nep-pol New Economics Papers
on Positive Political Economics
Issue of 2023‒06‒12
eight papers chosen by
Eugene Beaulieu
University of Calgary

  1. Toward an economic theory of populism: Uncertainty, Information, and Public Interest in Downs’s Political Economy By Alexandre Chirat; Cyril Hédoin
  2. Cultural Transmission and Political Attitudes: Explaining Differences between Natives and Immigrants in Western Europe By Jérôme Gonnot; Federica lo Polito
  3. Young Voters and Budget Deficits By Ole Henning Nyhus; Bjarne Strøm
  4. Does Combating Corruption Reduce Clientelism? By Gustavo J. Bobonis; Paul J. Gertler; Marco Gonzalez-Navarro; Simeon Nichter
  5. Political institutions, financial liberalisation, and access to finance: firm-level empirical evidence By Olayinka Oyekola; Sofia Johan; Rilwan Sakariyahu; Oluwatoyin Esther Dosumu; Shima Amini
  6. Political Regimes and Firms' Decisions to Pay Bribes: Theory and Evidence from Firm-level Surveys By Shuichiro Nishioka; Sumi Sharma; Tuan Le
  7. The Gasoline Climate Trap By Josse Delfgaauw; Otto Swank
  8. “Monopolistic” vs. “Cooperative” State in the Institutional and Economic Modelling of Antonio De Viti De Marco By Luca Tedesco; Roberto Ricciuti

  1. By: Alexandre Chirat; Cyril Hédoin
    Abstract: In this paper, we claim that Downs’s theory of democracy provides a framework to build an economic and positive theory of populism. Our purpose in this paper is threefold. First, we highlight systematically overlooked aspects of Downs’s work. In particular, we demonstrate that Downs is a thinker of political polarization and that his focus on uncertainty is relevant to build an economic theory of populism. Second, we take the issue of populism as an opportunity to test the explanatory power of Downs’s political economy. Third, our reconstruction of Downs’s political economy enables a comparative analysis with the theoretical political science literature on populism to achieve a wide reflexive equilibrium on the understanding of both the nature and the causes of populism. In accordance with such a method, we conclude that populism is, in essence, a political force in a democracy, always present in a latent state, and rationally promoted by political platforms when the minimum consensus required for democratic stability is in crisis. That is why populism is likely to regenerate as much as to sound the death knell of a democratic political system.
    Keywords: Democracy - Populism - Rationality - Public interest - Information
    JEL: P00 B20 H00 D02
    Date: 2023
  2. By: Jérôme Gonnot; Federica lo Polito
    Abstract: This paper uses data on individual political opinions from the European Social Survey to study the role of horizontal cultural transmission on immigrants' political assimilation in Western Europe. We analyze five key political issues: redistribution, gay rights, EU integration, immigration policy and trust in political institutions. Controlling for individual socio-economic characteristics, we document that immigrants show identical support for redistribution as natives, display more conservative attitudes towards gay rights and more liberal views on the other three issues. These differences widen with the cultural and religious distance between immigrants' background and Western European norms, and decrease with the number of years since migration. Among immigrants that have spent at least 10 years in their host country, attitudes towards migration policy catch up with those of natives and the migrant-to-native gap on political trust is reduced by 80\%. In contrast, differences on EU integration and gay rights remain stable while immigrants' views on redistribution becomes relatively more conservative. These attitude-specific patterns are also salient when studying political preferences at the regional and sub-regional level. Our results strongly point towards the transmission of cultural values from natives to immigrants on matters of immigration policy and political trust, whereas attitudes towards redistribution seem immune to cultural influences at destination.
    Keywords: Immigration;Assimilation;Political Attitudes;Cultural Transmission
    JEL: D72 J15 P16 R23 Z1
    Date: 2023–05
  3. By: Ole Henning Nyhus; Bjarne Strøm
    Abstract: This paper exploits a novel trial in Norwegian local elections in 2011 to provide empirical evidence on fiscal performance from lowering the minimum voting age from 18 to 16. Using a difference in differences research strategy, we find that this voting age change reduced the net operating surplus by around 600NOK (€60) per capita. This finding is consistent with micro evidence that young individuals have higher discount rates and are more likely to take risk than older ones, although other evidence is needed to confirm that interpretation. Further heterogeneity analysis demonstrates that increased deficits (reduced net operating surplus) due to the extension of the youth voting franchise mainly appear in governments with low party fragmentation and a large share of socialist politicians in the local council.
    Keywords: local public finance, fiscal performance, minimum voting age
    JEL: C23 D72 H72
    Date: 2023
  4. By: Gustavo J. Bobonis; Paul J. Gertler; Marco Gonzalez-Navarro; Simeon Nichter
    Abstract: Does combating corruption reduce clientelism? We examine the impact of a prominent anti-corruption program on clientelism using a novel representative survey of rural Brazilians. Randomized audits reduce politicians’ provision of campaign handouts, decrease citizens’ demands for private goods, and reduce requests fulfilled by politicians. With regards to mechanisms, audits undermine clientelist relationships by reducing citizens’ interactions with politicians and their knowledge of incumbents. Furthermore, audits significantly deteriorate citizens’ perceptions of politician reciprocity in a hypothetical trust game. Results also offer novel insights into audits’ dynamic effects: they have more pronounced effects in the short run, especially during electoral periods.
    Keywords: political clientelism; audits; transparency
    JEL: D72 D73 H83
    Date: 2023–05–17
  5. By: Olayinka Oyekola (Department of Economics, University of Exeter); Sofia Johan (College of Business, Florida Atlantic University); Rilwan Sakariyahu (Business School, Edinburgh Napier University); Oluwatoyin Esther Dosumu (Alliance Manchester Business School, University of Manchester); Shima Amini (Department of Finance, University of Leeds)
    Abstract: Worldwide, lack of access to finance has been identified by many firms as the most detrimental obstacle facing business entities. This article studies how political institutions and financial liberalisation alleviate or deepen financial constraints faced by firms. We hypothesise that a complementarity exists between political institutions and financial liberalisation in constructing barriers to firms securing bank financing. Evidence from an international sample of over 63, 000 firms in 75 countries, establishes that political institutions, proxied by democracy level in a country, and financial liberalisation, proxied by entry and participation of foreign banks, are significant factors in explaining cross-country disparities in firm-level credit accessibility. Importantly, we find a strong support for our proposition, documenting a remarkably significant and sizeable positive interaction effect between foreign bank presence and the level of democracy for access to finance. These results are robust against various forms of sensitivity checks. Overall, our study provides fresh insights into the financing effects of foreign bank activities interacted with democracy on firms. We conclude that these results may be of considerable benefit to policymakers, especially within developing, and emerging, economies, who are searching for economic growth, to re-evaluate what are the primary lending obstacles for their small and medium-sized enterprises.
    Keywords: financial liberalisation, foreign banks, political institutions, access to finance, credit constraints, firm-level data
    JEL: G21 G23 G32 O16
    Date: 2023–05–15
  6. By: Shuichiro Nishioka (West Virginia University); Sumi Sharma (Independent researcher); Tuan Le (University of Findlay)
    Abstract: This paper makes the most of the observed actions of bribe takers and givers from the World Bank Enterprise Surveys and studies how a taker’s action influences a giver's decision to pay bribes. To motivate our empirical study, we consider Kaufmann and Wei's (1999) Stackelberg game between a tax authority and a firm that undergoes tax inspection. The model predicts that, when the authority can use its action as a credible threat for the firm's profitability, the authority disturbs the firm by inspecting more, and the firm is more likely to pay bribes. Consistent with the theoretical prediction, we find correlational evidence that the propensity to pay bribes increases with the number of inspection visits, particularly for non-democratic countries.
    Keywords: Corruption, Autocracy, Policy implementation times, World Bank Enterprise Surveys
    JEL: H22 H32 O25 O43
    Date: 2023–04
  7. By: Josse Delfgaauw (Erasmus University Rotterdam); Otto Swank (Erasmus University Rotterdam)
    Abstract: Due to taxes and subsidies, gasoline prices vary dramatically across countries. Externalities cannot fully account for this. We develop a simple political-economic model that shows that group interests, resulting from the composition of a country’s car fleet, help to explain differences in gasoline taxes even among countries with identical fundamentals. In the model, citizens’ car ownership is endogenous, which can yield multiple equilibria. Our model demonstrates the possibility of a society in a climate trap where a low gasoline tax reflects the views of a majority, but another majority would benefit from transitioning to an equilibrium with a higher gasoline tax and fewer emissions.
    Keywords: median voter, gasoline taxes, multiple equilibria.
    JEL: D62 D72 H23 Q58
    Date: 2023–05–08
  8. By: Luca Tedesco (University Roma Tre); Roberto Ricciuti (Department of Economics (University of Verona))
    Abstract: Antonio de Viti de Marco was one of the most representative figures of the Italian school of public finance and is considered an intellectual father of the Public Choice school. In this paper we analyze the relationships between his theories and those of Herbert Spencer, explicitly cited by de Viti de Marco in his writings. We also explore to what extent the theory fueled the political and journalistic campaigns in which he was engaged, seeking to influence the economic and financial policy of the government. De Viti de Marco and his associates proposed a way out of the fin de siècle crisis based on a new fiscal pact and free trade, which in turn was grounded on a view of the British model that was already in crisis in its homeland. Unsurprisingly, this route was not chosen by the government, which opted for repression.
    Keywords: De Viti de Marco, liberal Italy, public finance, taxation, free trade, protectionism, Italian economic thought.
    JEL: B13 B31 D72 D78 H11
    Date: 2023–05

This nep-pol issue is ©2023 by Eugene Beaulieu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.