nep-pol New Economics Papers
on Positive Political Economics
Issue of 2022‒02‒28
twenty-one papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Knife Edge Election of 2020: American Politics Between Washington, Kabul, and Weimar By Thomas Ferguson; Paul Jorgensen; Jie Chen
  2. The Legacy of Authoritarianism in a Democracy By Kumar Sur, Pramod
  3. Do Economic Changes Affect the Political Preferences of Arabs in Israel? By Miaari, Sami H.; Loewenthal, Amit; Adnan, Wifag
  4. Voting With Endogenous Timing By Finn Schmieter
  5. The Gender Recontest Gap in Elections By Baskaran, Thushyanthan; Hessami, Zohal
  6. Income inequality and voters’ support for government intervention. A simple political model By Angel Solano-Garcia
  7. The Politicized Pandemic: Ideological Polarization and the Behavioral Response to COVID-19 By Grimalda, Gianluca; Murtin, Fabrice; Pipke, David; Putterman, Louis; Sutter, Matthias
  8. Social media, polarization and democracy: A multi-methods analysis of polarized users' interactions on Reddit's r/WallStreetBets By Massoc, Elsa; Lubda, Maximilian
  9. Estimating Candidate Valence By Kei Kawai; Takeaki Sunada
  10. Disamenity or a Signal of Competence? The Empirical Political Economy of Local Road Maintenance By Ben Blemings; Margaret Bock
  11. Political Constraints and Sovereign Default By Marina Azzimonti; Nirvana Mitra
  12. Political Competition and State Capacity: Evidence from a Land Allocation Program in Mexico By Fergusson, Leopoldo; Larreguy, Horacio; Riano, Juan Felipe
  13. Is Journalistic Truth Dead? Measuring How Informed Voters Are about Political News By Charles Angelucci; Andrea Prat
  14. Do Conservative Central Bankers Weaken the Chances of Conservative Politicians? By Maxime Menuet; Hugo Oriola; Patrick Villieu
  15. Diffusing Political Concerns: How Unemployment Information passed between social Ties Influence Danish Voters By Alt, James E.; Jensen, Amalie; Larreguy, Horacio; Lassen, David D.; Marshall, John
  16. Income Contingency and the Electorate's Support for Tuition By Lergetporer, Philipp; Woessmann, Ludger
  17. A theory of cultural revivals By Murat Iyigun; Jared Rubin; Avner Seror
  18. Trust in the time of coronavirus: longitudinal evidence from the United States. By Aassve,Arnstein; Capezzone,Tommaso; Cavalli,Nicolo’; Conzo,Pierluigi; Peng,Chen
  19. Preferences matter! Political Responses to the COVID-19 and Population’s Preferences By Étienne Dagorn; Martina Dattilo; Matthieu Pourieux
  20. State-Level Economic Policy Uncertainty By Scott R. Baker; Steven J. Davis; Jeffrey A. Levy
  21. Understanding the political challenges of introducing a carbon tax in Indonesia By Rakhmindyarto, Rakhmindyarto; Setyawan, Dhani

  1. By: Thomas Ferguson (Institute for New Economic Thinking); Paul Jorgensen (University of Texas Rio Grande Valley); Jie Chen (University of Massachusetts, Boston)
    Abstract: This paper analyzes the 2020 election, focusing on voters, not political money, and emphasizing the importance of economic geography. Drawing extensively on county election returns, it analyzes how spatial factors combined with industrial structures to shape the outcome. It treats COVID 19`s role at length. The paper reviews studies suggesting that COVID 19 did not matter much, but then sets out a new approach indicating it mattered a great deal. The study analyzes the impact on the vote not only of unemployment but differences in income and industry structures, along with demographic factors, including religion, ethnicity, and race. It also studies how the waves of wildcat strikes and social protests that punctuated 2020 affected the vote in specific areas. Trump`s very controversial trade policies and his little discussed farm policies receive detailed attention. The paper concludes with a look at how political money helped make the results of the Congressional election different from the Presidential race. It also highlights the continuing importance of private equity and energy sectors opposed to government action to reverse climate change as conservative forces in (especially) the Republican Party, together with agricultural interests.
    Keywords: political economy, voting, 2020 presidential election, Donald Trump, Populism, trade policy, farm policy, political money, Joe Biden, private equity
    JEL: D71 D72 G38 P16 N22 L51
    Date: 2021–11–07
  2. By: Kumar Sur, Pramod
    Abstract: Recent democratic backsliding and the rise of authoritarian regimes around the world have rekindled interest in understanding the causes and consequences of authoritarian rule in democracies. In this paper, I study the long-run political consequences of authoritarianism in the context of India, the world’s largest democracy.Utilizing the unexpected timing of the authoritarian rule imposed in the 1970s and the variation in a draconian policy implemented during this period, I document a sharp decline in the share of the then incumbent party’s, the Indian National Congress, votes and the probability of its candidates winning in subsequent elections. The decline in the incumbent party’s political dominance was not at the expense of a lower voter turnout rate. Instead, a sharp rise in the number of opposition candidates contesting for election in subsequent years played an important role. Finally, I examine the enduring consequences, revealing that confidence in politicians remains low in states where the draconian policy was high. Together, the evidence suggests that authoritarianism in a democracy has a persistent effect on voting behavior, political representation, and confidence in institutions.
    Keywords: Democracy, authoritarianism, voting behavior, voter turnout, confidence in institutions, family planning, India, D72, N45, J13, P16
    Date: 2022–02
  3. By: Miaari, Sami H. (Tel Aviv University); Loewenthal, Amit (University of Potsdam); Adnan, Wifag (New York University, Abu Dhabi)
    Abstract: We examine the relationship between socio-economic characteristics and voting patterns among Arabs in Israel. We combine panel data on 73 Arab localities with election results and socio-economic indicators for seven election years between 1996 and 2015. Exploiting variation in political preferences and socio-economic status between localities across time, we find that both demographic transition and improvements in standards of living are associated with a decrease in the proportion of Israeli Arabs voting for Jewish-majority parties and a rise in their electoral support for Arab Parties. We also find that the decrease in voter turnout among Arabs following the political effects of the Second Intifada may have been only circumstantial. Our results suggest that Arabs in Israel are becoming more politically independent, as a result of social, political and economic modernization.
    Keywords: Israel, elections, Arabs, political economy
    JEL: D01
    Date: 2022–01
  4. By: Finn Schmieter
    Abstract: This paper analyses the role of timing in common-value elections. There are two voting periods where voters can decide for themselves when to publicly cast their votes after receiving private signals. In welfare-optimal equilibria, agents use their timing to communicate the strength of their private information to the other voters. This communication allows for better information aggregation than simultaneous voting or voting with exogenously fixed timing. In the case of a simple majority voting rule, a second voting period mitigates the Swing Voter’s Curse more effectively than abstention.
    Keywords: Elections, Pivotal Voting, Communication, Information
    JEL: D72 D82 D83
    Date: 2022–01
  5. By: Baskaran, Thushyanthan (University of Siegen); Hessami, Zohal (Ruhr University Bochum)
    Abstract: This paper documents an important but mostly overlooked reason for female underrepresentation in politics: gender gaps in the recontest likelihood of candidates. Using hand-collected data on 116,185 candidates in four consecutive local council elections (2001-2016) in a German state, we provide evidence for a gender recontest gap among both incumbent and non-incumbent candidates. Female candidates are 4 to 5 percentage points less likely than male candidates to run again conditional on previous candidacy. Studying mechanisms, we find that women are likely held back by incompatibilities between family obligations and political duties as well as a culture of male dominance in local politics.
    Keywords: gender, political selection, persistence, local councils, candidacy
    JEL: D72 D78 J16
    Date: 2021–12
  6. By: Angel Solano-Garcia (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: This paper studies the effect of voters’ support for government intervention on the choice of policies that reduce income inequality. Using a Downsian two-party political competition framework in which voters differ in both income and ideology, I find that an increase in income inequality does not necessarily imply an increase in the tax rate chosen by majority voting. I only obtain this result, supported by the traditional models on redistributive politics (Romer, 1975, Roberts, 1977 and Meltzer and Richard, 1983), if the support for government intervention is alike for conservative and liberal voters. However if conservatives’ support for public spending is reduced, high-income inequality is compatible with a moderate tax rate.
    Keywords: : liberal, conservative, government intervention, Inequality.
    JEL: D72 D74 F22
    Date: 2022–02–21
  7. By: Grimalda, Gianluca (Kiel Institute for the World Economy); Murtin, Fabrice (OECD); Pipke, David (Kiel Institute for the World Economy); Putterman, Louis (Brown University); Sutter, Matthias (Max Planck Institute for Research on Collective Goods)
    Abstract: We investigate the relationship between political attitudes and prosociality in a survey of a representative sample of the U.S. population during the first summer of the COVID-19 pandemic. We find that an experimental measure of prosociality correlates positively with adherence to protective behaviors. Liberal political ideology predicts higher levels of protective behavior than conservative ideology, independently of the differences in prosociality across the two groups. Differences between liberals and conservatives are up to 4.4 times smaller in their behavior than in judging the government's crisis management. This result suggests that U.S. Americans are more polarized on ideological than behavioral grounds.
    Keywords: health behavior, worries, polarization, ideology, trust in politicians, COVID-19, prosociality
    JEL: D01 D72 D91 I12 I18 H11 H12
    Date: 2022–01
  8. By: Massoc, Elsa; Lubda, Maximilian
    Abstract: In times of increased political polarization, the continuing existence of a deliberative arena where people with antagonistic views may engage with each other in non-violent ways is critical for democracy to live on. Social media are usually not conceived as such arenas. On the contrary, there has been widespread worry about their role in increasing polarization and political violence. This paper suggests a more positive impact of social media on democracy. Our analysis focuses on the subreddit "r/WallStreetBets" (r/WSB) - a finance-related forum that came under the spotlight when its users coordinated a financial attack on hedge funds during the Gamestop saga in early 2021. Based on an original method attributing partisanship scores to users, we present a network analysis of interactions between users at the opposite sides of the political spectrum on r/WSB. We then develop a content analysis of politically relevant threads in which polarized users participate. Our analyses show that r/WSB provides a rare space where users with antagonistic political leanings engage with each other, debate, and even cooperate.
    Keywords: social media,polarization,democracy,investment forum,social media,polarization,democracy,investment forum
    Date: 2022
  9. By: Kei Kawai; Takeaki Sunada
    Abstract: We estimate valence measures for candidates running in U.S. House elections from data on vote shares. Our estimates control for endogeneity of campaign spending and sample selection of candidates due to endogenous entry. Our identification and estimation strategy builds on ideas developed for estimating production functions. We find that incumbents have substantially higher valence measures than challengers running against them, resulting in about 9.2 percentage-point differences in the vote share, on average. We find that open-seat challengers have higher valence measures than those running against incumbents by about 5.3 percentage points. Our measure of candidate valence can be used to study various substantive questions of political economy. We illustrate its usefulness by studying the source of incumbency advantage in U.S. House elections.
    JEL: D24 D72
    Date: 2022–01
  10. By: Ben Blemings (West Virginia University); Margaret Bock (West Virginia University)
    Abstract: Empirical results find different conclusions than theoretical evidence of how electorates perceive road work. This paper uses a geographically smaller unit of analysis than prior work, political alignment, local election cycles, and difference-in-differences. It finds political distortions in invasive road maintenance timing and rules out maintenance seasonality. Spatial discontinuity plots leveraging ward boundary cutoffs confirm the shift. Results identify new public distortions to road maintenance, local election cycles, which are widespread and frequent. The estimates are used to calculate financial costs of local elections on road maintenance. Local elections have cost medium-large U.S. cities over $185.5 million from 1960- 2020.
    Keywords: Road Maintenance, Infrastructure, Political Economy, Election
    JEL: H40 H76 R42 R53
    Date: 2020–05–29
  11. By: Marina Azzimonti; Nirvana Mitra
    Abstract: We study how political constraints, characterized by the degree of flexibility to choose fiscal policy, affect the probability of sovereign default. To that end, we relax the assumption that policymakers always repay their debt in the dynamic model of fiscal policy developed by Battaglini and Coate (2008). In our setup, legislators bargain over taxes, general spending, debt repayment, and a local public good that can be targeted to the region they represent. Under tighter political constraints, more legislators have veto power, implying that local public goods need to be provided to a larger number of regions. The resources that are freed after a default have to be shared with a higher number of individuals, which reduces the benefits from defaulting in per-capita terms. This lowers the incentive to default compared to the case with lax political constraints. The model is calibrated to Argentina and the results conform to robust empirical evidence. An event study for the 2001/2002 sovereign debt crisis shows that political constraints had an important role in the buildup that led to the crisis.
    JEL: D72 E43 E62 E65 F34 F41 F44 H2 H4 H63
    Date: 2022–01
  12. By: Fergusson, Leopoldo; Larreguy, Horacio; Riano, Juan Felipe
    Abstract: We develop a model of the politics of state capacity building undertaken by incum-bent parties that have a comparative advantage in clientelism rather than in public goods provision. The model predicts that, when challenged by opponents, clientelistic incumbents have the incentive to prevent investments in state capacity. We provide empirical support for the model’s implications by studying policy decisions by the Institutional Revolutionary Party (PRI) that affected local state capacity across Mex-ican municipalities and over time. Our difference-in-differences and instrumental variable identification strategies exploit a national shock that threatened the Mexican government’s hegemony in the early 1960s. The intensity of this shock, which varied across municipalities, was partly explained by severe droughts that occurred during the 1950s.
    JEL: D72 D73 Q15
    Date: 2022–01
  13. By: Charles Angelucci (MIT - Massachusetts Institute of Technology); Andrea Prat (Columbia University [New York])
    Abstract: How many voters are informed about political news mainstream journalists consider important? We develop a methodology that combines a protocol for identifying major news stories, online surveys, and the estimation of a model that disentangles individual information precision from news story salience and partisanship. We focus on news about U.S. politics in a monthly sample of 1,000 voters repeated 8 times. On average, 85% of individuals are able to distinguish the major real news story of the month from fake news. 59% of individuals confidently believe this news story to be true, 39% are uncertain, and 3% confidently believe it to be false. Our results indicate that the starkest pattern about the ability of voters to identify major news stories is not the generalized death of truth or its ideological polarization but rather its unequal distribution along socioeconomic lines.
    Keywords: Media,Inequalities,Polarization,Information
    Date: 2022–01–20
  14. By: Maxime Menuet (LEO - Laboratoire d'Économie d'Orleans - UO - Université d'Orléans - UT - Université de Tours); Hugo Oriola (LEO - Laboratoire d'Économie d'Orleans - UO - Université d'Orléans - UT - Université de Tours); Patrick Villieu (LEO - Laboratoire d'Économie d'Orleans - UO - Université d'Orléans - UT - Université de Tours)
    Abstract: In this paper, we challenge the claim that an independent conservative central bank strengthens the likelihood of a conservative government. In contrast, if an election is based on the comparative advantages of the candidates, an inflation-averse central banker can deter the chances of a conservative candidate because once inflation is removed, its comparative advantage in the fight against inflation disappears. We develop a theory based on a policy-mix game with electoral competition, predicting that the chances of a conservative (i.e., inflation-averse) party is reduced in the presence of tighter monetary policy. To test this prediction, we examine monthly data of British political history between 1960 and 2015. We show that a 1 percentage point increase in the interest rate in the 10 months prior to a national election decreases the popularity of a Tory government by approximately 0.75 percentage points relative to its trend.
    Keywords: monetary policy,elections,United Kingdom,comparative advantage
    Date: 2021–12–14
  15. By: Alt, James E.; Jensen, Amalie; Larreguy, Horacio; Lassen, David D.; Marshall, John
    Abstract: While social pressure is widely believed to influence voters, evidence that informa-tion passed between social ties affects beliefs, policy preferences, and voting behav-ior is limited. We investigate whether information about unemployment shocks dif-fuses through networks of strong and mostly weak social ties and influences voters in Denmark. We link surveys with population-level administrative data that logs un-employment shocks afflicting respondents’ familial, vocational, and educational net-works. Our results show that the share of second-degree social ties—individuals that voters learn about indirectly—that became unemployed within the last year increases a voter’s perception of national unemployment, self-assessed risk of becoming unem-ployed, support for unemployment insurance, and voting for left-wing political parties. Voters’ beliefs about national aggregates respond to all shocks equally, whereas sub-jective perceptions and preferences respond primarily to unemployment shocks afflict-ing second-degree ties in similar vocations. This suggests that information diffusion through social ties principally affects political preferences via egotropic—rather than sociotropic—motives.
    Date: 2022–01–24
  16. By: Lergetporer, Philipp (Ifo Institute for Economic Research); Woessmann, Ludger (University of Munich)
    Abstract: We show that the electorate's preferences for using tuition to finance higher education strongly depend on the design of the payment scheme. In representative surveys of the German electorate (N>18,000), experimentally replacing regular upfront by deferred income-contingent payments increases public support for tuition by 18 percentage points. The treatment turns a plurality opposed to tuition into a strong majority of 62 percent in favor. Additional experiments reveal that the treatment effect similarly shows when framed as loan repayments, when answers carry political consequences, and in a survey of adolescents. Reduced fairness concerns and improved student situations act as strong mediators.
    Keywords: tuition, higher education finance, income-contingent loans, voting
    JEL: H52 I22 D72
    Date: 2022–01
  17. By: Murat Iyigun (University of Colorado [Boulder]); Jared Rubin (Chapman University); Avner Seror (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Why do some societies have political institutions that support productively inefficient outcomes? And why does the political power of elites vested in these outcomes often grow over time, even when they are unable to block more efficient modes of production? We propose an explanation centered on the interplay between political and cultural change. We build a model in which cultural values are transmitted inter-generationally. The cultural composition of society, in turn, determines public-goods provision as well as the future political power of elites from different cultural groups. We characterize the equilibrium of the model and provide sufficient conditions for the emergence of cultural revivals. These are characterized as movements in which both the cultural composition of society as well as the political power of elites who are vested in productively inefficient outcomes grow over time. We reveal the usefulness of our framework by applying it to two case studies: the Jim Crow South and Turkey's Gülen Movement.
    Keywords: Institutions,Cultural beliefs,Cultural transmission,Institutional change
    Date: 2021–06
  18. By: Aassve,Arnstein; Capezzone,Tommaso; Cavalli,Nicolo’; Conzo,Pierluigi; Peng,Chen (University of Turin)
    Abstract: The COVID-19 pandemic has exposed most countries to an unexpected crisis, with unclear consequences for citizens’ trust in others and in public authorities. This study shed lights on how social and political trust changed during the pandemic. We conducted a longitudinal survey in the US of about 1000 respondents at three points in time during the pandemic. We elicited respondents’ trust towards other people and towards different institutional authorities, along with attribution of responsibility for the current situation. Results show that institutional trust fell, while interpersonal trust slightly increased, especially during the peak of the first pandemic wave. This dynamic was mainly driven by Republicans, whose institutional trust decreased, especially when exposed to COVID-19, along with growth in social trust. Considering that Republicans attributed, at the time, more responsibilities to their political leader, we argue that institutional trust was crowded out by social trust. Disappointed voters felt unprotected by institutions and looked for support elsewhere in society. Consistent with this, though, in the reverse direction, experimental results from the third wave show that Republicans increased institutional trust. However, social trust fell when primed with positive information about the pandemic. Overall, these findings suggest that societal shocks may induce people to exchange formal with informal institutions as a coping strategy, with social and political trust moving in opposite directions.
    Date: 2022–01
  19. By: Étienne Dagorn (Université Paris 1 Panthéon Sorbonne, IEDES and UMR D&S ; Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France); Martina Dattilo (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France); Matthieu Pourieux (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France)
    Abstract: This paper aims to document the drivers of governments’ political responses in the context of the covid-19 first wave. We test the hypothesis that populations’ economic preferences - risk, time and pro-social preferences - matters both in terms of the governments’ responsiveness and its stringency. Our empirical analysis combines data on worldwide political responses from the Oxford COVID-19 Government Response Tracker, individual economic preferences from the Global Preferences Survey, and the 6th and 7th waves of the World Values Surveys. Our final sample consists in 109 countries. We find that trust is an important driver of both aspects of political responses. First, countries with high levels of trust wait longer before implementing their first policy to tackle the epidemic. On the contrary, other preferences (risk, time and altruism) do not relate to responsiveness. Second, all measures of preferences positively relate to the intensity of the political responses in the middle to long-run, though at different periods of time. In the short-run, only patience and interpersonal trust are (negatively) related to policies’ stringency.
    Keywords: COVID - Political Responses - Economic Preferences
    JEL: C91 D91 I12 D63 D64
    Date: 2022–02
  20. By: Scott R. Baker; Steven J. Davis; Jeffrey A. Levy
    Abstract: We quantify and study state-level economic policy uncertainty. Tapping digital archives for nearly 3,500 local newspapers, we construct three monthly indexes for each state: one that captures state and local sources of policy uncertainty (EPU-S), one that captures national and international sources (EPU-N), and a composite index that captures both. EPU-S rises around gubernatorial elections and own-state episodes like the California electricity crisis of 2000-01 and the Kansas tax experiment of 2012. EPU-N rises around presidential elections and in response to 9-11, Gulf Wars I and II, the 2011 debt-ceiling crisis, the 2012 fiscal cliff episode, and federal government shutdowns. Close elections elevate policy uncertainty much more than the average election. The COVID-19 pandemic drove huge increases in policy uncertainty and unemployment, more so in states with stricter government-mandated lockdowns. VAR models fit to pre-COVID data imply that upward shocks to own-state EPU foreshadow weaker economic activity in the state.
    JEL: D80 E32 E66 G18 H70 R50
    Date: 2022–02
  21. By: Rakhmindyarto, Rakhmindyarto; Setyawan, Dhani
    Abstract: Indonesia is the 6th largest carbon emitter in the world. It is also one of the most vulnerable countries to climate change, with a population of 250 million people spread across thousands of islands and low-lying coastal areas. This paper investigates the political challenges to introduce a carbon tax as a climate policy option in Indonesia. It is based on the analysis of 29 in�depth elite interviews with key Indonesian stakeholders. It fnds that, while political elites seem, in principle, to be open to the idea of a carbon tax, they are also cognisant of the impact of corruption challenges in the Indonesia context. Meanwhile, the business community opposes a carbon tax and fears the introduction of additional costs that may infuence productivity and competitiveness. Non-government organisations, however, support its immediate introduction. Overall, this work makes an important contribution to the ever-growing academic debate on the introduction of carbon prices to assist carbon mitiga�tion eforts. It also has important ramifcations in terms of transparency, accountability and political pluralism in Indonesia.
    Keywords: Climate change · Climate policy · Carbon prices
    JEL: H2 H23
    Date: 2020–04–08

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