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on Positive Political Economics |
| By: | Klaus Abbink; Jordi Brandts |
| Abstract: | We study the process by which subordinated regions of a country can obtain a more favourable political status. In our theoretical model a dominant and a dominated region first interact through a voting process that can lead to different degrees of autonomy. If this process fails then both regions engage in a costly political conflict which can only lead to the maintenance of the initial subordination of the region in question or to its complete independence. In the subgame-perfect equilibrium the voting process always leads to an intermediate rrangement acceptable for both parts. Hence, the costly political struggle never occurs. In contrast, in our experiments we observe a large amount of fighting involving high material losses, even in a case in which the possibilities for an arrangement without conflict are very salient. In our experimental environment intermediate solutions are feasible and stable, but purely emotional elements prevent them from being reached. |
| Keywords: | secession, collective action, independence movements, laboratory experiments, rent-seeking. |
| JEL: | C92 C93 D72 D74 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:usi:labsit:013&r=pol |
| By: | Michael Funk; Reiner Eichenberger |
| Abstract: | Democratic elections look very much like a contest where voters have to compare the candidates according to an ordinal ranking. Nevertheless, the theory of tournaments has not yet been applied to Political Economics. Therefore, we deploy tournament models to analyse elections. The main difference between tournaments in a firm and election tournaments is a systematic asymmetry between the contestants: whereas the voters have plenty of information about the incumbent, they hardly know anything about the challenger. Unlike most models of political accountability that model the challenger as a standard, we focus on the specific role of the challenger and model him as a random draw with a given expected ability. Consequently the ordinal ranking of the candidates contains plenty of noise, which weakens the incumbent's incentives to exert e¤ort. After the presentation of the basic model, several extensions of the tournament theme in politics are explored. The model gives a fresh insight into very important aspects of politics, such as sabotage and selection, and it identifies exective policy reforms, e.g. the deregulation of politics. |
| Keywords: | Tournament; Political Agency; Elections |
| JEL: | D8 D72 H11 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2007-20&r=pol |
| By: | Picci, Lucio; Golden, Miriam |
| Abstract: | This paper analyzes the political determinants of the distribution of infrastructure expenditures by the Italian government to the country’s 92 provinces between 1953 and 1994. Extending implications of theories of legislative behavior to the context of open-list proportional representation, we examine whether individually powerful legislators and ruling parties direct spending to core or marginal electoral districts, and whether opposition parties share resources via a norm of universalism. We show that when districts elect politically more powerful deputies from the governing parties, they receive more investments. We interpret this as indicating that legislators with political resources reward their core voters by investing in public works in their districts. The governing parties, by contrast, are not able to discipline their own members of parliament sufficiently to target the parties’ areas of core electoral strength. Finally, we find no evidence that a norm of universalism operates to steer resources to areas when the main opposition party gains more votes. |
| Keywords: | pork barrel; distributive politics; electoral systems; Italy; public spending; infrastructure |
| JEL: | H40 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5626&r=pol |
| By: | Nauro F. Campos (Brunel University CEPR, WDI and IZA); Menelaos G. Karanasos (Brunel University) |
| Abstract: | What is the relationship between economic growth and its volatility? Does political instability affect growth directly or indirectly, through volatility? This paper tries to answer such questions using a power-ARCH framework with annual time series data for Argentina from 1896 to 2000. We show that while assassinations and strikes (what we call "informal" political instability) have a direct negative effect on economic growth, "formal" political instability (constitutional and legislative changes) has an indirect (through volatility) negative impact. We also find preliminary support for the idea that while the effects of "formal" instability are stronger in the long-run, those of "informal" instability are stronger in the short-run. |
| Keywords: | economic growth, volatility, political instability, power-ARCH |
| JEL: | C14 O40 E23 D72 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3087&r=pol |
| By: | Frederick van der Ploeg |
| Abstract: | The theory of tax smoothing and determination of public debt with uncertain future national income is extended for prudence. A prudent government deliberately underestimates future national income and the tax base, especially if the variance and persistence of shocks hitting the tax base are large and the tax rate and the unemployment benefit are large. As a precaution the tax rate is set higher and the level of public spending lower. As a result, as income and the tax base turn out to be bigger than budgeted, the minister of finance enjoys windfall revenues and is able to gradually reduce debt and debt service over time. This permits, depending on political preferences, either gradual cuts in the tax rate, gradual increases in government spending or a combination of both. It is easy to allow for government assets as well. Finally, political economy justifications are offered of why it is desirable to appoint a strong and pessimistic minister of finance. In particular, we show that prudence is able to offset the intertemporal spending, tax and debt biases resulting from the common-pool distortions. If the minister of finance and the prime minister are given as many voting rights as the spending ministers combined, the intratemporal common-pool distortions of an excessively large public sector are eliminated as well. A strong and pessimistic minister of finance can thus control the impatient profligacy of squabbling spending ministers. However, if voters care about outcomes on election eve, prudence may be abused for short-run electoral gains. Opportunistic manipulation of election results, however, also dampens the intertemporal common-pool distortions. |
| Keywords: | prudence, pessimism, precautionary taxation, tax smoothing, public debt, income forecasts, public sector assets, common pool, feedback Nash, voting rights, electoral budget cycles, political economy |
| JEL: | H21 H60 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2007/39&r=pol |
| By: | Matilde Bombardini (The University of British Columbia and IZA and The Rimini Centre for Economics Analysis, Rimini, Italy.); Francesco Trebbi (University of Chicago,USA) |
| Abstract: | This paper investigates the relationship between the size of interest groups in terms of voter representation and the interest group?s campaign contributions to politicians. We uncover a robust hump-shaped relationship between the voting share of an interest group and its contributions to a legislator. This pattern is rationalized in a simultaneous bilateral bargaining model where the larger size of an interest group a¤ects the amount of surplus to be split with the politician (thereby increasing contributions), but is also correlated with the strength of direct voter support the group can o¤er instead of monetary funds (thereby decreasing contributions). The model yields simple structural equations that we estimate at the district level employing data on individual and PAC donations and local employment by sector. This procedure yields structural estimates of electoral uncertainty and politicians e¤ectiveness as perceived by the interest groups. Our approach also implicitly delivers a novel method for estimating the impact of campaign spending on election outcomes: we ?nd that an additional vote costs a politician between 100 and 400 ollars depending on the district. |
| JEL: | D72 P48 H7 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:21-07&r=pol |
| By: | Marci Battaglini; Rebecca Morton; Thomas Palfrey |
| Abstract: | This paper reports the first laboratory study of the swing voter's curse and provides insights on the larger theoretical and empirical literature on "pivotal voter" models. Our experiment controls for different information levels of voters, as well as teh size of the electorate, the distribution of preferences, and other theoretically relevant parameters. The design varies hte share of partisan voters and the prior elief abouta payoff relevant state of the world. Our results support the equilibrium predictions of the Feddersen-Pesendorfer model, and clearly reject the notion that voters in the laboratory use naive decision-theoretic strategies. The voters act as if they are aware of the swing voter's curse and adjust their behavior to compensate. While the compensation is not complete and there is some heterogeneity in individual behavior, we find that aggregate outcomes, such as efficiency, turnout, and margin of victory, closely track the theoretical predictions. |
| Date: | 2007–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:cso:wpaper:0019&r=pol |
| By: | Dimitrios D. Thomakos (University of Peloponnese, Greece and The Rimini Centre for Economics Analysis, Italy.); Gikas A. Hardouvelis (University of Piraeus, Greece and CEPR) |
| Abstract: | We investigate the behavior of consumer confidence around national elections in the EU-15 countries during 1985:1-2007:3. Consumer confidence increases before the date of elections and falls subsequently by almost the same amount. It is able to predict the strength of the performance of the incumbent party and its probability of re-election both alone and in the presence of macroeconomic and fiscal variables. The post-election drop is negatively related to the previous run up and is a function of the political - but not the economic - environment. A similar rise and fall characterizes consumer confidence in the United States. |
| Keywords: | consumer confidence, national elections, incumbent party, macro-economy, fiscal conditions, political business cycle, EU-15, USA. |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:42-07&r=pol |
| By: | Jens Großer; Arthur Schram |
| Abstract: | We experimentally study the impact of public opinion poll releases on voter turnout and welfare in a participation game. We find higher turnout rates when polls inform the electorate about the levels of support for various candidates than when polls are prohibited. Distinguishing between allied and floating voters, our data show that this increase in turnout is entirely due to floating voters. Very high turnout is observed when polls indicate equal support levels for the candidates. This has negative consequences for welfare. Though in aggregate social welfare is hardly affected, majorities benefit more often from polls than minorities. Finally, our comparative static results are better predicted by quantal response (logit) equilibrium than by Bayesian Nash equilibrium. |
| Keywords: | laboratory experiments. |
| JEL: | C92 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:usi:labsit:014&r=pol |
| By: | Fabrice Barthélémy (THEMA, Université de Cergy-Pontoise); Mathieu MARTIN (THEMA, Université de Cergy-Pontoise); Vincent MERLIN (CREM, CNRS and Université de Caen, Faculté de sciences économiques et de gestion,) |
| Abstract: | A classical problem in the power index literature is to design a voting mechanism such as the distribution of power of the different players is equal (or closer) to a pre established target. This tradition is especially popular when considering two tiers voting mechanisms: each player votes in his own jurisdiction to designate a delegate for the upper tier; and the question is to assign a certain number of mandates for each delegate according the population of the jurisdiction he or she represents. Unfortunately, there exist several measures of power, which in turn imply different distributions of the mandates for the same pre established target. The purposes of this paper are twofold: first, we calculate the probability that the two most important power indices, the Banzhaf index and the Shapley-Shubik index, lead to the same voting rule when the target is the same. Secondly, we determine which index on average comes closer to the pre established target. |
| Keywords: | Banzhaf, Shapley-Shubik, power indices |
| JEL: | C7 D7 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ema:worpap:2007-25&r=pol |
| By: | Ariel D. Procaccia; Michal Feldmany; Jeffrey S. Rosenschein |
| Abstract: | The voting rules proposed by Dodgson and Young are both designed to find the candidate closest to being a Condorcet winner, according to two different notions of proximity; the score of a given candidate is known to be hard to compute under both rules. In this paper, we put forward an LP-based randomized rounding algorithm which yields an O(log m) approximation ratio for the Dodgson score, where m is the number of candidates. Surprisingly, we show that the seemingly simpler Young score is NP-hard to approximate by any factor. |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp466&r=pol |
| By: | Anwar, Mumtaz |
| Abstract: | This paper analyzes the determinants of multilateral aid from international financial institutions (IFIs) to Pakistan, focusing on the world three major IFIs, the World Bank, the IMF and the ADB. Political economic factors, notably bureaucratic interests and major shareholders economic interests, are suspected to be relevant in international aid allocation decisions. Pooled Tobit estimation analyses confirm this hypothesis. Although recipient need also proves to be a relevant determinant of lending, bureaucratic interest outranks the former. Among the main multilateral donors, the IDA and the ADB are shown to be more bureaucratic and stakeholders economic interest-oriented in their lending decisions than the IBRD and the IMF, which tend to adhere to official lending explanations. |
| Keywords: | Foreign aid; International organizations; Bureaucracy |
| JEL: | F35 D70 |
| Date: | 2006–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5601&r=pol |
| By: | Andrew Pickering; James Rockey |
| Abstract: | We analyze the impact of ideology on the size of government. In a simple model the government sets redistribution and provision of public services according to the preferences of the median voter, for whom private consumption is a necessity. Ideology is defined on preferences for public services and the impact of ideology upon the size of government increases with mean income. In empirical work ideology is measured using data based on party manifestos. Much of the increases and divergence in government size observed across OECD countries can be explained by the interaction of ideology and mean income. |
| Keywords: | ideology, Wagner's law, size of government |
| JEL: | D72 H10 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:bri:uobdis:07/599&r=pol |
| By: | Etienne Farvaque (Equippe - Universités de Lille, Faculté des Sciences Economiques et Sociales, France.); Norimichi Matsueda (School of Economics, Kwansei Gakuin University, Japan.); Pierre-Guillaume Méon (DULBEA, Université libre de Bruxelles, Brussels,) |
| Abstract: | This paper relates the volatility of interest rates to the collective nature of monetary policymaking in monetary unions. Several decision rules are modelled, including hegemonic and democratic procedures, and also committees headed by a chairman. A ranking of decision rules in terms of the volatility of policy rates is obtained, showing that the presence of a chairman has a cooling e¤ect. However, members of a monetary union are better off under symmetric rules (voting, consensus, bargaining), unless they themselves chair the union. The results are robust to the inclusion of heterogeneities among members of the monetary union. |
| Keywords: | Monetary Policy Committees, Decision Procedures, Interest-rate, Monetary Union |
| JEL: | D70 E43 E58 F33 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:dul:wpaper:07-11rs&r=pol |