nep-pol New Economics Papers
on Positive Political Economics
Issue of 2021‒11‒29
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Elections Hinder Firms’ Access to Credit By Florian LEON; Laurent WEILL
  2. Elections and Government Efficiency By Florian Dorn
  3. Does Social Media cause Polarization? Evidence from access to Twitter Echo Chambers during the 2019 Argentine Presidential Debate By Rafael Di Tella; Ramiro H. Gálvez; Ernesto Schargrodsky
  4. Past Exposure to Macroeconomic Shocks and Populist Attitudes in Europe By Despina Gavresi; Anastasia Litina
  5. The Emergence and Persistence of Oligarchy: A Dynamic Model of Endogenous Political Power By Ilwoo Hwang; Jee Seon Jeon
  6. The Political (In)Stability of Funded Social Security By Beetsma, Roel M. W. J.; Komada, Oliwia; Makarski, Krzysztof; Tyrowicz, Joanna
  7. Targeting Hunger or Votes? the Political Economy of Humanitarian Transfers in Malawi By Duchoslav, Jan; Kenamu, Edwin; Thunde, Jack
  8. How clientelism undermines state capacity: Evidence from Mexican municipalities By Ana L. De La O
  9. Public policy and participation in political interest groups: An analysis of minimum wages, labor unions, and effective advocacy By Michael R. Strain; Jeffrey Clemens
  10. A Sentiment-Enhanced Corruption Perception Index By Zaijin Zhan; Sandile Hlatshwayo; Ms. Yingjie Fan; Yongquan Cao; Monica Petrescu
  11. Trade Competition and the Decline in Union Organizing: Evidence from Certification Elections By Kerwin Kofi Charles; Matthew S. Johnson; Nagisa Tadjfar

  1. By: Florian LEON (FERDI, Clermont-Ferrand); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: We investigate whether the occurrence of elections affect access to credit for firms. We perform an investigation using firm-level data covering 44 developed and developing countries. We find that elections have a detrimental influence on access to credit: firms are more credit-constrained in election years but also in pre-election years. We explain this finding by the fact that elections exacerbate political uncertainty. The negative effect of elections takes place through lower credit demand, whereas the occurrence of elections does not affect credit supply. We further establish that the design of political and financial systems affects how elections influence access to credit.
    Keywords: Elections, access to credit, credit constraints.
    JEL: G21 D72
    Date: 2021
  2. By: Florian Dorn
    Abstract: Politicians are expected to influence policy outcomes in a way to gain electoral advantage. There is, however, a pending question whether efficiency in the provision of public goods and services is affected by strategic behavior. I examine how electoral cycles influence local government efficiency by using OLS fixed effects, event study, and instrumental variable estimations in a large balanced panel of around 2,000 municipalities in the German state of Bavaria. Cost efficiency is estimated by employing a fixed effects semi-parametric stochastic frontier analysis. The results show that electoral cycles increase government efficiency in election and pre-election years by around 0.75– 0.85 %. The effect is larger when executive and council electoral cycles coincide, and when incumbent mayors run for office again. My findings suggest an efficiencyenhancing effect of elections at given institutional conditions.
    Keywords: Electoral cycle, efficiency, local government, panel data, event study, stochastic frontier analysis (sfa), instrumental variables
    JEL: C14 C23 C26 D72 D73 H41 H70 H72 R15 R50
    Date: 2021
  3. By: Rafael Di Tella; Ramiro H. Gálvez; Ernesto Schargrodsky
    Abstract: We study how two groups, those inside vs those outside echo chambers, react to a political event when we vary social media status (Twitter). Our treatments mimic two strategies often suggested as a way to limit polarization on social media: they expose people to counter-attitudinal data, and they get people to switch off social media. Our main result is that subjects that started inside echo chambers became more polarized when these two strategies were implemented. The only scenario where they did not become more polarized is when they did not even experience the political event. Interestingly, subjects that were outside echo chambers before our study began experienced no change (or a reduction) in polarization. We also study a group of non-Twitter users in order to have a simple, offline benchmark of the debate’s impact on polarization.
    JEL: D72 L82 L86 O33 P16 Z13
    Date: 2021–11
  4. By: Despina Gavresi (University of Ioannina); Anastasia Litina (Department of Economics, University of Macedonia)
    Abstract: This paper explores the interplay between past exposure to macroeconomic shocks and populist attitudes. We document that individuals who experienced a macroeconomic shock during their impressionable years (between 18 and 25 years of age), are currently more prone to voting for populist parties, and manifest lower trust both in national and European institutions. We use data from the European Social Survey (ESS) to construct the differential individual exposure to macroeconomic shocks during impressionable years. Our findings suggest that it is not only current exposure to shocks that matters (see e.g., Guiso et al. (2020)) but also past exposure to economic recessions, which has a persistent positive effect on the rise of populism. Interestingly, the interplay between the two, i.e., past and current exposure to economic shocks, has a mitigating effect on the rise of populism. Individuals who were exposed to economic shocks in the past are less likely to manifest populist attitudes when faced with a current crisis, as suggested by the experience-based learning literature.
    Keywords: Macroeconomic Shocks, Trust, Attitudes, Populism
    JEL: D72 E60 F68 P16 Z13
    Date: 2021–11
  5. By: Ilwoo Hwang; Jee Seon Jeon
    Abstract: We study an infinite-horizon multilateral bargaining game in which the status quo policy, players¡¯ recognition probabilities, and their voting weights are endogenously determined by the previous bargaining outcome. With players not discounting future payoffs, we show that the long-run equilibrium outcome features the concentration of power by one or two players, depending on the initial bargaining state. If the players¡¯ initial shares are relatively equal, they successfully prevent tyranny, but a two-player oligarchy nevertheless emerges and persists. The same results are obtained with payoff discounting, provided that the players¡¯ shares are not too small. Our results highlight the importance of the initial power distribution and discounting of future payoffs in the long-run development of power configuration.
    Keywords: Dynamic bargaining; Endogenous political power; Endogenous institution; Markov perfect equilibrium, Oligarchy;
    Date: 2021–11
  6. By: Beetsma, Roel M. W. J. (University of Amsterdam); Komada, Oliwia (GRAPE); Makarski, Krzysztof (Warsaw School of Economics); Tyrowicz, Joanna (University of Warsaw)
    Abstract: We analyze the political stability of funded social security. Using a stylized theoretical framework we study the mechanisms behind governments capturing social security assets in order to lower current taxes. The results and the driving mechanisms carry over to a fully-fledged and carefully calibrated overlapping generations model with an aging population. Funding is efficient in a Kaldor-Hicks sense. We demonstrate that, even though we can rationalize the actual introduction of a two-pillar defined-contribution scheme with funding through a majority vote, a new vote to curtail the funded pillar through asset capture or permanent diversion of contributions to the pay-as-you-go pillar always receives majority support. For those alive and thus allowed to vote, the temporary reduction in taxes outweighs the reduction in retirement benefits. This result is robust to substantial intra-cohort heterogeneity and other extensions, and only overturned with a sufficient degree of altruism. Our analysis rationalizes the experience of Central and Eastern European countries, who rolled back their funded pension pillars soon after setting them up.
    Keywords: social security, funding, pay-as-you-go, asset capture, majority vote, welfare
    JEL: H55 D72 E17 E27
    Date: 2021–10
  7. By: Duchoslav, Jan; Kenamu, Edwin; Thunde, Jack
    Keywords: Political Economy, Food Security and Poverty
    Date: 2021–08
  8. By: Ana L. De La O
    Abstract: Does clientelism perpetuate the weak state capacity that characterizes many young democracies? Prior work explains that clientelist parties skew public spending to private goods and under-supply public goods. Building on these insights, this article argues that clientelism creates a bureaucratic trap. Governments that rely on clientelism invest in labour-intensive, low-skilled bureaucracies that can design and implement relatively more straightforward distributive policies.
    Keywords: Clientelism, State capacity, Bureaucratic capacity, political competition
    Date: 2021
  9. By: Michael R. Strain (American Enterprise Institute); Jeffrey Clemens (University of California at San Diego)
    Abstract: Why do individuals join interest groups?
    Keywords: Labor Unions, Minimum Wage, Public Opinion, Special Interests, US Economy, US Labor Market
    JEL: A
    Date: 2020–10
  10. By: Zaijin Zhan; Sandile Hlatshwayo; Ms. Yingjie Fan; Yongquan Cao; Monica Petrescu
    Abstract: Direct measurement of corruption is difficult due to its hidden nature, and measuring the perceptions of corruption via survey-based methods is often used as an alternative. This paper constructs a new non-survey based perceptions index for 111 countries by applying sentiment analysis to Financial Times articles over 2005–18. This sentiment-enhanced corruption perception index (SECPI) captures not only the frequncy of corruption related articles, but also the articles’ sentiment towards corruption. This index, while correlated with existing corruption perception indexes, offers some distinct advantages, including heightened sensitivity to current events (e.g., corruption investigations and elections), availability at a higher frequency, and lower costs to update. The SECPI is negatively correlated with business environment and institutional quality. Increases in the perceived incidence or scope of corruption influences economic agents’ behaviors, and thus economic dynamics. We found that when the SECPI is at least one standard deviation above the mean, the growth per capita falls by 0.65 percentage point on average, with more pronounced impacts for emerging market and low income countries.
    Keywords: sentiment analysis method; perception index; statistic department; articles' sentiment; summary statistics; Corruption; Emerging and frontier financial markets; Business environment; Global
    Date: 2021–07–23
  11. By: Kerwin Kofi Charles; Matthew S. Johnson; Nagisa Tadjfar
    Abstract: We assess whether and why trade competition partly explains the sharp decline in U.S. workers’ attempts to organize labor unions in recent decades. We find that between 1990-2007, import competition due to the “China Shock” lowered union certification elections by 4.5% among workers in manufacturing industries directly exposed to it, and by 8.8% among workers indirectly exposed through its effect on their local labor market. Consistent with a simple model of workers’ decision to seek union representa- tion, we show that direct exposure lowered the expected wage gain from unionization, whereas indirect exposure increased the cost of job loss, both of which discourage worker organizing.
    JEL: F16 J41 J50 J51 J52
    Date: 2021–11

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