nep-pol New Economics Papers
on Positive Political Economics
Issue of 2023‒06‒19
eleven papers chosen by
Eugene Beaulieu
University of Calgary

  1. Elite Selection in an Autocracy: The Career Costs of Political Ties By Leonie Bielefeld; Cathrin Mohr
  2. Universalism and Political Representation: Evidence from the Field By Benjamin Enke; Raymond Fisman; Luis Mota Freitas; Steven Sun
  3. The politics of redistribution and sovereign default By Scholl, Almuth
  4. The midterm election effect on US stock returns: Some practical considerations for investors By Warwick Anderson; Jędrzej Białkowski; Moritz Wagner
  5. Electoral Effects of Integrating Forced Migrants: Evidence from a Southern Country By Rozo, Sandra V.; Quintana, Alejandra; Urbina, Maria José
  6. The Role of GDP Growth in the ESG Approach at World Level By Angelo Leogrande; Alberto Costantiello
  7. A century of partisanship in Finnish political speech By Salla Simola; Jeremias Nieminen; Janne Tukiainen
  8. How Trump Triumphed: Multi-Candidate Primaries with Buffoons By Micael Castanheira De Moura; Andrew Schotter; Johannes Leutgeb; Steffen Huck
  9. British Voting Intentions and the Far Reach of 11 September Terrorist Attacks in New York By Stancanelli, Elena G. F.
  10. How Do Political Connections of Firms Matter during an Economic Crisis? By Chen, Yutong; Chiplunkar, Gaurav; Sekhri, Sheetal; Sen, Anirban; Seth, Aaditeshwar
  11. The normative permissiveness of political partyism By Tom Lane; Luis Miller; Isabel Rodriguez

  1. By: Leonie Bielefeld (University of Munich); Cathrin Mohr (University of Bonn)
    Abstract: We study the selection of the political elite in an autocratic state. Using detailed CV data on potential politicians in the German Democratic Republic, we track and quantify the position of individuals in the state hierarchy over time and exploit exogenous connections between individuals that were formed through imprisonment during the Nazi Era. We find asymmetric effects of being connected to the political elite: While being linked to the state's centre of power harms high-profile careers, they have positive effects on low-profile careers. An extensive analysis of potential mechanisms shows that the negative effect of being linked to the party leadership on individuals' probability to be part of the ruling elite is in line with anti-factionalism, whereas the positive effect on low-profile careers is in line with patronage.
    Keywords: Political Economy, autocracy, political elite, selection mechanisms
    JEL: P16 P26 D72
    Date: 2023–05
  2. By: Benjamin Enke; Raymond Fisman; Luis Mota Freitas; Steven Sun
    Abstract: This paper provides field evidence on the link between morals and political behavior. We develop a theory-guided real-stakes measure of each U.S. district's values on the universalism-particularism continuum, which reflects the degree to which charitable giving decreases as a function of social distance. District universalism is strongly predictive of local Democratic vote shares, legislators' roll-call voting, and the moral content of Congressional speeches. These results hold in both across- and within-party analyses. Overall, spatial heterogeneity in universalism is a substantially stronger predictor of geographic variation in political outcomes than traditional economic variables such as income or education.
    JEL: D72
    Date: 2023–05
  3. By: Scholl, Almuth
    Abstract: This paper studies how distributional and electoral concerns shape sovereign default incentives within a quantitative model of sovereign debt with heterogeneous agents and non-linear income taxation. The small open economy is characterized by a two-party system in which the left-wing party has a larger preference for redistribution than the right-wing party. Political turnover is the endogenous outcome of the electoral process. Fiscal policy faces a tradeoff: On the one hand, the government has incentives to fi- nance redistribution via external debt to avoid distortionary income taxation. On the other hand, the accumulation of external debt raises the cost of borrowing. Quanti- tative findings suggest that the left-wing party implements a more progressive income tax, is more prone to default, and has a lower electoral support than the right-wing party due to worse borrowing conditions and the distortionary effects of income taxa- tion. In equilibrium, electoral uncertainty raises sovereign default risk.
    Keywords: sovereign debt and default, inequality, redistribution, political economy
    JEL: F34 H63 E62 F41 D72
    Date: 2023
  4. By: Warwick Anderson; Jędrzej Białkowski (University of Canterbury); Moritz Wagner (University of Canterbury)
    Abstract: The midterm election effect is one of the most persistent regularities related to US politics reported in empirical finance, but it has also been one of the least examined. We explore practical implications for investors who would like to benefit from the effect. First, we draw lessons from an analysis of 49 industry portfolios, using monthly excess and risk-adjusted returns for the period 1926-2022. Contrary to much commentary in the professional media and prior literature, higher returns around midterm elections all but disappear after returns are adjusted for risk. Second, we find that midterm elections are predominantly associated with the market factor and thus, higher returns appear to merely compensate investors for bearing risk.
    Keywords: Midterm election, political cycle, political uncertainty, industry returns, benchmark returns
    JEL: G11 G12 G14 P48
    Date: 2023–05–01
  5. By: Rozo, Sandra V. (World Bank); Quintana, Alejandra (Columbia University); Urbina, Maria José (World Bank)
    Abstract: How does easing the economic integration of forced migrants affect native voting behaviors in the Global South? This paper assesses how the regularization of half a million Venezuelan forced migrants affected the electoral choices of Colombian natives by comparing election results in municipalities with higher and lower take-up rates for a program that supports forced migrants. The findings show negligible impacts on native voting behavior. The study then conducted a survey experiment to investigate the lack of voter response. Even after receiving information about the program, Colombian voters showed no changes in voting intentions or prosocial views toward migrants. This suggests that their indifference did not stem from a lack of awareness about the program. In contrast, the electoral indifference of natives may be explained by the fact that the program did not change labor and crime outcomes for native Colombians, and most migrants remained in the informal sector despite benefiting from the program through improvements in labor conditions and better access to public services.
    Keywords: refugees, amnesties, electoral outcomes
    JEL: D72 F02 F22 O15 R23
    Date: 2023–05
  6. By: Angelo Leogrande (LUM University Giuseppe Degennaro); Alberto Costantiello (LUM University Giuseppe Degennaro)
    Abstract: We analyze the question of GDP Growth-GDPG rate in the context of Environmental, Social and Governance-ESG framework. We use World Bank data for 193 countries in the period 2011-2020 using different econometric techniques i.e., Panel Data with Fixed Effects, Panel Data with Random Effects, Pooled Ordinary Least Squares-OLS. We found that GDPG rate is positively associated, among others, to "Government Effectiveness" and "Prevalence of Undernourishment" and negatively associated among others to "Unemployment" and "Research and Development Expenditure". Furthermore, we have applied the k-Means algorithm optimized with the Elbow method and we found the presence of four clusters in the sense of GDPG rate. Finally, we confront eight machine learning algorithms to predict the value of GDPG rate and we found that the Polynomial Regression is the best predictor. The Polynomial Regression predicts an increase of GDPG rate equal to 2.88% on average for the analysed countries.
    Keywords: Analysis of Collective Decision-Making, General, Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures and Voting Behaviour, Bureaucracy, Administrative Processes in Public Organizations, Corruption, Positive Analysis of Policy Formulation, Implementation
    Date: 2023–05–01
  7. By: Salla Simola (Storytel); Jeremias Nieminen (Department of Economics, Turku School of Economics, University of Turku.); Janne Tukiainen (Department of Economics, Turku School of Economics, University of Turku.)
    Abstract: We use novel data to describe the evolution of party differences in parliamentary speech in Finland during 1907–2018. We find a peak in left-right polarization in the 1970s, driven by the extreme left party, and co-occuring with a high prevalance of Soviet Union related phrases, perhaps resulting from Soviet information influencing. The period was also marked with short-lived coalition governments and inefficient policymaking. Moreover, as we find that left-right partisanship fluctuates during the majority of the 20th century, our results show that the levels of polarization currently perceived as high in many countries may not be that exceptional.
    Keywords: text analysis, parliamentary speech, polarization
    JEL: D72 P00
    Date: 2023–05
  8. By: Micael Castanheira De Moura; Andrew Schotter; Johannes Leutgeb; Steffen Huck
    Abstract: While people on all sides of the political spectrum were amazed that Donald Trump won the Republican nomination this paper theorizes that Trump’s victory was not a crazy event but rather the equilibrium outcome of a multi-candidate race where one candidate, the buffoon, is viewed as likely to self-destruct and hence unworthy of attack. Our model conceptualizes primaries as a truel (a three-way duel); we solve for its equilibrium, and test its implications in a laboratory experiment. We find that people recognize a buffoon when they see one and aim their attacks elsewhere with the unfortunate consequence that the buffoon has an enhanced probability of winning. This result is strongest amongst those subjects who demonstrate an ability to best respond, suggesting that our results would only be stronger when the game is played by experts and for higher stakes.
    Date: 2023–06–01
  9. By: Stancanelli, Elena G. F. (Paris School of Economics)
    Abstract: Terrorist attacks have often been found to impact voting behaviours in the country of the attack. Here I study the impact of 9/11 terrorist attacks in New York on voting preferences in the UK, concluding that 9/11 impacted the voting intentions of the British, significantly increasing prospective votes for the Conservative party and reducing future votes for the Labour, the incumbent party at the time. Using daily survey data on voting intentions of a representative sample of several thousands of British people in the days before and after the 9/11 attack, taking a Regression Discontinuity Design and Event Study approach, reveals an immediate large increase by about 31% in intentions to vote for the Conservative party and a decline of 17% in prospective Labour votes at future elections. These findings are robust to several checks, with the effects being short-lived, and varying largely depending on previous voting decisions, as well as by gender, education and employment status.
    Keywords: conflict economics, voting behaviour, household economics
    JEL: D72 F52 D12 D1
    Date: 2023–05
  10. By: Chen, Yutong (University of Virginia); Chiplunkar, Gaurav (University of Virginia); Sekhri, Sheetal (University of Virginia); Sen, Anirban (Microsoft Corporation); Seth, Aaditeshwar (Indian Institute of Technology Delhi)
    Abstract: We use a new machine learning-enabled, social network based measurement technique to assemble a novel dataset of firms' political connections in India. Leveraging this data along with a long panel of detailed financial transactions of firms, we study how political connections matter during an economic downturn. Using a synthetic difference-in-differences framework, we find that connected firms had 8-10% higher income, sales, and TFPR gains that were persistent for over a three-year period following the crisis. We unpack various mechanisms and show that connected firms were able to delay their short-term payments to suppliers and creditors, delay debt and interest payments, decrease expensive long-term borrowings from banks in favor of short-term non-collateral ones, and increase investments in productive assets such as computers and software. Our method to determine political connections is portable to other applications and contexts.
    Keywords: political connections, firms, crisis
    JEL: O16 D22 D73
    Date: 2023–05
  11. By: Tom Lane (University of Nottingham Ningbo China); Luis Miller (Spanish National Research Council); Isabel Rodriguez (Spanish National Distance Education University)
    Abstract: Political identity has become the strongest social divide within Western societies. This paper employs experiments to measure discrimination along multiple dimensions of social identity, and replicates previous findings showing the strongest discrimination against out-groups occurs in the political domain. Moreover, we explore a possible explanation for this phenomenon based upon social norms. We measure the social appropriateness of discrimination along each identity dimension. The ranking of dimensions by discrimination against out-groups reflects the extent to which such behaviour is normatively permissible, with the weakest anti-discrimination norms on the political dimension. Results are qualitatively similar in two European countries. We argue that, while norms sanctioning discrimination on other dimensions have developed historically, no such process has taken place in relation to political affiliation, bringing political identity to the fore and helping polarisation to flourish.
    Keywords: social norms; polarization; group identity; laboratory experiments; discrimination
    Date: 2023–06

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