nep-pol New Economics Papers
on Positive Political Economics
Issue of 2024‒06‒17
twelve papers chosen by
Eugene Beaulieu, University of Calgary

  1. EDMocracy: populism and democratic dissatisfaction in Europe By Federico Favaretto; Michele Mariani
  2. Opinion Polls, Turnout and the Demand for Safe Seats By Alabrese, Eleonora; Fetzer, Thiemo
  3. The Effect of Social Media on Elections: Evidence from the United States By Fujiwara, Thomas; Muller, Karsten; Schwarz, Carlo
  4. Gender and Electoral Incentives: Evidence from Crisis Response By Juan Pablo Chauvin; Clemence Tricaud
  5. A revolt of the distrustful? Political trust, political protest and the democratic deficit By Grande, Edgar; Gonzatti, Daniel Saldivia
  6. Politics and income taxes: progress and progressivity By Berliant, Marcus; Boyer, Pierre
  7. Navigating the treacherous political economy of structural reform By Davide Furceri; Jonathan Ostry; Chris Papageorgiou; Dennis P. Quinn
  8. Sailing Through History: The Legacy of Medieval Sea Trade On Migrant Perception and Extreme Right Voting By Bottasso, Anna; Cerruti, Gianluca; Conti, Maurizio; Santagata, Marta
  9. Dictatorship, Higher Education, and Social Mobility By Bautista, María Angélica; González, Felipe; Martinez, Luis R.; Muñoz, Pablo; Prem, Mounu
  10. Endogenous Constitutional Democracy Capital and Economic Development By Wei Liang; Heng-fu Zou
  11. Interest Groups, Ideology, and Indirect Lobbying: The Rise of Private Health Insurance In the United States By Marcella Alsan; Yousra Neberai; Xingyou Ye
  12. Beyond the Centre: Tracing Decentralization’s Influence on Time-varying Fiscal Sustainability By António Afonso; José Alves; João Tovar Jalles; Sofia Monteiro

  1. By: Federico Favaretto; Michele Mariani
    Abstract: We study the link among populist vote, democratic expectations and democratic performances by using individual level data in 26 European countries in 2012 and 2020. We use a Heckman model to explain the determinants of both the decision to vote and voting for populists: both are predicted by the gap between democratic expectations and perceived performance (that we define as “ideal democracy gap”), while controlling for fixed effects, political and economic variables, and attitudes. These results confirm the expectancy-disconfirmation model (EDM) that links both expectations and ideal democracy gaps for twelve aspects within electoral, liberal, social and direct dimensions of democracy to democratic dissatisfaction. Our analysis reveals differences and similarities among voter groups and within European regions
    Keywords: populism, voting behaviour, democratic dissatisfaction, EDM
    JEL: C21 D72 H30 P00
    Date: 2024
  2. By: Alabrese, Eleonora (University of Bath and QAPEC); Fetzer, Thiemo (University of Warwick, University of Bonn, ECONtribute, STICERD, CAGE, NIESR, CESifo, and CEPR)
    Abstract: Do opinion polls sway turnout and shape political competition in majoritarian systems? Can they strengthen the persistence of safe seats? Analysing national opinion polls during UK general elections and the perceived safeness of constituencies, we find that pre-election polls significantly affect voter turnout. Non-competitive elections predicted by national polls suppress turnout, especially in areas with low perceived electoral competition. This reinforces the advantage of trailing parties in their strongholds, potentially fuelling party demand for safe seats that may give rise to demands for gerrymandering. This can exacerbate spatial polarization of the electoral landscape, with implications for governance regarding opinion polling.
    Keywords: Opinion Polls, Closeness, Voters’ Behaviour, First past-the-post, UK general elections JEL Classification: D72, P16
    Date: 2024
  3. By: Fujiwara, Thomas (Princeton University, Department of Economics and SPIA, and NBER); Muller, Karsten (National University of Singapore, Business School); Schwarz, Carlo (Universita Bocconi, Department of Economics and IGIER, and PERICLES)
    Abstract: We study how social media affects election outcomes in the United States. We use variation in the number of Twitter users across counties induced by early adopters at the 2007 South by Southwest (SXSW) festival, a key event in Twitter’s rise to popularity. We show that this variation is unrelated to observable county characteristics and electoral outcomes before the launch of Twitter. Our results indicate that Twitter lowered the Republican vote share in the 2016 and 2020 presidential elections, but had limited effects on Congressional elections and previous presidential elections. Evidence from survey data, primary elections, and text analysis of millions of tweets suggests that Twitter’s relatively liberal content may have persuaded voters with moderate views to vote against Donald Trump.
    Keywords: JEL Classification:
    Date: 2024
  4. By: Juan Pablo Chauvin; Clemence Tricaud
    Abstract: This paper provides new evidence on why men and women leaders make different choices. We first use a simple political agency model to illustrate how voters' gender bias can lead reelection-seeking female politicians to undertake different policies. We then test the model's predictions by exploring leaders’ responses to COVID-19. Assuming that voters expect policies to be less effective if decided by women, the model predicts that female politicians undertake less containment effort than male politicians when voters perceive the threat as low, while the opposite is true when voters perceive it as serious. Exploiting Brazilian close elections, we find that, early in the pandemic, female mayors were less likely to close non-essential businesses and female-led municipalities experienced more deaths per capita, while the reverse was true later on, once the health consequences materialized. These results are exclusively driven by mayors facing reelection and stronger in municipalities with greater gender discrimination.
    JEL: D72 H11 J16
    Date: 2024–05
  5. By: Grande, Edgar; Gonzatti, Daniel Saldivia
    Abstract: During recent crises in Europe, new heterogeneous protest movements have emerged that are difficult to label and classify. Existing studies suggest that the common denominator of these protesters is primarily the lack of political trust. Therefore, these new protest movements offer favorable conditions for investigating the relationship between political trust and protest, and the consequences of political distrust for the stability of democracy. Do these protests represent a revolt of the distrustful which intensifies the frequently invoked crisis of democracy? Our study answers this question by focusing on two recent protest movements, the COVID-19 protest and the so-called 'energy protest', which have been an important part of the Ger-man protest landscape in recent years. Based on new survey data, our results reveal a considerable lack of trust in the core institutions of representative democracy in Germany and that political distrust increases the readiness for protest and the acceptance of political violence. The consequences of distrust for democracy are ambiguous, however. The distrustful citizens are strong supporters of direct democracy but hold illiberal and restrictive attitudes towards minorities and migrants. Hence, there are good reasons to be distrustful towards the distrustful citizens on the streets.
    Keywords: protest, political trust, political violence, democratic deficit, social movements
    Date: 2024
  6. 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: 2024–05–05
  7. By: Davide Furceri; Jonathan Ostry; Chris Papageorgiou; Dennis P. Quinn
    Abstract: In setting economic policy, politicians should pay attention to the latest economic data and to when they next need to face voters at the polls
    Date: 2024–05
  8. By: Bottasso, Anna (CIRIEC); Cerruti, Gianluca (University of Genoa); Conti, Maurizio (University of Genoa); Santagata, Marta (University of Genova)
    Abstract: In this study we evaluate the role that Mediterranean Medieval trade with Africa and the Middle-East still plays today in Italian politics by shaping the attitudes towards migrants of individuals that live close to Medieval ports. Trade connections between Medieval ports and Muslim Africa and Middle East might have indeed favoured the emergence of cultural traits that helped the interaction with foreigners from different cultures, ethnicity and religion a few centuries before with respect to other areas of the country. We use a representative survey of young individuals (aged 20-35) to show that, conditionally on a rich set of geographic, historic, economic and individual controls, people living close to a Medieval port are less likely to think that migrants make Italy an unsafe place as well as to report right-wing voting attitudes. Moreover, we also find, in those areas, a lower probability of xenophobic attacks during the spike of refugees from Siria of 2015. Interestingly, right-wing parties started to attract less votes near Medieval ports only when immigration had become a very salient issue. Similarly, we find a lower probability of Jewish deportations close to Medieval ports during the Nazi occupation, the only period in Italian contemporary history when a minority group was explicitly targeted by the government. This in turn suggests that some deep-rooted cultural traits, although not observed and not clearly at work in society, can become visible when the right historical and political circumstances take place.
    Keywords: political ideology, immigration, cultural transmission, medieval trade sea routes, Roman road network
    JEL: D72 N70 N90 O10 O12 P48
    Date: 2024–05
  9. By: Bautista, María Angélica (University of Chicago); González, Felipe (Queen Mary University of London); Martinez, Luis R. (University of Chicago); Muñoz, Pablo (Universidad de Chile); Prem, Mounu (Einaudi Institute for Economics and Finance)
    Abstract: We study the effect of political regime change on higher education and its distributional and political consequences. We focus on the 1973 coup that brought Augusto Pinochet to power in Chile. The Pinochet dictatorship's aims of political control and fiscal conservatism led to a large reduction in the number of openings for new students across all universities. Individuals that reached college age shortly after the coup experienced a sharp decline in college enrollment, had worse labor market outcomes throughout the life cycle and struggled to climb up the socioeconomic ladder. This contraction of higher education disproportionately affected applicants from less affluent backgrounds and plausibly contributed to the increase in inequality observed under Pinochet. We further show that individuals exposed to reduced access to college registered to vote at higher rates for the 1988 plebiscite that triggered Chile's democratic transition and we provide suggestive evidence that they increasingly voted against Pinochet.
    Keywords: dictatorship, college, technocracy, austerity, inequality
    JEL: H52 I23 I24 I25
    Date: 2024–05
  10. By: Wei Liang (China Economics and Management Academy, Central University of Finance and Economics); Heng-fu Zou (The World Bank)
    Abstract: This paper develops a dynamic representative-citizens model that endogenizes the accumulation of both constitutional democracy capital and physical capital. Drawing from Douglass North's seminal works, our model integrates interactions between institutional capital and economic performance, focusing on how changes in institutional frameworks impact economic dynamics. By exploring the reciprocal relationships between democratic institutions and economic variables over time, the model elucidates how democratic structures facilitate economic growth and how economic conditions affect the vitality of democratic governance. It demonstrates that exogenous economic variables significantly influence both democracy and physical capital, while political institutional factors critically shape economic outcomes. This approach highlights the importance of a supportive democratic environment in enhancing capital accumulation and shows how threats to democracy can hinder both democratic integrity and economic development, providing a comprehensive framework to understand the interplay between political systems and economic performance.
    Keywords: Democracy Capital, Constitutional Democracy, Liberty, Rue of Law, Property Rights, Institutions, Economic Growth, Development
    JEL: E20 E22 H56 O10 O40 P16 P48
    Date: 2024–05–22
  11. By: Marcella Alsan; Yousra Neberai; Xingyou Ye
    Abstract: This study examines the rise of private health insurance in the United States in the post- World War II era. We investigate the role of the American Medical Association (AMA) which financed a campaign against National Health Insurance that was directed by the country’s first political public relations firm, Whitaker & Baxter’s (WB) Campaigns, Inc. The AMA-WB Campaign had two key components: (1) physician outreach to patients and civic organizations; and (2) mass advertising that tied private insurance to “freedom” and “the American way.” We bring together archival data from several novel sources documenting Campaign intensity. We find a one standard deviation increase in Campaign exposure explains about 20% of the increase in private health insurance enrollment and a similar decline in public opinion support for legislation enacting National Health Insurance. We also find suggestive evidence that the Campaign altered the narrative for how legislators and pollsters described health insurance. These findings suggest the rise of private health insurance in the U.S. was not solely due to wartime wage freezes, collective bargaining, or favorable tax treatment. Rather, it was also enabled by an interest group-financed Campaign that used ideology to influence the behavior and views of ordinary citizens.
    JEL: D72 I14 I18 N34 N42
    Date: 2024–05
  12. By: António Afonso; José Alves; João Tovar Jalles; Sofia Monteiro
    Abstract: This paper explores the nuanced relationship between fiscal decentralization and fiscal sustainability. Employing panel data analyses, it scrutinizes how decentralization influences fiscal discipline across different governmental levels. Results for 185 countries show that while tax decentralization often hampers the degree of fiscal responsiveness, potentially due to misaligned local and national objectives and loss of scale efficiency, spending decentralization can enhance fiscal outcomes by promoting efficient resource allocation. These findings are contextualized within a broad range of economic and political environments, highlighting that the impacts of decentralization are contingent upon local capacities and overarching governance frameworks. Hence, we contribute to the understanding of fiscal policies’ complexity in decentralized systems and offer significant policy insights for fiscal sustainability in varied administrative contexts.
    Keywords: panel data analysis; fiscal sustainability; decentralization; fiscal rules; political cycles; time-varying coefficients.
    JEL: H11 H77 H72 H73 E62 C23
    Date: 2024–05

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