nep-pol New Economics Papers
on Positive Political Economics
Issue of 2021‒06‒14
fifteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Social Democracy and the Decline of Strikes By Molinder, Jakob; Karlsson, Tobias; Enflo, Kerstin
  2. A social-choice perspective on authoritarianism and political polarization By Salvatore Barbaro
  3. Electoral Systems and Inequalities in Government Interventions By Micael Castanheira De Moura; Laurent Bouton; Garance Génicot
  4. Pendular Voting By Volker Britz; Hans Gersbach
  5. Political activism when voters have a limited attention span By Barankay, Iwan
  6. Elections, Political Connections and Cash Holdings: Evidence from Local Assemblies By David Adeabah; Charles Andoh; Simplice A. Asongu; Isaac Akomea-Frimpong
  7. Effects of political institutions on the external debt-economic growth nexus in Africa By Yann Nounamo; Simplice A. Asongu; Henri Njangang; Sosson Tadadjeu
  8. Not all that glitters is gold: political stability and trade in Sub-Saharan Africa By Simplice A. Asongu; Thales P. Yapatake Kossele; Joseph Nnanna
  9. Voting by Simultaneous Vetoes By Margarita Kirneva; Matias Nunez
  10. How do Firms Respond to Long-term Political Tensions? Evidence from Chinese Food Importers By Li, Haoran; Wan, Xibo; Zhang, Wendong
  11. Voting right rotation, behavior of committee members and financial market reactions: Evidence from the U.S. Federal Open Market Committee By Michael Ehrmann; Robin Tietz; Bauke Visser
  12. Eat Widely, Vote Wisely? Lessons from a Campaign Against Vote Buying in Uganda By Blattman, Christopher; Larreguy, Horacio; Marx, Benjamin; Reid, Otis
  13. Corruption and Extremism By Attila Gaspar; Tommaso Giommoni; Massimo Morelli; Antonio Nicolò
  14. Latin America's Income Inequality Under five Political Regimes, 1870-2018 By Giovanni Andrea Cornia
  15. Semi-flexible Majority Rules for Public Good Provision By Gersbach, Hans; Tejada, Oriol

  1. By: Molinder, Jakob (Department of Economic History, Lund University); Karlsson, Tobias (Department of Economic History, Lund University); Enflo, Kerstin (Department of Economic History, Lund University)
    Abstract: This paper tests if a strong labor movement leads to fewer industrial conflicts. The focus is on Sweden between the first general election in 1919 and the famous Saltsjöbaden Agreement in 1938, a formative period when the country transitioned from fierce labor conflicts to a state of industrial peace. Using panel data techniques to analyze more than 2,000 strikes in 103 Swedish towns, we find that a shift of municipal political majority towards the Social Democrats led to a significant decline in local strike activity, but only in towns where union presence was strong. The strike-reducing mechanism is related to corporatist explanations rather than increased social spending in municipal budgets.
    Keywords: power resource theory; industrial conflicts; strikes; labor markets; local politics
    JEL: H53 J51 N34 N44
    Date: 2021–05–21
  2. By: Salvatore Barbaro (Johannes Gutenberg University Mainz)
    Abstract: Facing a spreading of polarization and authoritarianism, research from various disciplines attempted to explore the sources of this threatening development in many societies. Socio-economic factors, as well as the diffusion of social media, were identified as explaining factors. We emphasize another source for the success of polarizing politicians: The collective-decision rules. We show that several frequently used voting schemes greatly support polarizing candidates’ success while other voting rules that are often scientifically proposed but rarely in use are much more appropriate to avoid polarizing candidates’ success. The simple-majority rule and the Borda count are more suitable for preventing society from a polarizing candidate’s landslide. By comparing the two last-mentioned voting rules, we find that the Borda count has some advantage over the simple-majority rule.
    JEL: D71
    Date: 2021–05–25
  3. By: Micael Castanheira De Moura; Laurent Bouton; Garance Génicot
    Abstract: This paper studies the political determinants of inequalities in government interventions under majoritarian (MAJ) and proportional representation (PR) systems. We propose a probabilistic voting 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 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, PublicGood, Inequality
    JEL: D70 H00
    Date: 2021–05–01
  4. By: Volker Britz (CER–ETH – Center of Economic Research at ETH Zurich, Switzerland); Hans Gersbach (CER–ETH – Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: We introduce a democratic procedure with voting-based proposals called ”Pendular Voting”. It works as follows: An agenda-setter chooses a proposal meant to replace a given status quo. In the first stage, a random sample of the population votes on the proposal. The result is made public, which may reveal information about the distribution of preferences in the electorate. Depending on the outcome, a third option (next to the proposal and the status quo) is added: This option is either closer to or more distant from the status quo than the original proposal. Then, in a second stage the entire electorate expresses pairwise social preferences over the status quo, the initial proposal, and the third option. We investigate the manipulability and exploitation of this voting procedure and its welfare effects. We show that manipulation is limited or absent and that exploitation can be avoided. Regardless of whether the agenda-setter is altruistic or selfish, Pendular Voting leads to welfare gains in expectation.
    Keywords: Democracy, Manipulation, Information Sharing, Referendum
    JEL: C72 D70 D72
    Date: 2021–05
  5. By: Barankay, Iwan
    Abstract: We discuss the relationship between two forms of political activism and openness. We focus on direct democratic institutions and measure political activism by the number of direct democratic ballots and voter participation in those ballots. Openness is measured by the signature requirement that has to be met in order to qualify for a ballot. We show that in models where the status quo policy that elicits the political activity is invariant to changes in openness, more openness leads to more political activism results. However, looking at the empirical evidence on the frequency of ballots in Swiss Cantons, we find no relationship between openness and the number of ballots. This can be explained by allowing voters to have a limited attention span or that the status quo policy adapts to the more acute threat. We also find empirical evidence that more openness increases voter participation, which is due to the information externalities of signature collections.
    Keywords: direct democracy; limited attention; Political openness
    JEL: D72 D91
    Date: 2020–07
  6. By: David Adeabah (University of Ghana, Legon, Ghana); Charles Andoh (University of Ghana, Legon, Ghana); Simplice A. Asongu (Yaoundé, Cameroon); Isaac Akomea-Frimpong (Western Sydney University, Australia)
    Abstract: We examine the relationship between elections, political connections, and cash holdings in Ghanaian local assemblies. Using a panel dataset of 179local assemblies over a period 2012 to 2017, a panel regression and the generalized method of moments estimation techniques was employed for the analysis. We find that local assemblies hold less cash during election years, which suggests that election may be one of the potential factors to mitigate agency conflict in weak governance environment. Further, we demonstrate that local assemblies that have political connections hold less cash; however, political uncertainty makes these entities conducive to agency problems than their non-connected peers because they hold more cash. Additional analysis indicates that one year prior to elections, managerial conservatism kicks-in and leads managers to hold more cash in local assemblies that have political connections, which continues and becomes more pronounced in election years. Our results have implications for regulations on the cash management practices of local assemblies.
    Keywords: agency problem; cash holdings; generalized method of moments;panel regression; political connections
    Date: 2021–01
  7. By: Yann Nounamo (University of Douala, Douala, Cameroon); Simplice A. Asongu (Yaoundé, Cameroon); Henri Njangang (University of Dschang , Cameroon); Sosson Tadadjeu (University of Dschang , Cameroon)
    Abstract: The main contribution of this study is the determination of an endogenous threshold of institutional quality, beyond which external debt would affect economic growth differently. The focus is on 14 countries of the African Franc zone over the period 1985-2015. Based on the panel Smooth Threshold Regression model, the results reveal that the relationship between external debt and economic growth is based on institutional quality. It is found that the level of indebtedness at which the effect of external debt on economic growth becomes negative is higher in countries with lower levels of corruption and high levels of democracy. This means that poor institutional quality prevents a country from taking full advantage of its credit opportunities. Thus, the more countries become democratic, the more debt helps finance economic growth. These results are robust to sensitivity analysis and Generalized Method of Moments estimation.
    Keywords: external debt, political institutions, economic growth
    Date: 2021–01
  8. By: Simplice A. Asongu (CEREDEC, Bangui, CAR); Thales P. Yapatake Kossele (CEREDEC, Bangui, CAR); Joseph Nnanna (Abuja, Nigeria)
    Abstract: This study examines linkages between political stability and trade openness dynamics in a panel of 44 countries in SSA from 1996 to 2016. The empirical evidence is based on the generalized method of moments. From the findings, the negative relationship between political stability and merchandise trade is not significant while the negative relationship between political stability and trade openness (exports plus imports) is significant. Hence, the findings do not validate the tested hypothesis that political stability/no violence increases trade in the sub-region. The perspective that some forms of political stability can slow down and prevent international trade is consistent with Oslon in Rise and Decline of Nations (RADON) and recent contributions to the economic development literature which have shown that not all forms of political stability are development friendly because much depends on the extent to which stability translates into, inter alia, good governance. The principal policy implication is that standards of political governance need to be boosted in order to improve the anticipated effects of political stability on trade, especially in the light of the ambitious African Continental Free Trade Area (AfCFTA). Other policy implications are discussed.
    Keywords: Political Stability; Trade; Sub-Saharan Africa
    JEL: F52 K42 O17 O55 P16
    Date: 2021–01
  9. By: Margarita Kirneva (CREST, CNRS, Ecole Polytechnique); Matias Nunez (CREST, CNRS, Ecole Polytechnique)
    Abstract: We design voting mechanisms in which every Nash equilibrium is coalition proof, preventing the well known coordination failures of usual voting systems. In each of these simultaneous mechanisms, each voter has the right to select a list of alternatives to veto, and the winner is selected randomly from the nonvetoed alternatives. For each specification of the veto rights, we show that each of these mechanisms implements a veto by random priority rule introduced by Moulin[1981]. We then discuss necessary conditions for arbitrary mechanisms to satisfy implementation in both Nash and coalition proof and show that the existence of veto rights in the mechanism is unavoidableto achieve this demanding implementation notion.
    Keywords: Implementation, Voting, Vetoes, Coalition Formation, Efficiency.
    JEL: D71 D72
    Date: 2021–06–03
  10. By: Li, Haoran; Wan, Xibo; Zhang, Wendong
    Abstract: Political and economic tensions, which often jeopardize trade, are rising among the world’s major powers, and countries like China are more frequently using food-related trade actions to deal with deteriorating political relations. 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-termpolitical tensions. This paper investigates how importers respond to long-term political tensions by examining the six-year Norway-China political tensions that ended in 2016. In particular, we use an event study approach to examine China’s seafood importers’ responses to China’s 2010 sanction on Norwegian fresh salmon imports 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 20% persistent decline in their fresh salmon import value and an 80% decrease in import share of Norwegian fresh salmon products over our study period. At the extensive margin, we not only find a trade diversion effect on firms importing from other countries and less firms importing fresh salmon from Norway, but also a permanent "political hedging" effect with a 20% decline in the maximum import share from any particular country, even if not Norway. We also provide evidence of persistent sanction effects even after China-Norway relations unfroze. Our findings emphasize the need to consider the long-term sanction consequences in foreign policy using food-related trade sanctions.
    Date: 2021–06–02
  11. By: Michael Ehrmann (European Central Bank); Robin Tietz (Cass Business School); Bauke Visser (Erasmus University Rotterdam)
    Abstract: Whether Federal Reserve Bank presidents have the right to vote on the U.S. monetary policy committee depends on a mechanical, yearly rotation scheme. Rotation is without exclusion: also nonvoting presidents attend and participate in the meetings of the committee. Does voting status change behavior? We find that the data go against the hypothesis that without the voting right, presidents use their public speeches and their meeting interventions to compensate for the loss of formal influence; rather, they support the hypothesis that the voting right makes presidents more involved. We also find that speeches move financial markets less in years that presidents vote. We argue that these discounts are consistent with their communication behavior.
    Keywords: voting right rotation, monetary policy committee, central bank communication, FOMC, financial market response
    JEL: E58 D71 D72
    Date: 2021–06–05
  12. By: Blattman, Christopher; Larreguy, Horacio; Marx, Benjamin; Reid, Otis
    Abstract: We estimate the effects of one of the largest anti-vote-buying campaigns ever studied---half a million voters exposed across 1427 villages---in Uganda's 2016 elections. Working with civil society organizations, we designed the study to estimate how voters and candidates responded to their campaign in treatment and spillover villages, and how impacts varied with treatment intensity. Despite its heavy footprint, the intervention did not reduce offers of gifts in exchange for votes. However, it had sizable effects in the polling booth. Votes swung from well-funded incumbents (who buy most votes) towards their poorly-financed challengers. Qualitative and quantitative evidence suggests the swing arose from tactical responses by candidates as well as changes in village norms. Specifically, while the campaign struggled to instill norms of refusing gifts, it convinced some voters to abandon reciprocity---to accept gifts but vote for their preferred candidate. This leveling of the electoral playing field led challengers to buy votes in markets where they had previously been deterred from entering.
    Keywords: Africa; Elections; field experiment; voting behavior
    JEL: C93 D72 O55
    Date: 2020–06
  13. By: Attila Gaspar; Tommaso Giommoni; Massimo Morelli; Antonio Nicolò
    Abstract: This paper shows that corruption generates extremism, but almost exclusively on the opposition side. When the majority has greater ability to use corruption to obtain her favorite policy outcome from the minority, then the minority group has an incentive to select a more extreme representative because it is more unlikely that such a type will accept a bribe. On the majority side, on the other hand, the perception of more likely use of the corruption tool does not create any distortion in the choice of political representatives. We provide strong causal evidence for these novel predictions using two different types of corruption signals, in Indonesia and Brazil.
    Keywords: Corruption, Extremism, Delegation, elections
    JEL: D72 D73
    Date: 2021
  14. By: Giovanni Andrea Cornia
    Abstract: Most analysts of the Latin American economy believe in the unavoidable persistence of high income and wealth inequality in the region due to a continued structural dependence on primary commodities, the lingering effects of colonial policies, and the emergence of a modernized version of the traditional elites. This paper challenges this view on political economic grounds. It argues that the changes observed over the last one hundred and fifty years in the political orientation of governments affected the nature of economic and social policies that, in their turn, influenced the level of income inequality, both upward and downward. In other words, the evolution of inequality has depended to a considerable extent on ideological and political changes that need to be fully understood. This paper tries to explore this circular relation between `political orientation' of governments and `inequality', and between ‘endogenous changes in economic/social conditions' and `changes in the political orientation of governments'.
    Date: 2021
  15. By: Gersbach, Hans; Tejada, Oriol
    Abstract: We introduce semi-flexible majority rules for public good provision with private valuations. Such rules take the form of a two-stage, multiple-round voting mechanism where the output of the first stage is the default alternative for the second stage and the voting thresholds (a) vary with the proposal on the table and (b) require a qualified majority for final approval in the second stage. We show that the (detail-free) mechanism elicits the information about the valuations and uses it to implement the utilitarian optimal public-good level if valuations can be only high or low. This level is chosen after all potential socially optimal policies have been considered for voting. We explore ways to reduce the number of voting rounds and develop a compound mechanism when there are many types of citizens to approximate the optimal public-good level.
    Keywords: Voting - Utilitarianism - Implementation - Procedural democracy
    JEL: C72 D70
    Date: 2020–07

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