nep-pol New Economics Papers
on Positive Political Economics
Issue of 2021‒06‒28
twenty-one papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Effect of Social Media on Elections: Evidence from the United States By Thomas Fujiwara; Karsten Müller; Carlo Schwarz
  2. Vox Populi, Vox Dei? Tacit Collusion in Politics By Johansson, Christian; Kärnä, Anders; Meriläinen, Jaakko
  3. A Political-Economy Perspective on Mayoral Elections and Urban Crime By Batabyal, Amitrajeet; Beladi, Hamid
  4. The Virus of Fear: The Political Impact of Ebola in the U.S. By Filipe Campante; Emilio Depetris-Chauvin; Ruben Durante
  5. Political Power, Elite Control, and Long-Run Development: Evidence from Brazil By Ferraz, Claudio; Finan, Frederico; Martinez-Bravo, Monica
  6. Politicians' Willingness to Agree: Evidence from the interactions in Twitter of Chilean Deputies By Pablo Henr\'iquez; Jorge Sabat; Jos\'e Patr\`icio Sullivan
  7. The Seeds of Ideology: Historical Immigration and Political Preferences in the United States By Giuliano, Paola; Tabellini, Marco
  8. When Do Environmental Externalities Have Electoral Consequences? Evidence from Fracking By Judson Boomhower
  9. Politics and the Distribution of Federal Funds: Evidence from Federal Legislation in Response to COVID-19 By Jeffrey Clemens; Stan Veuger
  10. Long-Term Decline of Regions and the Rise of Populism: The Case of Germany By Maria Greve; Michael Fritsch; Michael Wyrwich
  11. Deliberative forms of democracy and intergenerational sustainability dilemma By Pankaj Koirala; Raja Rajendra Timilsina; Koji Kotani
  12. Voting right rotation, behavior of committee members and financial market reactions: evidence from the U.S. Federal Open Market Committee By Ehrmann, Michael; Tietz, Robin; Visser, Bauke
  13. The Impact of the Women’s March on the U.S. House Election By Felipe González; Magdalena Larreboure
  14. Political Economy of Crisis Response By Gitmez, Arda; Sonin, Konstantin; Wright, Austin L.
  15. Social mobility and political regimes: intergenerational mobility in Hungary, 1949-2017 By Bukowski, Pawel; Clark, Gregory; Gáspár, Attila; Peto, Rita
  16. Investment Committee Voting and the Financing of Innovation By Andrey Malenko; Ramana Nanda; Matthew Rhodes-Kropf; Savitar Sundaresan
  17. Globalization and political economy of food policies: insights from planting restrictions in colonial wine markets By Giulia Meloni; Johan Swinnen
  18. The Future of Democracy and Work: The Vote in our Economic Constitution By Ewan McGaughey
  19. Voting by Simultaneous Vetoes By Margarita Kirneva; Matias Nunez
  20. Globalization and Political Economy of Food Policies: Insights from Planting Restrictions in Colonial Wine Markets By Giulia Meloni; Johan Swinnen
  21. Governing a crisis and crises of governance: The political dimensions of COVID-19 By Kennedy, Adam; Resnick, Danielle

  1. By: Thomas Fujiwara; Karsten Müller; Carlo Schwarz
    Abstract: We study how social media affects election outcomes in the United States. We use variation in the number of Twitter users across counties induced by early adopters at the 2007 South by Southwest (SXSW) festival, a key event in Twitter's rise to popularity. We show that this variation is unrelated to observable county characteristics and electoral outcomes before the launch of Twitter. Our results indicate that Twitter lowered the Republican vote share in the 2016 and 2020 presidential elections, but had limited effects on Congress elections and previous presidential elections. Evidence from survey data, primary elections, and a text analysis of millions of tweets suggests that Twitter's relatively liberal content may have persuaded voters with moderate views to vote against Donald Trump.
    JEL: D72
    Date: 2021–05
  2. By: Johansson, Christian (Chalmers University of Technology); Kärnä, Anders (Research Institute of Industrial Economics (IFN)); Meriläinen, Jaakko (ITAM)
    Abstract: We study competition between political parties in repeated elections with probabilistic voting, allowing a multidimensional policy space and multiple political parties. This model entails multiple equilibria. When parties hold different opinions on some policy, they may take different policy positions that do not coincide with the median voter’s preferred policy platform but converge towards it. In contrast, when parties have a mutual understanding on a particular policy, their policy positions may converge (on some dimension) but not to the median voter’s preferred policy. Parties may collude with one another and take a position that differs from what the median voter prefers, despite political competition. Collusion may collapse, for instance, after the entry of a new political party. We substantiate the theoretical arguments with descriptive evidence using Swedish survey data on politicians and voters, which suggests that there is competition on some dimensions and collusion on others.
    Keywords: Electoral competition; Partisan collusion; Probabilistic voting; Repeated elections; Tacit collusion
    JEL: C73 D72 P16
    Date: 2021–06–16
  3. By: Batabyal, Amitrajeet; Beladi, Hamid
    Abstract: We provide a political-economy analysis of crime prevention in an arbitrary city in the United States. City residents (voters) elect mayors (politicians) and elected mayors determine the resources to be allocated to crime prevention. Between the two time periods, there is an election. Politicians are either honest or dishonest. The marginal cost of public monies ψ measures how efficiently an elected mayor converts tax receipts into crime prevention. Voters have identical per period utility functions. We ascertain the equilibrium outcome and per period voter well-being. Second, we show that an increase in ψ reduces the equilibrium allocation of resources to crime prevention and voter well-being. Third, a dishonest politician can delay the revelation of his dishonesty. A critical value of ψ,ψ^*, exists such that a dishonest incumbent separates and loses the election if and only if ψ>ψ^* and he pools and is re-elected otherwise. Finally, we note that an increase in ψ can raise voter well-being when politicians are more likely to be dishonest.
    Keywords: City Resident, Crime Prevention, Election, Mayor, Voting
    JEL: D72 R11 R50
    Date: 2020–12–15
  4. By: Filipe Campante; Emilio Depetris-Chauvin; Ruben Durante
    Abstract: We study how fear can affect the behavior of voters and politicians by looking at the Ebola scare that hit the U.S. a month before the 2014 midterm elections. Exploiting the timing and location of the four cases diagnosed in the U.S., we show that heightened concern about Ebola, as measured by online activity, led to a lower vote share for the Democrats in congressional and gubernatorial elections, as well as lower turnout, despite no evidence of a general anti-incumbent effect (including on President Obama’s approval ratings). We then show that politicians responded to the Ebola scare by mentioning the disease in connection with immigration, terrorism, and President Obama in newsletters, tweets and campaign ads. This response came only from Republicans, especially those facing competitive races, suggesting a strategic use of the issue in conjunction with topics perceived as favorable to them. Survey evidence suggests that voters responded with increasingly conservative attitudes on immigration but not on other ideologically-charged issues. Taken together, our findings indicate that emotional reactions associated with fear can have a strong electoral impact, that politicians perceive and act strategically in response to this, and that the process is mediated by issues that can be plausibly associated with the specific fear-triggering factor.
    Date: 2020
  5. By: Ferraz, Claudio; Finan, Frederico; Martinez-Bravo, Monica
    Abstract: This paper analyzes how changes in the concentration of political power affect long-run development. We study Brazil's military dictatorship whose rise to power dramatically altered the distribution of power of local political elites. We document that municipalities that were more politically concentrated prior to the dictatorship in the 1960s are relatively richer in 2000, despite being poorer initially. Our evidence suggests that this reversal of fortune was the result of the military's policies aimed at undermining the power of traditional elites. These policies increased political competition locally, which ultimately led to better governance, more public goods, and higher income levels.
    Date: 2020–06
  6. By: Pablo Henr\'iquez; Jorge Sabat; Jos\'e Patr\`icio Sullivan
    Abstract: Measuring the number of "likes" in Twitter and the number of bills voted in favor by the members of the Chilean Chambers of Deputies. We empirically study how signals of agreement in Twitter translates into cross-cutting voting during a high political polarization period of time. Our empirical analysis is guided by a spatial voting model that can help us to understand Twitter as a market of signals. Our model, which is standard for the public choice literature, introduces authenticity, an intrinsic factor that distort politicians' willigness to agree (Trilling, 2009). As our main contribution, we document empirical evidence that "likes" between opponents are positively related to the number of bills voted by the same pair of politicians in Congress, even when we control by politicians' time-invariant characteristics, coalition affiliation and following links in Twitter. Our results shed light into several contingent topics, such as polarization and disagreement within the public sphere.
    Date: 2021–06
  7. By: Giuliano, Paola; Tabellini, Marco
    Abstract: We test the relationship between historical immigration to the United States and political ideology today. We hypothesize that European immigrants brought with them their preferences for the welfare state, and that this had a long-lasting effect on the political ideology of US born individuals. Our analysis proceeds in three steps. First, we document that the historical presence of European immigrants is associated with a more liberal political ideology and with stronger preferences for redistribution among US born individuals today. Next, we show that this correlation is not driven by the characteristics of the counties where immigrants settled or other speci c, socioeconomic immigrants' traits. Finally, we provide evidence that immigrants brought with them their preferences for the welfare state from their countries of origin. Consistent with the hypothesis that immigration left its footprint on American ideology via cultural transmission from immigrants to natives, we show that our results are stronger when inter-group contact between natives and immigrants, measured with either intermarriage or residential integration, was higher. Our fi ndings also indicate that immigrants influenced American political ideology during one of the largest episodes of redistribution in US history--the New Deal-- and that such effects persisted after the initial shock.
    Keywords: cultural transmission; Immigration; Political Ideology; Preferences for Redistribution
    JEL: D64 D72 H2 J15 N32 Z1
    Date: 2020–05
  8. By: Judson Boomhower
    Abstract: The electoral salience of some issues may diminish when one politician has authority over many policy areas. This study measures the role of environmental regulation in concurrent elections for governors and specialized energy regulators in two U.S. states. I first show that while both offices can influence environmental and energy policies, quantitative analysis of campaign news coverage reveals clear differences in the importance of these issues in the two races. Next, I use geologic variation in earthquakes caused by oil and gas production to measure the electoral consequences of a costly environmental externality. There are measurable effects only in the energy regulator race. These results are consistent with theories of issue bundling. Finally, the unbundling effects that I measure appear to be themselves limited by voter attentiveness and partisanship.
    JEL: D72 H11 Q35 Q58
    Date: 2021–05
  9. By: Jeffrey Clemens; Stan Veuger
    Abstract: COVID-19 relief legislation offers a unique setting to study how political representation shapes the distribution of federal assistance to state and local governments. We provide evidence of a substantial small-state bias: an additional Senator or Representative per million residents predicts an additional $670 dollars in aid per capita across the four relief packages. Alignment with the Democratic party predicts increases in states’ allocations through legislation designed after the January 2021 political transition. This benefit of partisan alignment operates through the American Rescue Plan Act’s sheer size, as well as the formulas through which it distributed transportation and general relief funds.
    JEL: E62 H12 H71 H72 H77
    Date: 2021–05
  10. By: Maria Greve (Friedrich Schiller University Jena, Germany and University of Groningen, The Netherlands); Michael Fritsch (Friedrich Schiller University Jena, Germany); Michael Wyrwich (University of Groningen, The Netherlands and Friedrich Schiller University Jena, Germany)
    Abstract: What characterizes regions where right-wing populist parties are relatively successful? A prominent hypothesis proposed in recent literature claims that places that are "left behind" or "do not matter" are a breeding ground for the rise of populism. We re-examine this hypothesis by analyzing the rise of populism in Germany. Our results suggest that the high vote shares of populist parties are not only associated with low regional levels of welfare as such, but also with the long-term decline of a region's relative welfare. Hence, it is not the regions that do "not matter" that are most prone to the rise of populism, but the regions that once mattered, but are in long-term decline. Moreover, we find that regional knowledge represents an important channel through which the historical decline in wealth explains voting behavior in German regions.
    Keywords: Populism, economic development, territorial inequality, economic history
    JEL: R1 R11 D72 N94
    Date: 2021–05–11
  11. By: Pankaj Koirala (School of Economics and Management, Kochi University of Technology); Raja Rajendra Timilsina (School of Economics and Management, Kochi University of Technology); Koji Kotani (School of Economics and Management, Kochi University of Technology)
    Abstract: Intergenerational sustainability (IS) has emerged as the most serious social problem reflecting climate change and accumulation of public debt in modern democratic societies, undermining the potential interests and concerns of future generations. However, little is known about whether or not deliberative forms of democracy with majority voting helps support at maintaining IS by representing future generations’ potential interests and concerns. We institute intergenerational sustainability dilemma game (ISDG) with three forms of decision-making models with majority voting and examine how they maintain IS in laboratory experiments. In ISDG, a sequence of six generations is prepared where each generation consisting of three subjects is asked to choose either maintaining IS (sustainable option) or maximizing their own generation’s payoff by irreversibly costing the subsequent generations (unsustainable option) with anonymous voting systems: (1) majority voting (MV), (2) deliberative majority voting (DMV) and (3) majority voting with deliberative accountability (MVDA). In MV and DMV, generations vote for their choices without and with deliberation, respectively. In MVDA, generations are asked to be possibly accountable for their choices to the subsequent generations during deliberation, and then vote. Our analysis shows that decision-making models with only majority voting generally does not address IS, while DMV and MVDA treatments induce more and much more generations to choose a sustainable option than MV, respectively. Overall, the results demonstrate that deliberation and accountability along with majority voting shall be necessary in models of decision making at resolving IS problems and representing future generations’ potential interests and concerns.
    Keywords: democracy, decision-making, majority voting, deliberation, intergenerational accountability
    Date: 2021–06
  12. By: Ehrmann, Michael; Tietz, Robin; Visser, Bauke
    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. JEL Classification: D71, D72, E58
    Keywords: central bank communication, financial market response, FOMC, monetary policy committee, voting right rotation
    Date: 2021–06
  13. By: Felipe González; Magdalena Larreboure
    Abstract: Three million people participated in the Women’s March against discrimination in 2017, the largest single-day protest in U.S. history. We show that the March affected the political participation of women and people from ethnic minorities in the following federal election, the 2018 House of Representatives Election. Using daily weather shocks as exogenous drivers of attendance at the March, we show that protesters increased turnout at the Election and the vote shares obtained by minorities. We conclude that protests can help to empower historically underrepresented groups.
    Date: 2021
  14. By: Gitmez, Arda; Sonin, Konstantin; Wright, Austin L.
    Abstract: We offer a model in which heterogeneous agents make individual decisions with negative external effects such as the extent of social distancing during pandemics. Because of the externality, the agents have different individual and political preferences over the policy response. Personally, they might prefer a low-level response, yet would vote for a higher one because it deters the others - even if simultaneously decreasing their personal benefits. The effect is even more pronounced in information acquisition: agents would want one level of slant in the information they base their actions on and a different level of slant in public announcements. The model accounts for numerous empirical regularities of the public response to COVID-19.
    Keywords: Bayesian persuasion; compliance; COVID-19; Income inequality; media slant; public health externality
    JEL: D72 H12 I18 L82
    Date: 2020–05
  15. By: Bukowski, Pawel; Clark, Gregory; Gáspár, Attila; Peto, Rita
    Abstract: This paper measures social mobility rates in Hungary 1949-2017, for upper class and underclass families, using surnames to measure social status. In these years there were two very different social regimes. The first was the Hungarian People’s Republic, 1949-1989, a Communist regime with an avowed aim of favouring the working class. Then the modern liberal democracy, 1989-2020, a free-market economy. We find five surprising things. First, social mobility rates were low for both upper- and lower-class families 1949- 2017, with an underlying intergenerational status correlation of 0.6-0.8. Second, social mobility rates under communism were the same as in the subsequent capitalist regime. Third, the Romani minority throughout both periods showed even lower social mobility rates. Fourth, the descendants of the noble class in Hungary in the eighteenth century were still significantly privileged in 1949 and later. And fifth, while social mobility rates did not change measurably during the transition, the composition of the political elite changed fast and sharply.
    Keywords: social mobility; status inheritance; institutions; transition
    JEL: J62 N34 P36
    Date: 2021–06
  16. By: Andrey Malenko (University of Michigan); Ramana Nanda (Harvard Business School, Entrepreneurial Management Unit); Matthew Rhodes-Kropf (Massachusetts Institute of Technology); Savitar Sundaresan (Imperial College London)
    Abstract: We provide novel evidence on voting practices used by the investment committees of prominent venture capital investors in the U.S. A substantial share of these VCs use a voting rule for seed and early stage investments where a single `champion' is sufficient for the entire partnership to make an investment, even if other members are not as favorable. However, the same VCs migrate to more conventional `majority' or `unanimous' voting rules for their later stage investments. We show theoretically that a `champions' model can emerge as the optimal voting rule when outcomes follow a sub-exponential distribution (resembling the investments of early stage VC), but also requires that partners have sufficiently common objectives to prevent strategic overchampioning for pet projects. More traditional voting rules are robust to overchampioning but are more likely to systematically miss the best early stage investments.
    Date: 2021–06
  17. By: Giulia Meloni; Johan Swinnen
    Abstract: Globalization transforms not just the economics of production and exchange in the world, but also the political economy of public policies. We analyze how wine regulations, and more specifically planting rights restrictions, have been affected by globalization, in particular colonial expansions of wine producing empires. We study several historic cases and find that (a) planting right restrictions and compulsory uprooting of vineyards are introduced to deal with falling wine prices as colonial wine production takes off and expands; (b) that enforcement of the restrictions and uprooting was difficult and often imperfect; and (c) that there was a strong persistence of the policies: after their introduction the restrictions remain in place for a long time (often centuries) and they are only removed after major shocks to the political economy equilibrium.
    Date: 2021–05–25
  18. By: Ewan McGaughey
    Abstract: What should be the future of democracy? COVID-19 has exposed a desperate need, not just for a green recovery, and a social recovery, but a political recovery, to remake our institutions for the future, for justice on living planet. Today we are seeing that the vote, ‘a most transcendent thing’, is becoming an essential part of our economic constitution: votes at work, votes in capital and votes in public services. This is already practised, however imperfectly, however forgotten, in universities like Toronto, Cambridge, Oxford or Harvard, and the movement is growing, as it should. The evidence shows we are more productive, innovative, happy, and less unequal, when we have voice. Having moved ‘from status to contract’ in the industrial revolution, the future of work involves a move ‘from contract to membership’. The ‘right to take part in the government’ of our societies is depending less and less on holding money, or ‘other people’s money’, but is becoming universal. The days where shareholders monopolize the votes in the economy, and asset managers or banks monopolize votes on shares, are numbered. The true investors in the wealth of nations, people at work, savers for retirement, and all members of our society, are the future of democracy.
    Keywords: Democracy, work, capital, economic democracy, industrial democracy, universities, governance, contract, membership, property, human rights, vote, green recovery, social recovery, political recovery
    JEL: K00 D00
    Date: 2021–04
  19. By: Margarita Kirneva (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, IP Paris - Institut Polytechnique de Paris, GENES - Groupe des Ecoles Nationales d'Economie et Statistique - Institut national de la statistique et des études économiques (INSEE)); Matias Nunez (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz], IP Paris - Institut Polytechnique de Paris, GENES - Groupe des Ecoles Nationales d'Economie et Statistique - Institut national de la statistique et des études économiques (INSEE))
    Abstract: We propose the first class of simultaneous voting mechanisms in which each Nash equilibrium is coalition-proof. These mechanisms hence prevent the coordination failures which arise when some (coalition of) voters could have induced an outcome that they all prefer to the equilibrium outcome had they agreed on a common strategy. In each of these mechanisms, some voter(s) has the right to veto a list of alternatives. For each specification of the veto rights, each of these mechanisms implements a Veto by random priority rule introduced by Moulin [1981]. We then discuss necessary conditions for arbitrary mechanisms to implement a Pareto efficient rule ensuring that each equilibrium is coalition-proof. We show that the presence of veto rights in the mechanism is unavoidable to achieve this demanding implementation notion.
    Keywords: Implementation,Voting,Vetoes,Coalition Formation,Efficiency
    Date: 2021–05–28
  20. By: Giulia Meloni; Johan Swinnen
    Abstract: Globalization transforms not just the economics of production and exchange in the world, but also the political economy of public policies. We analyze how wine regulations, and more specifically planting rights restrictions, have been affected by globalization, in particular colonial expansions of wine producing empires. We study several historic cases and find that (a) planting right restrictions and compulsory uprooting of vineyards are introduced to deal with falling wine prices as colonial wine production takes off and expands; (b) that enforcement of the restrictions and uprooting was difficult and often imperfect; and (c) that there was a strong persistence of the policies: after their introduction the restrictions remain in place for a long time (often centuries) and they are only removed after major shocks to the political economy equilibrium.
    Keywords: colonial expansions; globalization; planting restrictions; regulation; wine history
    JEL: F68 L66 N40 N50 Q15 Q18
    Date: 2021
  21. By: Kennedy, Adam; Resnick, Danielle
    Abstract: Along with its impacts on health systems, economies, and schooling, one of the lasting effects of COVID-19 has been on the civic and political sphere. From conflict in Tigray, Ethiopia, to Myanmar’s recent military coup, governance restrictions have been either a lightning rod for opposition actors or a means of justifying repression and suspension of the rule of law. We draw on IFPRI’s CPR to examine various governance restrictions that were prominent during the first 12 months of the pandemic and focus on three main policy responses: postponing elections and restricting political rallies; censorship justified as a means to discourage misinformation; and imposing states of emergency. For the latter, we examine how this near-universal policy response had substantively different components and modes of implementation.
    Keywords: WORLD; governance; crises; Coronavirus; coronavirus disease; Coronavirinae; COVID-19; election; state of emergency; political rallies
    Date: 2021

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