nep-pol New Economics Papers
on Positive Political Economics
Issue of 2022‒01‒31
thirteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Careful What You Say: The Effect of Manipulative Information on the 2013 Czech Presidential Run-off Election By Guzi, Martin; Mikula, Stepan
  2. Campaign Spending in Local Elections: the Effects of Public Funding By Bruno Carvalho
  3. When does the winner take more? The role of political alignment in transfers to Romanian municipalities By Puscas, Georgiana
  4. Do Political Actors Engage in Strategic Deception on Social Media? By Ricketts, Simon
  5. Majority principle and indeterminacy in German elections By Salvatore Barbaro; Nils D. Steiner
  6. “Sort Selling”: Political Polarization and Residential Choice By W. Ben McCartney; John Orellana; Calvin Zhang
  7. The political economy of Kazakhstan. A case of good economics, bad politics? By Simon Commander; Ruta Prieskienyte
  8. The Political Economy of Anti-Bribery Enforcement By Lauren Cohen; Bo Li
  9. A Commitment Theory of Populism By Massimo Morelli; Antonio Nicolò; Paolo Roberti
  10. Guns, pets, and strikes: an experiment on identity and political action By Boris Ginzburg; José-Alberto Guerra
  11. A Costly Commitment: Populism, Government Performance, and the Quality of Bureaucracy By Luca Bellodi; Massimo Morelli; Matia Vannoni
  12. Democratic Political Economy of Financial Regulation By Igor Livshits; Youngmin Park
  13. Motivated political reasoning: The formation of belief-value constellations By Barron, Kai; Becker, Anna; Huck, Steffen

  1. By: Guzi, Martin (Masaryk University); Mikula, Stepan (Masaryk University)
    Abstract: We exploit a quasi-natural experiment that emerged during the Czech presidential run-off election to identify the impact of inaccurate and misleading information on electoral outcomes. A political campaign associated a vote for one of the candidates with a legally and politically unfounded risk relevant to people owning houses confiscated from ethnic Germans after the Second World War. Using municipalitylevel data in a difference-in-differences framework, our analysis suggests that the manipulative campaign affected the electoral outcomes and increased voter turnout in municipalities with a higher share of voters at risk of the unproven threat to housing ownership.
    Keywords: Sudetenland, voting, manipulative information, 2013 Czech presidential election
    JEL: D72 P16 P14
    Date: 2021–11
  2. By: Bruno Carvalho
    Abstract: Little is known about the influence of public funding for electoral campaigning on campaigning decisions and electoral outcomes. This paper proposes an analytically tractable model to assess such effects and tests its results on local elections in Portugal. The case of Portugal is interesting in that public allowances are the largest source of funds for campaigning, but are capped and conditional on contemporaneous electoral results. This creates a risky lottery for candidates. We show that, when the dispersion of voter ideology is high, candidates that are ex-ante more popular spend more in campaigning. The empirical analysis relies on a novel dataset covering all candidates in 308 municipalities for 3 elections, based on the official declarations of candidates to the Portuguese Constitutional Court. Identification follows from the rules governing the allocation of public funds across candidates in the municipality. We find that the expected public funding is an important determinant ofcampaign spending levels and that campaign spending boosts local vote shares. The spending of the average runner-up yields 7.4 percentage points of his vote share. For the two biggest Portuguese parties the effect hovers around 9-10 percentage points. Our estimates imply a cost-per-vote between e7 and e17, depending on the candidate. When we focus on elections between incumbents and challengers, we find that, as prescribed by the model, incumbents spend more in municipalities where voter ideology is more disperse.
    Keywords: campaign spending, local elections, public funding, probabilistic voting
    Date: 2021–12
  3. By: Puscas, Georgiana (University of Warwick)
    Abstract: This paper explores whether the political alignment between mayors and the central government brings additional financial benefits to municipalities in Romania, using a novel dataset over 2012-2018. Analysing close municipal elections, I apply a regression discontinuity design to identify the effect of political alignment on several categories of transfers. I find that politically aligned municipalities receive per capita about 19% more equalisation transfers, 46% more subventions and 30% more transfers for roads. The results indicate that transfers for decentralised costs at municipality level are nondiscretionary
    Keywords: transfers allocation ; political alignment ; electoral competition JEL Classification: D72 ; H77 ; H81 ; P16 ; C21
    Date: 2021
  4. By: Ricketts, Simon (Monash University)
    Abstract: We examine whether political actors engage in strategic deception on social media. We find evidence that certain groups of politicians engage in deception in response to an election. To infer deception, we construct a novel wealth inference model from text of political social media accounts. We use machine learning and natural language processing, which is accurate to within half an order of magnitude when compared to real wealth disclosures as required by law in the United States. Wealth exaggeration is not homogenous ; in an election year, the wealthiest political actors minimise their perceived wealth, while the poorest exaggerate their perceived wealth. We do not find evidence that there are differences in exaggeration due to sex, party or experience.
    Keywords: Strategic deception ; wealth-inference ; machine-learning ; natural language processing ; social media ; election JEL Classification: C55 ; D72
    Date: 2021
  5. By: Salvatore Barbaro (Johannes Gutenberg University Mainz); Nils D. Steiner (Johannes Gutenberg University Mainz)
    Abstract: Out of the many possible voting schemes, the notoriously-used plurality rule is far from being the best. Previous research from France and the US reveals how plurality winners fall short of majority support. Therefore, eminent scholars advocate the simple-majority rule. The latter, however, faces the threat of indeterminacy due to cycling patterns. To contribute to the scarce evidence on the empirical occurrence of these phenomena, we used survey data from the 2017 German election to simulate preference orderings on district candidates. We find that violations of the majority principle are frequent. Conversely, we do not uncover any indeterminacy.
    Keywords: Elections, Plurality voting, simple-majority rule, indeterminacy
    JEL: D71
    Date: 2022–01–13
  6. By: W. Ben McCartney; John Orellana; Calvin Zhang
    Abstract: Partisanship and political polarization are salient features of today’s society. We merge deeds records with voter rolls and show that political polarization is more than just “political cheerleading.” Descriptively, homeowners are more likely to sell their homes and move when their next-door neighbors are affiliated with the opposite political party. We use a novel, new-next door neighbor identification strategy along with rich demographic control variables and time by-geography fixed effects to confirm causality. Consistent with a partisanship mechanism, our results are strongest when new next-door neighbors (i) are more likely to be partisan and (ii) live especially close by. Our findings help explain increases in political segregation, improve our understanding of residential choice, and illustrate the importance of political polarization for economic decision-making.
    Keywords: Political Polarization; Residential Choice
    JEL: D10 H31 R20
    Date: 2021–03–02
  7. By: Simon Commander; Ruta Prieskienyte
    Abstract: Can autocracies and their associated institutions successfully implement economic policies that promote growth and investment? Can ‘good economics’ somehow offset the effects of ‘bad’ politics? Kazakhstan is a case where an autocratic regime has actively projected market-friendly policies and attracted significant amounts of incoming investment. These policies are to some extent reflected in the country’s governance ratings, although there has been a significant amount of investment disputes that question the attachment to the rule of law. Moreover, the political regime remains strongly personalised around the founder President, his family and associates. This is reflected in the economics of the autocracy whereby a large public sector and a set of privately held businesses coexist to mutual benefit. The latter have been formed around a very small number of highly connected individuals whose initial accumulation of assets allows them also to act as necessary gatekeepers for entrants. Competition as a result remains limited in both economic and political domains. Yet, uncertainties over the future leadership, along with latent rivalry over access to resources and markets, make the political equilibrium quite fragile. In short, ‘bad’ politics both squeezes the space for, and distorts the benefits from, ‘good’ economics.
    Keywords: Political networks, autocracy, investment
    JEL: D72 H11 L14 P26
    Date: 2021
  8. By: Lauren Cohen; Bo Li
    Abstract: This paper documents novel evidence on the influence of political incentives in the regulatory enforcement of foreign bribery. Using exogenous variation in the timing and geographic location of U.S. Congressional elections, we find that the probability of a Foreign Corrupt Practices Act (FCPA) enforcement action against foreign firms located in the Senator’s jurisdiction increases significantly pre-election, spiking 23%, with zero equivalent move for equivalently global (but domestic-headquartered) firms in the Senator’s jurisdiction. Using hand-collected case-level data from the U.S. SEC and DOJ, we also observe larger discretion in regions where foreign firms are larger global competitors of in-state firms, operate in locally important industries, and when Senators serve as the Chairman of the Senate Judiciary Committee (which oversees the DOJ). Anti-bribery enforcement has electoral implications, leading to spikes in media coverage of the FCPA enforcement coupled with greater vote shares for the Senator. Moreover, the cases pushed through against these foreign firms just prior to elections appear to be weaker cases. The enforcements result in real effects, as in response to strategic timing in enforcement, firms reallocate business segments and sales.
    JEL: F13 F14 F36 F53 F55 F65 G28 G38 K22 K33 K42
    Date: 2021–12
  9. By: Massimo Morelli; Antonio Nicolò; Paolo Roberti
    Abstract: When voters’ trust in politicians collapses, they demand simple policies that they can easily monitor. Disenchanted citizens therefore prefer committed delegates to politicians who propose themselves as competent policy makers but without a specific policy commitment (trustees). In a two-party competition, the unique asymmetric equilibrium is such that voters with lower interest for the common good select a committed delegate, while those with higher interest for the common good appoint a trustee. In this equilibrium, we show that the committed delegate also chooses all the strategies typically associated with populism in the literature. Hence, this paper puts forward a commitment theory of populism.
    Keywords: populism, competence, commitment, information acquisition, interest groups, moral universalism
    JEL: D72 D78
    Date: 2021
  10. By: Boris Ginzburg; José-Alberto Guerra
    Abstract: We study the implications of participation in political collective action on identity and on interpersonal interactions using a laboratory experiment. We offer subjects the possibility to sign an online petition, which was either related to animal rights or the right to bear firearms. Before and after the petition, we measure subjects' altruism and willingness to trust by asking them to play a dictator game and a trust game in pairs. The results show that there is considerably more altruism and more trust when both subjects had signed the petition than when one or both had not signed. The same behaviour is observed when we analyse high-cost political participation, namely, joining a street protest. This suggests that the experience of common participation in political collective action creates an identity that produces in-group favouritism. These results also suggest a reason why individuals choose to participate in political action despite private costs and a low probability of affecting the outcome: participation creates private benefits in subsequent interactions with fellow participants.
    Keywords: political identity, collective action, social preferences, laboratory experiment, petitions, street protests
    JEL: C91 D64 D79 D91
    Date: 2021–12–15
  11. By: Luca Bellodi; Massimo Morelli; Matia Vannoni
    Abstract: We study the consequences of populism for government performance and the quality of bureaucracy. When voters lose trust in representative democracy, populists strategically supply unconditional policy commitments that are easier to monitor for voters. When in power, populists implement their policy commitments regardless of financial constraints and expert assessment of the feasibility of their policies, worsening government performance and dismantling resistance from expert bureaucrats. We use novel data on about 8,000 municipalities in Italy, over a period of 20 years, and we estimate the effect of electing a populist mayor with a close-election regression discontinuity design. We find that the election of a populist mayor leads to more debts, a larger share of procurement contracts with cost overruns, higher turnover among top bureaucrats, and a sharp decrease in the percentage of graduate bureaucrats. These results contribute to the literature on populism, government performance, and bureaucratic appointments.
    Keywords: populism, government performance, bureaucracy, turnover
    Date: 2021
  12. By: Igor Livshits; Youngmin Park
    Abstract: This paper offers a simple theory of inefficiently lax financial regulation arising as an outcome of a democratic political process. Lax financial regulation encourages some banks to issue risky residential mortgages. In the event of an adverse aggregate housing shock, these banks fail. When banks do not fully internalize the losses from such failure (due to limited liability), they offer mortgages at less than actuarially fair interest rates. This opens the door to homeownership for young, low net-worth individuals. In turn, the additional demand from these new homebuyers drives up house prices. This leads to a non-trivial distribution of gains and losses from lax regulation among households. On the one hand, renters and individuals with large non-housing wealth suffer from the fragility of the banking system. On the other hand, some young, low net-worth households are able to get a mortgage and buy a house, and current (old) homeowners benefit from the increase in the price of their houses. When these latter two groups, who benefit from the lax regulation, constitute a majority of the voting population, then regulatory failure can be an outcome of the democratic political process.
    Date: 2022–01–10
  13. By: Barron, Kai; Becker, Anna; Huck, Steffen
    Abstract: We study the causal relationship between moral values ("ought" statements) and factual beliefs ("is" statements) and show that, contrary to predictions of orthodox Bayesian models, values exert an influence on beliefs. This effect is mediated by prior political leanings and, thus, contributes to increasing polarization in beliefs about facts. We study this process of motivated political reasoning in a preregistered online experiment with a nationally representative sample of 1,500 individuals in the US. Additionally, we show that subjects do not distort their beliefs in response to financial incentives to do so, suggesting that deep values exert a stronger motivational force.
    Keywords: Motivated Beliefs,Values,Polarization,Experiment
    JEL: C90 D72 D74 D83 P16
    Date: 2021

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