nep-pol New Economics Papers
on Positive Political Economics
Issue of 2023‒08‒28
sixteen papers chosen by
Eugene Beaulieu, University of Calgary

  1. Elections and Policies: Evidence from the Covid Pandemic By Daryna Grechyna
  2. (How) Do electoral surprises drive business cycles? Evidence from a new dataset By Fetzer, Thiemo; Yotzov, Ivan
  3. Fear to Vote Explosions, Salience, and Elections By Juan F. Vargas; Miguel E. Purroy; Felipe Coy; Sergio Perilla; Mounu Prem
  4. The politics of policy reform: Experimental evidence from Liberia By Wayne Aaron Sandholtz
  5. The Shift to Commitment Politics and Populism:Theory and Evidence By Luca Bellodi; Massimo Morelli; Antonio Nicolò; Paolo Roberti
  6. Rewarding allegiance: Political alignment and fiscal outcomes in local government By Christa N. Brunnschweiler; Samuel K. Obeng
  7. The Impact of Money in Politics on Labor and Capital: Evidence from Citizens United v. FEC By Pat Akey; Tania Babina; Greg Buchak; Ana-Maria Tenekedjieva
  8. Panic politics on the US West Coast By Nicolas Berman; Björn Brey; Jérémy Laurent-Lucchetti
  9. Black empowerment and white mobilization: The effects of the Voting Rights Act By Andrea Bernini; Giovanni Facchini; Marco Tabellini; Cecilia Testa
  10. The increase in partisan segregation in the United States By Jacob R. Brown; Enrico Cantoni; Ryan D. Enos; Vincent Pons; Emilie Sartre
  11. The Impact of Patent Applications in the Context of the ESG Model at World Level By Leogrande, Angelo; Leogrande, Domenico; Costantiello, Alberto
  12. How does democracy cause growth? By Vanessa Boese-Schlosser; Markus Eberhardt
  13. The Epistemic Vices of Democracies in the Age of Populism By Luigi Bonatti
  14. Economic Growth and Pollution in different Political Regimes By Andreas Kammerlander
  15. Policy Decentralization in the Post-Prohibition Era By Andrew Arnold; Holger Sieg
  16. Digitalization and Gender Equality in Political Leadership in Sub-Saharan Africa By Diego B. P. Gomes; Carine Meyimdjui

  1. By: Daryna Grechyna
    Abstract: This paper examines the evolution of public policies before the scheduled political elections based on the government responses to the Covid pandemic. The results of an event study in a sample of countries that experienced political elections during the first year of the pandemic suggest that “lockdown style” policies were more stringent the further away countries were from election dates. The gradual relaxation of “lockdown style” restrictions ahead of the elections was driven by policies in low income, less democratic countries, and countries with relatively low social trust. Covid-related “economic support” policies were not significantly affected by the scheduled political elections. Placebo tests based on a random sample of countries that did not experience political elections in the first year of the pandemic confirm the validity of the results.
    Keywords: political cycles, event study, Covid pandemic
    JEL: D72 C23 O57
    Date: 2023
  2. By: Fetzer, Thiemo (University of Warwick, University of Bonn, ECONtribute, STICERD, CAGE, NIESR, CESifo and CEPR); Yotzov, Ivan (University of Warwick, CAGE, and the Bank of England)
    Abstract: This paper documents that surprise election outcomes – measured as deviations between realised vote shares and expected vote shares based on a newly constructed dataset of opinion polls and party and candidate vote shares close to election day – are causing non-negligible short-term contractions in economic activity. We find that, on average, a percentage point higher surprise is associated with a 0.37 percentage point lower year-on-year growth rate one year after the election. These effects are only present in countries with strong democracies and seem to operate mainly through increased economic policy uncertainty and lower investment growth over a window of up to eight quarters after an election. In addition, surprise performances of left-wing political parties and in elections with transitions to left-wing governments (pre-defined from the Parlgov Database) are associated with the largest effects on the economy.
    Keywords: macroeconomic fluctuations ; elections ; structural reforms ; surprises ; uncertainty JEL codes: E02 ; E3 ; F5 ; E32
    Date: 2023
  3. By: Juan F. Vargas; Miguel E. Purroy; Felipe Coy; Sergio Perilla; Mounu Prem
    Abstract: Criminal groups use violence strategically to manipulate the behavior of vic- tims and bystanders. At the same time, violence is a stimulus that causes fear, which also shapes people’s reactions. Taking advantage of the randomness in the timing of antiperson- nel landmine accidents in Colombia, as well as their coordinates relative to those of voting polls, we identify the effect of violence-induced fear (independent from intentions) on elec- toral behavior. Fortuitous landmine explosions reduce political participation. We further disentangle whether the type of fear caused by landmine explosions responds to an informa- tion channel (whereby people learn about the risk of future victimization) or by the salience of the explosion (which causes individuals to make impulsive decisions, driven by survival considerations), and show evidence in favor of the latter. While the turnout reduction takes place across the ideological spectrum, we document that the explosions induce a shift in the political preferences of individuals who do vote. These findings point to worrisome potential consequences for the consolidation of democracies in places affected by conflict.
    Keywords: Landmine explosions, conflict, voting, salience, fear
    JEL: D72 D74 P48
    Date: 2023–07–24
  4. By: Wayne Aaron Sandholtz
    Abstract: Public service reform often entails broad benefits for society and concentrated costs for interest groups. These groups’ political responses determine whether electoral incentives exist to improve public services. This paper examines the electoral effects of a randomized Liberian school reform which increased student learning but antagonized teachers. On average, this policy reduced the incumbent party’s presidential vote share by 3 percentage points (10%). It had no significant impact on legislative races, consistent with correct attribution by voters; information experiments with candidates and voters further suggest a well-informed electorate. The policy also reduced teachers’ job satisfaction by 0.18s and lowered their participation in political activity by 0.22s. I use the policy’s pairwise randomization to study how its electoral effects varied across the (orthogonal) distributions of treatment effects on student learning and teacher political activity. The policy increased vote share more where it caused greater student learning, and reduced vote share more where it caused greater political disengagement of teachers. (Treatment effects on student learning and teacher political involvement were uncorrelated.) Back-of-the-envelope calculations suggest that the policy could have won votes on net if the floor on learning effects had been the 27th percentile, and the floor on teacher political involvement effects had been the 30th percentile. This paper shows empirically that electoral rewards correlate with the size of public service improvements, but that politically feasible reforms must balance voter rewards with the costs of alienating interest groups.
    Keywords: Electoral returns; Policy feedback; Public service delivery; Policy experimentation; Education; Political economy; Elections; Randomized controlled trial; Liberia; Information
    Date: 2023
  5. By: Luca Bellodi; Massimo Morelli; Antonio Nicolò; Paolo Roberti
    Abstract: The decline in voters' trust in government and the rise of populism are two concerning features of contemporary politics. In this paper, we present a model of commitment politics that elucidates the interplay between distrust and populism. Candidates supply policy commitments to mitigate voters' distrust in government, shrinking politicians' levels of discretion typical of representative democracies. Alongside commitments, candidates rationally choose the main strategies associated with populism, namely anti-elite and pro-people rhetoric. With novel data on voters' distrust towards the U.S. federal government, which we match with the Twitter activity of more than 2, 000 candidates over _ve congressional elections, we show that distrust is strongly associated with candidates' supply of commitments and populist rhetoric, which are also e_ective strategies at mobilizing distrustful voters. We also show theoretically that the shift to commitment politics determines greater aversion to checks and balances, and hence even illiberal populism can emerge.
    Keywords: Populism, Commitment, Anti-Elite Rhetoric, Trust, Turnout, Agencies of Restraint
    JEL: D72 D78 P16
    Date: 2023
  6. By: Christa N. Brunnschweiler; Samuel K. Obeng
    Abstract: We examine how local governments’ political alignment with central government affects subnational fiscal outcomes. In theory, alignment could be rewarded for example with more intergovernmental transfers, or swing voters in unaligned constituencies could be targeted instead. We analyze data from Ghana, which has a complex decentralized system that seeks to preclude political alignment effects. District Chief Executives (DCEs) are centrally appointed local administrators loyal to the ruling party, while district Members of Parliament (MPs) may belong to another party. A formula for central transfer distribution aims to limit the influence of party politics. Using a new dataset for 1994-2018 and a close election regression discontinuity design we find that despite this system, there is evidence of politically-motivated local fiscal outcomes. Aligned districts receive lower transfers and have lower district expenditure and internally generated funds, indicating swing-voter targeting. Results suggest that district fragmentations have weakened these effects. We also show strong electoral cycle effects, with mid-term peaks in fiscal outcomes.
    Keywords: political alignment, Ghana, regression discontinuity, electoral cycles, fiscal federalism
    Date: 2023
  7. By: Pat Akey; Tania Babina; Greg Buchak; Ana-Maria Tenekedjieva
    Abstract: We examine whether corporate money in politics benefits or hurts labor using the 2010 Supreme Court ruling Citizens United, which rendered bans on political election spending unconstitutional. In difference-in-difference analyses, affected states experience increases in both capital and labor income relative to unaffected states. We find evidence consistent with increased political spending spurring political competition and the adoption of pro-growth policies. These policies benefit a broader set of constituents as we find a broad-based increase in labor income. Affected states see increased political turnover and reduced regulatory burdens. The economic effects are stronger among ex-ante politically inactive and younger firms.
    JEL: D72 E25 G38 J30 P16
    Date: 2023–07
  8. By: Nicolas Berman; Björn Brey; Jérémy Laurent-Lucchetti
    Abstract: This study shows that military attacks —through fear and panic— can distort political behavior and create a “conservative shift” in subsequent elections. Using the distance to the Ellwood bombardment in 1942, a shelling of civilian installations on the US mainland during WW2 which caused minimal damage but that created a large wave of panic, we find that support for Republican candidates increased in subsequent Gubernatorial, Presidential and House elections in Californian counties in the vicinity of the incident. Interestingly, the effect appears to persist for a long time, even after WW2 ended. Using a large corpus of articles from Californian newspapers and text analysis, we provide evidence that the event led to a persistent shift in conservative beliefs of local communities. We conclude that attacks, through their psychological effects, might have long-run consequences through preference-shifting and changes in voting behaviors.
    Keywords: attack, bombing, elections, conservatism, World War II
    Date: 2023
  9. By: Andrea Bernini; Giovanni Facchini; Marco Tabellini; Cecilia Testa
    Abstract: The 1965 Voting Rights Act (VRA) paved the road to Black empowerment. How did southern whites respond? Leveraging newly digitized data on county-level voter registration rates by race between 1956 and 1980, and exploiting pre-determined variation in exposure to the federal intervention, we document that the VRA increases both Black and white political participation. Consistent with the VRA triggering counter mobilization, the surge in white registrations is concentrated where Black political empowerment is more tangible and salient due to the election of African Americans in county commissions. Additional analysis suggests that the VRA has long-lasting negative effects on whites’ racial attitudes.
    Keywords: Civil Rights, Race, Voting Behaviour, Enfranchisement
    Date: 2023
  10. By: Jacob R. Brown; Enrico Cantoni; Ryan D. Enos; Vincent Pons; Emilie Sartre
    Abstract: This paper provides novel evidence on trends in geographic partisan segregation. Using two individual-level panel datasets covering the near universe of the U.S. population between 2008 and 2020, we leverage information on individuals’ party affiliation to construct two key indicators: i) the fraction of Democrats among voters affiliated with either major party, which reveals that partisan segregation has increased across geographical units, at the tract, county, and congressional district levels; ii) The dissimilarity index, which measures differences in the partisan mix across distinct sub-units and highlights that partisan segregation has also increased within geographical units. Tracking individuals across election years, we decompose changes in partisan segregation into different sources: voter migration, generational change, older voters entering the electorate, and voters changing their partisanship or their registration status. The rise in partisan segregation is mostly driven by generational change, in Democratic-leaning areas, and by the increasing ideological conformity of stayers, in Republican-leaning areas.
    Date: 2023
  11. By: Leogrande, Angelo; Leogrande, Domenico; Costantiello, Alberto
    Abstract: In the following article, we estimate the value of Patent Applications-PA in the context of the Environmental, Social and Governance-ESG model at world level. We use data from World Bank for 193 countries in the period 2011-2021. We found that PA is positively associated, among others, to “CO_2 Emissions” and “Mammal Species Threated”, and negatively associated among others to “Hospital Beds” and “Research and Development Expenditures”. Furthermore, we found that at aggregate level PA is negatively associated to each macro component of the ESG model i.e.: Environment, Social and Governance. Furthermore, we have applied eight different machine-learning algorithms for the prediction of the future value of PA. We found that the best predictive algorithm is the Simple Regression Tree in terms of minimization of MAE, RMSE and MSE and maximization of R-squared. The value of PA is predicted to growth by an average of 9.82% 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.
    JEL: D7 D70 D72 D73 D78
    Date: 2023–07–18
  12. By: Vanessa Boese-Schlosser; Markus Eberhardt
    Abstract: Recent empirical work has established that ‘democracy causes growth’. In this paper, we determine the underlying institutions which drive this relationship using data from the Varieties of Democracy project. We sketch how incentives and opportunities as well as the distribution of political power shaped by underlying institutions, in combination with the extent of the market, endogenously form an ‘economic blueprint for growth’, which likely differs across countries. We take our model to the data by adopting novel heterogeneous treatment effects estimators, which allow for non-parallel trends and selection into institutional change, and run horse races between underlying institutions. We find that freedom of expression, clean elections, and legislative executive constraints are the foremost drivers of long-run development. Erosion of these institutions, as witnessed recently in many countries, may jeopardise the perpetual growth effect of becoming a liberal democracy we establish for the post-WWII period.
    Keywords: Democracy, Growth, Institutions, Interactive Fixed Effects, Difference-in-Difference
    Date: 2023
  13. By: Luigi Bonatti
    Abstract: The subject of this paper is how the epistemic limitations of individuals and their biases in reasoning affect collective decisions and in particular the functioning of democracies. In fact, while the cognitive sciences have largely shown how the imperfections of human rationality shape individual decisions and behaviors, the implications of these imperfections for collective choice and mass behaviors have not yet been studied in such detail. In particular, the link between these imperfections and the emergence of contemporary populisms has not yet been thoroughly explored. This is done in this paper by considering both fundamental dimensions of the political space: the cultural-identitarian and the socio-economic one. As has been noted, reflections on these points induce to revise the picture of democracy as a regime producing collective decisions that come out from the interaction of independent individuals well aware of their values and interests, and rationally (in the sense of rational choice theory) pursuing them. This leads to a certain skepticism towards the idealization of democracy as human rationality in pursuit of the common good, which serves to provide cover for those who profit from the distortions and biases in the policy-making processes of actual democracies. A natural conclusion of the paper is that contemporary democracies are quite vulnerable in the face of populist leaders and parties, that are systematically trying to exploit to their advantage people’s imperfect rationality (using “easy arguments”, emotions, stereotypes…).
    Keywords: bounded rationality, Plato’s political philosophy, cognitive sciences, social psychology, evolutionary psychology, social identity
    JEL: P00 Z10
    Date: 2023
  14. By: Andreas Kammerlander (Department of International Economic Policy, University of Freiburg)
    Abstract: I examine the association between nighttime light luminosity and ten pollution measures (CO2, CO, NOx, SO2, NMVOC, NH3, BC, OC, PM10 and PM2.5) across dierent political regimes at a local level. Although the eects of the political system and economic growth on pollution have been widely analyzed at the country level, this is the rst study to do so at the grid level. The empirical analysis yields three major insights. First, economic growth is positively associated with a wide array of dierent pollution measures. Second, there are signicant dierences in the association between economic growth and air pollution across dierent political regimes. For example, the association between nighttime light luminosity and air pollution is strictly positive for autocracies. The association between nighttime luminosity and air pollution is substantially smaller but still positive for democracies. Furthermore, among democracies the relationship between nighttime light luminosity and air pollution is concave for nine out of ten pollutants; among autocracies, the relationship is either convex (ve out of ten pollutants) or the squared term is insignicant. Third, the dierences among political regimes is driven chiey by pollution emissions in the industry, energy, and transport sectors; there is no dierence between autocracies and democracies in terms of the eect of growth on emissions in the agricultural and residential sectors.
    Keywords: local economic growth, air pollution, nighttime lights, geo-data
    JEL: O18 Q53
    Date: 2022–10
  15. By: Andrew Arnold; Holger Sieg
    Abstract: We study the decentralization of liquor policies in the Post-Prohibition Era, which is the most famous natural experiment ever conducted with respect to policy decentralization in the U.S. Our empirical analysis exploits a unique feature of this policy change, namely that we observe votes of citizens in public referenda as well as roll call votes of the state legislators affecting the same policy. Our analysis is based on a probabilistic voting model. We show how to identify and estimate a model with a multi-dimensional policy space. These estimates then allow us to map the policy space into an alcohol consumption space. We find that this mapping is highly non-linear. Hence, differences in estimated bliss points in the ideological policy space tend to exaggerate differences in preferences over alcohol consumption. Nevertheless, decentralized policies offer the opportunity to account for heterogeneity in preferences and increase welfare. The optimal decentralized policy increases aggregate welfare by up to 79 percent compared to the optimal uniform policy.
    JEL: C0 H0 P0
    Date: 2023–07
  16. By: Diego B. P. Gomes; Carine Meyimdjui
    Abstract: We examine the impact of digitalization on people’s perceptions of women as political leaders in 34 Sub-Saharan African countries. We find that being a social media or internet user is linked to a higher likelihood of people supporting gender equality in political leadership. However, the intensive margin of usage does not appear to be significant. Furthermore, women’s perceptions of gender equality in political leadership are more sensitive to internet and social media use than men’s. The paper recommends policies for improving ICT infrastructure and investing in technological education.
    Keywords: gender; political leadership; digitalization; internet; social media; internet user; data detail; social media usage; IMF working paper 23/122; usage indicator; Social networks; Women; Gender inequality; Gender diversity; Sub-Saharan Africa; Africa
    Date: 2023–06–09

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