nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒10‒26
sixteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Regional Heterogeneity and U.S. Presidential Elections By Rashad Ahmed; M. Hashem Pesaran
  2. Migrants' Missing Votes By Yvonne Giesing; Felicitas Schikora
  3. Do Party Ties Increase Transfer Receipts in Cooperative Federalism? - Evidence from Germany By Yannick Bury; Lars P. Feld; Ekkehard A. Köhler
  4. Preferences over Taxation of High-Income Individuals: Evidence from a Survey Experiment By Dirk Engelmann; Eckhard Janeba; Lydia Mechtenberg; Nils Wehrhöfer
  5. Electoral Systems and Inequalities in Government Interventions By Garance Génicot; Laurent Bouton; Micael Castanheira De Moura
  6. Dancing with the Populist. New Parties, Electoral Rules and Italian Municipal Elections By Massimo Bordignon; Tommaso Colussi
  7. A Theory of Small Campaign Contributions By Laurent Bouton; Micael Castanheira De Moura; Allan Drazen
  8. Optimal Voting Mechanisms on Generalized Single-Peaked Domains By Tobias Rachidi
  9. The impact of political instability on economic growth: the case of Guyana By Pasha, Sukrishnalall
  10. Evaluating the Effectiveness of Campaign Speeches:Evidence from the First National Speaking Tour By Johannes C. Buggle; Stephanos Vlachos
  11. Fiscal Forecast Manipulations and Electoral Results: Evidence from Portuguese Municipalities By Mamadou Boukari; Francisco José Veiga
  12. Agenda control and reciprocity in sequential voting decisions By Fischbacher, Urs; Schudy, Simeon
  13. EU Political System’s Resilience In The Age Of Politicization: Lessons From The 2019 European Parliament Elections By Sergei Shein
  14. How Trump Triumphed :Multi-candidate Primaries with Buffoons By Micael Castanheira De Moura; Steffen Huck; Johannes Leutgeb
  15. What the political economy literature tells us about blockades and sanctions By Dizaji, S.F.; Lis, P.; Murshed, S.M.; Zweiri, M.
  16. To Act or not to Act? Political competition in the presence of a threat By Arthur Fishman; Doron Klunover

  1. By: Rashad Ahmed; M. Hashem Pesaran
    Abstract: This paper develops a recursive model of voter turnout and voting outcomes at the U.S. county level to investigate the socioeconomic determinants of recent U.S. presidential elections. It exploits cross-section variations across U.S. counties and investigates the key determinants of the 2016 Presidential Election by allowing for regional heterogeneity and using high-dimensional variable selection algorithms such as Lasso and OCMT. It is shown that the relationship between many socioeconomic variables and voting outcomes are not uniform across U.S. regions. Specifically, allowing for regional heterogeneity explains the unexpected 2016 Republican victory. Moreover, incorporating regional heterogeneity improves electoral predictability among key swing states. Important factors explaining voting outcomes include incumbency effects, voter turnout, local economic performance, unemployment, poverty, educational attainment, house price changes, urban-rural scores, and international competitiveness. Our results also corroborate evidence of ‘short-memory’ among voters: economic fluctuations realized a few months prior to the election are indeed powerful predictors of voting outcomes as compared to their longer-term analogues. The paper also reports forecasts for the 2020 U.S. Presidential Election based on data available at the end of July 2020. The regional models predict a close electoral college outcome. The predictions are split: the Lasso-regional model forecasts a narrow Democratic electoral victory, while the OCMT-regional model forecasts a narrow Republican victory. All models point towards the Democratic candidate winning the popular vote.
    Keywords: voter turnout, popular and electoral college votes, simultaneity and recursive identification, high dimensional forecasting models, Lasso, OCMT
    JEL: C53 C55 D72
    Date: 2020
  2. By: Yvonne Giesing; Felicitas Schikora
    Abstract: Emigrants are less likely to participate in elections in their home country. They are also self-selected in terms of education, gender, age, and political preferences, changing the structure of the origin population. High emigration rates can therefore have a systematic influence on election results. Using administrative migration and voting data, we show that counties in Poland that have experienced large emigration following the accession to the European Union in 2004 are characterised by larger vote shares for right-wing parties. We use instrumental variable estimations that exploit distance to the border and to airports to account for endogenous migration patterns. Results are robust to estimations using first differences. Results hold for elections of the national and EU parliament and for different areas within Poland. Surprisingly, we find no effects on incumbent parties. In addition, our results show increased voting for parties with pro-European positions. Analysing the mechanisms using survey data, we illustrate that emigrants (stayers) have less (more) trust in right-wing parties. The results have important policy implications for voting regulations.
    Keywords: migration, voting, political economy, EU enlargement, trust
    JEL: D72 F22 O15 P16
    Date: 2020
  3. By: Yannick Bury; Lars P. Feld; Ekkehard A. Köhler
    Abstract: Cooperative fiscal federalism needs a multi-level consent to decide on the allocation of intergovernmental transfers. We study how parliamentary representation of municipalities on the federal level influences the allocation of federal transfers to municipal governments under this type of federalism. Using a regression discontinuity design in close electoral races, we find that a directly elected member of the federal parliament, who belongs to the party that leads the federal government, induces higher infrastructure transfers from the federal government to a local jurisdiction. However, our results show that this effect only unfolds, if the parliamentarian’s party is simultaneously leading the state government. Moreover, we identify party competition on the local level as motive behind the strategic use of federal funds. Thus, while supporting the swing voter hypothesis, our results suggest that federalism inherently entails restrictions for misusing intergovernmental transfers for political reasons.
    Keywords: fiscal federalism, partisan alignment, vertical transfers
    JEL: H71 H72 H77 E62
    Date: 2020
  4. By: Dirk Engelmann; Eckhard Janeba; Lydia Mechtenberg; Nils Wehrhöfer
    Abstract: Mobility of high-income individuals across borders puts pressure on governments to lower taxes. A central tenet of the corresponding textbook argument is that mobile individuals react to tax differentials through migration, and in turn immobile individuals vote for lower taxes. We investigate to which extent this argument is complete. In particular, political ideology may influence voting on taxes. We vary mobility and foreign taxes in a survey experiment within the German Internet Panel (GIP), with more than 3,000 individuals participating. We find that while the treatment effects qualitatively confirm model predictions how voters take mobility of high-income earners into account when choosing domestic taxes, ideology matters: left-leaning high-income individuals choose higher taxes and emigrate less frequently than right-leaning ones. These findings are in line with the comparative-static predictions of a simple model of inequality aversion when the aversion parameters vary with ideology.
    Keywords: taxation, mobility, ideology, survey experiments
    JEL: D72 F22 H21
    Date: 2020
  5. By: Garance Génicot; Laurent Bouton; Micael Castanheira De Moura
    Abstract: This paper studies the political determinants of inequalities in government interventions under majoritarian (MAJ) and proportional representation (PR) systems. We propose a model of electoral competition with highly targetable government interventions and heterogeneous localities. We uncover a novel relative electoral sensitivity effect that affects government interventions only under the majoritarian (MAJ) systems. This effect tends to reduce inequality in government interventions under MAJ systems when districts are composed of sufficiently homogeneous localities. This effect goes against the conventional wisdom that MAJ systems are necessarily more conducive to inequality than PR systems. We illustrate the empirical relevance of our results with numerical simulations on possible reforms of the U.S. Electoral College.
    Keywords: Distributive Politics; Electoral Systems; Electoral College; Public Good; Inequality
    JEL: D72 H00
    Date: 2020–10
  6. By: Massimo Bordignon (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Tommaso Colussi (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)
    Abstract: This paper develops a theoretical framework that makes predictions on (a) the conditions under which a populist party decides to run and the policy position it takes and (b) voters’ response under different electoral systems. We test these predictions using data on Italian municipal elections over the 2009-2019 period and focusing on the electoral outcomes of the Five Star Movement. The empirical analysis shows: (i) populists are more likely to run under a Dual Ballot (DB) system and in municipalities where there is a large share of dissatisfied voters; (ii) when the populist runs, turnout increases under both Single and Dual Ballot systems; (iii) in a DB system, the populist candidate who ranked second in the first round has a higher probability of winning than the candidate of traditional party who ranked second by the same margin, as a result of increased turnout in the second round. We finally provide evidence that the low education and the young age of populist candidates are likely to deteriorate the efficiency of the local administration.
    Keywords: Voting behavior, Populism, Five Star Movement, municipal elections.
    JEL: D72 D74 H56 D91
    Date: 2020–10
  7. By: Laurent Bouton; Micael Castanheira De Moura; Allan Drazen
    Abstract: We propose a theory of small campaign contributions driven by an electoral motive, i.e. the desire to influence election outcomes. Though small donors take as given the actions of others, strategic interactions induce patterns consistent with empirical findings, e.g. election closeness and underdog effects. We also study different forms of campaign finance laws, and show why caps should be combined with a progressive tax on contributions. Next, we introduce large donors and show how several conclusions in the literature may be modified by the interaction with small donors. Throughout, we discuss the empirical implications of our findings.
    Keywords: Campaign contributions; Small donors; Campaign finance laws; Elections; Income inequality
    JEL: D71 D72 H31
    Date: 2020–10
  8. By: Tobias Rachidi
    Abstract: This paper studies the design of voting mechanisms in a setting with more than two alternatives and arbitrarily many voters who have generalized single-peaked preferences derived from median spaces as introduced in [Nehring and Puppe, 2007b]. This class of preferences is considerably larger than the well-known class of preferences that are single-peaked on a line. I characterize the voting rules that maximize ex-ante utilitarian welfare among all social choice functions satisfying strategy-proofness, anonymity, and surjectivity. The optimal mechanism takes the form of voting by properties, that is, the social choice is determined through a collection of binary votes on subsets of alternatives involving qualified majority requirements that reflect the characteristics of these subsets of alternatives. I illustrate my general optimality result by means of applications including, for instance, collective choice when preferences are single-peaked with respect to a tree. Finally, I emphasize the importance of my characterization result for the analysis of stable constitutions.
    Keywords: Voting; Generalized Single-Peaked Preferences; Mechanism Design
    JEL: D71 D72 D82
    Date: 2020–09
  9. By: Pasha, Sukrishnalall
    Abstract: This paper empirically probes the nexus between political instability and economic growth in Guyana using time-series data covering the period 1961 – 2018 and GARCH (1,1) models. The results show that changes in the Head of State (HOS) exert a positive and significant impact on real GDP growth rates, while strikes have the opposite effect on economic growth. Other proxies of political instability, such as political assassinations, riots, insurrection, and terrorism, are not significantly related to growth in real GDP because of the dispersed nature of economic activities and their negligible effect on production and productivity. When the proxies of political instability are added to the conditional variance equation, the results indicate that only changes in Head of State (HOS) moderate volatility in growth rates. This is probably due to transitory goodwill enjoyed by the incoming Head of State that serves to dampen ethnic tensions, reducing instability. The latter result indicates the importance of democratic turnover.
    Keywords: Economic growth, GARCH (1,1), Guyana, political instability
    JEL: O47
    Date: 2020–09–27
  10. By: Johannes C. Buggle; Stephanos Vlachos
    Abstract: This paper examines the effect of campaign visits in the context of the unique onesided nationwide speaking tour by a US Presidential candidate. During the 1896 election, the Democratic candidate went on a whistle stop train tour, while the Republican followed a frontporch campaign. To identify the causal effect of campaign speeches, we exploit several estimation strategies, including a within-county difference-in-differences design and a neighbor-pair fixed effect estimator. We find that one speech given by the Democratic candidate increased his vote share by about one percentage point on average. This increase stems from the persuasion of previously non-aligned industrial workers.
    Keywords: Elections, campaign strategies, persuasive communication
    JEL: D72 N41 N71 P48
    Date: 2020–09
  11. By: Mamadou Boukari (Laboratoire de Recherche en Sciences Économiques et de Gestion (LaRSEG), Université de Kara); Francisco José Veiga (University of Minho and NIPE)
    Abstract: This paper aims to evaluate the impact of budget forecast manipulations on election results using a sample that covers all 308 Portuguese municipalities over the period running from 1998 to 2017. The results reveal that incumbent mayors overestimate revenues and expenditures. Overstating the budget more on the revenue side, they end up with a deficit. We check whether this opportunistic behavior is electorally benefcial. The results provide little or no evidence that election-year manipulations of revenue forecasts affect the vote shares of the parties of the incumbent mayors. On the other hand, the opportunistic management of total and capital expenditure forecasts pays off, which is consistent with previous results for Portugal indicating that increased total and, mainly, capital expenditures lead to higher vote shares.
    Keywords: Budget Forecast Errors, Elections, Municipalities, Portugal
    JEL: D72 H72
    Date: 2020
  12. By: Fischbacher, Urs; Schudy, Simeon
    Abstract: We study how reciprocity affects the extent to which a chair can exploit her control over an agenda if a committee votes sequentially on a known series of binary proposals. We show in a parsimonious laboratory experiment that committee members form vote trading coalitions favoring early proposals not only when the sequence of proposals is exogenously given, but also when a chair controls the sequence of proposals. Vote trading occurs even though chairs manipulate the agenda in their favor. Punishment for chairs exploiting agenda control is weak as chairs reciprocate support by others more frequently than nonchairs. (JEL C92, D71, D72)
    Date: 2020
  13. By: Sergei Shein (National Research University Higher School of Economics)
    Abstract: The democratic deficit problem in the EU polity is becoming more relevant in the context of the multifaceted crisis and the politicization of European integration. Taking into account that the category of resilience is actively used in the official EU discourse as a system’s ability to reform and to counter threats, it is interesting, from a research point of view, to consider the use of resilience as an analytical optics to view the current EU internal political development. This article analyzes, in terms of resilience, the attempts of the EU’s mainstream actors to improve the democratic elements of the EU’s institutional structure during the European Parliament (EP) elections 2019 and their relationships with the agents of EU politicization – right-wing populist actors. The main findings suggest that (1) EU politicization exacerbates the problem of the democratic deficit and forces mainstream actors to seek strategies to increase the resilience of the whole system; (2) in order to preserve their own subjectness in the face of growing populism and the politicization of European integration, mainstream actors choose a strategy of depoliticization, which has decreased the EU resilience; (3) right-wing populist actors are agents of politicization, they play an ambivalent role in relation to EU resilience, being a resource and a threat.
    Keywords: resilience, democratic deficit, EP elections 2019, politicization, populism.
    JEL: Z
    Date: 2020
  14. By: Micael Castanheira De Moura; Steffen Huck; Johannes Leutgeb
    Abstract: While people on all sides of the political spectrum were amazed that Donald Trump won the Republican nomination this paper demonstrates that Trump’s victory was not a crazy event but rather the equilibrium outcome of a multi-candidate race where one candidate, the buffoon, is viewed as likely to self-destruct and hence unworthy of attack. We model such primaries as a truel (a three-way duel), solve for its equilibrium, and test its implications in the lab. We find that people recognize a buffoon when they see one and aim their attacks elsewhere with the unfortunate consequence that the buffoon has an enhanced probability of winning. This result is strongest amongst those subjects who demonstrate an ability to best respond suggesting that our results would only be stronger when this game is played by experts and for higher stakes.
    Keywords: truel; political primaries; Trump
    JEL: C72 C92 D72 D74
    Date: 2020–10
  15. By: Dizaji, S.F.; Lis, P.; Murshed, S.M.; Zweiri, M.
    Abstract: Economic sanctions are usually defined as restrictions on customary trade and financial relations imposed by one or more countries against a target country, group, or individual for political and security policy purposes. Most existing studies of the effects of sanctions and blockades, whether bilateral or multilateral, are conducted from the perspective of the initiating or ‘sender’ country, which is typically a great power, e.g., the United States. However, there is a lack of literature on the possible policies that target nations may develop to prevent compromising their security, especially economic security, as well as neutralize the negative impact of sanctions. Sanctions and blockades disrupt the flow of international trade in goods, services and capital. These have consequences for the composition of output, employment, consumption and investment, and may also exert substantial effects on households, firms and government expenditures in targeted nations. Thus, it is important to understand the effects of blockades and sanctions on economic growth and public expenditure on security, military, health and education. Apart from the long-run growth consequences of sanctions and blockades, many of the macroeconomic effects are likely to be relatively short-lived, decaying over time as the economy adjusts to sanctions. Therefore, econometric techniques applied to investigate the impact of sanctions should be able to capture the simultaneous interplay between economic outcomes, political factors and adjustment processes, as in reality economics and politics are inseparable.
    Keywords: sanctions, blockades, international trade, economic effects, social effects, political effects
    Date: 2020–09–30
  16. By: Arthur Fishman; Doron Klunover
    Abstract: We present a model of political competition in which an incumbent politician, may implement a costly policy to prevent a possible threat to, for example, national security or a natural disaster.
    Date: 2020–10

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