail impossible. We show that, instead, she might strategically opt for no transparency that keeps all skeletons of the ancien regime in the closet, as it is easier to defeat a potentially compromised opponent. We corroborate our results using original data from the Global Transitional Justice Dataset combined with data on elections, incumbency, and successor autocrat status in post-communist Europe.
    Keywords: transitional justice, transparency regime, blackmail, signaling
    JEL: P26 D82
    Date: 2020
  10. By: Gonnot, Jérôme
    Abstract: This paper documents the evolution of a range of political preferences among first-generation immigrants in Western Europe. The overall aim is to study to what extent and at what pace immigrants adapt to the political norms that prevail in their host countries. I use a cross-national research strategy to compare and analyze attitudes of foreign-born individuals in 16 European countries and nd strong empirical support for assimilation over time: On average, the opinion gap between natives and immigrants' political preferences on redistribution, gay rights, EU unification, immigration policies, and trust level in national governments is reduced by 40% after 20 years of residence in the destination country. I also provide evidence that most of this assimilation is driven by immigrants from non-developed countries, and that convergence in political preferences varies significantly across immigrants' economic and cultural background as well as with the size of the immigrant group from their country of origin. Finally, I show that a substantial part of assimilation on gay rights, immigration and political trust is driven by acculturation at the national level where immigrants with longer tenure tend to adapt more to the political preferences of natives in their destination country. These findings shed new light on the timing and magnitude of the political assimilation of first-generation immigrants, with potentially important implications for the political economy of immigration policy.
    Date: 2020–09–14
  11. By: Marco Battaglini; Valerio Leone Sciabolazza; Eleonora Patacchini
    Abstract: We study the extent to which personal connections among legislators influence abstentions in the U.S. Congress. Our analysis is conducted by observing representatives' abstention for the universe of roll call votes held on bills in the 109th-113th Congresses. Our results show that a legislator's propensity to abstain increases when the majority of his or her alumni connections abstains, even after controlling for other well-known predictors of abstention choices and a vast set of fixed effects. We further reveal that a legislator is more prone to abstain than to take sides when the demands from personal connections conflict with those of the legislator's party.
    JEL: D72 D74 D91
    Date: 2020–09
  12. By: Amuedo-Dorantes, Catalina (University of California, Merced); Bucheli, Jose R. (New Mexico State University)
    Abstract: For the first time in U.S. history, approximately 10 percent of the U.S. House of Representatives is Hispanic. The greater engagement of Hispanics in national politics has occurred after unprecedented growth in interior immigration enforcement disproportionately impacting Latinos. Using county-level data on all candidates running for congressional elections over the 2008–2018 decade, we find evidence of intensified immigration enforcement suppressing Hispanics' willingness to run for Congress. The effect, which is not present for female or Black minorities, is driven by local police-based measures, and more prevalent in localities without a sanctuary policy and in states with a Republican governor.
    Keywords: diversity, electoral candidates, immigration enforcement, United States
    JEL: D72 H0 J15
    Date: 2020–09
  13. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: The state elections in the former East German states of Brandenburg, Saxony and Thuringia stand for a rise of the right-wing Alternative für Deutschland (AfD) [Alternative for Germany], a relatively new populist party which was created in 2013. This party has won seats in all state parliaments and also has achieved a considerable voting share in the European Parliament elections in 2019 and the federal German Parliament in 2017; the voting shares obtained in the state elections of Brandenburg and Saxony were close to 25% and thus force the traditionally leading parties CDU (Christian Democrats) and SPD (Social Democrats) to form broader coalitions that take on board at least a third party. There are apparent reasons for the expansion of the AfD; the makeup of the current German government – a grand coalition of center right (CDU) and center left (SPD) – and its weak policy play a strong role in this. Germany’s economic system is facing major new adjustment problems and people, at least in eastern Germany, continue to face considerable personal and other fears. The situation in 2019 has improved, however, in western Germany. Major policy initiatives and reforms are needed to successfully cope with the challenges in Germany and the EU, respectively.
    Keywords: State Elections, Eastern Germany, German Unification, Populism, AfD, Inequality, Fears
    JEL: D63 D72 D74 D78
    Date: 2019–09
  14. By: Andres Rodriguez-Pose; Lewis Dijkstra;
    Abstract: Some regions in Europe that have been heavily supported by the European Union’s cohesion policy have recently opted for parties with a strong Eurosceptic orientation. The results at the ballot box have been put forward as evidence that cohesion policy is ineffective for tackling the rising, European- wide wave of discontent. However, the evidence to support this view is scarce and, often, contradictory. This paper analyses the link between cohesion policy and the vote for Eurosceptic parties. It uses the share of votes cast for Eurosceptic parties in more than 63,000 electoral districts in national legislative elections in the EU28 to assess whether cohesion policy investment since 2000 has made a difference for the electoral support for parties opposed to European integration. The results indicate that cohesion policy investment is linked to a lower anti-EU vote. This result is robust to employing different econometric approaches, to considering the variety of European development funds, to different periods of investment, to different policy domains, to shifts in the unit of analysis, and to different levels of opposition by parties to the European project.
    Keywords: Euroscepticism, anti-system voting, populism, cohesion policy, elections, regions, Europe
    JEL: D72 R11 R58
    Date: 2020–09
  15. By: Aparicio Fenoll, Ainoa; Gonzalez, Libertad (Universitat Pompeu Fabra)
    Abstract: We study the effect of exposure to political instability in-utero on health at birth. We exploit the coup d'état that took place in Spain on February 23, 1981. Although short-lived and unsuccessful, the event generated stress and fear among the population, especially in areas that had suffered more repression during the Civil War and the recent dictatorship. We follow a difference-in-differences strategy and compare birth outcomes before and after the coup, in areas that were differentially "affected". We find that children who were in utero during the coup in more affected areas were born with significantly lower birth-weight (around 9 grams lighter), especially if they were exposed to the coup in the first or second trimester of pregnancy. We contribute to the literature on the effects of maternal stress by focusing on an acute (and relatively common) source of distress that is unlikely to have affected newborn health via other channels.
    Keywords: birth outcomes, birth weight, political instability, military coup
    JEL: I12 J13
    Date: 2020–09
  16. By: Wioletta Dziuda (University of Chicago - Harris School of Public Policy); William G. Howell (University of Chicago - Harris School of Public Policy)
    Abstract: We study a model that characterizes the conditions under which past misbehavior becomes the subject of present scandal, with consequences for both the implicated politician and the parties that work with him. In the model, both authentic and fake scandals arise endogenously within a political framework involving two parties that trade off benefits of continued collaboration with a suspect politician against the possibility of reputational fallout. Rising polarization between the two parties, we show, increases the likelihood of scandal while decreasing its informational value. Scandals that are triggered by only the opposing party, we also find, are reputationally damaging to both parties and, in some instances, reputationally enhancing to the politician. The model also reveals that jurisdictions with lots of scandals are not necessarily beset by more misbehavior. Under well-defined conditions, in fact, scandals can be a sign of political piety.
    Date: 2020

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