Political budget cycles,incumbency advantage,and propaganda

This paper combines incumbency advantage and political budget cycle theory. An opportunistic politician is given two instruments: deficit‐financed transfers and propaganda. Unlike earlier analytical models, but in accordance with the empirical literature, government manipulations do actually improve re‐election chances. However, the optimal level of government manipulation depends on country characteristics, in particular the competence dispersion among potential candidates. This may explain why it is easier to detect political budget cycles in, for instance, developing countries or new democracies. Results are robust to alternative competence distribution and propaganda cost assumptions.     

Corporate taxation, incumbency advantage and entry

It is the purpose of this paper to show that corporation tax may affect industrial structure. Analyzing the effects of corporation tax, we demonstrate that it tends to favour incumbents over entrants. We further show that the effect of this advantage on an incumbent's output depends on his profit or loss history. An incumbent with a past profit is likely to produce a greater output, thereby partially or fully crowding out an entrant's output. In contrast, an incumbent with a past loss is more likely to produce a smaller output, making entry easier.     

Legislators' behaviour and electoral rules: Evidence from an Italian reform

We explore how electoral rules and the degree of civicness of the voters interact in shaping elected officials' behaviour. We examine the expenditure proposals sponsored by Italian Senators from 1994 to 2013 and exploit the 2005 electoral reform that transformed a mainly majoritarian system into a mainly proportional one. First, we find that legislators elected in first-past-the-post districts are more likely to sponsor pork-barrel bills and to put effort into legislative activity than those elected with a closed-list proportional system. Second, more importantly, we show that the effects of the electoral rules are muted in areas with high civicness.     

Information advantage,short sales,and stock returns: Evidence from short selling reform in China

We study short selling around earnings announcements and examine the potential sources of their information. Using unique daily aggregate short selling transactions in China, we find that short sellers significantly increase (decrease) their short positions before negative (positive) earnings surprise. In addition, abnormal high short selling is significantly associated with negative post-earnings announcement stock returns. The findings suggest that short sellers, on average, are informed and sophisticated traders and they can exploit profitable opportunities contained in earnings announcements. Finally, we find that stocks with poor governance or more insiders have higher (lower) abnormal short selling in negative (positive) earnings surprise, indicating private information leakage from firms with weak governance; which is consistent with the tipping argument. Our findings have important policy implications for capital market regulation in China.     

Higher turnout increases incumbency advantages: Evidence from mayoral elections

We analyze the effect of electoral turnout on incumbency advantages by exploring mayoral elections in the German state of Bavaria. Mayors are elected by majority rule in two-round (runoff) elections. Between the first and second ballot of the mayoral election in March 2020, the state government announced an official state of emergency. In the second ballot, voting in person was prohibited and only postal voting was possible. To construct an instrument for electoral turnout, we use a difference-in-differences strategy by contrasting turnout in the first and second ballot in 2020 with the first and second ballots from previous elections. We use this instrument to analyze the causal effect of turnout on incumbent vote shares. A 10-percentage point increase in turnout leads to a statistically robust 3.4 percentage point higher vote share for incumbent mayors highlighting the relevance of turnout-related incumbency advantages.     

Globalization and electoral outcomes: Evidence from Italy

We study whether and to what extent the electoral dynamics in Italy over the 1994–2008 period can be explained by the development of economic factors associated with globalization. To measure the level of exposure to globalization for local labor markets, our main unit of analysis, we use the intensity of import competition from China and the presence of immigrants. Looking at parties’ political positions and employing an estimation strategy that accounts for endogeneity and time‐invariant unobserved effects across local labor markets, we find that both immigration intensity and exposure to import competition from China have contributed positively to the electoral outcomes of far‐right parties, whereas only immigration intensity has increased the vote shares of right‐wing and traditionalist/authoritarian/nationalist parties. Some evidence, albeit not robust, shows that immigration may have also had a positive impact on far‐left parties, thus possibly further contributing toward political polarization. Moreover, electoral turnout has responded negatively to an increased presence of migrants. While the above effects seem to work through the mediation of labor markets, our results, especially those related to immigration, suggest that other mechanisms at the level of local communities are also at play.     

Child labor and the minimum wage: Evidence from India

This study examines how changes in the minimum wage affect child labor in India. The analysis uses repeated cross sections of India's NSSO employment data from 1983 to 2008 merged with data on state-level minimum wage rates. Theoretically, the impact of the minimum wage on child work could go either way, so empirical evidence from a country with high rates of child labor and a myriad of minimum wage laws across states and industries helps to lessen the ambiguity. Results indicate that regardless of gender, in urban areas, a higher minimum wage reduces child labor in household work. In rural areas a similar result applies for girls while household labor does rise for boys. The minimum wage has virtually no impact on child work outside of the home across urban and rural areas.     

Competition,benchmarking, and electoral success: Evidence from 69 years of the German Bundestag

The German electoral system ensures that there is always at least one federal legislator per constituency. This legislator can face competition from additionally elected competitors to the Bundestag from precisely the same constituency. The existence of several legislators per constituency allows voters to benchmark their quality against each other. We analyze the causal impact of having more elected competitors from the same constituency on legislators’ personal success versus the success of their parties. Our data cover the legislative terms in the German Bundestag and federal elections in the period 1953–2021. In our analysis, we rely on exogenous variation in elected competitors by investigating changes induced by legislators who leave the Bundestag during the legislative period and their respective replacement candidates as instrumental variables. We find that legislators are less successful in elections when they are exposed to elected competitors from the same constituency. The results suggest that benchmarking possibilities are relevant for voters to evaluate their representatives.     

Creative accounting and electoral motives: Evidence from OECD countries

Using an unbalanced panel of 27 OECD countries over the period 1970–2011, I examine whether electoral motives influenced creative accounting. Governments engage in “below-the-line” operations, such as transactions in financial assets, that do not show up in the deficit figures but give rise to changes in debt. I use the difference between the change in public debt and the deficit (stock-flow adjustment) to measure creative accounting. The results suggest that governments strategically engaged in creative accounting before regular elections so as to sugarcoat the budget balance. I also provide an overview of government interventions that gave rise to large stock-flow adjustments.     

Local representation and strategic voting: Evidence from electoral boundary reforms

We analyze whether voters value local political representation by exploiting municipal mergers, which increase the number of candidates available to voters and intensify political competition. In the Finnish open-list proportional representation system, voters rank the candidates within parties, and thus, concentrating votes to local candidates increases the extent of local representation. Using a difference-in-differences strategy, we find that the vote distributions become more concentrated in municipalities less likely to gain local representation after the mergers. Moreover, the effect is much larger in municipalities where the benefits of local representation to voters are large. The latter result disentangles voters' responses from the responses of other political actors. The results are important also for designing local government mergers, which are an important policy tool in many countries. They highlight that concerns over deteriorating local democracy due to mergers have merit, because voters have preferences for local representation. At the same time, the vote concentration patterns we find alleviate these concerns.     

Political philosophy,executive constraint and electoral rules

This paper explains the choice of electoral rule by the difference in the ease of implementing targeted transfer. By modeling the choice of electoral rule as a decision by the ruling rich-elite party before universal suffrage is enacted, this paper predicts that a loose constitutional constraint on targeted transfers is conducive to the adoption of proportional representation. To complete the theory, this work argues that the British empiricism and the Continental rationalism have their own views concerning the role and the power of a state, leading to differential levels of constraints on redistribution. Thus the theory explains why Anglo-Saxon countries tend to maintain majoritarian electoral rule. Employing the event history analysis with the two-stage-residual-inclusion approach, this work shows that countries with poorer executive constraints are more likely to adopt proportional representation. Meanwhile, we find evidence supporting that countries with British origin have been associated with tighter constraint upon the executive.     

Economic reform,growth and the poor: Evidence from rural Ethiopia

A new decomposition of poverty changes is developed to analyse the determinants of poverty changes during a period of economic reform (1989–1995) in villages in Ethiopia. Poverty fell substantially, but with diverse experiences across villages. Shocks mattered, but the main factors driving consumption changes were relative prices changes, resulting in changes in the returns to land, labour, human capital and location. The experience of the poor is mixed: one group of the poor in 1989, with relatively good land and location, outperformed all other households, while another group with much poorer endowments and location experienced virtually unchanged and persistent poverty.     

The Turkish wage curve: Evidence from the Household Labor Force Survey

This paper examines the Turkish wage curve using individual data from the Household Labor Force Survey including 26 NUTS-2 regions over the period 2005-2008. We find an unemployment elasticity of −0.099, with a higher elasticity for younger, less educated, less experienced and female workers.     

Patronage and ideology in electoral behavior: Evidence from Egypt's first presidential elections

This paper investigates the impact of patronage and ideology on voter behavior and election outcomes. Egypt's first free presidential elections represent a good case study to answer the question whether private gain outweighs ideology in voter behavior on a broader level. First, we combine election results with household surveys and national statistics to estimate the impact of patronage (measured by public employment) on voting for the pre-revolution regime candidate. Second, using results of the first round of elections as a proxy for ideology, we test for the effect of ideological preferences on voting behavior. Additionally, we test for candidates' ability to mobilize supporters. Our results suggest that patronage has a stronger effect than secularist ideology but a weaker effect than pro-change ideology. Results show that the number of public sector and government employees in each electoral district has a positive impact on participation rates.     

Economic reform, voting, and local political intervention: Evidence from India

This paper uses the Indian tariff reforms of the early nineties to estimate how voters hurt by economic reforms respond. Regions more hurt by the tariff reform increased their support for both the party that initiated their suffering and parties with similar preferences in favor of poverty-centric policies. This response is surprisingly sophisticated, where voters did not simply punish incumbents for negative income shocks and correctly discounted initial anti-reform stances by opposition parties that later turned out to be false. Furthermore, the strength of this voting response varied with both geography and local political incentives, suggesting that the economic effects of reforms might vary substantially in large and decentralized democracies.     

Trade liberalization, antidumping, and safeguards: Evidence from India's tariff reform

This paper is the first to use product-level data to examine empirically whether countries use antidumping and safeguard exceptions to unwind commitments to lower tariffs in the face of domestic political-economic pressure. We focus on the case of India, a country that underwent a major exogenous tariff reform program in the early 1990s and subsequently initiated substantial use of safeguard and antidumping import restrictions. We first estimate structural determinants of India's import protection using the Grossman and Helpman (1994) model and provide evidence from its pre-reform tariff data of 1990 that is consistent with the theory. We then re-estimate the model on the Indian tariff data after the trade liberalization is complete and find that the model no longer fits, a result consistent with theory and evidence provided in other settings that India's 1991-1992 IMF arrangement can be interpreted as resulting in an exogenous shock to India's tariff policy. However, when we re-estimate the model on data from 2000-2002 that more completely reflects India's cross-product variation in import protection by including both its post-reform tariffs and its additional non-tariff barriers of antidumping and safeguard import protection, the significance of the Grossman and Helpman model determinant estimates is restored. We interpret these combined results as evidence that India unwound its commitment to reduce tariffs through use of antidumping and safeguard protection in the face of political-economic pressure. The estimates are also economically important and provide one explanation for separate results in the literature that the magnitude of import reduction associated with India's use of antidumping is similar to the initial import expansion associated with its tariff reform. Finally, we interpret the implications of our results for the burgeoning research literature examining the effects of liberalization on India's micro-level development.     

Can biased polls distort electoral results? Evidence from the lab

We introduce a new methodological approach for studying the effect of biased polls on election outcomes and apply it to a set of new experiments with 375 participants. Voters may observe and learn about the bias by playing multiple voting rounds. While in control conditions, polls are unbiased, in treatment conditions, participants view only poll results where a particular candidate’s vote share is the largest. This candidate is consistently elected more often in the treatments than in the controls, because biased polls robustly distort voters’ expectations about vote shares. This effect holds after eighteen election rounds, out of which the first three are practice rounds, but somewhat more weakly in our main treatment where voters are explicitly informed about the bias.     

Immigration,Ethnic Diversity,and Political Outcomes: Evidence from Denmark

I study the impact of immigration and increasing ethnic diversity on political outcomes in immigrant‐receiving countries, focusing on immigration and election outcomes in Danish municipalities between 1981 and 2001. A novel instrumental variable strategy based on historical housing stock data addresses issues of endogenous location choices of immigrants and a rich set of control variables is employed to isolate ethnic diversity effects from those of other immigrant characteristics. Increases in local ethnic diversity lead to rightward shifts in election outcomes by shifting electoral support away from traditional “big government” left‐wing parties and towards anti‐immigrant nationalist parties. This holds for both local and national elections.     

Technical change and wage premiums amongst skilled labour: Evidence from the economic transition

I present reduced-form and structural evidence that the reorganization of the Russian economy in the post-transitional period increased the demand on law and business graduates. This demand shock provides a novel unified explanation of the Russian wage structure for 1985–2015. I then show that this shock is a common feature of all transitional economies, and it contributed to the transformational recession. The demand behaviour is identified with a new skill-biased technical change model of demand for skills with three production inputs (high school graduates and bachelor-level educations with two majors), showing that a technology shift that favours a particular skill might emerge within the skilled group rather than between skilled and unskilled. This is relevant because similar shifts (e.g., data scientists vs. liberal arts) emerge today in the frontier economies that adopt new general-purpose technologies (e.g., machine learning). Thus, this paper informs policymakers today on tools to counteract a potential drop in economic equality and performance that result from this adoption. Lastly, because of similarities between the mechanics of the transition and the 2022 sanctions to discourage Russia's war effort, my results highlight the importance of additional sanctions against the education system to prevent the regime's structural adaptation and preservation.     

Incumbency advantage in a proportional electoral system: A regression discontinuity analysis of Irish elections

The existence of a large incumbency advantage in the winner-takes-all plurality system of the United States is well documented. It is unclear whether incumbents in proportional systems should enjoy such a large advantage. Multi-seat constituencies make it difficult for individual incumbents to claim credit for the provision of local public goods and services. Moreover, multiple incumbents may dilute media attention thereby limiting name recognition advantage. We use a regression discontinuity design to estimate the causal effect of incumbency using election data from Ireland’s system of proportional representation with a single transferable vote (PR-STV). Incumbency causes an eighteen percentage point increase in the probability that a candidate in Ireland’s lower house of parliament wins a seat in the next election. Our results indicate that the protection of vulnerable incumbents from intra-party competition may be a source of incumbency advantage in multi-member district elections.