nep-pol New Economics Papers
on Positive Political Economics
Issue of 2024‒02‒19
thirteen papers chosen by
Eugene Beaulieu, University of Calgary

  1. Urbanization and the Change in Political Elites By Raphaël Franck; Victor Gay
  2. Digging Up Trenches: Populism, Selective Mobility, and the Political Polarization of Italian Municipalities By Luca Bellodi; Frédéric Docquier; Stefano Iandolo; Massimo Morelli; Riccardo Turati
  3. Income shocks, political support and voting behaviour By Upward, Richard; Wright, Peter
  4. Election-Induced Fiscal Policy Cycles in Emerging Market and Developing Economies By Jakob de Haan; Franziska Ohnsorge; Shu Yu
  5. Are the upwardly mobile more left-wing? By Clark, Andrew Eric; Cotofan, Maria Alexandra
  6. Global political ties and the global financial cycle By Ambrocio, Gene; Hasan, Iftekhar; Li, Xiang
  7. Fragility of The Condorcet Jury Theorem: Information Aggregation and Preference Aggregation By Masayuki Odora
  8. Factor Shares, Redistribution and Growth in a Captured Democracy By Vindigni, Andrea
  9. Preface to the Japanese Edition of Golden Rule By Thomas Ferguson
  10. Should Politicians be Informed? Targeted Benefits and Heterogeneous Voters By Maxim Senkov; Arseniy Samsonov
  11. Group Identity and Belief Formation: A Decomposition of Political Polarization By Kevin Bauer; Yan Chen; Florian Hett; Michael Kosfeld
  12. Political Turnover and Fatal Government Transitions By Helena Arruda; Rudi Rocha
  13. Beliefs about inequality and the nature of support for redistribution By Aljosha Henkel; Ernst Fehr; Julien Senn; Thomas Epper

  1. By: Raphaël Franck; Victor Gay
    Abstract: This study argues that urbanization changed the relationship between the occupation of candidates running in parliamentary elections and their electoral success. To identify local-level variation in urbanization, we leverage exogenous changes to the boundaries of electoral constituencies in the 1928, 1932, and 1936 French parliamentary elections. The results suggest that urbanization was detrimental to the electoral success of lawyers but beneficial to that of employees and workers. This electoral effect of urbanization was especially felt on the left of the political spectrum, whereby left-wing employees and workers crowded out left-wing lawyers.
    Keywords: elections, political representation, urbanization
    JEL: D72 K16 N44 N94
    Date: 2024
  2. By: Luca Bellodi; Frédéric Docquier; Stefano Iandolo; Massimo Morelli; Riccardo Turati
    Abstract: We study the effect of local exposure to populism on net population movements by citizenship status, gender, age and education level in the context of Italian municipalities. We present two research designs to estimate the causal effect of populist attitudes and politics. Initially, we use a combination of collective memory and trigger variables as an instrument for the variation in populist vote shares across national elections. Subsequently, we apply a regression discontinuity design to estimate the effect of electing a populist mayor on population movements. We establish three converging findings. First, the exposure to both populist attitudes and policies, as manifested by the vote share of populist parties in national election or the close-election of a new populist mayor, reduces the attractiveness of municipalities, leading to larger population outflows. Second, the effect is particularly pronounced among young, female, and highly educated natives, who tend to relocate across Italian municipalities rather than internationally. Third, we do not find any effect on the foreign population. Our results highlight a foot-voting mechanism that may contribute to a political polarization in Italian municipalities.
    Keywords: Migration; Human Capital; Populism; Italian Politics
    JEL: D72
    Date: 2024–02
  3. By: Upward, Richard; Wright, Peter
    Abstract: We provide new evidence on the effects of economic shocks on political support, voting behaviour and political opinions over the last 25 years. We exploit a sudden, large and long-lasting shock in the form of job loss and trace out its impact on individual political outcomes for up to 10 years after the event. The availability of detailed information on households before and after the job loss event allows us to reweight a comparison group to closely mimic the job losers in terms of their observable characteristics, pre-existing political support and voting behaviour. We find consistent, long-lasting but quantitatively small effects on support and votes for the incumbent party, and short-lived effects on political engagement. We find limited impact on the support for fringe or populist parties. In the context of Brexit, opposition to the EU was much higher amongst those who lost their jobs, but this was largely due to pre-existing differences which were not exacerbated by the job loss event itself.
    Keywords: job loss, political support, voting
    JEL: C21 C23 D72 J63
    Date: 2024
  4. By: Jakob de Haan; Franziska Ohnsorge; Shu Yu
    Abstract: The widening of fiscal deficits during democratic elections is well established. We examine a broader set of fiscal outcomes around elections for a large set of emerging and developing economies (EMDEs), probe for differences between democracies and non-democracies, and estimate the degree to which fiscal deteriorations are unwound after elections. We show three patterns. First, primary deficits rise statistically significantly during elections, by 0.6 percentage point of GDP. Primary spending, especially on the government wage bill, also rises statistically significantly and indirect tax revenues fall. Second, these deteriorations occur in democracies and non-democracies alike. Third, the deterioration in primary deficits is not unwound after elections and the deterioration in primary spending is partially unwound after the election, mainly through cuts in capital spending. These patterns imply that deficits in EMDEs ratchet up over the course of several election cycles. Over time, this can threaten the sustainability of public finances. Finally, we find that better institutional quality (such as strong fiscal rules) and the presence of an IMF program partly mitigate the impact of elections on fiscal positions.
    Keywords: political budget cycles, emerging and developing countries, democracies, autocracies
    JEL: D72 E62 H62 O10
    Date: 2023
  5. By: Clark, Andrew Eric; Cotofan, Maria Alexandra
    Abstract: It is well-known that the wealthier are more likely to have Right-leaning political preferences. We here in addition consider the role of the individual's starting position, and in particular their upward social mobility relative to their parents. In 18 waves of UK panel data, both own and parental social status are independently positively associated with Right-leaning voting and political preferences: given their own social status, the upwardly-mobile are therefore more Left-wing. We investigate a number of potential mediators: these results do not reflect the relationship between well-being and own and parents' social status but are rather linked to the individual's beliefs about how fair society is.
    Keywords: social mobility; voting; redistribution; satisfaction; fairness
    JEL: A14 C25 D31 D63 J28 J62
    Date: 2023–07–21
  6. By: Ambrocio, Gene; Hasan, Iftekhar; Li, Xiang
    Abstract: We study the implications of forging stronger political ties with the US on the sensitivities of stock returns around the world to a global common factor - the global financial cycle. Using voting patterns at the United Nations as a measure of political ties with the US along with various measures of the global financial cycle, we document evidence indicating that stronger political ties with the US amplify the sensitivities of stock returns in developing countries to the global financial cycle. We explore several channels and find that a deepening of financial linkages along with a reduction in information asymmetries and an amplification of sentiment are potentially important factors behind this result.
    Keywords: global financial cycle, international spillovers, political ties, stock returns
    JEL: E44 F30 F50 G15
    Date: 2023
  7. By: Masayuki Odora (Graduate School of Economics, Waseda University)
    Abstract: This study considers a binary election in which imperfectly informed voters have partially conflicting interests. There is an unambiguously correct alternative in some states, while voters disagree on the better alternative in other states. The true state is unknown to anybody, but each voter receives a private signal about the state. This study identifies the circumstances in which the probability that a society utilizing the majority rule reaches the correct decisions does not converge to 1, thus showing the failure of an asymptotic Condorcet Jury Theorem. Moreover, we show that the voting behavior never reflects voters’ private information in the large elections.
    Keywords: bargaining; Information aggregation; partially conflicting interests; Condorcet Jury Theorem
    Date: 2024–01
  8. By: Vindigni, Andrea (University of Genova)
    Abstract: A model of endogenous growth is presented, based on productive public expenditures, and featuring some degree of income inequality, and polarization in policy preferences. The main innovation lays in the political process determining capital taxation that relies, both on voting and on "influence activities, " exploited by the capitalist elite in order to capture some political power at the expenses of the median voter. In particular, investments in lobbying activities allow the rich to obtain lower capital taxes, to the benefit of both themselves and economic growth. The model's equilibrium dynamics features variable taxes and lobbying. In addition, it is established the existence of a transitional dynamics featuring convergence to a balanced growth path, characterized by constant taxes and lobbying (and a constant growth rate of consumption and capital). Capital accumulation leads, along the transitional path, to more and more lobbying, that asymptotically cause taxation to reach precisely the tax rate preferred by the capitalists (induced by a very large political pressure on the government). Specifically, the (unique) balanced growth equilibrium features the maximization of the net interest rate, as well as the economy's growth rate and capitalists' welfare. On the transitional path, lobbying reduces the workers' political weight (and their consumption), and therefore makes fiscal policy relatively more and more capitalists friendly. Policy polarization (loosely speaking reflecting inequality) has somewhat interesting effects along the transitional path towards balanced growth. Hereby, actual taxes become more capitalists-friendly relatively to the Meltzer and Richard's (1981) canonical median voter tax benchmark, mutatis mutandis. In the end, full convergence is established, from a pure democracy ruled through the de jure power only, to a political economic realm totally de facto dominated by the few capitalists, i.e. to an "oligarchic technocracy, " possibly ruled by the "top 1%" of the population.
    Keywords: political economy, government, inequality, economic growth, redistribution, lobbying
    JEL: O11 O43
    Date: 2024–01
  9. By: Thomas Ferguson (Institute for New Economic Thinking)
    Abstract: This is the English version of the author's preface to the Japanese translation of Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems (Chicago: University of Chicago Press, 1995). The Japanese version is published in two volumes by Keiei Kagaku Publishing and this preface appears with its permission. The paper discusses some of the problems the author's early work in archives highlighted with conventional approaches to understanding political power. It also locates the book's argument in relation to earlier studies of industrial structures and politics and surveys some of the most important later results of quantitative research within the book's framework.
    Keywords: median voter, New Deal, political money, elections, industrial structure.
    JEL: D72 H10 H4 P16 L50 M14 N82
    Date: 2023–08–08
  10. By: Maxim Senkov; Arseniy Samsonov
    Abstract: We compare two scenarios in a model where politicians offer local public goods to heterogeneous voters: one where politicians have access to data on voters and thus can target specific ones, and another where politicians only decide on the level of spending. When the budget is small, or the public good has a high value, access to voter information leads the winner to focus on poorer voters, enhancing voter welfare. With a larger budget or less crucial public goods, politicians target a narrow group of swing voters, which harms the voter welfare.
    Date: 2024–01
  11. By: Kevin Bauer; Yan Chen; Florian Hett; Michael Kosfeld
    Abstract: How does group identity affect belief formation? To address this question, we conduct a series of online experiments with a representative sample of individuals in the US. Using the setting of the 2020 US presidential election, we find evidence of intergroup preference across three distinct components of the belief formation cycle: a biased prior belief, avoidance of outgroup information sources, and a belief-updating process that places greater (less) weight on prior (new) information. We further find that an intervention reducing the salience of information sources decreases outgroup information avoidance by 50%. In a social learning context in wave 2, we find participants place 33% more weight on ingroup than outgroup guesses. Through two waves of interventions, we identify source utility as the mechanism driving group effects in belief formation. Our analyses indicate that our observed effects are driven by groupy participants who exhibit stable and consistent intergroup preferences in both allocation decisions and belief formation across all three waves. These results suggest that policymakers could reduce the salience of group and partisan identity associated with a policy to decrease outgroup information avoidance and increase policy uptake.
    Keywords: group identity, information demand, information processing, political polarization
    JEL: D47 C78 C92 D82
    Date: 2023
  12. By: Helena Arruda; Rudi Rocha
    Keywords: political turnover, government transitions, birth outcomes, infant mortality
    Date: 2024–01–15
  13. By: Aljosha Henkel; Ernst Fehr; Julien Senn; Thomas Epper
    Abstract: Do beliefs about inequality depend on distributive preferences? What is the joint role of preferences and beliefs about inequality for support for redistribution? We study these questions in a staggered experiment with a representative sample of the Swiss population conducted in the context of a vote on a highly redistributive policy proposal. Our sample comprises a majority of inequality averse subjects, a sizeable group of altruistic subjects, and a minority of predominantly selfish subjects. Irrespective of preference types, individuals vastly overestimate the extent of income inequality. An information intervention successfully corrects these large misperceptions for all types, but essentially does not affect aggregate support for redistribution. These results hide, however, important heterogeneity because the effects of beliefs about inequality for demand for redistribution are preference-dependent: only affluent inequality averse individuals, but not the selfish and altruistic ones, significantly reduce their support for redistribution. These findings cast a new light on the seemingly puzzling result that, in the aggregate, large changes in beliefs about inequality often do not translate into changes in demand for redistribution.
    Keywords: Social preferences, beliefs about inequality, preferences for redistribution, information, inequality aversion
    JEL: D31 D72 H23 H24
    Date: 2024–01

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