nep-pol New Economics Papers
on Positive Political Economics
Issue of 2021‒11‒15
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Competition with Endogenous Party Formation and Citizen Activists By Emanuel Hansen
  2. Electoral Turnout During States of Emergency and Effects on Incumbent Vote Shares By Frank, Marco; Stadelmann, David; Torgler, Benno
  3. Investing in Influence: How Minority Interests Can Prevail in a Democracy By Stergios Skaperdas; Samarth Vaidya
  4. Quantifying Political Populism and Examining the Link with Economic Insecurity: evidence from Greece By Raphael Ntentas
  5. Democracy or Optimal Policy: Income Tax Decisions without Commitment By Jang, Youngsoo
  6. Read My Lips? Taxes and Elections By Clemens Fuest; Klaus Gründler; Niklas Potrafke; Fabian Ruthardt; Fabian Ruthardt
  7. Does Labor Protection Increase Support for Immigration? Evidence from Switzerland By Mirjam Bächli; Teodora Tsankova
  8. Who Pays a Visit to Brussels? The Firm Value of Cross-Border Political Access to European Commissioners By Biguri, Kizkitza; Stahl, Jörg R.
  9. Obvious Manipulability of Voting Rules By Haris Aziz; Alexander Lam

  1. By: Emanuel Hansen
    Abstract: This paper studies the effects of endogenous party formation on political platforms. It develops a model in which parties allow like-minded citizens to, first, share the cost of running in a public election and, second, coordinate on a policy platform. The paper characterizes the set of political equilibria with two competing parties and with one uncontested party. In two-party equilibria, the distance between both platforms is always positive but limited, in contrast to the median voter model and the citizen candidate model. In one-party equilibria, the median voter can be worse off than in all equilibria with two competing parties.
    Keywords: elections, party formation, platform choice, electoral uncertainty
    JEL: D71 D72
    Date: 2021
  2. By: Frank, Marco; Stadelmann, David; Torgler, Benno
    JEL: D72
    Date: 2021
  3. By: Stergios Skaperdas; Samarth Vaidya
    Abstract: How can the West’s economic and political polarization be explained? We argue that persuasive lobbying at various levels of government leads to systematic deviations of policies from those desired by the majority. Implemented policies diverge from the majority position despite centripetal forces that induce interest groups to select positions closer to that majority position. Resources, organization, and cognitive biases can induce one-sided outcomes. When we allow for long-term lobbying infrastructure investments in a simpli_ed tax-and-spend model, the deviations between majority desires and implemented policies are even larger than those in the absence of long-term investments.
    Keywords: interest groups, lobbying, polarization, persuasion, regulatory capture
    JEL: D72 D73 D78 H20
    Date: 2021
  4. By: Raphael Ntentas
    Abstract: At this juncture of human history populism is ubiquitous and Greek politics constitute no exception. This paper sheds light on a methodology that quantifies political populism (i.e. parliamentary populist rhetoric) in Greece through a novel textual dataset, which includes 16.5 years filled with heated debates over times of economic peaks and valleys. Combining computer with human intelligence to identify populism based upon a creative dictionary and strict definitional guidelines that fit the Hellenic ParliamentÕs context, helps one explore perspectives unimagined just a few years ago. Besides, as Greece has gone through a series of sharp, intense and generalized socio-economic shocks, this paper uses an OLS multiple regression analysis to test whether there is a link between economic insecurity and political populism. Ultimately, it provides empirical evidence on a weak link, indicating economic insecurityÕs minimal role in explaining the variation in political populism levels. Our results do offer some tentative insights into how political populism evolves in the country during 2004-2020, confirming the previous empirical finding that assigns higher levels of populism to December when heated parliamentary debates on the following yearÕs budget occur. Lastly, the empirical results indicate that populism does not intensify in conditions of crises, in alignment with the findings of some of the latest cross-national studies.
    Keywords: Populism, Hellenic Parliament, Economic Insecurity, Big Data, Quantitative Text Analysis, Multiple Regression Analysis
    Date: 2021–11
  5. By: Jang, Youngsoo
    Abstract: How do differences in the government’s political and commitment structure affect the aggregate economy, inequality, and welfare? I analyze this question, using a calibrated Aiyagari’s (1994) economy with wealth effects of labor supply wherein a flat tax rate and transfers are endogenously determined according to its political and commitment structure. I compare four economies: a baseline economy, an economy with the optimal tax with commitment in all steady states, an economy with the optimal tax without commitment, and a political economy with sequential voting. I obtain two main findings. First, the commitment structure shifts the government’s weighting between redistribution and efficiency. A lack of commitment leads the government to pursue a more redistributive policy at the expense of efficiency. Second, given a lack of commitment, the political economy with voting yields greater welfare than the economy with the time-consistent optimal policy. In the latter case, a lack of commitment hinders the government from implementing a more frugal policy desirable in the long run; instead, it cares more for low-income and wealth households, resulting in a substantial efficient loss. However, in the political economy with voting, the government considers only the interests of the median voter, who is middle class and reluctant to bear larger distortions from a higher tax rate and larger transfers. These findings imply that in terms of welfare, policies targeting the middle class would possibly be better than those exquisitely designed for the general public.
    Keywords: Commitment, Time-Consistent Policy, Political Economy, Voting
    JEL: E61 H11 P16
    Date: 2021–10
  6. By: Clemens Fuest; Klaus Gründler; Niklas Potrafke; Fabian Ruthardt; Fabian Ruthardt
    Abstract: We introduce a new dataset that includes quantitative harmonized indices of tax reforms based on qualitative information of about 900 Economic Surveys from the OECD and 37,000 tax-related news from the IBFD archives. The data set provides indicators on tax reforms for tax rates and tax bases, along with detailed sub-indices for six types of taxes (23 countries, 1960–2014). Relating tax reforms to the timing of elections, we examine electoral cycles in tax reforms. Our results show that politicians postpone tax rate increases to after elections. A key innovation of our data set is the coverage of harmonized indices for six tax types. Examining heterogeneity across tax types, we find that electoral cycles are particularly pronounced for value added tax rates and personal income tax rates.
    Keywords: tax reforms, tax systems, tax rates, tax bases, data set, electoral cycles
    JEL: D72 H20 H25 C23
    Date: 2021
  7. By: Mirjam Bächli; Teodora Tsankova
    Abstract: What affects native support for immigration? At a time of rising anti-immigration sentiments, this is a question raised by both academics and policy makers. We study the role of labor protection in shaping native preferences over migration policies. We look at Swiss national votes which took place from 2000 to 2014. Our results show that a higher immigrant exposure reduces pro-immigration vote shares in municipalities with a relatively low-skilled native population. The negative response is mitigated under higher levels of labor protection as measured by collective bargaining coverage. We look at labor market outcomes to understand mechanisms at play and find some suggestive evidence that collective agreements mitigate negative wage responses among low-skilled natives. Overall, the analysis suggests that labor protection affects vote outcomes by improving in addition other labor market conditions or by alleviating existing fears among the native population.
    Keywords: immigration, popular votes, collective bargaining
    JEL: D72 F22 J52 J61
    Date: 2021
  8. By: Biguri, Kizkitza; Stahl, Jörg R.
    Abstract: We present novel evidence on the value of cross-border political access. We analyze data on meetings of US multinational enterprises (MNEs) with European Commission (EC) policymakers. Meetings with Commissioners are associated with positive abnormal equity returns. We study channels of value creation through political access in the areas of regulation and taxation. US enterprises with EC meetings are more likely to receive favorable outcomes in their European merger decisions and have lower effective tax rates on foreign income than their peers without meetings. Our results suggest that access to foreign policymakers is of substantial value for MNEs.
    Keywords: Cross-border political access,European Commission,firm value
    JEL: D72 G30
    Date: 2020
  9. By: Haris Aziz; Alexander Lam
    Abstract: The Gibbard-Satterthwaite theorem states that no unanimous and non-dictatorial voting rule is strategyproof. We revisit voting rules and consider a weaker notion of strategyproofness called not obvious manipulability that was proposed by Troyan and Morrill (2020). We identify several classes of voting rules that satisfy this notion. We also show that several voting rules including k-approval fail to satisfy this property. We characterize conditions under which voting rules are obviously manipulable. One of our insights is that certain rules are obviously manipulable when the number of alternatives is relatively large compared to the number of voters. In contrast to the Gibbard-Satterthwaite theorem, many of the rules we examined are not obviously manipulable. This reflects the relatively easier satisfiability of the notion and the zero information assumption of not obvious manipulability, as opposed to the perfect information assumption of strategyproofness. We also present algorithmic results for computing obvious manipulations and report on experiments.
    Date: 2021–11

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