nep-pol New Economics Papers
on Positive Political Economics
Issue of 2023‒09‒04
twelve papers chosen by
Eugene Beaulieu, University of Calgary

  1. Voters, Bailouts, and the Size of the Firm By Schilling, Linda
  2. Ideological Ambiguity and Political Spectrum By Hector Galindo-Silva
  3. Politics and income taxes: progress and progressivity By Berliant, Marcus; Boyer, Pierre
  4. The Electric Telegraph, News Coverage and Political Participation By Wang, Tianyi
  5. Information Aggregation in Stratified Societies By Marina Agranov; Ran Eilat; Konstantin Sonin
  6. Social Norms, Political Polarization, and Vaccination Attitudes: Evidence from a Survey Experiment in Turkey By Mustafa Kaba; Murat Koyuncu; Sebastian O. Schneider; Matthias Sutter
  7. The use of social media as a form of strategic communication by political parties in Morocco: A theoretical study By Nouha Anka Idrissi; Rachid Smouni
  8. The Liar's Dividend: The Impact of Deepfakes and Fake News on Trust in Political Discourse By Schiff, Kaylyn Jackson; Schiff, Daniel S.; Bueno, Natalia
  9. Political favoritism and internal migration in Benin By Stöcker, Alexander; Baskaran, Thushyanthan; Hufschmidt, Patrick
  10. The Political Economy of Assisted Immigration: Australia 1860-1913 By Hatton, Timothy J.
  11. Political Visits and Firm Value: Evidence from central leaders’ local tours in China By ITO Asei; LIM Jaehwan; ZHANG Hongyong
  12. Aid, Reform, and Interest Groups By Heckelman, Jac C; Wilson, Bonnie

  1. By: Schilling, Linda
    Abstract: I present a political economic theory, explaining bailouts for failing firms in the presence of non-voters (foreigners). The governing politician uses the bailout as a tool to sway voters for maximizing re-election chances. Bailouts partially leak to foreigners at the firm and are also financed by tax-paying foreigners outside the firm. I show, larger failing firms are granted larger bailouts even if the additional size is due to having more foreign stakeholders (``too-big-to-fail- lookalike''). Yet, among equally sized firms, the firm with more voting-stakeholders receives the larger bailout, contradicting social optimality. Besides firm size, also voting rights cause bailouts.
    Keywords: political finance, bailouts, economic voting, probabilistic voting, vote-share maximization, too-big-to-fail, socially optimal bailouts, partial suffrage
    JEL: D72 G3 G32 G33 G35 G38 P16
    Date: 2023–07–30
  2. By: Hector Galindo-Silva
    Abstract: This study examines the relationship between ambiguity and the ideological positioning of political parties across the political spectrum. We identify a strong non-monotonic (inverted U-shaped) relationship between party ideology and ambiguity within a sample of 202 European political parties. This pattern is observed across all ideological dimensions covered in the data. To explain this pattern, we propose a novel theory that suggests centrist parties are perceived as less risky by voters compared to extremist parties, giving them an advantage in employing ambiguity to attract more voters at a lower cost. We support our explanation with additional evidence from electoral outcomes and economic indicators in the respective party countries.
    Date: 2023–08
  3. By: Berliant, Marcus; Boyer, Pierre
    Abstract: This paper begins with a survey of the literature on the political economy approaches to labor income taxation. We focus on recent progress made by examining in detail the specific properties of non-linear taxes derived in the context of voting. Next, we present new results on the existence of majority voting equilibrium that unify work in the standard framework. Finally, we discuss how recent theoretical results help us uncover empirical patterns from the last 50 years in the US tax system, namely a sharp decrease in top marginal tax rates, the rise of the Earned Income Tax Credit (EITC), and increased progressivity in the middle of the income distribution.
    Keywords: Non-linear income taxation; Tax reform; Political economy; Optimal taxation; EITC
    JEL: C72 D72 D82 H21
    Date: 2023–07–26
  4. By: Wang, Tianyi (University of Toronto)
    Abstract: Using newly digitized data on the growth of the telegraph network in America during 1840-1852, the paper studies the impacts of the electric telegraph on national elections. I use proximity to daily newspapers with telegraphic connections to Washington to generate plausibly exogenous variation in access to telegraphed news from Washington. I find that access to Washington news with less delay significantly increased voter turnout in national elections. For mechanisms, I provide evidence that newspapers facilitated the dissemination of national news to local areas. In addition, text analysis on more than a hundred small-town weekly newspapers from the 1840s shows that the improved access to news from Washington led newspapers to cover more national political news, including coverage of Congress, the presidency, and sectional divisions involving slavery. The results suggest that the telegraph made newspapers less parochial, facilitated a national conversation and increased political participation. I find little evidence that access to telegraphed news from Washington affected party vote shares or Congressmen's roll call votes.
    Keywords: information technology, newspaper, election, economic history
    JEL: O3 L96 L82 D72 N71
    Date: 2023–07
  5. By: Marina Agranov; Ran Eilat; Konstantin Sonin
    Abstract: We analyze a model of political competition in which the elite forms endogenously to aggregate information and advise the uninformed median voter which candidate to choose. The median voter knows whether or not the endorsed candidate is biased toward the elites, but might still prefer the biased candidate if the elite’s endorsement provides sufficient information about her competence. The elite size and the degree of information aggregation by the elite depend on the extent to which the median voter follows the elite’s advice. A higher cost of redistribution minimizes the elite’s information advantage, hinders information transmission, and decreases the expected competence of the elected politician.
    JEL: D72 D83
    Date: 2023–07
  6. By: Mustafa Kaba (Max Planck Institute for Research on Collective Goods, Bonn); Murat Koyuncu (Bogazici University); Sebastian O. Schneider (Max Planck Institute for Research on Collective Goods, Bonn); Matthias Sutter (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: This paper examines the role of social norms and political polarization in shaping vaccination attitudes and behaviors in the context of the Covid-19 pandemic. Using a largescale representative survey experiment in Turkey, we first show that political affiliation is a strong predictor of attitudes towards vaccination. We then use standard economic games to measure the extent of polarization caused by subjects’ attitudes towards vaccination. We find that pro- and anti-vaxxers discriminate each other substantially. Furthermore, when pro- and anti-vaxxers perceive a political difference between them, this polarization is exacerbated. Finally, using randomized informational treatments, we show that the promotion of a broadly shared social identity might mitigate this outgroup discrimination.
    JEL: C9 D01 D9
    Date: 2023–07
  7. By: Nouha Anka Idrissi (FSJES - Faculté des Sciences Juridiques, Economique et Sociales de Mohammedia - UH2MC - Université Hassan II [Casablanca]); Rachid Smouni (FSJES - Faculté des Sciences Juridiques, Economique et Sociales de Mohammedia - UH2MC - Université Hassan II [Casablanca])
    Abstract: n a world where social media are playing an increasingly central role in political life, this article aims to present a systematic analysis of their use by political parties and analyzes their impact on political strategy and communication, especially in the Moroccan context. By examining the conceptual, historical and theoretical framework of social media, as well as the definitions and characteristics that accompany them, we have identified the main factors influencing their use by political parties. Through this study, we will also attempt to deduce a theoretical model of the relationship between political communication and social media users. This theoretical model will be based on a set of key hypotheses concerning the interaction between social media, political parties and users. By analyzing the impact of social media on the strategic communication of political parties, this study also examines the factors that influence this impact, while carrying out a comparative study of the use of social media bypolitical parties in other contexts. Analysis of current social media use practices by political parties in Morocco reveals a growing adoption of these platforms to reach and mobilize their target audiences, particularly during the 2021 elections. However, the effectiveness of social media depends on various factors, such as the social and economic structure of society, political culture and the organizational structure of political movements. To better understand the impact of social media, we also carried out a comparative analysis of their use in different contexts, such as protest movements in Egypt and elections in the USA. In conclusion, this study underlines the importance of a systematic analysis of the impact of social media in the communication and strategy of political parties in Morocco, while highlighting the local specificities that need to be taken into account for an effective use of these tools. The knowledge gained from this research can guide political decision-makers, activists and researchers in the development of mobilization and political communication strategies adapted to Moroccan realities.
    Keywords: Social media political parties political communication JEL Classification : M3, M31 Paper type : Theoretical article, Social media, political parties, political communication JEL Classification : M3
    Date: 2023–06–20
  8. By: Schiff, Kaylyn Jackson (Emory University); Schiff, Daniel S. (Purdue University); Bueno, Natalia
    Abstract: This study examines the phenomenon of misinformation about misinformation, or politicians falsely claiming that stories are fake news or deepfakes. Strategic and false claims that stories are fake news or deepfakes may benefit politicians by helping them maintain support after a scandal. We propose that this benefit, known as the "liar's dividend, " may be achieved through two strategies employed by politicians: by invoking informational uncertainty or by rallying core supporters in opposition. We administer five survey experiments to over 15, 000American adults detailing hypothetical politician responses to video or text news stories depicting real politician scandals. We find that claims of misinformation representing both strategies increase politician support across partisan subgroups. These strategies are effective against text-based reports of scandals but are largely ineffective against video evidence and do not reduce general trust in media. Finally, these false claims produce greater dividends for politicians than alternative responses to scandal, such as remaining silent or apologizing.
    Date: 2023–08–10
  9. By: Stöcker, Alexander; Baskaran, Thushyanthan; Hufschmidt, Patrick
    Abstract: In this paper we explore the role of regional connections with a national leader as a pull factor of internal migration in Benin by exploiting granular census data over the period 1991-2013. The empirical analysis is based on a gravity model of migration and utilizes a PPML estimator. Controlling for a diverse set of fixed effects, we show that being connected to a national leader goes along with statistically significant levels of migration into the respective districts. We also provide more detailed evidence that links these migration movements to the presence of political favoritism through its ability to improve economic opportunities and the access to public goods at the local level. The evidence in this paper blends in well with the related literature on political favoritism extending it by a previously unexplored dimension.
    Keywords: Favoritism, internal migration, spatiality, luminosity, Africa
    JEL: D73 R11 R23 O55
    Date: 2023
  10. By: Hatton, Timothy J. (University of Essex)
    Abstract: From 1860 to 1913 the six colonies that became states of Australia strove to attract migrants from the UK with a variety of assisted passages. The colonies/states shared a common culture and sought migrants from a common source, the UK, but set policy independently of each other. This experience provides a unique opportunity to examine the formation of assisted immigration policies. Using a panel of colonies/states over the years 1862 to 1913 I investigate the association between measures of policy activism and a range of economic and political variables. Assisted migration policies were positively linked with government budget surpluses and local economic prosperity. They were also associated with political participation including the widening of the franchise and remuneration of members of parliament. While the reduction in travel time to Australia reduced the need for assisted migration, slumps in the UK increased the take-up of assisted passages.
    Keywords: colonial Australia, assisted passages, international migration
    JEL: F22 N37 N47
    Date: 2023–07
  11. By: ITO Asei; LIM Jaehwan; ZHANG Hongyong
    Abstract: This study investigates how Chinese central leaders choose firms to visit and how these visits affect the firm value and performance of the companies visited. We compile a list of visits made by General Secretary Xi Jinping and Premier Li Keqiang to Chinese listed companies from 2012 to 2022. Together with an event list for the Hu Jintao period, we apply an event study to estimate the determinants of firm selection and the short- and long-term effects of these visits on firm stock price and performance. The results reveal that political visits generated positive cumulative abnormal returns of 1.26%–5.97% for visited companies, depending on the individual leader. The findings also indicate that the visiting effects are qualitatively different among two administrations. Moreover, the visits made during the second term of the Xi administration increased cumulative abnormal returns prior to the visit, implying the possibility of suspicious pre-event trading due to information leaks. Regarding long-term effects, we find positive impacts on sales and bank loans of private firms. Results suggest while the business environments surrounding the Chinese companies have institutionalized, the value of political connections has not been diminished, but the way in which their effects manifest has been transformed.
    Date: 2023–07
  12. By: Heckelman, Jac C; Wilson, Bonnie
    Abstract: Foreign aid is often granted to encourage market-oriented reform. It is not clear that this approach to reform has been effective. We seek to understand this seeming failure of aid. We ask whether and how political markets for institutions have influenced the impact of aid allocations on reform, and we explore the extent to which the impact of aid on reform is conditional on the influence of a particular player in those markets - special interest groups. In a panel of 92 aid-receiving nations over four decade-long time periods, for several measure of reform, we find evidence that the aid-reform relation is conditional on the influence of interest groups. We find that only under relatively extreme and rare conditions has aid been positively associated with reform. Mostly, we find that aid has been associated with reform backsliding. The effects are economically meaningful in magnitude.
    Keywords: aid, reform, institutions, special interest groups
    JEL: O1 O19 P11
    Date: 2023–07

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