nep-pol New Economics Papers
on Positive Political Economics
Issue of 2022‒08‒29
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Class voting for radical-left parties in Western Europe: The libertarian vs. authoritarian class trade-off By Nils D. Steiner; Lucca Hoffeller; Yanick Gutheil; Tobias Wiesenfeldt
  2. Manipulating Credit: Government Popularity as Driver of Credit Cycles By Etienne Lepers
  3. The Origins of Elite Persistence: Evidence from Political Purges in post-World War II France * By Toke Aidt; Jean Lacroix; Pierre-Guillaume Méon
  4. Electoral Voting Machines By Aqsa Gul
  5. Help Me Help You? Populism and Distributive Politics in Ecuador By Adrian Nicholas Gachet
  6. Divided Government and Polarization: Regression-Discontinuity Evidence from US States By Luca Repetto; Maximiliano Sosa Andrés
  7. Policy Reforms and the Amount of Checks & Balances By Hans Gersbach; Oriol Tejada; Julia Wagner
  8. Beyond reasonable doubt: the impact of politically independent jurors on jury trials in the US By Alessandra Foresta
  9. Potterian Economics‎ By Daniel Levy; Avichai Snir
  10. Symmetric reduced form voting By Xu Lang; Debasis Mishra
  11. Political Spillovers of Workplace Democracy in Germany By Jirjahn, Uwe; Le, Thi Xuan Thu
  12. The Political Relation and Trade - The Case of US, China and Australia. By Yifei Cai; Jamel Saadaoui; Yanrui Wu

  1. By: Nils D. Steiner (Johannes Gutenberg University Mainz); Lucca Hoffeller (Johannes Gutenberg University Mainz); Yanick Gutheil (Johannes Gutenberg University Mainz); Tobias Wiesenfeldt (Johannes Gutenberg University Mainz)
    Abstract: Which classes vote for radical-left parties (RLPs) in Western Europe? Have these parties become the domain of highly educated socio-cultural professionals, or can they still attract support from the working class? Building on previous work on class voting in the two-dimensional policy space, this article show how class voting for RLPs is shaped these parties’ positions on the cultural dimension of political competition. Combining voter-level data from the European Social Survey (2002 to 2018) with information on RLPs’ positions for 12 Western European countries, we find evidence of a class trade-off: RLPs with more authoritarian positions receive relatively more support from production workers but relatively less support from socio-cultural professionals. These findings add to evidence that parties shape class voting. Ours is the first study to demonstrate that this is true for RLPs as well, showing how, in the early 21 st century, cultural positions matter for class voting.
    Date: 2022–11–08
  2. By: Etienne Lepers
    Abstract: This paper analyses the interaction between credit and political cycles, arguing that short-termist governments will seek to ride and amplify credit cycles for political gains. Specifically, it tests for the existence of political credit cycles not only before elections but throughout the term when executives seek to bolster support in periods of popularity drops. Compiling a unique database on government approval from opinion polls in 57 countries starting in 1980, it provides evidence that drops in popularity are systematically associated with larger future credit cycles, robust to a number of checks for confounding factors. Such credit manipulation appears to target credit to households specifically, is more prevalent in advanced, financialized, and indebted economies, and increases the likelihood of bad credit booms. Overall, this research points to the crucial importance of political cycles as drivers and sources of financial cycles and vulnerabilities.
    Keywords: credit booms, financial stability, political business cycle, government popularity, electoral cycles, credit subsidies, homeownership
    JEL: D72 E51 E58 G01 G18 I38 N20
    Date: 2022–07
  3. By: Toke Aidt (Faculty of Economics - CAM - University of Cambridge [UK]); Jean Lacroix (RITM - Réseaux Innovation Territoires et Mondialisation - Université Paris-Saclay); Pierre-Guillaume Méon (Centre d'Etudes Economiques et Sociales de l'Environnement-Centre Emile Bernheim - ULB - Université libre de Bruxelles)
    Abstract: This paper studies a new mechanism that allows political elites from a non-democratic regime to survive a democratic transition: connections. We document this mechanism in the transition from the Vichy regime to democracy in post-World War II France. The parliamentarians who had supported the Vichy regime were purged in a two-stage process where each case was judged twice by two different courts. Using a difference-indifferences strategy, we show that Law graduates, a powerful social group in French politics with strong connections to one of the two courts, had a clearance rate that was 10 percentage points higher than others. This facilitated the persistence of that elite group. A systematic analysis of 17,589 documents from the defendants' dossiers is consistent with the hypothesis that the connections of Law graduates to one of the two courts were a major driver of their ability to avoid the purge. We consider and rule out alternative mechanisms.
    Keywords: Purges,Political transitions,Elite persistence,Connections JEL Codes: D73,K40,N44,P48
    Date: 2022–05–24
  4. By: Aqsa Gul (MPhil Scholar, PIDE)
    Abstract: In the wake of the recent hue and cry regarding the adoption of electronic voting machines (EVMs) in the coming general elections, the Pakistan Institute of Development Economics, keeping up with the norm of free inquiry and discussing ideas, held a webinar on the hot subject.
    Keywords: Electoral Voting Machines,
    Date: 2021
  5. By: Adrian Nicholas Gachet
    Abstract: Populist regimes manage to dismantle checks and balances on the executive with the help of popular support. What does a distributive politics model predicts under a populist regime? In this paper I use a particular setting: The (very) first election of former Ecuadorean President Rafael Correa in 2006. This election is relevant since the political candidate was an unknown figure in politics and won with a new political party, no congressmen, and no local candidates. Due to this reason, the vote share of this election provides a reasonably good proxy of initial affinity for a populist politician. Between 2006 and 2010 several institutional reforms, that dismantled checks and balances on the executive, were implemented and supported via direct referendums. I estimate an empirical model using the vote share in 2006 and the number of bureaucrats at the municipal level in 2010. I also use the growth rate between 2001 and 2010 of the number of bureaucrats as an alternative outcome. To mitigate endogeneity, I construct a broad measure of intrastate conflict and use it as an instrument. To construct this measure, I use geographical distances to episodes of conflict in the period 1984-1988 between the government of that time and subversive groups. Moreover, I control for several pre-1984 characteristics. Municipalities closer to conflict episodes voted more for Correa and have more bureaucratic jobs. Results are driven by the municipalities with the strongest initial affinity (highest vote share in 2006), hence pointing to a patronage story.
    Keywords: populism; tactical redistribution; state; conflict; Ecuador
    JEL: P16 P48 D72
    Date: 2022–08
  6. By: Luca Repetto; Maximiliano Sosa Andrés
    Abstract: This paper studies how divided government – arising when control of the government branches is split between parties – affects the polarization of the legislature and policy implementation. Using data on electoral and legislative outcomes for US states and a regression-discontinuity design, we show that Republican state senators are substantially more polarized when they serve in a divided government than they are in a fully unified government. We find similar but smaller effects for Democrats. In addition, governors facing an opposing, united legislature veto more bills, and have more of these overridden. However, in terms of policy implementation, we find evidence of moderation: when a unified Republican government loses a chamber or the governor to the Democratic party, the implemented legislation becomes much more liberal. Correspondingly, when Democrats lose unified control, policies become more conservative. These results suggest that divided government creates incentives for legislators to polarize knowing they will need to compromise in order to obtain their preferred policy.
    Keywords: divided governments, polarization, policy liberalism, regression-discontinuity design, US state governments
    JEL: H10 H70 R50
    Date: 2022
  7. By: Hans Gersbach (CER-ETH – Center of Economic Research at ETH Zurich and CEPR Zuerichbergstrasse 18 8092 Zurich, Switzerland); Oriol Tejada (Faculty of Economics and Business Universitat de Barcelona Diagonal 690-696 08034 Barcelona, Spain); Julia Wagner (CER-ETH – Center of Economic Research at ETH Zurich and CEPR Zuerichbergstrasse 18 8092 Zurich, Switzerland)
    Abstract: We examine how democracies choose their amount of checks and balances (C&B). For this purpose, we consider a simple model of political competition with costly policy reforms. The cost of a marginal reform is determined endogenously at the constitutional phase—i.e. before policies are chosen—through the choice of (the amount of) C&B. We characterize the set of stable C&B for different constitutional rules which vary depending on (i) who has the power to propose changes to C&B and (ii) on the qualified majority used for approving such changes. Our main results show that stable C&B always exist, are never zero, lead to gridlock, and are higher if the proposal-maker is the party in government. We also find that higher majority requirements for constitutional changes and more polarized societies are conducive to larger sets of stable C&B.
    Keywords: elections; democracy; political polarization; reform costs; constitutions; checks and balances
    JEL: C72 D72 D78 H4
    Date: 2022–08
  8. By: Alessandra Foresta
    Abstract: This article evaluates the impact of politically independent jurors on trial verdicts in the US state of North Carolina. To identify the effect of jurors' political affliations, I rely on the day-to-day random variation in the composition of jury pools. The results suggest that the presence of independent jurors decreases the percentage of guilty verdicts. I implement a set of robustness checks, dividing the proportion of independent jurors by gender and by ethnicgroup. The findings suggest that the effect is mainly driven by independent men, and remain negative and significant across different ethnicities. Moreover, I interact the proportion of independent jurors with the ethnicity of defendants, and I remove counties with a high/low number of trials. The results suggest that the effect is stronger for black defendants and that my findings are not driven by outlier counties. Finally, I evaluate the presence of possible political discrimination in the striking patterns. I find that there are no clear strike patterns for independent jurors, although some statistically significant strategic striking is present for Republicans and Democrats alike.
    Keywords: Jury, Peremptory challenges, Political Affiliation, Independent
    JEL: K14 K40 D72
    Date: 2022–01
  9. By: Daniel Levy (Bar-Ilan University); Avichai Snir
    Abstract: TRecent studies in psychology and neuroscience offer systematic evidence that fictional works exert a surprisingly strong influence on readers and have the power to shape their opinions and worldviews. Building on these findings, we study ‘Potterian economics’, the economic ideas, insights, and structure, found in Harry Potter books, to assess how the books might affect economic literacy. A conservative estimate suggests that more than 7.3% of the world’s population has read the Harry Potter books, and millions more have seen their movie adaptations. These extraordinary figures underscore the importance of the messages the books convey. We explore the Potterian economic model and compare it to professional economic models to assess the consistency of the Potterian economic principles with the existing economic models. We find that some of the principles of Potterian economics are consistent with economists’ models. Many other principles, however, are distorted and contain numerous inaccuracies, contradicting professional economists’ views and insights. We conclude that Potterian economics can teach us about the formation and dissemination of folk economics—the intuitive notions of naïve individuals who see market transactions as a zero-sum game, who care about distribution but fail to understand incentives and efficiency, and who think of prices as allocating wealth but not resources or their efficient use.
    Keywords: Economic and Financial Literacy; Folk Economics; Political Economy; Public Choice; Social Organization of Economic Activity; Harry Potter; Potterian Economy, Potterian Economics; Popular Opinion
    JEL: A13 A20 D72 D73 H00 H11 I20 P16 P48 Z11
    Date: 2022–08
  10. By: Xu Lang; Debasis Mishra
    Abstract: We study a model of voting with two alternatives in a symmetric environment. We characterize the interim allocation probabilities that can be implemented by a symmetric voting rule. We show that every such interim allocation probabilities can be implemented as a convex combination of two families of deterministic voting rules: qualified majority and qualified anti-majority. We also provide analogous results by requiring implementation by a unanimous voting rule. A consequence of our results is that if the prior is independent, every symmetric and ordinally Bayesian incentive compatible voting rule is reduced (interim) form equivalent to a symmetric and strategy-proof voting rule.
    Date: 2022–07
  11. By: Jirjahn, Uwe; Le, Thi Xuan Thu
    Abstract: While works councils provide a highly developed mechanism to promote workplace democracy, research on their consequences has been dominated by economic aspects. This study brings a new perspective to the understanding of works councils by examining their influence on workers' political behavior. Political spillover theory suggests that participation in the firm's decision making has the potential to foster workers' political participation in civic society. Our study for Germany indeed finds a positive association between the presence of a works council and workers' interest in politics. This holds in panel data estimations including a large set of controls and accounting for unobserved individual-specific factors. However, separate estimations by gender show a positive association between works councils and political interest only for men, but not for women. Traditional gender roles and disproportionate responsibility for family may make it difficult for women to be politically engaged even when a works council is present.
    Keywords: Works council,works councilor,union member,gender,political interest
    JEL: J51 J52 J53 J58
    Date: 2022
  12. By: Yifei Cai; Jamel Saadaoui; Yanrui Wu
    Abstract: This paper employs structural vector autoregression and local projection methods to examine the impacts of the deterioration in US-China political relations on Australia-China bilateral trade. By imposing a recursive identification scheme with different assumptions, the empirical results illustrate that worsening US-China political relations have a negative impact on Australian exports to and imports from China. Under a time-varying structural vector autoregression model, it is found that the deterioration in US-China political relations augments the negative impacts on Australia-China bilateral trade during the Trump’s administration. The empirical findings provide insightful policy suggestions to both Australian and Chinese governments.
    Keywords: Structural vector autoregression, Local projection, Impulse response; US-China political relation; Australia-China trade.
    JEL: C32 F14 F51
    Date: 2022

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