nep-pol New Economics Papers
on Positive Political Economics
Issue of 2023‒04‒10
ten papers chosen by
Eugene Beaulieu
University of Calgary

  1. Do Incompetent Politicians Breed Populist Voters? Evidence from Italian Municipalities By Federico Boffa; Vincenzo Mollisi; Giacomo A.M. Ponzetto
  2. Do Unions Shape Political Ideologies at Work? By Johannes Matzat; Aiko Schmeißer
  3. Political Institutions and Output Collapses By Patrick A. Imam; Jonathan R. W. Temple
  4. Human Capital and Climate Change By Angrist, Noam; Winseck, Kevin; Patrinos, Harry A.; Graff Zivin, Joshua
  5. Income inequality and campaign contributions: evidence from the Reagan tax cut By Larcinese, Valentino; Parmigiani, Alberto
  6. Moderation in instant runoff voting By Kiran Tomlinson; Johan Ugander; Jon Kleinberg
  7. Trade Liberalization, Economic Activity, and Political Violence in the Global South: Evidence from PTAs By Amodio, Francesco; Baccini, Leonardo; Chiovelli, Giorgio; Di Maio, Michele
  8. The relationship between political instability and economic growth in advanced economies: Empirical evidence from a panel VAR and a dynamic panel FE-IV analysis By Dirks, Maximilian; Schmidt, Torsten
  9. On the Relation between Trade and Democratization By Martin Hoppe
  10. (Ch)eating for oneself or cheating for others? Experimental evidence from young politicians and students in Kenya By Hoffmann, Lisa

  1. By: Federico Boffa; Vincenzo Mollisi; Giacomo A.M. Ponzetto
    Abstract: Poor performance by the established political class can drive voters towards anti-establishment outsiders. Is the ineffectiveness of incumbent politicians an important driver of the recent rise of populist parties? We provide an empirical test exploiting a sharp discontinuity in the wage of local politicians as a function of population in Italian municipalities. We find that the more skilled local politicians and more effective local government in municipalities above the threshold cause a significant drop in voter support for the populist Five-Star Movement in regional and national elections. Support for incumbent governing parties increases instead.
    Keywords: populism, government efficiency, politician quality, political agency
    JEL: D72 D73 H70
    Date: 2023–03
  2. By: Johannes Matzat; Aiko Schmeißer
    Abstract: Labor unions’ greatest potential for political influence likely arises from their direct connection to millions of individuals at the workplace. There, they may change the ideological positions of both unionizing workers and their non-unionizing management. In this paper, we analyze the workplace-level impact of unionization on workers’ and managers’ political campaign contributions over the 1980-2016 period in the United States. To do so, we link establishment-level union election data with transaction-level campaign contributions to federal and local candidates. In a difference-in-differences design that we validate with regression discontinuity tests and a novel instrumental variables approach, we find that unionization leads to a leftward shift of campaign contributions. Unionization increases the support for Democrats relative to Republicans not only among workers but also among managers, which speaks against an increase in political cleavages between the two groups. We provide evidence that our results are not driven by compositional changes of the workforce and are weaker in states with Right-to-Work laws where unions can invest fewer resources in political activities.
    Keywords: labor unions, political ideology, campaign contributions, worker-manager relations
    JEL: D70 J50
    Date: 2023
  3. By: Patrick A. Imam; Jonathan R. W. Temple
    Abstract: Major output collapses are costly and frequent in the developing world. Using cross-country data, we classify five-year periods using a two-dimensional state space based on growth regimes and political institutions. We then model the joint evolution of output growth and political institutions as a finite state Markov chain, and study how countries move between states. We find that growth is more likely to be sustained under democracy than under autocracy; output collapses are more persistent under autocracy; and stagnation under autocracy can give way to outright collapse. Democratic countries appear to be more resilient.
    Keywords: Economic growth; autocracy; democracy
    Date: 2023–02–17
  4. By: Angrist, Noam (University of Oxford); Winseck, Kevin (University of California at San Diego); Patrinos, Harry A. (World Bank); Graff Zivin, Joshua (University of California, San Diego)
    Abstract: Addressing climate change requires individual behavior change and voter support for pro-climate policies, yet surprisingly little is known about how to achieve these outcomes. In this paper, we estimate causal effects of additional education on pro-climate outcomes using new compulsory schooling law data across 16 European countries. We analyze effects on pro-climate beliefs, behaviors, policy preferences, and novel data on voting for green parties – a particularly consequential outcome to combat climate change. Results show a year of education increases pro-climate beliefs, behaviors, most policy preferences, and green voting, with voting gains equivalent to a substantial 35% increase.
    Keywords: human capital, education, climate change, compulsory schooling laws, voting
    JEL: D72 H41 I20 I28 P16 Q01 Q5
    Date: 2023–03
  5. By: Larcinese, Valentino; Parmigiani, Alberto
    Abstract: What is the relationship between economic and political inequality? Campaign contributions are often mentioned among the possible channels creating opportunities for richer people to exert disproportionate influence on policymakers. At the same time, by exacerbating economic disparities, public policies that favour the wealthy might also give them a greater relative weight in the donor pool, hence creating a self-reinforcing spiral between material wealth and political influence. We study the effect of the 1986 Tax Reform Act, a remarkable tax cut that, following the prevailing doctrine about optimal income taxation at the time, decreased the marginal tax rates disproportionately at the top of the income distribution. Using data at the census tract level, we show that this policy decision caused a spike in contributions from the groups of citizens that benefited the most from it, namely the top ten percent of the income distribution. The increase in individual donations regards both parties with similar magnitudes and it does not display any heterogenous effect with respect to other observable characteristics of recipients of contributions. This finding is entirely driven by the extensive margin, namely new donors who started to donate after the tax reform, and it holds for donations for House, Senate and Presidential races. Our conclusion is that the erosion of tax progressivity has contributed to rise the political clout of wealthy individuals, via campaign donations, and that the Tax Reform Act, a landmark policy of the second Reagan administration, has been a crucial step in the spiral between economic inequality and uneven political influence of the last four decades.
    JEL: N0 J1
    Date: 2023–03–01
  6. By: Kiran Tomlinson; Johan Ugander; Jon Kleinberg
    Abstract: Instant runoff voting (IRV) has gained popularity in recent years as an alternative to traditional plurality voting. Advocates of IRV claim that one of its benefits relative to plurality voting is its tendency toward moderation: that it produces more moderate winners than plurality and could therefore be a useful tool for addressing polarization. However, there is little theoretical backing for this claim, and existing evidence has focused on simulations and case studies. In this work, we prove that IRV has a moderating effect relative to traditional plurality voting in a specific sense, developed in a 1-dimensional Euclidean model of voter preferences. Our results show that as long as voters are symmetrically distributed and not too concentrated at the extremes, IRV will not elect a candidate that is beyond a certain threshold in the tails of the distribution, while plurality can. For the uniform distribution, we provide an approach for deriving the exact distributions of the plurality and IRV winner positions, enabling further analysis. We also extend a classical analysis of so-called stick-breaking processes to derive the asymptotic winning plurality vote share, which we use to prove that plurality can elect arbitrarily extreme candidates even when there are many moderate options.
    Date: 2023–03
  7. By: Amodio, Francesco (McGill University); Baccini, Leonardo (McGill University); Chiovelli, Giorgio (Universidad de Montevideo); Di Maio, Michele (Sapienza University of Rome)
    Abstract: This paper investigates the impact of agricultural trade liberalization on economic activity and political violence in emerging countries. We use data on all Preferential Trade Agreements (PTAs) signed between 25 low- and middle-income countries and their high-income trade partners between 1995 and 2013. We exploit the implied reduction in agricultural tariffs over time combined with variation within countries in their suitability to produce liberalized crops to find that economic activity increases differentially in affected areas. We also find strong positive effects on political violence, and present evidence consistent with both producer- and consumer-side mechanisms: violence increases in more urbanized areas that are suitable to produce less labor-intensive crops as well as crops that are consumed locally. Our estimates imply that economic activity and political violence would have been around 2% and 7% lower, respectively, across countries in our sample had the PTAs not been signed.
    Keywords: political violence, trade, agriculture, preferential trade agreement
    JEL: D22 D24 F51 N45 O12
    Date: 2023–03
  8. By: Dirks, Maximilian; Schmidt, Torsten
    Abstract: This paper analyzes the relationship between political instability and economic growth in advanced economies. Using a panel of 34 advanced economies from 1996 to 2020, we first employ a panel VAR estimated via System GMM, which allows us to explore the endogenous relationship between economic growth and political instability and to identify potential transmission channels. Second, we use an instrumental variable approach that exploits variation in median temperature and spillover effects of political instability from culturally approximate countries to establish causality. The empirical results suggest that political instability reduces GDP by 4 to 7 % five years after the shock, mainly through lower investment and consumption. A one standard deviation increase in economic growth reduces political instability by half a standard deviation, five years after the shock.
    Keywords: Political instability, economic growth, panel VAR, system GMM, Panel IV, local projection
    JEL: C33 C26 O43 P16
    Date: 2023
  9. By: Martin Hoppe
    Abstract: Whether trade can achieve societal change is a contested topic and difficult to investigate. This round-up aims at summarizing recent empirical research on this topic while focusing on democracy and democratization as an important part of societal change. No robust results for change arising from trade can be found, but there exists an inverse causality, i.e., democratization leading to more trade. Further, reciprocal causality between democratic consolidation and trade agreements is found, meaning an influence of democratic instability on free trade agreements and vice versa.
    Date: 2023
  10. By: Hoffmann, Lisa (German Institute for Global and Area Studies (GIGA))
    Abstract: Honesty and orientation toward the common good are key qualities that people expect from their elected politicians. However, dishonesty in the forms of corruption, vote-buying and identity politics are not uncommon and can lead to a loss of trust in politics. This paper focuses on the cheating behavior of aspirant politicians and students in Kenya. I applied online coin flip experiments as means to detect cheating. In a between-subject design, participants could either (1) cheat to the benefit of a common good, (2) cheat to the benefit of their ethnic group, or (3) cheat to their own monetary advantage. On average, 38% of participants report the payoff-maximizing number of successful coin tosses with no difference between aspirant politicians and students. However, aspirant politicians report the payoff-maximizing outcome more readily than students when cheating benefits a common good. Perceiving corruption as justifiable is correlated with reporting higher numbers of successful coin tosses in the online experiment.
    Date: 2023–03–16

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