nep-pol New Economics Papers
on Positive Political Economics
Issue of 2020‒12‒07
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Cause and Effect in Political Polarization: A Dynamic Analysis By Steven Callander; Juan Carlos Carbajal
  2. The Cost of a Divided America: An Experimental Study Into Destructive Behavior By Wladislaw Mill; John Morgan
  3. Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure By Autor, David; Dorn, David; Hanson, Gordon H.; Majlesi, Kaveh
  4. The Idea of Jurisdictional Representation in a Federation: A Proposal and Illustrations from Recent Canadian and US Elections By Syed M. Ahsan
  5. Agricultural Comparative Advantage andLegislators' Support for Trade Agreements By Giorgio Chiovelli; Francesco Amodio; Leonardo Baccini; Michele Di Maio
  6. The COVID-19 Pandemic and the 2020 U.S. Presidential Election By Baccini, Leonardo; Brodeur, Abel; Weymouth, Stephen
  7. The effect of quotas on female representation in local politics By Köppl-Turyna, Monika; Kantorowicz, Jarosław
  8. Voter turnouts, voting rules and the abolishment of run-off elections By Salvatore Barbaro
  9. Political Connections and White-collar Crime: Evidence from Insider Trading in France By Bourveau, Thomas; Coulomb, Renaud; Sangnier, Marc
  10. The Electoral Consequences of Nuclear Fallout: Evidence from Chernobyl By Mehic, Adrian
  11. Contesting an international trade agreement By Matthew T. Cole; James Lake; Ben Zissimos
  12. How do Firms Respond to Political Tensions? Evidence from Chinese Food Importers By Li, Haoran; Wan, Xibo; Zhang, Wendong
  13. Policy Options to Mitigate Political Risk and Attract FDI By Priyanka Kher; Dongwook Chun

  1. By: Steven Callander (Stanford GSB); Juan Carlos Carbajal (UNSW-Sydney)
    Abstract: Political polarization is an important and enduring puzzle. Complicating attempts at explanation is that polarization is not a single thing. It is both a description of the current state of politics today and a dynamic path that has rippled across the political domain over multiple decades. In this paper we provide a simple model that is consistent with both the current state of polarization in the U.S. and the process that got it to where it is today. Our model provides an explanation for why polarization appears incrementally and why it was elites who polarized first and more dramatically whereas mass polarization came later and has been less pronounced. The building block for our model is voter behavior. We take an ostensibly unrelated finding about how voters form their preferences and incorporate it into a dynamic model of elections. On its own this change does not lead to polarization. Our core insight is that this change, when combined with the response of strategic candidates, creates a feedback loop that is able to replicate many features of the data. We explore the implications of the model for other aspects of politics and trace out what it predicts for the future course of polarization
    Keywords: Political Polarization, Electoral Competition, Dynamic Analysis, Behavioral Voters.
    Date: 2020–11
  2. By: Wladislaw Mill; John Morgan
    Abstract: Does the polarization in the US lead to dysfunctional behavior? To study this question, we investigate the attitudes of supporters of Donald Trump and of Hillary Clinton towards each other and how these attitudes affect spiteful behavior. We find that both Trump and Clinton supporters have less positive attitudes towards the opposing supporters compared to coinciding supporters. More importantly, we show that significantly more wealth is destroyed if the opponent is an opposing voter. Surprisingly, this effect is mainly found for Clinton voters. This provides the first experimental evidence that the divide in the nation leads to destructive behavior.
    Keywords: Spite, Voting, Experiment, Hillary Clinton, Donald Trump
    JEL: C91 D01 D62 D72 D74
    Date: 2020–11
  3. By: Autor, David (MIT); Dorn, David (University of Zurich); Hanson, Gordon H. (University of California, San Diego); Majlesi, Kaveh (Lund University)
    Abstract: Has rising import competition contributed to the polarization of U.S. politics? Analyzing multiple measures of political expression and results of congressional and presidential elections spanning the period 2000 through 2016, we find strong though not definitive evidence of an ideological realignment in trade-exposed local labor markets that commences prior to the divisive 2016 U.S. presidential election. Exploiting the exogenous component of rising import competition by China, we find that trade exposed electoral districts simultaneously exhibit growing ideological polarization in some domains—meaning expanding support for both strong-left and strong-right views—and pure rightward shifts in others. Specifically, trade-impacted commuting zones or districts saw an increasing market share for the FOX News channel (a rightward shift), stronger ideological polarization in campaign contributions (a polarized shift), and a relative rise in the likelihood of electing a Republican to Congress (a rightward shift). Trade-exposed counties with an initial majority white population became more likely to elect a GOP conservative, while trade-exposed counties with an initial majority-minority population become more likely to elect a liberal Democrat, where in both sets of counties, these gains came at the expense of moderate Democrats (a polarized shift). In presidential elections, counties with greater trade exposure shifted towards the Republican candidate (a rightward shift). These results broadly support an emerging political economy literature that connects adverse economic shocks to sharp ideological realignments that cleave along racial and ethnic lines and induce discrete shifts in political preferences and economic policy.
    Keywords: political polarization, elections, trade, labor market shocks
    JEL: D72 F14 F16 F68
    Date: 2020–11
  4. By: Syed M. Ahsan
    Abstract: The idea of proportional representation has been circulating for over two hundred years and is widely practiced, among other, in post-war Europe. The primary focus is to allow smaller parties, minorities and other disenfranchised groups in society systematic representation in the national legislature. This paper proposes a novel idea of jurisdictional-level proportionality specifically targeted at federal systems. Emphasising the primacy of jurisdictions (namely provinces and states) within a federation, we use data on the voting pattern in each such jurisdiction to determine the allocation of elected delegates (or electoral seats for that matter) that would be utilized in the eventual makeup of the ruling government. The proposed scheme is the simplest that we know of. All it requires is the record of all votes cast by individuals in favour of the candidate of their choice in a given constituency. Our design ensures that the mechanism encompass the governance virtues such as (a) inclusivity and stability of the elected government, (b) accountability of elected delegates and their interface with voters, and (c) and fully conform to the principle of proportionality. In the parliamentary mode, while it may tend to predict minority governments more often, it allows each major party a greater degree of freedom to forge a ruling coalition. When reviewing the US Presidential election, it appears that the outcome here may change too, typically in favour of the plurality winner of nation-wide popular votes, even though the seat arithmetic is based on proportional votes within each state in the union.
    Keywords: the agency problem, effective governance, gerrymandering, inclusive representation, jurisdictional representation, proportional representation, stable government
    JEL: D72 H77 I31
    Date: 2020
  5. By: Giorgio Chiovelli; Francesco Amodio; Leonardo Baccini; Michele Di Maio
    Abstract: Does comparative advantage explain legislators' support for trade liberalization? We use data onpotential crop yields as determined by weather and soil characteristics to derive a new, plausiblyexogenous measure of comparative advantage in agriculture for each district in the US. Evidenceshows that comparative advantage in agriculture predicts how legislators vote on the ratificationof preferential trade agreements in Congress. We show that legislators in districts with highagricultural comparative advantage are more likely to mention that trade agreements are goodfor agriculture in House floor debates preceding roll-call votes on their ratifications. Individualsliving in the same districts are also more likely to support free trade. Our analysis and resultscontribute 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: Trade, Agricultural, Political Economy, Trade Agreements
    Date: 2020
  6. By: Baccini, Leonardo; Brodeur, Abel; Weymouth, Stephen
    Abstract: What is the effect of the COVID-19 pandemic on the 2020 U.S. presidential election? Guided by a pre-analysis plan, we estimate the effect of COVID- 19 cases and deaths on the change in county-level voting for Donald Trump between 2016 and 2020. To account for potential confounders, we include a large number of COVID-19-related controls as well as demographic and socioeconomic variables. Moreover, we instrument the numbers of cases and deaths with the share of workers employed in meat-processing factories to sharpen our identification strategy. We find that COVID-19 cases negatively affected Trump's vote share. The estimated effect appears strongest in urban counties, in swing states, and in states that Trump won in 2016. A simple counterfactual analysis suggests that Trump would likely have won re-election if COVID-19 cases had been 5 percent lower. Our paper contributes to the literature of retrospective voting and demonstrates that voters hold leaders accountable for their (mis-)handling of negative shocks.
    Keywords: COVID-19,pandemic,elections,political behavior,pre-analysis plan
    JEL: D72 I18
    Date: 2020
  7. By: Köppl-Turyna, Monika; Kantorowicz, Jarosław
    Abstract: This work looks at the policies aimed at promoting female participation in local legislative bodies using a series of changes to electoral law in Poland. We use a difference-in-discontinuities design to examine the effect of an introduction of a female quota on female participation in local councils. We find that the female quota has a strong positive effect on the percentage of females in the local council by increasing the pool of female candidates. It does not, however, affect the individual probability of being elected as a female, suggesting that its effect on voters' preferences is limited.
    Keywords: female quota,electoral rules,female representation,regression discontinuity,difference in discontinuities
    JEL: D72 B52
    Date: 2020
  8. By: Salvatore Barbaro (Johannes Gutenberg University)
    Abstract: Due to low election turnouts, the debate on run-off elections to fill a mayor’s office flames up again and again. On average, roughly 37% cast a vote in recent local run-off elections to fill the office of mayors and district chief executives. A recent attempt by the state of North Rhine-Westphalia to substitute the strict-majority voting cum run-off by the plurality rule failed in court. The reasons given for the ruling by the state’s constitutional court were that the considerations were not sufficient with regard to the “democratic principle of majority decision” However, by taking the “principle of majority decision” as a basis, neither the strict majority voting cum run-off nor the plurality rule meet its requirements. By using the methods of social choice theory, we show that only the simple-majority rule is appropriate to comply with the principle of majority decision. Aside its axiomatic superiority, we show that by using the simplemajority rule a second-round run-off is dispensable. Thus, if run-off elections should be abolished, then the strict-majority rule should be replaced by a superior voting scheme (which identifies the Condorcet winner) rather than by an inferior one.
    Date: 2020–09–01
  9. By: Bourveau, Thomas; Coulomb, Renaud; Sangnier, Marc
    Abstract: This paper investigates whether political connections affect individuals' propensity to engage in white-collar crime. We identify connections by campaign donations or direct friendships and use the 2007 French Presidential election as a marker of change in the value of political connections to the winning candidate. We compare the behavior of Directors of publicly listed companies who were connected to the future President to the behavior of other non-connected Directors, before and after the election. Consistent with the belief that connections to a powerful politician can protect someone from prosecution or punishment, we uncover indirect evidence that connected Directors are more likely to engage in suspicious insider trading after the election: Purchases by connected Directors trigger larger abnormal returns, connected Directors are less likely to comply with trading disclosure requirements in a timely fashion, and connected Directors trade closer in time to their firms' announcements of results.
    Keywords: Political Connections, White-Collar Crime, Insider Trading
    JEL: D72 G14 G18 G38 K22 K42
    Date: 2020–11
  10. By: Mehic, Adrian (Department of Economics, Lund University)
    Abstract: What are the political effects of a nuclear accident? Following the 1986 Chernobyl disaster, environmentalist parties were elected to parliaments in several nations. This paper uses Chernobyl as a natural experiment creating variation in radioactive fallout exposure over Sweden. I match municipality-level data on cesium ground contamination with election results for the anti-nuclear Green Party, which was elected to parliament in 1988. After adjusting for pre-Chernobyl views on nuclear power, the results show that voters in high-fallout areas were more likely to vote for the Greens. Additionally, using the exponential decay property of radioactive isotopes, I show a persistent, long-term effect of fallout on the green vote. However, the Chernobyl-related premium in the green vote has decreased substantially since the 1980s. Detailed individual-level survey data further suggests that the results are driven by a gradually decreasing resistance to nuclear energy in fallout-affected municipalities.
    Keywords: Chernobyl; pollution; voting
    JEL: D72 P16 Q48 Q53
    Date: 2020–11–19
  11. By: Matthew T. Cole; James Lake; Ben Zissimos
    Abstract: We develop a new theoretical political economy framework called a `parallel contest' that emphasizes the political fight over trade agreement (TA) ratification within countries. TA ratiification is inherently uncertain in each country because anti- and pro-trade interests contest each other to in fluence their own government's ratification decision. As in the terms-of-trade theory of TAs, the TA removes terms-of-trade externalities created by unilateral tarifs. But, a TA also creates new terms-of-trade and local-price externalities in our framework due to endogenous ratification uncertainty combined with the requirement that each country ratifies the TA for it to go ahead. Thus, reciprocal TA liberalization fails to eliminate all terms-of-trade externalities.
    Keywords: Contest, international agreement, lobbying, tarifs, trade agreement
    Date: 2020
  12. By: Li, Haoran; Wan, Xibo; Zhang, Wendong
    Abstract: Political and economic tensions, which often jeopardize trade, are rising among the world’s major powers. Previous literature largely focuses on how brief, short-lived political tensions affect bilateral trade; however, little is known about firm-level trade responses to long-term political tensions. This paper investigates how firms respond to long-term political tensions by examining the Norway-China political tensions that lasted for six years. In particular, we use an event study approach to examine China's seafood importers' response to China's 2010 sanction on Norwegian fresh salmon after Norway awarded Liu Xiaobo, a Chinese political dissident, a Nobel Peace Prize. Our results reveal firm-level responses at both the extensive and intensive margins. At the intensive margin, firms that imported Norwegian fresh salmon before the sanction saw a dramatic and persistent decline in their imports of fresh salmon products from Norway ranging from 89% to 96%. At the extensive margin, we not only find a trade diversion effects of firms importing from other countries and less firms importing fresh salmon from Norway, but also a permanent "political hedging" effect with a decline in the maximum import share from any particular country, even if not Norway.
    Date: 2020–11–25
  13. By: Priyanka Kher; Dongwook Chun
    Keywords: Governance - Politics and Government International Economics and Trade - Foreign Direct Investment Private Sector Development - Business Environment
    Date: 2020–08

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