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on Positive Political Economics |
| By: | Ege Asutay (Friedrich-Schiller-Universität Jena) |
| Abstract: | Does carbon pricing fuel the populist radical right? This paper exploits the Phase 3 reduction in free emission allowances beginning in 2013 in the EU Emissions Trading System as a quasi-natural experiment in a difference-in-differences model for 889 NUTS-3 regions in 23 European countries. Regions more exposed to the shock saw higher populist radical-right (PRR) shares, concentrated in European Parliament (EP) elections, pointing to expressive voting that channels EU-policy grievances toward the EU ballot box. The shock reaches voters through broader regional stagnation rather than deindustrialisation, as services employment falls, GDP per capita declines, and population shrinks while manufacturing employment remains unchanged. A sectoral decomposition links the EP concentration to regions with greater power-sector exposure, consistent with allowance-cost pass-through to household electricity bills. Replacing PRR with populist radical-left or Green vote shares flips the coefficient to negative, suggesting a right-wing rather than generic protest response. Instrumental variable estimates based on the manufacturing free-allocation component support the finding, which survives controls for Eurozone-crisis exposure and migration patterns. The paper contributes to the political economy of climate policy by showing that carbon pricing can generate geographically concentrated right-wing backlash and EU-directed protest voting. |
| Keywords: | EU Emissions Trading System, carbon pricing, populist radical right, climate policy backlash, regional decline, expressive voting |
| JEL: | D72 H23 Q52 Q58 R11 |
| Date: | 2026–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:jrp:jrpwrp:2026-006 |
| By: | Arregui Alegria, Iker (Department of Economics, Lund University) |
| Abstract: | Public spaces are increasingly becoming battlegrounds over collective identity, as societies revisit which figures deserve commemoration. The removal of statues and street names has become a powerful symbolic act, as for those attached to these legacies, such changes may be seen as denying their group identity. This paper examines the political consequences of such symbolic changes in the context of Spain, focusing on the recent renaming of streets honoring figures from the dictatorship. Using three complementary empirical strategies and drawing on both observational and survey evidence, I find that removing Francoist streets leads to a significant increase in support for far right parties in the affected areas, particularly when the names held high salience. I further implement a novel individual level survey and show that this response is driven by identity-based concerns rather than practical objections, shedding light on the political consequences of contested memory in democratic societies. |
| Keywords: | Voting; Identity; Spain; Renaming; Far-Right |
| JEL: | D72 N44 Z13 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:lunewp:2026_006 |
| By: | Bhishma Bhusha; Soledad Artiz Pillaman; Michael J. Callen; Deepak Singharia; Rohini Pande; Apurva Subedi |
| Abstract: | How does wartime rebel governance shape post-conflict institutions? We study this in Nepal, where the Maoist People's War (1996–2006) dismantled a 240-year caste-based monarchy and ended with Maoists entering democratic politics. During the conflict, Maoists established sub-national "People’s Governments" that administered justice, collected taxes, and delivered local services. Using a spatial regression-discontinuity design, we show that exposure to People's Governments increased political knowledge and participation especially among historically marginalized indigenous groups (Janajatis). Exposure also reshaped party institutions and inter-party competition: candidate-selection committees in more exposed areas have 26 percent more Janajati members who, drawing on novel implicit-attitude data, exhibit less pro-upper caste bias. Non-Maoist parties' Janajati nomination rates nearly double in fully exposed areas, consistent with competition for newly mobilized voters. Nearly two decades on, local governments in exposed areas score 0.2–0.3 standard deviations higher on state capacity indices and receive 13% more in conditional federal grants. These findings show that when rebel groups enter competitive democratic politics, wartime governance institutions can — through citizen mobilization, party gatekeeping, and cross-party competition — enable a more inclusive and capable post-war state. |
| Keywords: | rebel governance, post-conflict institutions, political selection, state capacity, citizen mobilization, Nepal, Janajatis, spatial regression-discontinuity, implicit association test, cross-party competition |
| JEL: | D72 O17 H11 D73 O12 Z13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12697 |
| By: | Lucas Braga de Melo; Valdemar Pinho Neto |
| Abstract: | This paper analyzes the economic returns to political connections in Brazilian local elections, focusing not only on traditional campaign donations but also on two novel channels: firms that provide goods or services to candidates during campaigns and firms’ owners affiliated with parties within a coalition running for mayor. Employing regression discontinuity and event study methods around close mayoral races, we find that politically connected firms substantially increase both their likelihood of securing procurement contracts and the value of those contracts, though without corresponding gains in employment or wages. This paper contributes to the literature on political connections by documenting the emergence of indirect political connections and public procurement allocation in a context of weak institutional constraints. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:not:notnic:2026-01 |
| By: | Eiji YAMAMURA; Yasuyuki TODO |
| Abstract: | This study examines vote switching between Japan’s July 2025 House of Councillors and February 2026 House of Representatives elections. The Liberal Democratic Party (LDP) suffered a major defeat in 2025, then achieved a landslide victory in 2026 under Prime Minister Sanae Takaichi, who adopted a moderate but firmly immigration-restrictive platform. Based on a survey that collected 19, 945 responses, we analyzed a sub-sample of 14, 431 valid respondents using multinomial logit and Heckman selection probit models to examine party choice and vote switching. Major findings are as follows: (1) opposition to Trump-style tariffs is universal across parties, while support for immigration restriction divides voters sharply. (2) voters who switched to the LDP distrusted unverified foreigners but accepted workplace-integrated ones. (3) risk-averse voters who had supported right-wing opposition parties were especially likely to switch to the LDP. However, it should be noted that the estimation results may be biased, as the study does not account for views on topics such as the Constitution or nuclear power. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26044 |
| By: | Alberto Chong (Georgia State University and Universidad del Pacifico); Mark Gradstein (Ben Gurion University, CEPR, CESifo, and IZA) |
| Abstract: | Why does democratic backsliding often reverse rather than culminate in durable autocracy? Using V-Dem data for 202 countries over 1900-2024, this paper shows that the apparent durability advantage of autocracy largely disappears once historical composition is taken into account. It further shows that political polarization disproportionately destabilizes democracies relative to autocracies. Event-study evidence indicates that polarization rises before democratic collapse and declines following democratization. A simple political-economy framework rationalizes these patterns through endogenous demand for centralized authority under democratic instability and subsequent backlash against concentrated power. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ays:ispwps:paper2618 |
| By: | Mariano Tommasi (Universidad de San Andrés) |
| Abstract: | Over recent decades, many Latin American democracies have expanded political participation, social rights, and redistribution, yet have simultaneously experienced rising discontent, policy volatility, and institutional fragility. This coexistence challenges standard political economy models that associate democratization with greater stability and accountability. This paper argues that incorporation—the expansion of effective participation in political and policymaking processes—alters the cooperation problem itself. While broader participation raises the potential gains from collective action, it also increases coordination costs and the institutional demands required to sustain self-enforcing cooperation. A simple model shows that as participation expands, the minimum level of institutional adaptation required for cooperation rises; when such adaptation lags, polities may become trapped in low-cooperation equilibria marked by polarization and short time horizons. Comparative case studies of Uruguay, Chile, Brazil, Argentina, Peru, and Venezuela illustrate how similar inclusionary processes generate divergent political trajectories depending on whether cooperative governance adjusts to expanded participation. Where cooperation is rebuilt, inclusion supports legitimacy and durable governance; where it is not, expanded voice yields instability and, in extreme cases, democratic breakdown. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:sad:wpaper:182 |
| By: | Bradley, Jake (University of Nottingham); Albornoz, Facundo (University of Nottingham); Sonderegger, Silvia (University of Nottingham); Rodriguez, Jesus (University of Nottingham); Rustagi, Devesh (University of Warwick) |
| Abstract: | There are concerns over the rise in populism and hate crimes targeting minorities in democracies. We examine whether national information shocks triggered by political events play a role. Focusing on two UK events that revealed nationwide anti-immigrant sentiment, we document counterintuitive results: large persistent surges in hate crimes in the post-event periods in areas with pro-immigrant, rather than anti-immigrant, attitudes. We show that the xenophobic minority residing in pro-immigrant areas experience stronger belief shocks from these events, inducing them to update their beliefs about social acceptability of hate. Our findings highlight how heterogeneous priors interact with national events to amplify xenophobic behavior |
| Keywords: | Information shocks, attitudes towards immigrants, hate crimes, United Kingdom JEL codes: C72, D80, P0 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1611 |
| By: | Roman Horvath (Institute of Economic Studies, Charles University (Prague)); Matej Korinek (Institute of Economic Studies, Charles University (Prague)); Laurent Weill (LaRGE Research Center, Université de Strasbourg) |
| Abstract: | This paper investigates whether financial development shapes people’s preferences for redistribution. Although a large literature examines the effects of finance on growth and inequality, much less is known about its influence on the political demand for redistribution. Using individual-level data from the World Values Survey and the European Values Study, we estimate the relation between financial development and preferences for income equality. We find no significant average effect of financial development on redistributive demand. However, this aggregate neutrality masks significant individual-level heterogeneity. We find that financial development is associated with lower support for redistribution among men, married individuals, and right-leaning respondents. In contrast, the effect is significantly positive for more educated individuals. These results suggest that financial development reshapes the political landscape not by shifting average preferences, but by altering the composition and polarization of pro-redistribution coalitions. |
| JEL: | D31 D63 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:lar:wpaper:2026-01 |
| By: | Ahlquist, John S; Ntounias, Theodoros |
| Abstract: | In the face of contemporary democratic backsliding, are labor unions the “bulwark of democracy” that some have claimed? We decompose this into two analytically distinct phases: prevention and resistance. We argue that unions’ traditional structural, associational, and social power has declined to the point where their preventive influence is quite weak. As structural and associational power has declined, institutional power is vulnerable, even where union membership remains high. Empirically, we show that union density and coverage are uncorrelated with antidemocratic party vote shares across the OECD. In looking at resistance, we examine 11 episodes of twenty-first century democratic backsliding. In none of those cases were existing labor unions key players in resisting democratic erosion. In some instances, major unions were willing to capitulate to or even collaborate with increasingly undemocratic governments. Unions are not currently a reliable bulwark against backsliding, although they can and should be important parts of broader pro-democracy coalitions. |
| Keywords: | Social and Behavioral Sciences, Democratic backsliding, Labor unions, Bulwark of democracy, 2024 U.S. presidential election, Varieties of democracy |
| Date: | 2026–05–27 |
| URL: | https://d.repec.org/n?u=RePEc:cdl:globco:qt8r55t4fd |
| By: | Rojas Venzor, Jesús |
| Abstract: | The electoral rise of right-wing populism has reshaped domestic political competition across Western democracies. Democratic governments have simultaneously developed bilateral arrangements to control migration, often involving authoritarian partners with questionable legal and human rights practices. In this paper, I present a novel dataset on the emergence of these agreements across five continents and over the last thirty years. I then develop a theory of foreign policy co-optation that explains when and why governments appropriate flexible foreign policy instruments central to the narrative of the opposition to reduce their electoral threat. I show that bilateral security Cooperation Arrangements on Migration (CAMs) are most likely to emerge when incumbent governments are challenged by right-wing populist parties, especially from left-of-center governments. The findings suggest that right-wing populist pressure paradoxically enables executives to manage electoral opposition through foreign policy, highlighting the need to revisit assumptions about the domestic sources of international cooperation and migration policy. |
| Keywords: | Social and Behavioral Sciences, Migration Governance, Populism, Border Security, Bilateral Security Agreements, Foreign Policy Co-optation |
| Date: | 2026–05–21 |
| URL: | https://d.repec.org/n?u=RePEc:cdl:globco:qt9vz7h2xz |
| By: | Rajeev K. Goel; Michael A. Nelson |
| Abstract: | Military spending by nations has the potential to either stabilize governments or destabilize them (via threats of coups, for instance). We study this relationship formally by using a rich dataset on more than 150 countries, spanning nearly two recent decades from 2006 to 2023. Among other relevant factors, the analysis pays special attention to the role of corruption. The main results show that both military spending and corruption increase fragility. When three-year intervals are studied over the large time span, the positive effect of corruption remains robust, but the positive effect of military spending loses statistical significance over some periods. In other findings, greater economic prosperity promotes stability, while greater economic uncertainty has the opposite effect. Democratic nations tend to be more stable, but this is not necessarily true of presidential democracies. Furthermore, ethnic fractionalization and genetic distance promote instability, but population density has the reverse effect. Finally, considering the endogeneity of corruption via IV regressions supports the main findings, and the mediation analysis shows little mediation. Policy implications are discussed. |
| Keywords: | state fragility, military spending, corruption, democracy, economic uncertainty, ethnicity |
| JEL: | K42 H11 H56 F50 D74 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12707 |
| By: | Artyom Jelnov (Ariel University); Maxim Senkov (Department of Actuarial, Financial and Economic Mathematics. Universitat de Barcelona and BEAT) |
| Abstract: | In a political-agency model, an incumbent can initiate a restrictive policy in response to a crisis state of the world. Both the opposition and the citizen value the incumbent's policy matching the state; however, they are uncertain about the incumbent's true motives. If the incumbent is of the dictatorial type, a restrictive policy that is not protested by both the opposition and the citizen leads to the start of authoritarian rule. We show that when the incumbent is relatively unlikely to be dictatorial, the presence of radical opposition, protesting the restrictive policy regardless circumstances, can reduce voter welfare: it eliminates the efficient state-matching equilibrium, since the opposition never fully reveals dictatorial incumbents. Conversely, when the incumbent is relatively likely to be dictatorial, a high probability of radical opposition can increase voter welfare by deterring the dictatorial type from implementing the restrictive policy. |
| Keywords: | democratic backsliding, autocratization, emergency powers, populist radical parties |
| JEL: | D72 D82 D83 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ewp:wpaper:495web |