nep-pol New Economics Papers
on Positive Political Economics
Issue of 2023‒02‒06
nine papers chosen by
Eugene Beaulieu
University of Calgary

  1. The Long-Run Earnings Effects of Winning a Mayoral Election By Bertoni, Marco; Brunello, Giorgio; Cappellari, Lorenzo; De Paola, Maria
  2. Works Councils and Workers' Party Preferences in Germany By Uwe Jirjahn; Thi Xuan Thu Le
  3. Ideological Consistency and Valence By Enriqueta Aragonès; Dimitrios Xefteris
  4. Do Bishops Matter for Politics? Evidence From Italy By Gianandrea Lanzara; Sara Lazzaroni; Paolo Masella; Mara P. Squicciarini
  5. Dark Money and Politician Learning By Schnakenberg, Keith; Turner, Ian R
  6. Political Economy of Industrialization and Industrial Parks in Ethiopia By Kebede, Selamawit G.; Heshmati, Almas
  7. Resource Allocation in Power-Sharing Arrangements: Evidence from Lebanon By Mounir Mahmalat; Sami Atallah; Wassim Maktabi
  8. Intermediate Condorcet Winners and Losers By Salvador Barberà; Walter Bossert
  9. Democracy, economic development and low carbon energy: When and why does democratization promote energy transition? By Clulow, Z.; Reiner, D.

  1. By: Bertoni, Marco (University of Padova); Brunello, Giorgio (University of Padova); Cappellari, Lorenzo (Università Cattolica del Sacro Cuore); De Paola, Maria
    Abstract: We estimate the effect of winning a mayoral election on long-run licit earnings, which plays a key role in the selection of local political leaders. We use Italian administrative social security data from 1995 to 2017 and a sharp regression discontinuity design based on close elections. Over a 15-year horizon, the average present discounted value of winning an election is equal to 35, 000€, or 85 percent of the annual labor and social security earnings for the average candidate in our sample, a modest effect driven by the compensations for political service and concentrated during the first five years after the election. Net of compensations for service, this effect is negative during the first ten years after the election, and almost fades away afterwards. Differences in the political careers of winners and runners-up and a two-term limit rule on mayors' office contribute to explain our results.
    Keywords: returns to office, political selection, revolving door, rent-seeking, close elections
    JEL: D72 J44 J45
    Date: 2023–01
  2. By: Uwe Jirjahn; Thi Xuan Thu Le
    Abstract: Research on the consequences of works councils has been dominated by economic aspects. Our study provides evidence that works councils have nonfinancial consequences for civic society that go beyond the narrow boundaries of the workplace. Using panel data from a large sample of male workers, the study shows that works councils have an influence on workers' party preferences. The presence of a works council is negatively associated with preferences for extreme right-wing parties and positively associated with preferences for the Social Democratic Party and The Left. These results holds in panel data estimations including a large set of controls and accounting for unobserved individual-specific factors. Our findings fit the notion that workplace democracy increases workers' generalized solidarity and their awareness of social and political issues.
    Keywords: Workplace democracy, worker participation, political spillover, party identification
    JEL: D72 J51 J52 J58
    Date: 2023
  3. By: Enriqueta Aragonès; Dimitrios Xefteris
    Abstract: We study electoral competition between two win-motivated candidates, considering that voters care both about the valence and the ideological consistency of the competing candidates. When valence asymmetries are not too large we find a unique pure strategy Nash equilibrium in which (i) platform polarization (i.e. the distance between the candidates’ policy proposals) is solely determined by the strength of preferences for consistency, and (ii) the expected policy outcome may move to the right as the valence of the leftist candidate increases. When valence differences are large, a mixed equilibrium emerges: the high-valence left-wing candidate chooses a moderate right policy and the low-valence right-wing candidate responds, usually, with an extreme right position and, occasionally, with a moderate left one. Our analysis provides novel insights regarding candidates’ flip-flopping incentives, and parties’ motives to nominate low-quality candidates.
    Keywords: valence, ideology, consistency, flip-flopping, electoral competition, mixed equilibrium
    JEL: D72
    Date: 2022–12
  4. By: Gianandrea Lanzara; Sara Lazzaroni; Paolo Masella; Mara P. Squicciarini
    Abstract: This paper studies whether and how religious leaders affect politics. Focusing on Italian dioceses in the period from 1948 to 1992, we find that the identity of the bishop in office explains a significant amount of the variation in the vote share for the Christian Democracy party (DC). This result is robust to several exercises that use different samples and time windows. Zooming into the mechanism, we find that two characteristics of bishops matter: (i) his political culture, and (ii) his interaction with the population—the latter being measured using state-of-the-art text-analysis techniques.
    JEL: D72 Z12 D02
    Date: 2023–01
  5. By: Schnakenberg, Keith; Turner, Ian R (Yale University)
    Abstract: We study the consequences of campaign finance disclosure laws in a model of informative campaign finance. Campaign spending can affect electoral outcomes and also signal policy information to politicians. Under mandatory disclosure donors may engage in spending that runs counter to their electoral interests in order to signal good news regarding their preferred policy. When donors can use dark money the electoral price to influence policy increases to account for the possibility that donors use public spending to signal, but secretly offset the electoral costs with dark money. Our results suggest that observable spending will tend to increase for moderate candidates and decrease for extreme candidates when dark money is allowed. We also illustrate how different social pressures affect patterns of campaign spending.
    Date: 2023–01–07
  6. By: Kebede, Selamawit G. (University of Addis Ababa, Ethiopia); Heshmati, Almas (Jönköping University, Sogang University)
    Abstract: This study investigates the political economy of industrialization in Ethiopia. It discusses the economic and political institutions during three political regimes and assesses the industrial sector's performance across these different regimes. Further, it evaluates the different industrial strategies and organizational structures for implementing the industrial policies together with the current industrial park strategy and its contemporary impact on employment creation, export promotion, foreign exchange revenues, the value chain, and spillover effects. Both qualitative and quantitative approaches are used for exploring the role of political economy in Ethiopian industrialization. Different political strategies were followed by the political regimes to support the industrial sector. The paper distinguishes between two extreme political strategies of protectionist import substitution industrialization and the outward strategy of export-oriented industrialization. The study confirms that political institutions negatively impacted industry for several decades. The results support focusing on institutions to successfully implement industry policies for inducing the industrialization process in the country. Policies must be implemented considering existing opportunities and resources in the country along with their respective economic outcomes instead of excessive priority being given to the political interests of the regime in power.
    Keywords: industrialization, industrial parks, political economy, industrial strategy, industry growth, Ethiopia
    JEL: J24 O14 O25 O47 P48
    Date: 2023–01
  7. By: Mounir Mahmalat (The Policy Initiative); Sami Atallah (Founding director of The Policy Initiative); Wassim Maktabi (Researcher at The Policy Initiative)
    Abstract: Power-sharing arrangements not only allocate political power but also economic resources from valuable state functions among powerful elites. Two broad hypotheses emerge from existing literature for how elites allocate such resources. Elites would either distribute the control over valuable institutions or share the rents they generate. This article investigates which mechanism prevails by focusing on a major source of such resources: public procurement of large infrastructure projects. We analyze an original dataset of infrastructure procurement contracts in Lebanon and investigate which politically connected firms receive larger contracts than nonconnected firms. We find that firms receive inflated contracts only when they are connected to elites with a “seat at the table” at the board of the implementing agency, rather than the wider set of powerful political elites. We argue that resource distribution depends on elites’ access to important institutional functions, rather than other conceivable mechanisms of resource sharing. By penetrating key positions with loyal personnel, elites serve as brokers in collusive networks, or cartels, that succeed in undermining a process as complex as infrastructure procurement
    Date: 2022–12–20
  8. By: Salvador Barberà; Walter Bossert
    Abstract: The conditions of strong Condorcet winner consistency and strong Condorcet loser consistency are, in essence, universally accepted. However, there are many situations in which they are silent. The weak counterparts of these properties suffer from the fatal flaw that a weak Condorcet winner can be a weak Condorcet loser at the same time. We propose a new notion of Condorcet-type winners and losers that is intermediate in strength between these two extremes. A feasible candidate is an intermediate Condorcet winner if this candidate wins against or ties with each other feasible candidate in a pairwise contest, with at least one instance of a win. Likewise, a feasible candidate is an intermediate Condorcet loser if the candidate loses against or ties with each other feasible candidate, with at least one instance of a loss. Our intermediate variants of Condorcet winner consistency and Condorcet loser consistency share the intuitive appeal of strong Condorcet winner consistency and strong Condorcet loser consistency, and they do not lead to the counterintuitive conclusions of the consistency conditions defined in terms of weak Condorcet winners and losers. We provide a thorough examination of the properties of our proposal and compare it to earlier attempts to modify the traditional Condorcet conditions. Journal of Economic Literature Classification Nos.: D71, D72, D63. Keywords. Social choice; Voting; Condorcet consistency; Single-peakedness.
    Keywords: Social Choice, voting, Condorcet consistency, single-peakedness
    JEL: D71 D72 D63
    Date: 2023–01
  9. By: Clulow, Z.; Reiner, D.
    Abstract: Despite the growing consensus surrounding the need to decarbonize power for meeting the ambitious temperature target set out in the 2015 Paris Agreement, the share of low-carbon energy sources in the overall energy mix varies significantly across countries and over time. We evaluate the influence of democracy on clean energy transition by studying national solar, wind, hydro and nuclear energy shares of total energy use for electricity generation from 1980 to 2020. Using data from the Varieties of Democracy, Freedom House and Polity IV democracy indices, International Energy Agency Extended Energy Balances and Summary Statistics and World Bank World Development Indicators, we conduct a large-N study of the emissions levels of 135 countries. This article develops existing understandings about the relationship between democracy and energy transition by employing a more sophisticated – hierarchical – research design to determine whether: (i) democracy continues to be an important driver of low-carbon energy use once country-level clustering is accounted for, (ii) fluctuations in the democratic attributes of domestic political regimes have uniform effects across countries and (iii), if so, economic development plays a role in shaping the effect of democracy within individual countries. The results suggest that, even after controlling for country-level clustering and other putative drivers of energy portfolios, democracy has a significant effect on the low-carbon energy sources examined here. A second-order regression of country-specific democracy effects estimated by our hierarchical model provides robust evidence that economic development plays an important role in shaping the effect of democracy within individual countries: Strikingly, democratic spells (of increased democratic institutions and processes) in advanced economies tend to inhibit solar, wind and hydro energy, but promote nuclear energy use, while having the opposite effects (promoting solar, wind and hydro and inhibiting nuclear shares) in emerging economies.
    Keywords: renewable energy, solar, wind, hydro, geothermal, nuclear, energy transition, decarbonization, democracy, electricity generation, energy mix, economic development
    JEL: N7 O13 P18 P28 P48 Q42 Q43 Q48
    Date: 2023–01–12

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