nep-pol New Economics Papers
on Positive Political Economics
Issue of 2022‒11‒28
twelve papers chosen by
Eugene Beaulieu
University of Calgary

  1. Cash Transfers and Voter Turnout By Alexander James; Nathaly Rivera; Brock Smith
  2. Political consequences of consumer debt relief By Aidt, Toke; Asatryan, Zareh; Badalyan, Lusine
  3. Political markets as equity price factors By Auld, T.
  4. Workplace segregation and electoral success of right wing identity politics in India By Mukherjee, Anirban; Paul, Soham Kumar
  5. Political Regimes, Party Ideological Homogeneity and Polarization By Micael Castanheira; Benoit S Y Crutzen
  6. Perceiving bad apples versus rotten trees: Evidence from the exposure of politician misbehavior in Colombia By Lucía Mendoza Mora
  7. Political Spillovers of Workplace Democracy in Germany By Uwe Jirjahn; Thi Xuan Thu Le
  8. Checks and Balances and Nation Building: The Spanish Constitutional Court and Catalonia By Agustin Casas; Federico Curci; Antoni-Italo De Moragas
  9. Do Americans Favor Female or Male Politicians? Evidence from Experimental Elections By Poutvaara, Panu; Graefe, Andreas
  10. Betting and financial markets are cointegrated on election night By Auld, T.
  11. Multiparty Democracy in Decentralized Autonomous Organization (DAO): Evidence from MakerDAO By Xiaotong Sun; Xi Chen; Charalampos Stasinakis; Georgios Sermpinis
  12. Politicians' Age and Long-Term Policy: Evidence from Brazilian Municipalities By Dahis, Ricardo; de las Heras, Iván; Saavedra, Santiago

  1. By: Alexander James (Department of Economics, University of Alaska Anchorage); Nathaly Rivera (Department of Economics, University of Chile); Brock Smith (Agricultural Economics and Economics, Montana State University)
    Abstract: We estimate the effect of cash transfers on voter turnout, leveraging a large-scale natural experiment, the Alaska Permanent Fund Dividend (PFD) program, which provides residents with a check of varying size one month before election day. We find that transfers cause people to vote, especially in gubernatorial elections in which a 10% increase in cash ($180) causes a 1.4 percentage point increase in turnout. Effects are concentrated among racial minorities, theÊyoung, and poor. There is little evidence that transfers reduce logistical costs of voting, but rather operate by reducing voter apathy among the low-income electorate.
    Keywords: Voter Turnout, Civic Engagement, Cash Transfers, Natural-Field Experiment, Democratic Institutions
    JEL: D72 H31 H70 I38
    Date: 2022–10
  2. By: Aidt, Toke; Asatryan, Zareh; Badalyan, Lusine
    Abstract: We study consumer debt relief as a tool of distributive politics and ask if debt relief can influence elections. We utilize quasi-experimental variation generated by a very large debt relief program enacted in the Republic of Georgia by a private foundation that affected every sixth voter. We estimate that the program helped the incumbent candidate linked to the foundation win the 2018 Presidential election, and that its effects persisted into the next election. We show how economic power can translate into political power in polities with de jure competitive elections but with de facto weak accountability.
    Keywords: Consumer debt relief,distributive politics,vote buying,elections
    JEL: D72 E51 O10
    Date: 2022
  3. By: Auld, T.
    Abstract: There is a gap in the existing literature for models linking prices in prediction markets with those for financial markets. We bridge this gap using a model based on the assumption that a binary political event has a constant effect on the difference of the conditional expectations of financial prices, given that event. This leads to a model where returns can be partitioned into a political factor, driven by changes in the likelihood of an election outcome, and a non-political component. Contrary to the existing literature, this model is based on economic principles and applies in a general setting. This model is naturally extended to equities using the Fama-French 5 factors to model the non-political part of returns variance. We test the model for six elections and referendums from the US and UK. Strong support is found for the theory for four events, and weak evidence for one. The remaining election, the 2017 UK general election, does not appear informative for asset prices. An exploration of the political factor loadings reveals pleasing relationships between firm characteristics and political sensitivity. Internationalisation of revenue, location and nationalisation risk are found to be significant. This is consistent with the existing literature, as well as the idea that firms can diversify away from local political risk using offshore sales.
    Keywords: Elections, Election market, Political risk, Factor model, Pricing of risk
    JEL: C38 C51 D72 G12 G14 G15
    Date: 2022–11–03
  4. By: Mukherjee, Anirban (University of Calcutta); Paul, Soham Kumar
    Abstract: In this paper we examine the role of social segregation on the electoral success of the right wing, Hindu nationalist platform in Indian politics. Existing studies have looked at the effect of social segregation on Hindu-Muslim riots and their findings indicate both possibilities; while some studies found segregated societies are more riot prone, some other studies found the opposite. We, using a state level panel data, examine the effect of Hindu-Muslim segregation at the workplace on the vote share for the right wing political party (Bharatiya Janata Party) . We find that workplace segregation in general is positively associated with the right wing vote share. But as proportion of Muslim population increases in a state, the relationship gets reversed.
    Date: 2022–10–21
  5. By: Micael Castanheira (Université Libre de Bruxelles); Benoit S Y Crutzen (Erasmus University Rotterdam)
    Abstract: e develop a model of elections in which parties choose their ideological position and the ideology of their candidates. Tighter candidate selection reduces policy uncertainty for voters. We show that weak institutional constraints, as in a Presidential regime, induce parties to allow their candidates to be ideologically heterogeneous. Tighter constraints or reduced voter polarization induces them to choose an ideologically homogeneous set of candidates. This highlights a multiplier effect of intraparty candidate selection: the parties’ best responses amplify institutional and socio-economic changes. These effects rationalize why mainstream parties look so different across the two sides of the Atlantic. Around the middle of the nineteenth century, when facing similar organizational challenges, parties made opposite choices that still apply to this day: the introduction of direct primaries in the US, which decentralized candidate selection, versus the tightening and centralization of selection in Victorian England.
    Keywords: parties as brands, political regime, intraparty candidate selection, ideology, polarization
    Date: 2022–11–13
  6. By: Lucía Mendoza Mora
    Abstract: This paper studies the effects of disclosing information about politician misbehavior on trust in public institutions. I use news bulletins from the main anti-corruption agency in Colombia announcing disciplinary prosecutions against municipal mayors. I exploit the timing of the bulletin's publication as a source of variation on the information about the mayor's misbehavior. Using a difference-in-difference framework, I find that news of the prosecution led to increased trust in judicial institutions. However, the effects on confidence in the political system depend on whether citizens perceive the prosecuted mayor as an individual transgressor or as representative of political institutions that are persistently led by questionable individuals. In the former case, the bulletin's publication increased support for the political system. In the latter, it diminished trust in the elections, political parties and Congress. These findings highlight the sophistication of citizens' judgements in response to information on institutional performance.
    Keywords: Trust, Public Institutions, Corruption
    JEL: D73 H11 D80
    Date: 2022–10–27
  7. By: Uwe Jirjahn; Thi Xuan Thu Le
    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 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
  8. By: Agustin Casas (CUNEF Universidad/INARBE); Federico Curci (CUNEF Universidad); Antoni-Italo De Moragas (CUNEF Universidad)
    Abstract: We examine whether judicial review can affect political attitudes by studying how the ruling of the Spanish Constitutional Court on the Catalan Constitution affected Catalan support for secession, which doubled in the 2010-2012 period. Our identification strategy relies on the fact that the ruling occurred amid a public opinion survey. We find that the ruling led to a 20% increase in support for Catalan independence from Spain in 2010. The ruling exacerbated the preferences for decentralization (up to secession) and ignited a backlash against institutions (courts, democracy, etc). Additionally, the polarization of political attitudes depended on (endogenous) identification: the ruling strengthened Catalan identity and increased political polarization in that dimension between people with and without Catalan heritage. Polarization around this issue came at the expense of depolarization in the economic dimension. All of these results are consistent with the predictions of identity politics theories
    Keywords: Identity Politics, Political Polarization, Checks and Balances, Judicial Review, Supreme Court, Nation Building.
    JEL: D02 O12 O17 K4
    Date: 2022–10
  9. By: Poutvaara, Panu; Graefe, Andreas
    JEL: D72
    Date: 2022
  10. By: Auld, T.
    Abstract: We present a model linking prices of political binary options to financial assets that applies in the very particular circumstance of the overnight session following an election. Contrary to most of the existing literature, the model is derived from economic first principles and applies in a general setting. We find that under suitable assumptions, election and financial markets will be cointegrated. Deviations from risk neutrality lead to the presence of a non-linear term relating to risk in the cointegrating relationship. The model is tested on three recent political events: The 2014 Scottish independence referendum, the 2016 Brexit referendum and the 2016 US presidential election. Strong support is found for two events (the Brexit referendum and the 2016 Trump win). We find that weak market efficiency broadly holds although there are violations of the order of minutes to tens of minutes. This is apparently caused by betting markets leading financial markets, a phenomena that is observed for all three events. This finding is consistent with the conclusion of the existing literature that prediction markets have superior forecasting ability to other methods. A realistic ex-ante trading strategy is presented for Brexit that profits from these inefficiencies. However, the success is not repeated for the 2016 presidential election. This is due to an apparent deviation from risk neutrality that is not observed on the night of Brexit.
    Keywords: Elections, Election market, Political risk, High frequency data, Pricing of risk
    JEL: C51 D72 G12 G14 G15
    Date: 2022–11–02
  11. By: Xiaotong Sun; Xi Chen; Charalampos Stasinakis; Georgios Sermpinis
    Abstract: Decentralized Autonomous Organization (DAO) provides a decentralized governance solution through blockchain, where decision-making process relies on on-chain voting and follows majority rule. This paper focuses on the most influential DAO, namely MakerDAO, and we find voters fall into different 'voting parties' after applying clustering algorithm to voting history. The significant voting power controlled by voting parties is a signal of governance centralization in DAO, and voting parties have complicated influence on Maker protocol, which is governed by MakerDAO. This paper presents empirical evidence of multiparty democracy in DAO and further contributes to the contemporary debate on whether decentralized governance is possible.
    Date: 2022–10
  12. By: Dahis, Ricardo; de las Heras, Iván; Saavedra, Santiago
    Abstract: A fundamental difficulty in policy-making is that policies often have costs today but benefits far into the future. This difficulty is particularly salient to climate change and environmental conservation policies. A critical dimension in this trade-off is the age of politicians. Younger politicians have a longer lifespan, which could lead them to weigh more future policy benefits. However, younger politicians might be more prone to show short-term economic results to climb the political ladder. We study this trade-off in the case of Brazilian mayors and deforestation, using a regression dis- continuity design for close elections. We find that when a young politician is elected, there is a reduction in deforestation and greenhouse gas emissions intensity, without significant effects on municipal gross domestic product. The results also show that younger politicians allocate more budget to education and capital investment, suggesting that the time horizon aspect dominates the trade-off. These results illustrate the importance of youth political participation for long-term policy.
    Date: 2022–10–31

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