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on Positive Political Economics |
| By: | Richard Van Weelden (University of Chicago); Massimo Morelli (Columbia University) |
| Abstract: | We provide a positive analysis of effort allocation by a politician facing reelection when voters are uncertain about the politician's preferences on a divisive issue. We then use this framework to derive normative conclusions on the desirability of transparency, term limits, and independence of executive power. There is a pervasive incentive to ``posture'' by over-providing effort to pursue the divisive policy, even if all voters would strictly prefer to have a consensus policy implemented. As such, the desire of politicians to convince voters that their preferences are aligned with the majority can lead them to choose strictly pareto dominated effort allocations in the first period. Transparency over the politicians' effort choices can either mitigate or re-enforce the distortions depending on the strength of politicians' office motivation and the efficiency of institutions. When re-election concerns are paramount, and executive institutions are strong, transparency about effort choices can be bad for both incentivizing politicians and for sorting. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:111&r=pol |
| By: | Simeon Alder (Department of Economics, University of Notre Dame); Guillermo Ordonez (University of Pennsylvania and NBER) |
| Abstract: | Many policies enhance welfare under certain conditions, but have the potential to generate private rents at other times. This can prompt rent-seeking governments to adopt such policies excessively. If the economy's constituents can easily detect opportunistic policymaking, rent-seeking is constrained by the prospect of loosing political reputation and the removal from power. If, in contrast, information is scarce and the politician's motives are accordingly murky, his discretion depends critically on the ability of different constituents to report instances of abuse. Governments, however, can mitigate scrutiny by way of excessive transfers that benefit prospective political clients. The patterns of inefficiency and redistribution that our model generates match salient stylized facts. In contrast to the standard view that inefficiencies are unavoidable when implementing redistributive policies, we argue that redistribution may be a means to disguise inefficient policies that generate private benefits to politicians. |
| Keywords: | Reputation, Rent-Seeking, Redistribution, Asymmetric Information, Institutions, Political Economics |
| JEL: | O43 D72 D82 P16 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:nod:wpaper:017&r=pol |
| By: | De Donder, Philippe; Leroux, Marie-Louise |
| Abstract: | We build a political economy model where individuals differ in the extent of the behavioral bias they exhibit when voting first over social long-term care (LTC) insurance and then choosing the amount of LTC annuities. LTC annuities provide a larger return if dependent than if healthy. We study the majority voting equilibrium under three types of behavioral biases: myopia, optimism and sophisticated procrastination. Optimists and myopics similarly under-estimate their own dependency risk both when voting and when buying LTC annuities. They differ in that optimists know the correct average dependency risk (that determines the return of both social and private insurance), while myopics also under-estimate this average risk (and thus over-estimate the insurance return). Sophisticated procrastinators act as if they under-estimated their own risk when buying annuities, but anticipate this bias at the time of voting. We obtain that the stylized observation of lack of LTC insurance is compatible with agents being optimistic or myopic, but not sophisticated procrastinators. Increasing the dfference in return across dependency states for the LTC annuity is detrimental to sophisticated voters and to very biased myopic and optimist voters. Finally, less myopic individuals may end up worse off, at the majority-voting equilibrium, than more myopic agents, casting some doubt on the usefulness of information campaigns. |
| Keywords: | Majority Voting, Myopia, Optimism, Sophisticated Procrastinators, Dependency Linked Annuity, Enhanced Life Annuity, Complementary Private Insurance. |
| JEL: | D91 H55 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:26382&r=pol |
| By: | Shawn Kantor; Price V. Fishback; John Joseph Wallis |
| Abstract: | The critical election of 1932 represented a turning point in the future electoral successes of the Democrats and Republicans for over three decades. This paper seeks to measure the importance of the New Deal in facilitating the Democrats’ control of the federal government well into the 1960s. We test whether long-differences in the county-level electoral support for Democratic presidential candidates after the 1930s can be attributed to New Deal interventions into local economies. We also investigate more narrowly whether voters rewarded Roosevelt from 1932 to 1936 and from 1936 to 1940 for his efforts to stimulate depressed local economies. Our instrumental variables estimates indicate that increasing a county’s per capita New Deal relief and public works spending from nothing to the sample mean ($277) would have increased the long-run support for the Democratic party by 10 percentage points. We further find that the long-run shift toward the Democratic party after 1928 was not a function of the Roosevelt landslide victory in 1932. Roosevelt’s ability to win over voters during the 1936 and 1940 elections, however, did matter for the long-term. |
| JEL: | H5 N42 |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18500&r=pol |
| By: | Costa Lima, Rafael; Moreira, Humberto; Verdier, Thierry |
| Abstract: | We re-address the tradeoff between centralized and decentralized decision making of local policies when policymakers are subject to capture by special interest groups. In particular, we consider the case where lobbies have private information about their ability to exert influence. We find a new informational effect in the political game under centralized structures that gives the policymaker additional bargaining power against lobbies. Thus, when compared to decentralization, centralization reduces capture, and is more likely to be welfare enhancing in the presence of information asymmetries. Then, we apply the model to the classical problem of local public goods provision and to the incentives towards the creation of customs unions agreements. |
| Keywords: | Asymmetric information; Centralization; custom unions; lobbying; public goods |
| JEL: | D72 D82 F15 H41 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9199&r=pol |
| By: | Carlos Eduardo S. Gonçalves; Mauro Rodrigues Jr., Ricardo A. Madeira |
| Abstract: | There is an open debate in social sciences concerning the impact of different electoral rules and societal heterogeneity on the number of candidates vying for a seat during election times. Using data from Brazil’s municipal mayoral elections, this paper assesses the empirical validity of the so-called nuanced view, which claims the interaction between societal heterogeneity and institutional permissiveness of electoral rules (presence of a runoff, in our case) is key to explain the number of candidates. Our study differs from others in the literature in two major aspects: (i) we have a truly exogenous source of variation in electoral rules due to a change in legislation introduced by the constitutional reform of 1988 and, (ii) we use panel-data techniques that allow for a more reliable identification of the parameters. Our results provide support for the nuanced-view: the coefficient of the interaction between heterogeneity and the presence of a runoff is always positive and statistically significant. |
| Keywords: | runoff, heterogeneity, number of candidates |
| JEL: | D72 D63 E D02 |
| Date: | 2012–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2012wpecon25&r=pol |
| By: | Matthias Doepke (Northwestern University) |
| Abstract: | Women's rights and economic development are highly correlated. Today, the discrepancy between the legal rights of women and men is much larger in developing compared to developed countries. Historically, even in countries that are now rich women had few rights before economic development took off. Is development the cause of expanding women's rights, or conversely, do women's rights facilitate development? We argue that there is truth to both hypotheses. The literature on the economic consequences of women's rights documents that more rights for women lead to more spending on health and children, which should benefit development. The political-economy literature on the evolution of women's rights finds that technological change increased the costs of patriarchy for men, and thus contributed to expanding women's rights. Combining these perspectives, we discuss the theory of Doepke and Tertilt (2009), where an increase in the return to human capital induces men to vote for women's rights, which in turn promotes growth in human capital and income per capita. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:116&r=pol |