nep-pol New Economics Papers
on Positive Political Economics
Issue of 2023‒07‒24
seventeen papers chosen by
Eugene Beaulieu
University of Calgary

  1. When Credit Turns Political: Evidence from the Spanish Financial Crisis By Pia Hüttl; Simon Baumgartner
  2. The Political Effects of the 1918 Influenza Pandemic in Weimar Germany By Stefan Bauernschuster; Matthias Blum; Erik Hornung; Christoph Koenig
  3. Approval vs. Participation Quorums By Dmitriy Vorobyev; Azamat Valei; Andrei Matveenko
  4. Gender differences in re-contesting decisions: New evidence from French municipal elections By Peveri, Julieta; Sangnier, Marc
  5. The Labor Force Participation Rate in the Context of ESG Models at World Level By Angelo Leogrande; Alberto Costantiello
  6. Ethnic conflict : the role of ethnic representation By Bhalotra, Sonia; Clots-Figueras, Irma; Iyer, Lakshmi
  7. The “weight” of territorial issues: Evidence from Catalonia, Scotland, and Northern Ireland By Laia Balcells; Lesley-Ann Daniels; Daniel Alexander Kuo
  8. Voting with Interdependent Values: The Condorcet Winner By Alex Gershkov; Andreas Kleiner; Benny Moldovanu; Xianwen Shi
  9. Diluted blood still better than water? The beneficial effects of politicians' birthplaces on refugee acceptance By Dang, Hai-Anh H.; Trinh, Trong-Anh
  10. The political economy of lockdown: does free media matter? By Besley, Timothy; Dray, Sacha
  11. The Status Quo and Belief Polarization of Inattentive Agents: Theory and Experiment By Vladimír Novák; Andrei Matveenko; Silvio Ravaioli
  12. Politicians’ Incentives and the Congested Budget Effect: Evidence from Italian Municipalities By Luca Bellodi; Massimo Morelli
  13. Key predictors for climate policy support and political mobilization: The role of beliefs and preferences By Simon Montfort
  14. What do politicians think of technocratic institutions? Experimental Evidence on the European Central Bank By Federico M. Ferrara; Donato Masciandaro; Manuela Moschella; Davide Romelli
  15. Automation and Public Policy Preferences By Colombe Ladreit
  16. Political Backlash to Refugee Settlement: Cultural and Economic Drivers By Francesco Campo; Sara Giunti; Mariapia Mendola; Giulia Tura
  17. Political Elites, Urban Institutions And Long-Run Persistence : The King Owned Towns By Elisa Borghi; Donato Masciandaro

  1. By: Pia Hüttl; Simon Baumgartner
    Abstract: This paper provides causal evidence on the effect of credit crunches on political polarization. We combine data on bank-firm connections and electoral outcomes at the city-level during the 2008-2014 Spanish Financial Crisis. First, we show that firms in a relationship with weak banks experience a reduction in their loan supply and employment growth. Next, we estimate the effects of unemployment on voting behaviour. We construct an instrument for unemployment based on the city-level exposure to foreign weak banks. We find that a one standard deviation increase in instrumented unemployment translates into a 7 percentage increase in the polarisation of voters.
    Keywords: Polarization, financial crisis, instrumental variable strategy, Spanish elections, credit supply shock, real effects, unemployment risk
    JEL: G01 P16 D72 D43
    Date: 2023
  2. By: Stefan Bauernschuster (University of Passau); Matthias Blum (German Medical Association); Erik Hornung (University of Cologne); Christoph Koenig (University of Rome Tor Vergata)
    Abstract: How do health crises affect election results? We combine a panel of election results from 1893-1933 with spatial heterogeneity in excess mortality due to the 1918 Influenza to assess the pandemic's effect on voting behavior across German constituencies. Applying a dynamic differences-in-differences approach, we find that areas with higher influenza mortality saw a lasting shift towards left-wing parties. We argue that pandemic intensity increased the salience of public health policy, prompting voters to reward parties signaling competence in health issues. Alternative explanations such as pandemic-induced economic hardship, punishment of incumbents for inadequate policy responses, or polarization of the electorate towards more extremist parties are not supported by our findings.
    Keywords: Pandemics, Elections, Health, Voting behavior, Issue salience, Issue ownership, Weimar Republic
    JEL: D72 I18 N34 H51
    Date: 2023–06
  3. By: Dmitriy Vorobyev; Azamat Valei; Andrei Matveenko
    Abstract: Using a pivotal costly voting model of elections between a status quo and a challenger alternative, we compare participation and approval quorum requirements in terms of how they shape voter incentives to cast votes, and how they ultimately impact voter turnout, election outcomes, and welfare. We first show that approval and participation quorum restrictions of equal strictness result in at most two types of stable non-trivial equilibria: “abstention, ” in which status quo supporters strategically abstain from voting, and “coordination, ” in which they vote with positive probability. While abstention equilibria are always identical in the two quorum settings, coordination equilibria may differ, but only when the cost of voting is sufficiently low and status quo support among voters is neither extremely high or low, nor is it close to the degree of support for the challenger. We show that, in those cases, the difference in the outcomes of interest between approval and participation quorum settings is quantitatively small. The main difference between the two settings therefore arises from the fact that, under an approval quorum, coordination equilibrium exists for a narrower range of status quo support levels than under a participation quorum. We discuss the implications of these findings for designing optimal quorum restrictions, suggesting that choosing an approval quorum over a participation quorum and setting its strictness close to half of the number of voters, or setting no quorum restrictions at all, are often welfare maximizing choices.
    Keywords: voting, participation quorum, approval quorum
    JEL: D71 D72
    Date: 2023–07
  4. By: Peveri, Julieta; Sangnier, Marc
    Abstract: This paper studies differences across genders in the re-contesting decisions of politicians following electoral wins or defeats. Using close races in mixed-gender French local elections, we show that women are less likely to persist in competition when they lose compared to male runners-up, but are equally or more prone than male winners to re-contest when they win. Differences in observable characteristics or in the expected electoral returns of running again cannot fully account for these gender gaps in persistence. In contrast, evidence suggests that results are driven by behavioural explanations such as cross-gender differences in candidates' attitudes toward competition, or by political parties behaving differently toward female and male candidates for a given electoral outcome. Additionally, we provide evidence that a woman's victory encourages former female challengers to re-contest but does not trigger the entry of new female candidates.
    Keywords: Gender, Competition, Persistence, Candidates, Self-selection, Elections
    JEL: D72 J16 J24
    Date: 2023–06
  5. By: Angelo Leogrande (LUM University Giuseppe Degennaro); Alberto Costantiello (LUM University Giuseppe Degennaro)
    Abstract: In this article we analyze the impact of Labor Force Partecipation Rate-LFPR in the context of the Environmental, Social and Governance-ESG model at world level. We use data from the ESG dataset of the World Bank for the period 2011-2020. We use Panel Data with Fixed Effects, Panel Data with Random Effects, Pooled OLS, Dynamic Panel. We find that the level of LFPR is positively associated among others to "Ratio of Female to Male Labor Force Participation Rate" and "Life Expectancy at Birth", and negatively associated among others, to "Unemployment" and "Agricultural Land". Furthermore, we have applied a clusterization with the k-Means algorithm optimized with the Silhouette coefficient, and we found the presence of three clusters. Finally, we confront eight different machine learning algorithms to predict the value of LFPR. We find that the best predictor is the Linear Regression. Linear Regression predicts an increase in LFPR equal to 0.42% on average for the analyzed 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 JEL Classification: D7 D70 D72 D73 D78, 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 JEL Classification: D7, D70, D72, D73, D78
    Date: 2023–06–01
  6. By: Bhalotra, Sonia (University of Warwick); Clots-Figueras, Irma (University of Kent); Iyer, Lakshmi (University of Notre Dame)
    Abstract: We investigate the impact of the political representation of minority groups on the incidence of ethnic conflict in India. We code data on Hindu-Muslim violence and Muslim political representation in India and leverage quasi-random variation in legislator religion generated by the results of close elections. We find that the presence of Muslim legislators results in a large and significant decline in Hindu-Muslim conflict. The average result is driven by richer states and those with greater police strength. Our results suggest that the political empowerment of minority communities can contribute to curbing civil conflict.
    Keywords: conflict ; violence ; religion ; political representation ; police ; close elections JEL codes: D72 ; D74 ; J15
    Date: 2023
  7. By: Laia Balcells (Georgetown Universit); Lesley-Ann Daniels (Institute Barcelona d’Estudis Internacionals (IBEI)); Daniel Alexander Kuo (University of Oxford (DPIR and Christ Church))
    Abstract: Territorial debates complicate the politics of the affected regions, as parties must decide whether to compete on a territorial dimension alongside others, such as redistribution, that have longstanding importance. Yet, empirical evidence is scarce regarding how much voters actually weigh territorial issues against others, and on which issues voters most reward congruent (like-minded) candidates. We theorize that in contexts when such issues are salient, they have a greater weight relative to others due to their identity-oriented nature. We present evidence from a conjoint experiment embedded in simultaneously fielded surveys in three European regions with active territorial disputes: Catalonia, Scotland, and Northern Ireland. We find that individuals’ preferences on the territorial issue matter more than other issues for candidate choice: the reward (punishment) of congruent (incongruent) candidates is greater, and individuals are less prepared to concede on this issue. Our results have broader comparative implications for political competition in multidimensional spaces where territorial disputes are present.
    Keywords: secessionism, voting behavior, conjoint experiment, territorial disputes, substate nationalism, United Kingdom, Spain
    Date: 2023–06
  8. By: Alex Gershkov (Department of Economics, Hebrew University Jerusalem and School of Economics, University of Surrey); Andreas Kleiner (Department of Economics, Arizona State University); Benny Moldovanu (Department of Economics, University of Bonn); Xianwen Shi (Department of Economics, University of Toronto)
    Abstract: We generalize the standard, private values voting model with single-peaked preferences and incomplete information by introducing interdependent preferences. Our main results show how standard mechanisms that are outcome-equivalent and implement the Condorcet winner under complete information or under private values yield starkly different outcomes if values are interdependent. We also propose a new notion of Condorcet winner under incomplete information and interdependent preferences, and discuss its implementation. The new phenomena in this paper arise because diffrent voting rules (including dynamic ones) induce different processes of information aggregation and learning.
    Date: 2023–06
  9. By: Dang, Hai-Anh H.; Trinh, Trong-Anh
    Abstract: In parliamentary systems, elected representatives often have power to direct resources to their preferred areas. Foreign-born politicians, those who were born in countries other than the country where they hold policymaking positions, may exhibit a strong preference for refugees. We provide the first empirical evidence on the relationship between politicians' birthplaces and refugee acceptance. Employing an instrumental variable approach to analyze a newly-constructed panel data set comprising 17 destination countries in the OECD during 2002-2019, we find that countries with higher shares of foreign-born politicians have higher recognition rates and offer more aid to refugees. Our findings remain robust for different outcome variables, model specifications, and birthplaces' income levels. Some evidence also suggests that countries with more foreign-born politicians affiliated with left-wing parties tend to show more favouritism toward refugees. Finally, we find that favourable asylum policy and positive public opinion are possible explanations for increased acceptance of refugees.
    Keywords: foreign-born politician, refugee acceptance, recognition rate, refugee aid, asylum policy
    JEL: F22 F35 D72 O15
    Date: 2023
  10. By: Besley, Timothy; Dray, Sacha
    Abstract: This paper studies the role of free media in how governments and the public responded to the COVID-19 pandemic. We first document the presence of policy and behavioral responsiveness during the early phase of the pandemic. Using a panel data of daily COVID-19 deaths, lockdown policies, and mobility changes in 155 countries, we find that governments were more likely to impose a lockdown, and citizens to reduce their mobility, as the initial number of deaths increased. To measure the role of media freedom on responsiveness given endogeneity in death reporting, we simulate deaths from a calibrated SEIR model as an instrument for reported deaths. Using this approach, we find evidence that the presence of free media mattered for the timing of early responses to COVID-19. Responsiveness to deaths was limited to citizens in free-media countries, and accounted for 40% of the difference in lockdown decision and mobility changes between free-media and censored-media countries. In support of the role of free media, we show that differences in responsiveness are not explained by a range of other country characteristics such as the level of income, education or democracy. We also find evidence that citizens with access to free media were better informed about the pandemic and had more responsive levels of online searches about COVID-19, supporting the view that free media served to inform the public on the risks of COVID-19.
    Keywords: COVID-19; lockdown; media freedom; responsiveness; Coronavirus; PERISCOPE project which has received funding from the European Union’s Horizon 2020 Research and Innovation programme under the Grant Agreement number 101016233; Elsevier deal
    JEL: D72 D78 L82
    Date: 2023–01–31
  11. By: Vladimír Novák (National Bank of Slovakia); Andrei Matveenko (University of Mannheim); Silvio Ravaioli (Cornerstone Research)
    Abstract: We show that rational but inattentive agents can become polarized ex-ante. We present how optimal information acquisition, and subsequent belief formation, depend crucially on the agent-specific status quo valuation. Beliefs can systematically - in expectations over all possible signal realizations conditional on the state of the world - update away from the realized truth and even agents with the same initial beliefs might become polarized. We design a laboratory experiment to test the model’s predictions. The results confirm our predictions about the mechanism (rational information acquisition), its effect on beliefs (systematic polarization) and provide general insights into demand for information.
    JEL: C92 D72 D83 D84 D91
    Date: 2023–06
  12. By: Luca Bellodi; Massimo Morelli
    Abstract: Once in office, politicians propose policies and programmes aimed at winning the support of their constituencies. While this form of political activism increases with the number of politicians in government, it can also clash with capacity constraints, leading to a congestion effect whereby politicians’ plans are not enacted in practice. With novel data on Italian municipalities, we estimate the effect of the number of politicians on a battery of planned and actual budget outcomes. We leverage a reform that introduced a new temporary population threshold where the size of government bodies changed discontinuously and estimate treatment effects with a difference-in-discontinuities design. We find that more politicians plan to spend more but they do not do so in practice. The degree of this congestion decreases when bureaucratic capacity is high (i.e., larger share of bureaucrats with a university degree), suggesting administrative capacity deficits prevent politicians from implementing their proposed agenda.
    Date: 2023
  13. By: Simon Montfort
    Abstract: Public support and political mobilization are two crucial factors for the adoption of ambitious climate policies in line with the international greenhouse gas reduction targets of the Paris Agreement. Despite their compound importance, they are mainly studied separately. Using a random forest machine-learning model, this article investigates the relative predictive power of key established explanations for public support and mobilization for climate policies. Predictive models may shape future research priorities and contribute to theoretical advancement by showing which predictors are the most and least important. The analysis is based on a pre-election conjoint survey experiment on the Swiss CO2 Act in 2021. Results indicate that beliefs (such as the perceived effectiveness of policies) and policy design preferences (such as for subsidies or tax-related policies) are the most important predictors while other established explanations, such as socio-demographics, issue salience (the relative importance of issues) or political variables (such as the party affiliation) have relatively weak predictive power. Thus, beliefs are an essential factor to consider in addition to explanations that emphasize issue salience and preferences driven by voters' cost-benefit considerations.
    Date: 2023–06
  14. By: Federico M. Ferrara; Donato Masciandaro; Manuela Moschella; Davide Romelli
    Abstract: Technocracy has come to be increasingly regarded as a threat to representative democracy. Significant attention has thus been recently devoted to exploring public preferences towards technocratic institutions. Elected policymakers’ attitudes have instead not been investigated as systematically. This paper fills this gap by examining politicians’ views on central banks. Based on an original elite survey of the Members of the European Parliament, we gauge elected policymakers’ attitudes towards the mandate and policy conduct of the European Central Bank. Our findings show that the political orientation of politicians largely drives attitudes towards the ECB’s institutional mandate. Interestingly, the findings from two experiments embedded in the survey also show that the attitudes of MEPs are not as static as ideological orientations would lead us to expect. The information set to which politicians are exposed significantly shapes their views on both the ECB’s mandate and its policy conduct, but less on ECB independence
    Keywords: accountability, central banks, ECB, independence, political attitudes, technocracy, trust
    Date: 2023
  15. By: Colombe Ladreit
    Abstract: Automation and globalization triggered sizeable labor market adjustments in the US. While the backlash against globalization has been well-identified in the political economy literature, this is not the case for automation. Using a survey experiment, we study how Americans update their public policy preferences after priming them with an automation story. We show it does not increase their support for government intervention and uncover two explanatory channels behind it: fairness considerations and perceived vulnerability to automation. First, respondents do not see automation as particularly unfair to workers and think that firms are justified in automating. Second, our automation treatment increases respondents'anxiety regarding automation's impact on American jobs in general but not on their own occupations. Hence, while an automation prime increases average anxiety levels, respondents do not feel personally threatened by robots. Finally, we find that respondents are less likely to support nationalist policies once they know the cause of the shock is automation. This suggests that misperceptions about the cause of the shock have partly driven the increase in anti-trade and anti-immigration sentiment following robot adoption. Classification-JEL :
    Date: 2022
  16. By: Francesco Campo; Sara Giunti; Mariapia Mendola; Giulia Tura
    Abstract: The 2015 refugee crisis in Europe fueled anti-immigration sentiment in receiving areas, with potential unintended consequences for refugee integration. We investigate the heterogeneity of political backlash across Italian municipalities in the aftermath of the crisis and assess the role played by local conditions at the time of refugees’ settlement, distinguishing between baseline economic and cultural factors. By leveraging the quasirandom dispersal policy and using causal forests, we find that the impact of refugee exposure on anti-immigration backlash is significantly higher in more affluent areas, with more bonding social capital. The opposite holds in contexts where there is meaningful intergroup contact with former immigrants (e.g mixed marriages). We exploit this pattern of heterogeneity to evaluate a matching model to optimally assign refugees to locations and deliver policy implications for novel refugee resettlement schemes that minimize anti-immigration backlash.
    Keywords: Refugee Social Integration, Dispersal Policy, Political Preferences.
    JEL: J15 H53 I38
    Date: 2023–06
  17. By: Elisa Borghi; Donato Masciandaro
    Abstract: We explore the long run socio-economic impact of a medieval urban governance setting , the king-owned towns (KOTs). For a town the KOT status implies special fiscal, commercial and administrative prerogatives between the community and the Crown, where such as status could be renovated, modified or suspended. Researchers have tested the persistence effect of urban governance by comparing free city-states (communes) and feudal towns in Italy, Germany, Switzerland and the United Kingdom. This paper explores the KOTs as a third and novel category. The KOTs case is analysed using the southern Italy case, where the Kingdom of Naples delegated jurisdictional and fiscal powers to towns’ ruling classes – nobles and commoners - thereby creating a self-governance setting in which community representatives took collective decisions, including the systematic implementation of rights negotiations with the Crown, that shaped the evolution of their towns’ municipal statutes. This peculiar collective action can strengthen the persistence effect. Empirically, we find that a town’s past king owned experience is correlated with five centuries later outcomes, in terms of both economic performance and civil capital. Our results suggest that KOT status is more similar to commune experience than to fief experience, being a device to develop collective decision skills; at the same time, the unstable nature of the KOT status inhibited the strengthening of these capacities in the local communities.
    Keywords: urban governance, political elites, long-run persistence, economic history, culture, economic geography, Italy
    JEL: D72 H10 N44 O43 O52 K00 R10
    Date: 2023

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