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on Positive Political Economics |
| By: | Carlos Fernando Avenancio-León; Adelina Barbalau; Cyndi Hou; Alessio Piccolo |
| Abstract: | We study how dominant employers can act as *electoral monopsonies*, using local labor market power to shape political preferences and electoral outcomes. We first present original survey evidence showing that workers at major local employers are more likely to experience employer political communication and to report that their employers influence their voting behavior and career expectations. We then develop a model in which a dominant employer can affect voters’ preferences by shaping their expectations about how wages and employment depend on electoral outcomes. We distinguish a passive channel, through which workers internalize firms’ economic interests, from an active channel, through which dominant employers strategically influence these expectations. Under the active channel, labor market power translates into political power and can generate political failures by inducing voters to oppose policies they would otherwise support. The model also shows how electoral monopsonies can contribute to political polarization, constrain political platforms, and substitute for campaign spending. Using U.S. individual-level voting data and a shift-share design based on national industry concentration shocks and predetermined local employment shares, we show that greater electoral monopsony power increases Republican voter turnout. Counterfactual estimates imply that reducing electoral monopsony power could have narrowly changed the outcomes of the 2016 and 2024 presidential elections. |
| JEL: | D72 J42 P16 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35676 |
| By: | Raphaël Franck (CEPR - Center for Economic Policy Research, University of Stuttgart = Universität Stuttgart); Victor Gay (IAST - Institute for Advanced Study in Toulouse, TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | This study argues that urbanization changed the relationship between candidates' occupation and their electoral success. To identify the causal effect of local variation in urbanization, we exploit exogenous changes in the boundaries of electoral constituencies in the 1928, 1932, and 1936 French parliamentary elections. We find that urbanization reduced the electoral success of lawyers—who had historically dominated electoral politics—while benefiting employees and workers. This effect was concentrated on the left of the political spectrum, whereby left-wing employees and workers displaced left-wing lawyers. |
| Keywords: | Third Republic, France, Urbanization, Political representation, Election |
| Date: | 2026–08–20 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04364519 |
| By: | Vannutelli, Silvia |
| Abstract: | Stimulus transfers are widely used during economic downturns, yet they are often poorly targeted from an economic perspective. I show that political incentives might help explain this discrepancy. I study one of the largest stimulus tax credits in Italy which excluded the poorest individuals and targeted middle-income earners. Leveraging quasi-random geographic variation in recipient shares and a difference-in-differences design, I find that the transfer raised the incumbent party's vote share by 0.18 percentage points per 1 pp rise in recipients. These gains persist for at least five years. Political returns are stronger in areas with relatively richer beneficiaries, despite weaker consumption responses, and electoral punishment for exclusion is similarly asymmetric: higherincome excluded individuals reduce support for the incumbent, while poorer excluded individuals do not. Voters also punish incumbents when transfers are revoked, helping explain why temporary programs are rarely repealed. A counterfactual transfer targeting poorer households would have increased the consumption response by 30% but reduced electoral returns by at least 15%. These findings highlight a key political-economy trade-off in stimulus design, where electoral incentives skew transfers toward politically responsive recipients, as opposed to consumption responsive recipients. |
| JEL: | D72 H23 H53 I38 O15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:342456 |
| By: | Grigoriadis, Theocharis; Veselov, Dmitriy |
| Abstract: | This paper develops a political-economy game of skilled exit, redistribution, repression, and regime survival. Skilled workers are economically valuable because they become entrepreneurs, pay taxes, and generate productive externalities for low-skilled workers. They are also politically dangerous because they can enter political competition in democracy, participate in revolution- ary collective action in autocracy, or leave the country altogether. Governments therefore face a strategic tradeoff. Retaining skilled citizens raises output and fiscal capacity, but it can also increase electoral or revolutionary pressure. Allowing skilled citizens to leave weakens development, but it may relax the incumbent's political constraint. In democracy, redistribution toward the low-skilled majority lowers the return to skilled entrepreneurship and can induce exit. In autocracy, exit barriers and repression are alternative technologies of political survival: hard dictatorships can restrict exit and extract from skilled workers, while soft dictatorships may tolerate emigration because it reduces the pool of potential protesters. We characterize this logic in a one-shot benchmark and a dynamic extension with persistent brain drain and absorbing political turnover. We also allow repression costs to rise with the human-capital intensity of the economy, so that repression becomes more destructive precisely when skilled labor is more productive. The model yields a comparative regime logic of skilled exit: emigration is highest where exit directly relaxes the incumbent's political constraint, as in soft dictatorship, or where redistribution lowers the domestic return to skilled entrepreneurship, as in redistributive democracy; it is lower in elitist democracy and lowest in hard dictatorship. |
| Keywords: | brain drain, migration, democracy, dictatorship, redistribution, repression, political competition, revolution, institutions |
| JEL: | D72 D73 D78 F22 J24 O15 P16 P26 P48 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:fubsbe:342530 |
| By: | Ramos-Toro, Diego; Voytas, Elsa |
| Abstract: | We examine how people think and speak about the history of race in the United States. Based on 14, 033 surveys, we document substantial ideological divides in views about the Civil War, the Civil Rights Movement, and slavery's legacy, with pronounced differences among white respondents. The structure of historical narratives also varies by ideology: Conservatives, particularly white conservatives, emphasize individual agency and detach the past from the present, while liberals tend to portray the present as the continuation of the past. Evidence from two survey-embedded interventions suggests that historical narratives about race can deepen polarization in institutional satisfaction. |
| JEL: | D63 D72 D83 J15 P16 Z1 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:342449 |
| By: | Grigoriadis, Theocharis; Shahmohammadi, Shahrzad |
| Abstract: | We study the political careers of provincial governors in Iran and ask whether competence and loyalty shape the risk of exit from office. Using province-year panel data with province and year fixed effects, we implement two IV strategies to address selection into hard postings and measurement error. To identify competence, we use a shift-share (Bartik) "merit shifter" that interacts predetermined provincial exposure to oil-linked fiscal capacity with national oil-price movements, generating plausibly exogenous variation in measured performance across provinces over time. To identify loyalty, we instrument parliamentary turnout with election-year voting-cost shocks: election-day temperature (and nonlinear transformations) interacted with an election-year indicator, which shifts participation when voting is salient but is orthogonal to governor retention decisions conditional on fixed effects and controls. Our estimates show that higher instrumented competence increases the probability of exit, especially along the rotation margin, while loyalty has weaker and less stable effects once endogeneity is addressed. We explain the competence-exit link through a performance-driven rotation model: the center deploys high performers to difficult provinces and then reassigns them quickly once acute constraints are relieved. In that sense, crisis posts are designed for short tenures ("send Ç fix Ç move"). An alternative discipline mechanism may suggest that competent governors face removal when their actions threaten entrenched interests. Nevertheless, this mechanism receives less consistent support in baseline specifications. Identification is strong for competence (weak-IV-robust tests reject the null), and the core findings are stable across aligned specifications. Substantively, the evidence suggests that managerial capacity is leveraged intensively rather than rewarded with tenure, underscoring the importance of distinguishing rotation from punishment in authoritarian personnel management. |
| Keywords: | provincial governance, competence, loyalty, regime legitimacy, authoritarian personnel management, Iran |
| JEL: | C23 D72 D73 H77 O53 P16 P26 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:fubsbe:342460 |
| By: | Gockel, Christine; Strohsal, Till |
| Abstract: | We study how inflation expectations can be anchored through different forms of communication and whether such anchoring survives political change. Using a two-wave panel RCT around the 2025 German federal election, we show that providing the ECB's target and projections lowers expectations by about 100 basis points. We then introduce a teaching-style intervention explaining the ECB's institutional role using simple language and an intuitive metaphor, which proves equally effective. Treatment effects persist through the election, and partisan polarization remains modest. Our results suggest that well-designed communication - combining quantitative information with clear explanations of institutional responsibility - can durably anchor beliefs even in changing political environments. |
| Keywords: | elections, anchoring, inflation expectations, central bank communication, survey experiment, randomized controlled trial (RCT) |
| JEL: | E31 E42 E52 D84 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:fubsbe:342441 |
| By: | Eric A. Baldwin; Takuma Iwasaki; John J. Donohue; Charlie Grabois |
| Abstract: | Political contributions generate access and influence for firms, but their public visibility exposes firms to reputational risk. We study how firms adjust their political spending when the reputational cost of political ties rises sharply. To identify this response, we exploit fatal school shootings and mass shootings as exogenous shocks to the salience of gun violence in the United States. We implement a staggered difference-in-differences design on a panel of corporate PAC contributions to U.S. House candidates, 2000–2024. We find that corporate PACs divest selectively and temporarily following gun violence shocks. Contributions to Republican candidates fall by 70.3% after fatal school shootings in competitive districts and return to baseline within nine months, with no substitution toward Democratic candidates. A parallel penalty of 60.9% emerges for Republicans in safe Democratic districts but is absent in safe Republican districts. Mass shootings generate similar perturbations in corporate contributions. These patterns indicate that firms withdraw only where the reputational risk of continued association is high or its strategic value is low. The observed divestment appears across industries and is stronger for firms with greater consumer exposure. Our findings reveal that firms treat political ties as time-varying liabilities, temporarily withdrawing visible financial support when issue salience spikes and resuming once public attention fades, leaving firms’ long-run political investment intact. Since public pressure is limited and dissipates quickly, and corporate divestment is transient rather than durably reallocated, the underlying financial incentives facing policymakers remain unchanged in the long run, sustaining the policy status quo. |
| JEL: | C23 D22 D72 G32 H32 L21 M14 P10 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35494 |
| By: | Ricardo Alonso; Monica Martinez-Bravo; Gerard Padró I Miquel; Carlos Sanz; Silvia Vannutelli |
| Abstract: | Clarity of responsibility is an essential element of political accountability. We develop a rational model of Bayesian updating in the presence of ambiguous attribution and we test its predictions using an original survey. We show that respondents’ partisanship, assessment of public healthcare quality, and beliefs over which layer of government is responsible for healthcare are correlated as predicted: good-assessment voters attribute responsibility to the layer governed by their preferred party, while bad-assessment voters blame the layer governed by the party they dislike. These partisan patterns of credit and blame, often interpreted as evidence of motivated reasoning or partisan bias, can thus arise from rational Bayesian updating under attribution ambiguity. No such partisan patterns exist where the same party is in charge of regional and central government. A survey experiment in which we inform subjects of the official quality of healthcare has them update in the predicted, partisan, direction. Model and empirical results show that partisan priors are extremely hard to dislodge when attribution is ambiguous. |
| JEL: | D83 H19 H49 H7 P16 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35550 |
| By: | Invernizzi, Giovanna M.; Trombetta, Federico |
| Abstract: | We develop a model of partisan factions within an accountability framework. The incumbent leader can implement reforms but faces an internal faction that may undermine reform effectiveness through dissent. Unlike the faction, the leader's preferences align with those of the voter. Dissent reveals information to the voter about the leader's strength, sometimes inducing over-reform-strong leaders reform even when they should not. Moderate factional strength enhances voter welfare by balancing reform effectiveness and policy accuracy. Active dissent can improve welfare relative to strategic silence, and strong leaders may benefit more from dissent than from silence. |
| Keywords: | factions, accountability, reforms |
| JEL: | D72 D78 H11 P00 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:342526 |
| By: | Masayuki Haruhara |
| Abstract: | We study causal moderation when treatment assignment is randomized but the moderator is not. We combine the parallel estimation framework with front-door adjustment to identify an average mediated treatment moderation effect. We apply this approach to 165 municipal assembly elections in Tokyo (1987-2023), where pamphlet positions are assigned by lottery and total pamphlet pages are mechanically determined by candidate set size and fixed municipal rules. One additional candidate increases the front-page effect on winning probability by 0.322 percentage points through the page-count channel, 8.0% of its baseline magnitude, while the back-page effect does not increase significantly. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.20779 |
| By: | Aman Ray; Srikanth Pai |
| Abstract: | In the standard Downsian model, two office-seeking parties converge to the median voter. However alienated voters may abstain and turn out only for a party within their tolerance radius. For single-peaked voter distributions, convergence survives but relocates to a central voter, the median of the electorate that participates at the convergent platform. However single-peakedness of the voter distribution is an empirically contested assumption. So we first characterize pure-strategy equilibrium for any continuous voter distribution. For general distributions, pure-strategy equilibrium can fail to exist or be non-unique, and existence of equilibrium need not persist as the tolerance radius of the voters increases. In order to resolve these issues, we propose a fundamental object: \emph{centripetal} structure for which there is a single anchor platform toward which competition always pulls. We show this structure produces convergence at equilibrium under alienation based abstention. Our main result concerns the emergence and persistence of this new structure as the tolerance radius increases. Even though equilibria for office-seeking parties themselves can vanish and reappear as the radius grows, once centripetal structure emerges, it persists as long as the midpoint voter is not alienated. Moreover, the centripetal structure always emerges, and this structure classifies equilibrium completely when parties are policy motivated. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.03788 |
| By: | Trein, Philipp (University of Lausanne); Maggetti, Martino |
| Abstract: | This paper explores the dual role of governments as both adopters and regulators of artificial intelligence (AI), focusing on the implications for democratic governance. As AI technologies become increasingly embedded in public administration – from policymaking to service delivery – they offer opportunities for improving efficiency and personalization but also raise concerns about transparency, accountability, and fairness. To deal with these questions, this paper examines how AI is framed as a policy problem, the regulatory approaches adopted in different political systems, and the politicization of AI governance. It also analyzes the democratic risks posed by algorithmic decision-making, polarization, and corporate concentration of power, while highlighting the potential of AI to enhance democratic quality through improved public services, inclusive discourse, and citizen engagement. The paper concludes by identifying key areas for future research, including legitimacy, trust, regulatory design, and equity in AI governance. |
| Date: | 2026–08–15 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:rcqbt_v1 |
| By: | Jan Carlo B. Punongbayan (School of Economics, University of the Philippines Diliman) |
| Abstract: | I use event-level data from the Armed Conflict Location & Event Data Project (ACLED) to estimate the impact of Rodrigo Duterte’s “war on drugs†on political violence in the Philippines. Constructing a balanced panel of 80 provinces observed weekly from January 2016 through June 2017, I estimate event-study and difference-in-differences models that compare drug-war-tagged fatalities against a within-country placebo—non-drug-war political violence (battles, explosions, and non-drug violence against civilians). The headline finding is that the placebo series exhibits no discontinuity around either the election or the inauguration, while drug-war fatalities show a sharp, immediate spike. The violence increase is there-fore specific to the drug war, rather than reflecting general conflict trends, ACLED source-coverage changes, or other simultaneous shocks. As a precondition for this comparison, I show that the relevant event date is the May 9 presidential election, not the June 30 inauguration. I discuss identification challenges including anticipation effects, the endogeneity of ACLED’s tagging, and the absence of cross-regional treatment variation. |
| Keywords: | Philippines; war on drugs; event study; political violence; Duterte |
| JEL: | K42 D74 O17 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:phs:dpaper:202604 |
| By: | Sami Es-snibi; Mehdi Guelmamen |
| Abstract: | We ask whether high-frequency political communication shapes the level of conditional volatility, its persistence, or the probability of transiting between volatility states. The question is addressed with hourly Bitcoin prices and the universe of Donald Trump’s social media posts from August 2017 to February 2026, scoring the directional tone of market-relevant posts and entering it as an exogenous regressor in single-regime and Markov-switching variance equations. Three results follow. First, the tone coefficient is recovered only in log-linear specifications, where more positive communication coincides with lower conditional volatility and adversarial communication with higher volatility; additive specifications place the estimate at the boundary of the admissible parameter space. Second, a two-state Markov-switching EGARCH identifies a calm and a turbulent state with expected durations of eight and four hours, so that regime alternation is an intraday phenomenon that daily aggregation cannot resolve. Third, the tone effect is proportionally identical across the two states, and a fourteen-month interruption in communication leaves regime alternation essentially unchanged. Political communication thus modulates volatility intensity within whichever state prevails, without governing transitions between states. |
| Keywords: | Political communication; cryptocurrency volatility; sentiment analysis; Markovswitching GARCH; regime transitions; high-frequency data |
| JEL: | C58 E44 G15 G17 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2026-27 |
| By: | Montag, Felix |
| Abstract: | Current enforcement practice does not consider how mergers alter the merging parties' incentives to petition for trade protection. I document mergers between domestic producers across jurisdictions that are followed by tariff petitions. I develop a model to characterize the trade-policy channel of mergers. Theoretically, a domestic merger raises the profitability of tariffs when offshoring is unavailable; once offshoring is possible, the effect becomes ambiguous. I apply this framework to a merger between domestic producers in the U.S. appliance industry. Empirically, I find that when import competition is weak, the merging parties prefer to lower their own costs through offshoring; when import competition is strong, the merger makes it more profitable for them to raise their foreign rivals' costs through tariffs. The resulting consumer harm is comparable in magnitude to the direct market-power effect. A hypothetical cross-border merger reduces the profitability of tariffs in this market. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:342514 |
| By: | Angell, Kevin J. |
| Abstract: | Control of the purse is considered fundamental to Congress's role in government, but presidents have long sought to expand their own influence over spending. Do presidents undermine Congress's power by influencing the amount spent without securing changes to the enacted budget? Using original data from 1956 to 2018 and a differences-in-differences design, I find evidence that spending more closely matches presidential budget requests than if budget legislation were perfectly executed. Controlling for Congress's budget, I estimate that spending changes by thirty cents for every dollar change in a presidential budget request. This power is driven by presidents spending less than Congress appropriates when presidents request smaller budgets. This power persists after 1970s-era reforms restricted presidential discretion, is strongest in politicized government units, and is used across both parties. Overall, this paper demonstrates that overseeing budget execution provides an institutional advantage that enables presidents to undermine Congress's formal authority over spending. |
| Keywords: | Presidential Power, Power of the Purse, Congressional Power, Interbranch relations, Impoundment |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:343065 |
| By: | Kyyrönen, Otto |
| Abstract: | This paper critically examines the debt sustainability analysis (DSA) calculations underpinning Finland's new national fiscal rule, the "debt brake." The rule requires the public debt-to-GDP ratio, currently around 90 percent, to decline by at least 0.75 percentage points annually until it reaches 40 percent. Its implementation will rely on DSA calculations by the Finnish Ministry of Finance (MoF), which estimates that the next government must undertake fiscal adjustment amounting to more than 10 percent of this year's central government appropriations. Drawing on the European Commission's DSA framework, the paper reconstructs a model analogous to the MoF's unpublished model and analyses how assumptions about fiscal multipliers, automatic stabilisers, and hysteresis effects shape projected debt dynamics. It then compares expenditure-based consolidation with revenueand investment-based alternatives under different multiplier assumptions. The results suggest that the MoF's calculations may underestimate the adverse effects of spending cuts on growth and debt dynamics. Alternative scenarios based on revenue measures and public investment can produce comparable or better debt outcomes while sustaining higher output. The paper shows how technical modelling choices, which often escape sufficient critical scrutiny, shape perceived fiscal policy space. |
| Keywords: | debt sustainability analysis, fiscal rules, debt brake, political economy, Finland |
| JEL: | E17 E62 H20 H50 H63 H68 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ipewps:343108 |