What remains of the popularity function? The case of Austria

In this paper, the effects of changes in economic conditions on the popularity of political parties in Austria are investigated. According to the traditional theory of the popularity function, economic variables such as the rate of unemployment, the rate of inflation, and the growth rate of real disposable income exert direct influence upon voters' evaluations of political parties. Estimations of such popularity functions for Austria show that some effects of this kind can be found, but they seem to be unstable over time. On the other hand, models of political popularity based on the assumption of voters' rational expectations predict that only unexpected changes in economic conditions affect political popularity. One of these models seems to have favorable predictive properties for Austria.The authors are grateful to A. Kirschhofer-Bozenhardt (IMAS Linz) for providing the Austrian popularity data and to G. Kirchgässner for valuable comments on an earlier version of this paper. Financial support from the Ludwig Boltzmann-Institut zur Analyse wirtschaftspolitischer Aktivitäten is gratefully acknowledge. Sohbet Karbuz acknowledges support from the Institute for Advanced Studies, Vienna.     

On the Strategic Use of Representative Democracy in International Agreements

We consider as endogenous the choice of the delegation rule in an international agreement between two countries. We study three potential types of delegation: strong, weak or no delegation, the latter case corresponding to direct democracy. We show that populations decide to bind themselves by delegating the national policy decision-making to a "powerful conservative representative," in order to improve their bargaining position. These noncooperative behaviors of countries when they decide on their delegation rule induce negative political externalities between countries, which cancel the gains achieved by the internalization of economic externalities in the case of political integration. We then examine the consequences of ratification by referendum. We conclude that a Pareto improvement of the international agreement would be to incorporate an ex post referendum.     

The political economy of Brexit: explaining the vote

The UK’s closely contested Brexit vote to leave the EU is expected to have a significant impact on the UK and EU. While calculating the impact of Brexit is difficult since the UK is still formally a member of the EU, understanding the vote is possible. Leading up to the referendum, public opinion was divided along demographic and economic lines. This article uses referendum results at the local government level to test whether national, racial, religious and economic factors actually influenced the vote. Results indicate that demographic variables played a role while economic variables did not.     

Anchors,endorsements, and preferences: A field experiment

This study investigates how access to political endorsements affects stated preferences for an environmental public good in Switzerland. We developed a contingent valuation survey questionnaire with two valuation questions, the first formulated as a (hypothetical) policy referendum, the second an open-ended WTP question. For the referendum question we solicited endorsements from a range of political parties and relevant interest groups. We then conducted a split-sample mail-survey experiment in which a table listing the endorsements was included with a subsample of the questionnaires. Access to the policy endorsements significantly affected the responses to the open-ended willingness-to-pay question.     

Growth effects of EU and EZ memberships: Empirical findings from the first 15 years of the Euro

One of the major economic reasons for the creation of the European Union (EU) and of the Euro-zone (EZ) was an expected bonus of economic growth for member countries. Whilst several studies exist on the growth bonus of EU membership, there are none for the EZ, the latest and deepest step of economic integration in Europe. The aim of this article is to investigate whether EU and EZ memberships enhance growth for their members. In order to perform our empirical analysis, we estimate different growth models restricting the time frame to the first 15 years of the Euro - from 1999 to 2013. We find a positive impact of EU membership on economic growth, but no impact of being part of the EZ, except during the financial crisis, when the EZ has a negative impact on growth amongst its members. Considering the heated political debate related to the Brexit referendum, our results favour a “yes” to the EU but a less clear answer when it comes to the EZ.     

A Conversation with Kurt Rothschild

Kurt Rothschild was born in Vienna in 1914. In 1938 he came to Glasgow as a refugee from the Nazis, and taught there until his return to Austria in 1947. Between 1947 and 1966 he was a researcher at the Austrian Economic Research Institute in Vienna (WIFO), specialising in labour market and trade issues; he still works for WIFO as a consultant. From 1966 until 1985 he was Professor of Economics at the University of Linz. Two volumes of his collected papers appeared in the 1990s (Rothschild, 1993, 1995). His recent publications include Rothschild (2004a, 2004b, 2006, 2007a, 2007b). This interview took place in Vienna on 1 November 2007.     

Mapping the theory of political representation to the empirics: An investigation for proportional and majoritarian rules

We combine roll call votes and referendum decisions on identically worded legislative proposals to identify the effect of electoral rules on the way Swiss Members of Parliament (MPs) represent their constituents’ preferences. We exploit the fact that MPs in both Houses of Parliament are elected in the same electoral districts (the cantons). Yet, in the Lower House, MPs are elected using a proportional rule, while in the Upper House they are elected employing a majoritarian rule. We find that electoral rules matter strongly for political representation. The voting patterns of MPs are fully in line with three theoretical predictions regarding the influence of electoral rules on representation of constituents’ preferences: 1) The probability that a proportional-elected MP accepts a legislative proposal closely follows the share of voters that accept the proposal in the referendum. 2) In contrast, for majority-elected MPs the probability of acceptance is strongly increasing in the share of voter acceptance if the latter is close to the 50% threshold. 3) The estimated probability that an Upper House MP votes “yes” as a function of the share of voters voting “yes” in the referendum has an S-shape form with an inflection point close to 50%.     

Political uncertainty and stock market returns: evidence from the 1995 Quebec referendum

Abstract.  In this study, we investigate the short run effect of the 30 October 1995 Quebec referendum on the common stock returns of Quebec firms. Our results show that the uncertainty surrounding the referendum outcome had an impact on stock returns of Quebec firms. We also find that the effect of the referendum varied with the political risk exposure of Quebec firms, that is, the structure of assets and principally the degree of foreign involvement. JEL classification: G14, G15     

The political economy of constitutional choice: a study of the 2005 Kenyan constitutional referendum

Recent studies of the linkages between the wealth of nations and the institutions of governance suggest that concentrating political power in a monarchy or a ruling coalition impedes economic growth and, moreover, that while power-diffusing reforms can enhance the wellbeing of society in general, opposition by groups benefiting from the status quo is predictable. In November 2005, Kenyans rejected a proposed constitution that, despite promises made by their new chief executive, would not have lessened the powers of the presidency. Using a unique, constituency-level dataset on the referendum vote, we estimate a model of the demand for power diffusion and find that ethnic groups’ voting decisions are influenced by their expected gains and losses from constitutional change. The results also highlight the importance of ethnic divisions in hindering the power-diffusion process, and thus establish a channel through which ethnic fragmentation adversely impacts economic development.     

Zur Wahlzyklik wirtschaftspolitischer Maßnahmen

Summary Election cycles of economic policy measures: An empirical test of the votemaximizing hypothesis.A special characteristic of the economic theory of democracy lies in the assumption of the behaviour of politicians: they are not as much striving for the advancement of public interest but display much rather a behaviour of utility maximization. It is their goal to win the next elections. Public preferences are taken into consideration only because voters seem to favour the political party whose election pledge most closely corresponds to their own ideas. Assuming further that voters are forgetful, we can derive the hypothesis that governments set popular (i.e. vote capturing) economic policy measures ahead of elections and unpopular ones right afterwards. In this paper we test this hypothesis using the increase of political prices and the development of certain categories of public expenditure as explanatory variables.Administered prices and public tariffs proved greatly dependent upon the timing of elections. For all of the tariffs under examination a statistically significant predominance of increases (unpopular) could be observed shortly after elections. The extent of the increase, however, does not appear to have any correlation with the election date.As to popular government expenditures, only subsidies have been paid clearly in line with election cycles in the period under consideration.As to further spending categories, our hypothesis appears to be directionally confirmed, yet the data available is infufficient for a statistically significant proof. Besides, especially in the case of Austria, other factors seem to be important in the determination of economic policy measures as well. Some reasons are given in this paper.