nep-pol New Economics Papers
on Positive Political Economics
Issue of 2022‒10‒03
fourteen papers chosen by
Eugene Beaulieu
University of Calgary

  1. Political Selection When Uncertainty Is High By Baskaran, Thushyanthan; Hessami, Zohal; Khasanboev, Temurbek
  2. Monotonicity violations under plurality with a runoff: the case of French presidential elections By Umut Keskin; M. Remzi Sanver; H. Berkay Tosunlu
  3. The Political Polarization of Corporate America By Fos, Vyacheslav; Kempf, Elisabeth; Tsoutsoura, Margarita
  4. A Quantitative and Qualitative Analysis of the Robustness of (Real-World) Election Winners By Niclas Boehmer; Robert Bredereck; Piotr Faliszewski; Rolf Niedermeier
  5. Connecting to power: political connections, innovation, and firm dynamics By Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
  6. Trust Institutions, Perceptions of Economic Performance and the Mitigating role of Political Diversity By Samba Diop; Simplice A. Asongu
  7. Historical Political Economy: What Is It? By Jeffrey Jenkins; Jared Rubin
  8. Logistics contracts and the political economy of state failure: evidence from Somalia By Elder, Claire
  9. Do Rival Political Parties Enforce Government Efficiency? Canada, 1867-2021* By J. Stephen Ferris; Marcel-Cristian Voia
  10. Citizens’ Protests: causes and consequences. A Research on Regime Change and Revolutionary Entrepreneurs by Bueno De Mesquita By Gilli, Mario; Giorgini, Filippo
  11. Why Are Tobacco and Alcohol Control Policies So Different?–A Political-Economy Explanation By Zhihao Yu
  12. The Shifting Attention of Political Leaders: Evidence from Two Centuries of Presidential Speeches By Oscar Calvo-Gonz\'alez; Axel Eizmendi; Germ\'an Reyes
  13. Health Costs of a “Healthy Democracy”: The Impact of Peaceful Political Protests on Healthcare Utilization By Tushar Bharati; Adnan M. S. Fakir
  14. Catching the Political Leader's Signals: Economic policy uncertainty and firm investment in China By ITO Asei; LIM Jaehwan; ZHANG Hongyong

  1. By: Baskaran, Thushyanthan (University of Siegen); Hessami, Zohal (Ruhr University Bochum); Khasanboev, Temurbek (Ruhr University Bochum)
    Abstract: Do voters place their trust in tried and tested leaders when uncertainty is high or do they prefer a new slate of leaders who are arguably more competent? To study this question, we make use of hand-collected data on 402,385 candidates who competed in open-list local council elections (1996-2020) in Bavaria. The 2020 elections took place at the dawn of the Covid-19 pandemic, a time of high uncertainty about the future course of events. Using local heterogeneity in Covid-19 outbreaks and related school/daycare closures to proxy the degree of perceived uncertainty across Bavarian municipalities, we show with a difference-in-differences design that councilors' incumbency advantage declined more in exposed municipalities. This decrease in the incumbency advantage is limited to male and non- university educated incumbents, resulting in shifted patterns of political selection. Overall, we conclude that voters select more competent politicians when they face uncertainty about the future.
    Keywords: political selection, council elections, incumbency, Bavaria, COVID-19, uncertainty
    JEL: D72 D78 H70 J13 J16
    Date: 2022–08
  2. By: Umut Keskin (Istanbul Bilgi University); M. Remzi Sanver (LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique); H. Berkay Tosunlu (LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)
    Abstract: A voting rule is monotonic if a winning candidate never becomes a loser by being raised in voters' rankings of candidates, ceteris paribus. Plurality with a runoff is known to fail monotonicity. To see how widespread this failure is, we focus on French presidential elections since 1965. We identify mathematical conditions that allow a logically conceivable scenario of vote shifts between candidates that may lead to a monotonicity violation. We show that eight among the ten elections held since 1965 (those in 1965 and 1974 being the exceptions) exhibit this theoretical vulnerability. To be sure, the conceived scenario of vote shifts that enables a monotonicity violation may not be plausible under the political context of the considered election. Thus, we analyze the political landscape of these eight elections and argue that for two of them (2002 and 2007 elections), the monotonicity violation scenario was plausible within the conjuncture of the time.
    Keywords: French presidential elections,plurality with a runoff,monotonicity
    Date: 2022
  3. By: Fos, Vyacheslav; Kempf, Elisabeth; Tsoutsoura, Margarita
    Abstract: Executive teams in U.S. firms are becoming increasingly partisan. We establish this new fact using political affiliations from voter registration records for top executives of S&P 1500 firms between 2008 and 2020. The new fact is explained by both an increasing share of Republican executives and increased assortative matching by executives on political affiliation. Departures of politically misaligned executives are value-destroying for shareholders, implying the increasing political polarization of corporate America may not be in the financial interest of shareholders.
    Date: 2021
  4. By: Niclas Boehmer; Robert Bredereck; Piotr Faliszewski; Rolf Niedermeier
    Abstract: Contributing to the toolbox for interpreting election results, we evaluate the robustness of election winners to random noise. We compare the robustness of different voting rules and evaluate the robustness of real-world election winners from the Formula 1 World Championship and some variant of political elections. We find many instances of elections that have very non-robust winners and numerous delicate robustness patterns that cannot be identified using classical and simpler approaches.
    Date: 2022–08
  5. By: Ufuk Akcigit (University of Chicago); Salomé Baslandze (Federal Reserve Bank of Atlanta); Francesca Lotti (Bank of Italy)
    Abstract: How do political connections affect firm dynamics, innovation, and creative destruction? We extend a Schumpeterian growth model with political connections that help firms ease their bureaucratic and regulatory burden. The model highlights how political connections influence an economy's business dynamism and innovation, and generate a number of implications guiding our empirical analysis. We construct a new large-scale dataset, for the period 1993-2014, on the universe of firms, workers, and politicians, supplemented by corporate financial statements, patent and election data, so as to define connected firms as those employing local politicians. We identify a leadership paradox: market leaders are much more likely to be politically connected, but much less likely to innovate. Political connections relate to a higher rate of survival, as well as growth in employment and revenues, but not in productivity. This result was also confirmed using the regression discontinuity design. At the aggregate level, gains from political connections do not offset losses stemming from lower reallocation and growth.
    Keywords: firm dynamics, innovation, political connections, creative destruction, productivity
    JEL: O3 O4 D7
    Date: 2022–07
  6. By: Samba Diop (Alioune Diop University, Bambey, Senegal); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: Several previous studies have explored the nexus between trust and socio-economic conditions but do not attempt to examine channels through which the relation operates. In this paper, we examine how political fractionalization mitigates the positive relationship between trust institutions and national economic performance in Africa. Using Round 7 data of Afrobarometer in over 1000 districts in 34 countries, we find that trust institutions positively and significantly affect economic performance. Nevertheless, the positive effect is attenuated in districts with a high level of political diversity. More specifically, a higher level of trust is associated with lower economic performance at a higher level of political fractionalization and vice versa, with a steady linear decrease of the estimated coefficients. Policy implications are discussed.
    Keywords: Trust institutions; economic performance; political diversity
    JEL: K00 O10 P16 P43 P50
    Date: 2022–09
  7. By: Jeffrey Jenkins; Jared Rubin (Chapman University)
    Abstract: In this chapter, we define what historical political economy (HPE) is and is not, classify the major themes in the literature, assess the relative strengths and weaknesses of the literature, and point to future directions. We view HPE as social scientific inquiry which highlights political causes or consequences of historical issues. HPE is different from conventional political economy in the emphasis placed on historical processes and context. While we view HPE in the most inclusive manner reasonable, we define it to exclude works that are either solely of contemporary importance or use historical data without any historical context (e.g., long-run macroeconomic time series data). The future of HPE is bright, especially as more historical data from around the world become available via digitization. Consequently, the future frontier of the field likely falls outside of the US, which is the concern of a disproportionate amount of the current literature.
    Keywords: historical political economy, economics, political science, economic history, political history
    JEL: N00 P00
    Date: 2022
  8. By: Elder, Claire
    Abstract: Scholars have long sought to understand how economic rents may inhibit the formation of effective and accountable government. Prevailing interpretations of empirical state failure do not adequately account for economic connections and rents. Based on in-depth ethnographic fieldwork and original source material from the Somalia context, this study shows how the dominance of the logistics economy, as a system of 'graft' endogenous to state-building, has contributed to empirical state failure. Empirical state failure is characterized by intra-elite struggle, endemic political violence, and insecurity including the threat posed by Islamic extremism. Contributing to the study of political settlements, political clientelism, and business-state relationships in Africa, findings from this study offer new insights for understanding how the dominance of logistics rents and lead firms within a political system may prevent the establishment of legitimate, centralized authorities. These findings contribute to the broader study of Africa's political economies which have experienced protracted civil war and post-conflict reconstruction. In conclusion, it argues how economic development, procurement reform agendas, and efforts to withhold or withdraw aid through economic sanctions fail to resolve endemic conflict and governance issues due to vested interests, elite fragmentation, and polycentric aid practices. Instead, both government policy and foreign interventions continue to empower lead logistics firms (as skilful political entrepreneurs) that destabilize the Federal Government of Somalia.
    Keywords: ES/P008038/1
    JEL: J1
    Date: 2022–07–09
  9. By: J. Stephen Ferris (Department of Economics, Carleton University); Marcel-Cristian Voia (Department of Economics, University of Orleans, France)
    Abstract: This paper investigates the role of inter-party rivalry in enhancing federal government efficiency in post-Confederation Canada. It tests and finds confirmation in the data for two hypotheses.The first is that the ex post size of the first versus second seat share marginis a useful metric of the effectiveness of political partiesinpolicingthe incumbent’sspendingbehaviouroverits period of tenure.The second is the hypothesis thatincumbent party shirking is decreased by greaterel ectoral contestability and contestability is related to the expected number of competing parties nonmonotonically. Classification
    Date: 2022–05–05
  10. By: Gilli, Mario; Giorgini, Filippo
    Abstract: Citizens political participation to protests is a crucial issue for any political system, whether democratic or autocratic. Political systems have different ways of dealing with citizens’ protests, determining cost and benefit of public dissent, responding to public requests and allowing different degree of transparency in public information. Also the social characteristics of a country, such as citizens’ diversity and radicalization, matter for citizens political participation. The aim of this paper is to analyze causes and consequences of citizens’ protests, focusing on how private and public information affect citizens’ opinion and political behavior, and on how they depend on sociopolitical factors as well as on the political regime. In Regime Change and Revolutionary Entrepreneurs, Bueno de Mesquita proposed a seminal model to study why revolutionary vanguards might use violence to mobilize citizens against a regime. We claim that the model can be used more generally to investigate citizens’ protest. We refer to his model to understand citizens’ political behavior, studying the relationship between the model’s structural parameters and the causes and consequences of citizens’protests, adopting a partially different approach and extending his results.
    Keywords: Institutional and Behavioral Economics, Research Methods/ Statistical Methods
    Date: 2022–09–15
  11. By: Zhihao Yu (Department of Economics, Carleton University)
    Abstract: This paper shows that the emergence (and the maintenance) of the striking different policy regimes applied to tobacco and alcohol in the U.S. and some other countries like the UK- that has increasingly puzzled many health policy experts- could be explained by their very different levels of industry concentration. The maintenance of the policy differences was further enhanced by the persistent government mass media anti-smoking campaigns, which ultimately contributed to the exclusion of the tobacco industry from direct nd formal involvement in the policy-making processes. The model can also explain the very different levels of tobacco industry' political contributions before and after 2002, as well as the lack of government effort of anti-smoking campaigns in Canada. Classification-D72; 118
    Keywords: tobacco and alcohol control policies, anti-smoking campaigns, government mass media campaigns, political contribution, lobbying
    Date: 2022–05–15
  12. By: Oscar Calvo-Gonz\'alez; Axel Eizmendi; Germ\'an Reyes
    Abstract: This paper proposes a novel methodology to measure political leaders' attention that combines text data with machine learning algorithms. We use this method on a hand-collected database of presidential ``state-of-the-union''-type speeches spanning ten countries and two centuries to study the determinants of political attention, its shifts over time, and its impacts on countries' outcomes. We find that presidential attention can be characterized by a compact set of topics whose relative importance remains stable over long periods. Contrary to presidential rhetoric, using a differences-in-differences design, we show that presidents' attention has precisely-estimated null effects on growth and other policy outcomes.
    Date: 2022–09
  13. By: Tushar Bharati (Economics Department, Business School, The University of Western Australia); Adnan M. S. Fakir (University of Sussex Business School)
    Abstract: Peaceful protests are one of the most common and effective forms of political action worldwide. But they may have negative spillovers on health-seeking behavior. Using an instrumental variable approach that leverage variations in national sporting events and combining data on politically disruptive events from the Armed Conflict Location & Event Data (ACLED) project with information on healthcare utilization from the Bangladesh Demographic and Health Surveys (DHS), we show that peaceful protests reduce healthcare utilization among mothers with young children. Prenatal and postnatal care, vaccination rates, the likelihood of visiting a hospital facility if a child is unwell, and hospital deliveries all decrease in response to protests, while home deliveries increase. The effect is stronger for more elastic demands, like facility visits for minor illnesses and timely vaccinations. Security concerns and traffic congestion, which increases the time and costs of accessing health facilities, appear to be two potential mechanisms. The findings are not a criticism of peaceful protests, which we consider both an essential tenet and a by-product of a strong democracy, but instead seek to draw attention to an often ignored cost associated with it.
    Keywords: health-seeking; political violence; protests; non-violence; cricket; Bangladesh
    JEL: D74 H11 I12 I18 I31 P16
    Date: 2022
  14. By: ITO Asei; LIM Jaehwan; ZHANG Hongyong
    Abstract: This study uses a text dataset of the Chinese President’s speeches and reports from November 2012 to December 2021 to construct an original economic policy uncertainty (EPU) index: President Xi Jinping’s EPU (XiEPU). XiEPU moderately correlates with a previous study’s representative EPU, showing notably different peaks. Our index spiked in April 2016 after a sharp decline in the Chinese stock market index and late 2020, reflecting the global COVID-19 pandemic. Using firm-level panel data, we find that a higher value of XiEPU is associated with a lower investment rate at the quarterly level and has a larger and longer-lasting effect than the existing China EPUs. Moreover, there are noteworthy heterogeneous effects among firms and periods. Specifically, we find a stronger effect of XiEPU on manufacturing sectors, a weaker effect on state-owned enterprises, and a stronger effect in the second term of Xi Jinping’s presidential tenure after November 2017.
    Date: 2022–08

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