nep-pol New Economics Papers
on Positive Political Economics
Issue of 2021‒03‒08
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Connections, Allocation of Stimulus Spending, and the Jobs Multiplier By Joonkyu Choi; Veronika Penciakova; Felipe Saffie
  2. Trust we lost: The Treuhand experience and political behavior in the former German Democratic Republic By Kellermann, Kim Leonie
  3. Politicians Avoid Tax Increases Around Elections By Andrew C. Chang; Linda R. Cohen; Amihai Glazer; Urbashee Paul
  4. The Political Economy of Open Borders: Theory and Evidence on the role of Electoral Rules By Matteo Gamalerio; Massimo Morelli; Margherita Negri
  5. Using machine learning for measuring democracy: An update By Gründler, Klaus; Krieger, Tommy
  6. Voting for environmental policy with green consumers: the impact of income inequality By Lesly Cassin; Paolo Melindi-Ghidi; Fabien Prieur
  7. How Organizational Capacity Can Improve Electoral Accountability By Dana Foarta
  8. Social Norms and Elections: How Elected Rules Can Make Behavior (In)Appropriate By Arno Apffelstaedt; Jana Freundt; Christoph Oslislo
  9. Homo moralis goes to the voting booth: a new theory of voter turnout By Alger, Ingela; Laslier, Jean-François
  10. Scoring Run-off Rules, Single-peaked Preferences and Paradoxes of Variable Electorate By Eric Kamwa; Vincent Merlin; Faty Mbaye Top

  1. By: Joonkyu Choi; Veronika Penciakova; Felipe Saffie
    Abstract: Using American Recovery and Reinvestment Act (ARRA) data, we show that firms lever their political connections to win stimulus grants and public expenditure channeled through politically connected firms hinders job creation. We build a unique database that links campaign contributions and state legislative election outcomes to ARRA grant allocation. Using exogenous variation in political connections based on ex-post close elections held before ARRA, we causally show that politically connected firms are 64 percent more likely to secure a grant. Based on an instrumental variable approach, we also establish that state-level employment creation associated with grants channeled through politically connected firms is nil. Therefore, the impact of fiscal stimulus is not only determined by how much is spent, but also by how the expenditure is allocated across recipients.
    Keywords: Campaign Finance; State Grants; Public Expenditure Allocation; American Recovery and Reinvestment Act
    JEL: D22 D72 E62 H57 P16
    Date: 2021–01–29
  2. By: Kellermann, Kim Leonie
    Abstract: We study whether the experience of losing one's job due to the Treuhand activities in the early 1990s affected long-term political behavior among citizens of the former German Democratic Republic. During the German Reunification process, the Treuhand coordinated the privatization of former GDR firms at the cost of massive job losses. We exploit individual and spatial variation in Treuhand layoffs between 1990 and 1994, based on micro-level survey data from the German Socio-economic Panel and firm data from the IWH Treuhand Database to examine the effects on various behavioral outcomes in later years. Our results suggest that former GDR citizens who have experienced a Treuhand layoff are significantly more likely to prefer a radical party, are less interested in politics and tend to have less trust in others. At the aggregate level, districts with relatively more layoffs exhibit higher radical left vote shares in federal elections. Investigating the underlying mechanisms, we find that the effects of Treuhand job losses are relatively stronger for respondents who stayed in East Germany after Reunification. Furthermore, it seems to be nostalgia and disappointment with the transition process which drive the effects, rather than financial grievances.
    Keywords: GDR,trust agency,political behavior,unemployment,radical voting
    JEL: D72 E24 L33
    Date: 2021
  3. By: Andrew C. Chang; Linda R. Cohen; Amihai Glazer; Urbashee Paul
    Abstract: We use new annual data on gasoline taxes and corporate income taxes from U.S. states to analyze whether politicians avoid tax increases in election years. These data contain 3 useful attributes: (1) when state politicians enact tax laws, (2) when state politicians implement tax laws on consumers and firms, and (3) the size of tax changes. Using a pre-analysis research plan that includes regressions of tax rate changes and tax enactment years on time-to-gubernatorial election year indicators, we find that elections decrease the probability of politicians enacting increases in taxes and reduce the size of implemented tax changes relative to non-election years. We find some evidence that politicians are most likely to enact tax increases right after an election. These election effects are stronger for gasoline taxes than for corporate income taxes and depend on no other political, demographic, or macroeconomic conditions. Supplemental analysis supports political salience over legislative e ort in generating this difference in electoral effects.
    Keywords: Corporate Income Taxes; Electoral Cycle; Gasoline Taxes; Pre-analysis Plan; Tax Salience
    JEL: D72 D78 H24 H71 K34 P16
    Date: 2021–01–29
  4. By: Matteo Gamalerio; Massimo Morelli; Margherita Negri
    Abstract: Institutions matter for the political choice of policies, and hence the consideration of the median voter's preferences should not be considered sufficient. We study theoretically and empirically how different electoral systems affect the level of openness of a country or city, zooming on the labor market as the main source of heterogeneous economic preferences towards immigration. The general result is that a polity is more open to immigration the less likely it is that policy making can be supported by a plurality of voters who do not constitute the absolute majority. There is evidence for this result at all levels in terms of correlations, and we establish causality via regression discontinuity design for the Italian case.
    Keywords: Electoral Rules, Immigration, Occupational Choice
    JEL: D72 J24 J61 R23
    Date: 2021
  5. By: Gründler, Klaus; Krieger, Tommy
    Abstract: We provide a comprehensive overview of the literature on the measurement of democracy and present an extensive update of the Machine Learning indicator of Gründler and Krieger (2016, European Journal of Political Economy). Four improvements are particularly notable: First, we produce a continuous and a dichotomous version of the Machine Learning democracy indicator. Second, we calculate intervals that reflect the degree of measurement uncertainty. Third, we refine the conceptualization of the Machine Learning Index. Finally, we largely expand the data coverage by providing democracy indicators for 186 countries in the period from 1919 to 2019.
    Keywords: Data aggregation,Democracy indicators,Machine Learning,Measurement Issues,Regime Classifications,Support Vector Machines
    JEL: C38 C43 C82 E02 P16
    Date: 2021
  6. By: Lesly Cassin (UP1 - Université Paris 1 Panthéon-Sorbonne); Paolo Melindi-Ghidi (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Fabien Prieur (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: This article analyzes the impact of income inequality on environmental policy in the presence of green consumers. We develop a theory with three main ingredients: first, citizens have different income capacities; second they have access to two different commodities whose consumption differs in terms of price and environmental impact, and third, they have to vote on the environmental policy. In this setting, there exists a unique political equilibrium such that the population is split in two groups, depending on whether there is positive consumption of the green good. The analysis shows that higher income inequality is generally associated with lower public spending in environmental protection. We then test this prediction in a fixed-effect model with robust standard errors using a panel of European countries over the period 1996-2019. We indeed find that income inequality negatively affects both public expenditures in environmental protection.
    Keywords: income distribution,inequality,green consumption,environmental policy,probabilistic voting,political equilibrium
    Date: 2021–02–19
  7. By: Dana Foarta
    Abstract: The organizational structure of the bureaucracy is a key determinant of policy outcomes. Bureaucratic agencies exhibit wide variation in their organizational capacity, which allows politicians to strategically shape policy implementation. This paper examines what bureaucratic structure implies for the ability of voters to hold politicians electorally accountable. It explicitly models di erences in organizational capacity across bureaucratic agencies and considers a problem where a politician must decide not only which policy to choose but which agency, or combination of agencies, will implement it. The choice of implementation feeds back into the choice of policy and this, in turn, a ects how voters perceive the performance of the incumbent. This creates a chain of interdependence from agency structure to policy choice and political accountability. The formal model shows that the variation in organizational capacity serves the interests of voters by improving electoral control of politicians.
    Keywords: organizational capacity, electoral accountability, bureaucratic politics
    JEL: D73
    Date: 2021
  8. By: Arno Apffelstaedt (University of Cologne, Center for Social and Economic Behavior (C-SEB) and ECONtribute; Albertus-Magnus-Platz, 50931 Cologne, Germany); Jana Freundt (University of Fribourg, Department of Economics and University of Pennsylvania, School of Arts and Sciences; University of Fribourg, Boulevard de Perolles 90, 1700 Fribourg, Switzerland); Christoph Oslislo (University of Cologne, Institute for Economic Policy; Pohligstraße 1, 50969 Cologne, Germany)
    Abstract: Can elections change people’s ideas about what is ethically right and what is wrong? A number of recent observations suggest that social norms can change rapidly as a result of election outcomes. We explore this conjecture using a controlled online experiment. In our experiment, participants rate the social appropriateness of sharing income with poorer individuals. We compare situations in which a rule has been elected that asks people to share or not to share, respectively, with situations in which no rule has been elected. In the absence of an election, sharing is widely considered socially appropriate, while not sharing is considered socially inappropriate. We show that elections can change this social norm: They shift the modal appropriateness perception of actions and, depending on the elected rule, increase their dispersion, i.e. erode previously existing consensus. As a result, actions previously judged socially inappropriate (not sharing) can become socially appropriate. This power prevails, albeit in weaker form, even if the election is subject to controversial practices such as vote buying or voter disenfranchisement. Drawing on behavioral data from another experiment, we demonstrate that election-induced norm shifts predict behavior change.
    Keywords: social norms, elections, prosocial behavior, rule compliance
    JEL: D02 D91 C91
    Date: 2021–02
  9. By: Alger, Ingela; Laslier, Jean-François
    Abstract: Why do voters incur costs to participate in large elections? This paper proposes an exploratory analysis of the implications of evolutionary Kantian morality for this classical problem in the economic theory of voting: the costly participation problem.
    Keywords: voter turnout; voting, ethical voter; homo moralis; Kantian morality
    Date: 2021–02
  10. By: Eric Kamwa (LC2S - Laboratoire caribéen de sciences sociales - UA - Université des Antilles - CNRS - Centre National de la Recherche Scientifique, UA FDEM - Université des Antilles - Faculté de droit et d'économie de la Martinique - Université des Antilles (Pôle Martinique) - UA - Université des Antilles); Vincent Merlin (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique, UNICAEN UFR SEGGAT - Université de Caen Normandie - UFR de Sciences Économiques, Gestion, Géographie et Aménagement des Territoires - UNICAEN - Université de Caen Normandie - NU - Normandie Université); Faty Mbaye Top
    Abstract: In three-candidate elections with single-peaked preferences, this paper analyzes the vulnerability of scoring runoff rules to abstention and participation paradoxes. These paradoxes occur when the size of the electorate varies (grows or diminishes). In particular, the Abstention or No-show paradox occurs when a voter is better off by not casting his ballot in the election. First, we show that all the scoring runoff rules that always elect the Condorcet winner on this domain are immune to the different forms of Abstention and Participation paradoxes. Secondly, when these paradoxes are still possible, we compute their likelihood under the Impartial Anonymous Culture assumption. We conclude that considering the single-peaked domain drastically reduces, and even sometimes eliminates the impact of No-show paradoxes, for scoring runoff rules.
    Keywords: Participation,Abstention,No-show,Run-offs,Scoring Rules,Paradoxes,Impartial Anonymous Culture,Probability
    Date: 2021–02–17

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