nep-pol New Economics Papers
on Positive Political Economics
Issue of 2022‒07‒25
fourteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Electoral Competition, Voter Bias, and Women in Politics By Thomas Le Barbanchon; Julien Sauvagnat
  2. Local Economic and Political Effects of Trade Deals: Evidence from NAFTA By Jiwon Choi; Ilyana Kuziemko; Ebonya L. Washington; Gavin Wright
  3. The Political Economy of Technocratic Governments By Guido Merzoni; Federico Trombetta
  4. Why does import competition favor republicans? Localized trade shocks and cultural backlash in the US By Ferrara, Federico
  5. The Effect of Labor Market Liberalization on Political Behavior and Free Market Norms By Ran Abramitzky; Netanel Ben-Porath; Shahar Lahad; Victor Lavy; Michal Palgi
  6. Voting Right Rotation, Behavior of Committee Members and Financial Market Reactions: Evidence from the U.S. Federal Open Market Committee By Michael Ehrmann; Robin Tietz; Bauke Visser
  7. Fighting Populism on Its Own Turf: Experimental Evidence By Vincenzo Galasso; Massimo Morelli; Tommaso Nannicini; Piero Stanig
  8. Politics At Work By Emanuele Colonnelli; Valdemar Pinho Neto; Edoardo Teso
  9. Chinese Aid and Democratic Values in Latin America By Andreas Freytag; Miriam Kautz
  10. Predicting Political Ideology from Digital Footprints By Michael Kitchener; Nandini Anantharama; Simon D. Angus; Paul A. Raschky
  11. Early warning models for systemic banking crises: can political indicators improve prediction? By Tran Huynh; Silke Uebelmesser
  12. Perceived Temperature, Trust and Civil Unrest in Africa By Gabriel Aboyadana; Marco Alfano
  13. Political ideology, mood response, and the confirmation bias. By David L. Dickinson
  14. The Brexit vote, inflation and UK living standards By Breinlich, Holger; Leromain, Elsa; Novy, Dennis; Sampson, Thomas

  1. By: Thomas Le Barbanchon (Bocconi University [Milan, Italy]); Julien Sauvagnat (Bocconi University [Milan, Italy])
    Abstract: Only a quarter of the members of the world's national parliaments are women. Despite significant progress in recent years, women remain largely under-represented among elected politicians. This study provides some explanations for the under-representation of women in politics using data from the past seven French legislative elections. On the one hand, the analyses suggest that there is a preference bias among voters towards male candidates. In addition, political parties contribute to reproducing the under-representation of women in elected office by running fewer female candidates in constituencies where voter bias is high. To promote women's access to political office, the 2000 law to promote equal access of women and men to electoral mandates and elective offices, also known as the parity law, requires French political parties to nominate women as 50% of their candidates or face financial penalties. As expected, the application of this law has led to an increase in the proportion of women candidates. However, this proportion is relatively lower in electoral districts where the vote is close compared to those where a majority is more easily obtained. In these competitive districts, paying a fine for not complying with the parity rule is more advantageous than the risk of losing the election by running a woman rather than a man. This suggests that parties still prefer to put forward male rather than female candidates to increase their chances of winning.
    Date: 2022–03
  2. By: Jiwon Choi (Princeton University); Ilyana Kuziemko (Princeton University); Ebonya L. Washington (Yale University); Gavin Wright (Stanford University)
    Abstract: Why have white, less educated voters left the Democratic Party over the past few decades? Scholars have proposed ethnocentrism, social issues and deindustrialization as potential answers. We highlight the role played by the 1994 North American Free Trade Agreement (NAFTA). In event-study analysis, we demonstrate that counties whose 1990 employment depended on industries vulnerable to NAFTA suffered large and persistent employment losses relative to other counties. These losses begin in the mid-1990s and are only modestly offset by transfer programs. While exposed counties historically voted Democratic, in the mid-1990s they turn away from the party of the president (Bill Clinton) who ushered in the agreement and by 2000 vote majority Republican in House elections. Employing a variety of micro-data sources, including 1992-1994 respondent-level panel data, we show that protectionist views predict movement toward the GOP in the years that NAFTA is debated and implemented. This shift among protectionist respondents is larger for whites (especially men and those without a college degree) and those with conservative social views, suggesting an interactive effect whereby racial identity and social issue positions mediate reactions to economic policies.
    Keywords: NAFTA, trade, politics
    JEL: D72 F16 H5 J2
    Date: 2021–11
  3. By: Guido Merzoni; Federico Trombetta
    Abstract: This paper proposes the first game theoretical model of technocratic governments, i.e. cases where a non political technocrat is put in charge by political parties. Based on the literature on post-electoral politics and agenda setting, we show conditions for the existence of a technocratic government equilibrium, where both parties agree to delegate the agenda setting power to technocrats, committed to maximize social welfare. Such an equilibrium exists only if the technocrats have a superior competence with respect to the majority party/coalition, or if the country is in a sufficiently important economic crisis. Furthermore, it is more likely to exist in countries with unstable parliament (i.e. one where the governing coalition is not always able to impose its will) and where parties care about the common value dimension, vis-a-vis the ideological one. Finally, we show that polarization increases the set of parameters where the technocratic government equilibrium exists, when parliament is unstable.
    JEL: C78 D72 D73 D78
    Date: 2022
  4. By: Ferrara, Federico
    Abstract: Evidence that local exposure to Chinese import competition favors right-wing parties has often been attributed to the success of economic nationalism. We test an alternative account. Trade shocks catalyze cultural backlash, which drives support for conservative candidates, as they compete electorally by targeting out-groups. We assess this hypothesis in the 2008–2016 US presidential elections. Using individual-level survey data, we provide evidence that Chinese import shocks drive negative attitudes towards minorities and positive feelings towards in-groups. Opinions about free trade and redistribution are not affected. Results indicate that this rightward shift is primarily driven by non-Hispanic white and male respondents. These findings point to the role played by trade-induced cultural backlash in shaping political outcomes in the US.
    Keywords: T&F deal
    JEL: L81
    Date: 2022–04–27
  5. By: Ran Abramitzky; Netanel Ben-Porath; Shahar Lahad; Victor Lavy; Michal Palgi
    Abstract: We study the effects of labor market liberalization on political behavior and attitudes towards free-market capitalism and socialism, exploiting a reform whereby the Israeli socialist communities called kibbutzim shifted from equal sharing to market-based wages. Our identification strategy relies on this reform's sharp and staggered implementation in different kibbutzim. We first examine changes in behavior associated with this labor market liberalization and document that the reform led to a shift in electoral voting patterns, resulting in decreased support for left-wing political parties and increased support for the center and right parties in national elections. Using annual survey data on attitudes over 25 years, we show that the reform led to increased support for free-market policies such as full privatization and differential wages. Moreover, it decreased support for socialist policies such as the joint ownership of production means. Yet, the reform increased support for the safety net to support weak members through mutual guarantee. These effects appear to be driven by an increase in living standards and work ethics that resulted from the reform. We conclude that introducing market-based wages led to a shift in attitudes towards a market economy with compassion, revealing a change in members’ support from their traditional democratic socialist model to a social democratic model.
    JEL: B14 J5
    Date: 2022–06
  6. By: Michael Ehrmann; Robin Tietz; Bauke Visser
    Abstract: Which Federal Reserve Bank presidents vote on the U.S. monetary policy committee depends on a mechanical, yearly rotation scheme. Rotation is without exclusion: nonvoting presidents do attend and participate in the meetings of the committee. We test two hypotheses about the dependence of presidents' behavior on voting status. (i) Loss compensation: presidents compensate the loss of the right to vote with an increased use of speeches and contributions. (ii) Motivation: presidents complement the right to vote with an increased use of speeches and contributions. The evidence favors the motivation hypothesis. Also, in years that presidents vote, their speeches move financial markets less than in years they do not vote. We argue that this vote discount is consistent with presidents’ communication behavior.
    Keywords: voting right rotation; monetary policy committee; central bank communication; FOMC; financial market response; motivation hypothesis; communication behavior; presidents vote; FOMC meeting; Fed president; voting status; Unemployment; Unemployment rate; Inflation; Financial sector; Asset prices
    Date: 2022–05–27
  7. By: Vincenzo Galasso; Massimo Morelli; Tommaso Nannicini; Piero Stanig
    Abstract: We evaluate how traditional parties may respond to populist parties on issues that are particularly fitting for populist messages. The testing ground is the 2020 Italian referendum on the reduction of members of Parliament. We implement a large-scale field experiment, with almost one million impressions of programmatic advertising, and a survey experiment. Our treatments are an informative video on the likely costs of cutting MPs, aimed at deconstructing the populist narrative, and a reducing trust video aimed at attacking the credibility of populist politicians. Our field experiment shows that the latter video is more effective at capturing the viewers’ attention. It decreases the turnout rate and, albeit less, the “Yes” votes (in favor of cutting MPs). We present a theoretical framework based on trust in traditional parties and information acquisition to account for our findings and provide additional predictions. In the survey experiment, both (unskippable) videos reduce the “Yes” votes and increase the share of undecided. Confirming the theory, for voters of traditional parties the effects are concentrated among people with low information, while for voters of populist parties previous information plays no role. Our findings show that campaign messages should target not only demographic characteristics but also trust attitudes.
    Keywords: field experiment, programmatic advertisement, electoral campaign
    JEL: D72 C93
    Date: 2022
  8. By: Emanuele Colonnelli; Valdemar Pinho Neto; Edoardo Teso
    Abstract: We study how individual political views shape firm behavior and labor market outcomes. Using new micro-data on the political affiliation of business owners and private-sector workers in Brazil over the 2002–2019 period, we first document the presence of political assortative matching: business owners are significantly more likely to employ copartisan workers. Political assortative matching is larger in magnitude than assortative matching along gender and racial lines. We then provide three sets of results consistent with the presence of employers’ political discrimination. First, several patterns in the micro-data and an event study are consistent with a discrimination channel. Second, we conduct an incentivized resume rating field experiment showing that owners have a direct preference for copartisan workers opposed to workers from a different party. Third, we conduct representative large- scale surveys of owners and workers revealing that labor market participants view employers’ discrimination as the leading explanation behind our findings. We conclude by presenting evidence suggesting that political discrimination in the workplace has additional real consequences: copartisan workers are paid more and are promoted faster within the firm, despite being less qualified; firms displaying stronger degrees of political assortative matching grow less than comparable firms.
    JEL: D22 D72 D73 G0 G3 G4 J0 J15 J2 J3 J7 O0 O1
    Date: 2022–06
  9. By: Andreas Freytag (Friedrich-Schiller University Jena, University of Stellenbosch, and CESifo Research Network); Miriam Kautz (Friedrich-Schiller University Jena)
    Abstract: International economic engagement has been increasingly framed in terms of liberal democratic values. Specifically, Chinese aid has been at the center of this debate. Since Chinese aid comes with "no strings attached", a popular narrative is that Chinese aid poses a challenge to conditional aid, thus weakening democracy promotion. This study aims to deepen our understanding of how democratic values are shaped by international economic engagement. Drawing on the Latinobarómetro Household Survey, we use an instrumental variable approach to test the effect of Chinese aid on attitudes toward democracy in 18 Latin American countries on the national and regional level. We find that Chinese aid has a non-negative effect on support for democracy. We also find that individuals who have a positive attitude towards China are more likely to value democracy. In contrast, positive attitudes towards the USA have no robust impact on support for democracy.
    Keywords: China, Latin America, foreign aid, public opinion, support for democracy, values
    JEL: F35 F61 F69 O54 P33
    Date: 2022–06–23
  10. By: Michael Kitchener; Nandini Anantharama; Simon D. Angus; Paul A. Raschky
    Abstract: This paper proposes a new method to predict individual political ideology from digital footprints on one of the world's largest online discussion forum. We compiled a unique data set from the online discussion forum reddit that contains information on the political ideology of around 91,000 users as well as records of their comment frequency and the comments' text corpus in over 190,000 different subforums of interest. Applying a set of statistical learning approaches, we show that information about activity in non-political discussion forums alone, can very accurately predict a user's political ideology. Depending on the model, we are able to predict the economic dimension of ideology with an accuracy of up to 90.63% and the social dimension with and accuracy of up to 82.02%. In comparison, using the textual features from actual comments does not improve predictive accuracy. Our paper highlights the importance of revealed digital behaviour to complement stated preferences from digital communication when analysing human preferences and behaviour using online data.
    Date: 2022–06
  11. By: Tran Huynh (Friedrich Schiller University Jena); Silke Uebelmesser (Friedrich Schiller University Jena and CESifo)
    Abstract: This study provides the first attempt to evaluate whether a logit early warning system (EWS) for systemic banking crises can produce better predictions when political indicators are used alongside traditional macro-financial indicators. Based on a dataset covering 32 advanced economies for the period 1975-2017, we show that the inclusion of political indicators helps improve the predictive performance of the model. While the improvement is small, it is statistically significant and consistent for several different performance measures and robustness tests. Among the newly employed political variables, variables indicating the political ideology of the ruling party and the time in office of the incumbent chief executive show significant correlations with the likelihood of systemic banking crises. The results suggest that a systemic banking crisis is less likely when the government is left-wing and when the chief executive officer has been in office longer.
    Keywords: early warning systems, systemic banking crises, vulnerability, political indicators, macro-financial indicators
    JEL: C35 C53 E60 F37 G01 G28
    Date: 2022–06–24
  12. By: Gabriel Aboyadana (Department of Economics, University of Strathclyde and School of Education, University of Glasgow); Marco Alfano (Department of Economics, University of Strathclyde and Centre for Research and Analysis of Migration, University College London)
    Abstract: This paper documents a significant effect of short-term temperature fluctuations on attitudes towards institutions and on civil unrest in Africa. Combining attitudinal survey and climate data, we calculate temperature as perceived by respondents via an algorithm that combines different meteorological variables. The results show that daily temperature anomalies at the location of interview increase self-reported mistrust in government and intentions to vote for opposition parties. Effects are particularly strong in poor countries where temperature anomalies also increase self-reported intentions to protest. Accordingly, we find that temperature anomalies also increase incidences of protests and riots. Evidence suggests that effects are not driven by changes in agricultural incomes.
    Keywords: Climate, Trust, Conflict
    JEL: D74 Q54 N57
    Date: 2021–04
  13. By: David L. Dickinson
    Abstract: The confirmation bias is a well-known form of motivated reasoning that serves to protect an individual from discomfort. Hearing opposing viewpoints or information creates cognitive dissonance, and so avoiding exposure to, or discounting the validity of, dissonant information are rational strategies that may help avoid or mitigate negative emotion. Because there is often a systematic thought process involved in generating the confirmation bias, deliberation tends to promote this behavioral bias. Nevertheless, the importance of negative emotion in triggering the need for this bias is an underappreciated facet of the confirmation bias. This paper addresses this gap in the literature by examining mood and the confirmation bias in the political domain. Using data from two studies and three distinct decision tasks, we present data on over 1100 participants (Study 1, n=611; Study 2, n=503) that document the confirmation bias in different settings. Specifically, task 1 (Study 1) examines perceptions of opposing argument strength in a classic confirmation bias task. Task 2 (Study 1) is a novel task that measures the change in one’s perceptions and normative preferences regarding political issues after receipt of a random issue-specific informational message. Finally, Task 3 (Study 2) administers a Bayesian decision task to examine one’s belief-updating regarding the truthfulness of factual political statements after receipt of a noisy signal about whether the statement is true or false. All methods (recruitment and sample size, hypotheses, variables, analysis plans, etc.) were preregistered on the Open Science Framework. Our data show evidence of a confirmation bias across the variety of tasks administered, which covered distinct dimensions of belief and preference formation. As hypothesized, the data show a strong increase in self-reported negative mood states after viewing political statements or information that are dissonant with one’s political ideology. Finally, while not as robust across tasks, we report evidence that supports our hypothesis that negative mood will moderate the strength of the confirmation bias. Together, these results highlight the importance of mood response in understanding the confirmation bias, which helps further our understanding of how this bias may be particularly difficult to combat. Key Words: confirmation bias; sleep; deliberation; cognitive reflection; motivated reasoning
    Date: 2022
  14. By: Breinlich, Holger; Leromain, Elsa; Novy, Dennis; Sampson, Thomas
    Abstract: This paper studies how voting to leave the European Union affected living standards in the United Kingdom. Using heterogeneity in exposure to import costs across product groups, we analyze how the depreciation of sterling caused by the referendum affected consumer prices. We find the Brexit depreciation led to higher inflation in product groups with greater import shares in consumer expenditure. Our results are consistent with complete pass-through of the cost of imports to consumer prices and imply aggregate exchange rate pass-through of 0:29. We estimate the Brexit depreciation increased consumer prices by 2:9 percent, costing the average household £870 per year.
    Keywords: Brexit; economic disintegration; import costs; inflation; trade policy
    JEL: N0 L81
    Date: 2021–09–03

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