Latest Political Economy and Public Policy Papers

Partisan Bias in Economic News: Evidence on the Agenda-Setting Behavior of U.S. Newspapers

Valentino Larcinese, Riccardo Puglisi, James M. Snyder, Jr.

PEPP 27. March 2008.
We study the agenda-setting political behavior of a large sample of U.S. newspapersduring the last decade, and the behavior of smaller samples for longer time periods. Ourpurpose is to examine the intensity of coverage of economic issues as a function of theunderlying economic conditions and the political affiliation of the incumbent president,focusing on unemployment, inflation, the federal budget and the trade deficit. Weinvestigate whether there is any significant correlation between the endorsement policy ofnewspapers, and the differential coverage of bad/good economic news as a function ofthe president’s political affiliation. We find evidence that newspapers with pro-Democratic endorsement pattern systematically give more coverage to highunemployment when the incumbent president is a Republican than when the president isDemocratic, compared to newspapers with pro-Republican endorsement pattern. Thisresult is not driven by the partisanship of readers. There is on the contrary no evidence ofa partisan bias – or at least of a bias that is correlated with the endorsement policy – forstories on inflation, budget deficit or trade deficit.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp27.pdf

Group deliberation and the transformation ofjudgments: an impossibility result

Christian List

PEPP 26. March 2007.
While a large social-choice-theoretic literature discusses the aggregation ofindividual judgments into collective ones, there is relatively little formalwork on the transformation of individual judgments in group deliberation. Idevelop a model of judgment transformation and prove a baselineimpossibility result: Any judgment transformation function satisfying someinitially plausible condition is the identity function, under which no opinionchange occurs. I identify escape routes from this impossibility result andargue that successful group deliberation must be ‘holistic’: individualscannot generally revise their judgments on a proposition based on judgmentson that proposition alone but must take other propositions into account too. Idiscuss the significance of these findings for democratic theory.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp26.pdf

Individual and Collective Performance and the Tenureof British Ministers 1945-1997

Samuel Berlinski, Torun Dewan, Keith Dowding

PEPP 25. February 2007.
We study the effects of individual and collective ministerial performance on the length oftime a minister serves in British government from 1945-97, using the number ofresignation calls for a minister as an individual performance indicator and the cumulativenumber of such calls as an indicator of government performance. Our analysis lendssupport to a ‘two-strike rule’: ministers facing a second call for their resignation have asignificantly higher hazard than those facing their first, irrespective of the performance ofthe government. A minister’s hazard rate is decreasing in the cumulative number ofresignation calls; but conditional on receiving a first resignation call, the hazard rateincreases with the number of calls that all government ministers have faced in the past.Our message is that collective ministerial performance is a key determinant of whether aminister survives his first resignation call.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp25.pdf

The Qualities of Leadership:Direction, Communication, and Obfuscation

Torun Dewan, David P. Myatt

PEPP 24. February 2007.
Party activists wish to (i) advocate the best policy and yet (ii) unify behind a commonparty line. An activist’s understanding of his environment is based on the speeches ofparty leaders. A leader’s influence, measured by the weight placed on her speech,increases with her judgement on policy (sense of direction) and her ability to conveyideas (clarity of communication). A leader with perfect clarity of communication enjoysgreater influence than one with a perfect sense of direction. Activists can choose howmuch attention to pay to leaders. A necessary condition for a leader to monopolize theagenda is that she is the most coherent communicator. Sometimes leaders attract moreattention by obfuscating their messages. A concern for party unity mitigates thisincentive; when activists emphasize following the party line, they learn more about theirenvironment.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp24.pdf

The Effect of Direct Democracy on Income Redistribution:Evidence for Switzerland

Lars P. Feld, Justina A.V. Fischer, Gebhard Kirchgässner

PEPP 23. October 2006.
There is an intensive dispute in political economics about the impact of institutions on incomeredistribution. While the main focus is on comparison between different forms of representativedemocracy, the influence of direct democracy on redistribution has attracted much lessattention. According to theoretical arguments and previous empirical results, governmentpolicies of income redistribution are expected to be more in line with median voter preferencesin direct than in representative democracies. In this paper, we find that institutions ofdirect democracy are associated with lower public spending and revenue, particularly lowerwelfare spending and broad-based income and property (wealth) tax revenue. Moreover, weestimate a model which explains the determinants of redistribution using panel data providedby the Swiss Federal Tax Office from 1981 to 1997 and a cross section of (representative)individual data from 1992. While our results indicate that less public funds are used to redistributeincome and actual redistribution is lower, inequality is not reduced to a lesser extent indirect than in representative democracies for a given initial income distribution. This findingmight well indicate the presence of efficiency gains in redistribution policies.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp23.pdf

Leading the Party:Coordination, Direction, and Communication

Torun Dewan, David P. Myatt

PEPP 22. October 2006.
Party activists face a coordination problem: a critical mass (a barrier tocoordination) must advocate a single policy alternative if the party is tosucceed. The need for direction is the degree to which the merits of thealternatives respond to the underlying mood of the party. An individual’sability to assess the mood is his sense of direction. These factors combine toform an index of both the desirability and the feasibility of leadership: wecall this index Michels’ Ratio. A sovereign party conference gives way toleadership by an individual or oligarchy if and only if Michels’ Ratio issufficiently high. Leadership enhances the clarity of intra-partycommunication, but weakens the response of policy choices to the party’smood.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp22.pdf

Cross-Country Determinants of Life Satisfaction:Exploring Different Determinants across Groups inSociety

Christian Bjørnskov, Axel Dreher, Justina A. V. Fischer

PEPP 21. September 2006.
This paper explores a wide range of cross-country determinants of life satisfaction exploiting adatabase of 90,000 observations in 70 countries. We distinguish four groups of aggregate variablesas potential determinants of satisfaction: political, economic, institutional, and human developmentand culture. We use ordered probit to investigate the importance of these variables on individual lifesatisfaction and test the robustness of our results with Extreme Bounds Analysis. The results showthat only a small number of factors, such as openness, business climate, postcommunism, thenumber of chambers in parliament, Christian majority, and infant mortality robustly influence lifesatisfaction across countries while the importance of many variables suggested in the previousliterature is not confirmed. This remains largely true when the analysis splits national populationsaccording to gender, income and political orientation also.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp21.pdf

BEING THE NEW YORK TIMES: THEPOLITICAL BEHAVIOUR OF A NEWSPAPER

Riccardo Puglisi

PEPP 20. April 2006.
I analyze a dataset of news from the New York Times, from 1946 to 1997. Controllingfor the incumbent President's activity across issues, I find that during the presidentialcampaign the New York Times gives more emphasis to topics that are owned by theDemocratic party (civil rights, health care, labor and social welfare), when the incumbentPresident is a Republican. This is consistent with the hypothesis that the New YorkTimes has a Democratic partisanship, with some "watchdog" aspects, in that -during thepresidential campaign- it gives more emphasis to issues over which the (Republican)incumbent is weak. In the post-1960 period the Times displays a more symmetric type ofwatchdog behaviour, just because during presidential campaigns it gives more morecoverage to the typically Republican issue of Defense when the incumbent President is aDemocrat, and less so when the incumbent is a Republican.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp20.pdf

TESTING MODELS OF DISTRIBUTIVE POLITICSUSING EXIT POLLS TO MEASURE VOTERPREFERENCES AND PARTISANSHIP

Valentino Larcinese, James M. Snyder, Jr., Cecilia Testa

PEPP 19. April 2006.
This paper tests various hypotheses about distributive politics by studying the distributionof federal spending across U.S. states over the period 1978-2002. We improve onprevious work by using survey data to measure the share of voters in each state that areDemocrats, Republicans, and independents, or liberals, conservatives and moderates. Wefind no evidence for the “swing voter" hypothesis { that is, no significant associationbetween the amount of federal funds a state receives and the fraction of independents ormoderates in the state. We also find no evidence for the “battleground state" hypothesis -no significant association between the amount of federal funds and the degree of partisanbalance in a state. Modest support is found for the \partisan supporters" hypothesis, whichconjectures that politicians will favour areas that contain a large percentage of their coresupporters.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp19.pdf

Information Acquisition, Ideology and Turnout:Theory and Evidence from Britain

Valentino Larcinese

PEPP 18. March 2006.
The amount of political information that voters decide to acquire during anelectoral campaign depends, among other things, on prior ideological beliefsabout parties and/or candidates. Voters that are ex ante indifferent about thecandidates attach little value to information because they perceive thatvoting itself will have little value. Voters that are ex ante very ideologicalalso attach little value to information because they think that the news willhardly change their opinion. Thus, high incentives to be informed can befound at intermediate levels of ideological strength. Moreover, the impact ofincreased political knowledge on turnout is asymmetric: New informationincrease the probability of voting of indifferent voters but decrease that ofvery ideological voters. These results are derived within a decisiontheoretical model of information acquisition and turnout that combines theRiker-Ordeshook (1968) approach to voting behaviour with the Becker(1965) approach to "personal production functions". These predictions arethen tested on survey data from the 1997 British Election Study. Ourempirical findings are compatible with all the results of the theoreticalexercise.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp18.pdf

Electoral Bias and Policy Choice:Theory and Evidence

Timothy Besley, Ian Preston

PEPP 17. February 2006.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp17.pdf

The Length of Ministerial Tenure in the UK 1945-1997

Samuel Berlinski, Torun Dewan, Keith Dowding

PEPP 16. December 2005.
We analyse the determinants of ministerial hazard rates in the UK from 1945-1997. Wefocus on three sets of attributes i) personal characteristics of the minister; ii) politicalcharacteristics of the minister and iii) characteristics pertaining to the government inwhich the minister serves. We find that educational background increases ministers’capacity to survive, that female ministers have lower hazard rates and older ministershave higher hazard rates. Experienced ministers have higher hazard than newly appointedministers. Ministerial rank increases a ministers’ capacity to survive, with full cabinetmembers having the lowest hazard rates in our sample. We use different strategies tocontrols for the characteristics of the government the ministers serve in. Our results arerobust to any of these controls.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp16.pdf

Working or Shirking?A Closer Look at MPs’ Expenses and Parliamentary Attendance

Timothy Besley, Valentino Larcinese

PEPP 15. November 2005.
This paper studies determinants of MPs expense claims in Parliament using the datareleased under the freedom of information act in 2004. Using a multiple regressionframework, we correlate expenses with three sets of variables: constituencycharacteristics, party affiliation and individual characteristics. We also look at the ratio ofparliamentary expenses claimed to votes cast in parliament as a crude measure of valuefor money. We use the results to reflect on two views of the motivation of MPs, thepublic Choice view and the public service view.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp15.pdf

Women in Politics. Evidence from the Indian states

Irma Clots-Figueras

PEPP 14. October 2005.
This paper uses panel data from the 16 main states in India during the period 1967-1999 to study the effects of having higher female representation in the State Legislatureson public goods, policy and expenditure. I find that women legislators make different decisionsthan men legislators. Moreover, women elected in seats reserved for scheduled castesand tribes make different decisions compared to women elected in general seats. Scheduledcaste/tribe women favour capital investments, especially on low tiers of education andirrigation. They also favour “women-friendly” laws, such as amendments to the HinduSuccession Act that give women the same inheritance rights as men. In contrast, generalwomen legislators do not have any impact on “women-friendly” laws, oppose redistributivepolicies such as land reforms, favour pro-rich expenditure and invest in high tiers ofeducation.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp14.pdf

Arrow’s theorem in judgment aggregation

Franz Dietrich, Christian List

PEPP 13. October 2005.
In response to recent work on the aggregation of individual judgments on logicallyconnected propositions into collective judgments, it is often asked whether judgmentaggregation is a special case of Arrowian preference aggregation. We argue the op-posite. After proving a general impossibility result on judgment aggregation, weconstruct an embedding of preference aggregation into judgment aggregation andprove Arrow’s theorem as a corollary of our result. Although we provide a new proofof Arrow’s theorem, our main aim is to identify the analogue of Arrow’s theoremin judgment aggregation, to clarify the relation between judgment and preferenceaggregation and to illustrate the generality of the judgment aggregation model.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp13.pdf

GOVERNANCE FROM BELOW A Theory of Local Government With Two Empirical Tests

Jean-Paul Faguet

PEPP 12. August 2005.
I examine decentralization through the lens of the local dynamics that it unleashes. The national effects of decentralization are simply the sum of its local-level effects. Hence to understand decentralization we must first understand how local government works. This paper proposes a theory of local government as the confluence of two quasi-markets and one organizational dynamic. Good government results when these three elements – political, economic and civil – are in rough balance, and actors in one cannot distort the others. Specific types of imbalance map into specific forms of government failure. I use comparative analysis to test the theory’s predictions with qualitative and quantitative evidence from Bolivia. The combined methodology provides a higher-order empirical rigor than either approach can alone. The theory proves robust.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp12.pdf

The Costs of Remoteness: Evidence from German Division and Reunification

Stephen Redding, Daniel M. Sturm

PEPP 11. August 2005.
This paper exploits the division of Germany after the Second World War and the reunificationof East and West Germany in 1990 as a natural experiment to provide evidenceof the importance of market access for economic development. In line with a standard neweconomic geography model, we find that following division cities in West Germany that wereclose to the new border between East and West Germany experienced a substantial decline inpopulation growth relative to other West German cities. We provide several pieces of evidencethat the decline of the border cities can be entirely accounted for by their loss in market accessand is neither driven by differences in industrial structure nor differences in the degree of warrelated destruction. Finally, we also find some first evidence of a recovery of the border citiesafter the re-unification of East and West Germany.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp11.pdf

The Entry of NGO Schools and Girls’ Educational Outcomes in Bangladesh

Pataporn Sukontamarn

PEPP 10. August 2005.
This paper uses household, school, and test score data from Bangladeshto compare and contrast the effectiveness of NGO-run and state-run schoolsin the provision of primary education. I study how the entry of NGOs inprimary education has affected educational outcomes of girls and examine themechanisms which account for the relative performance of NGO versus stateschools in improving female educational outcomes. The results show that theentry of NGO schools has significantly increased girls’ enrollment as comparedto boys. Constructing cohorts from cross-sectional data using year of birth andyear of NGO school establishment, I show that cohorts which were exposed toNGO schools have higher probability of enrollment and the effect operatesmainly through girls. The two most prominent characteristics of NGO schoolsthat encourage girls’ enrollment are the high percentage of female teachers andhaving Parent-Teacher Associations (PTAs). NGO schools show strong effectsin improving children’s test scores.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp10.pdf

Strategy-proof judgment aggregation

Franz Dietrich, Christian List

PEPP 09. August 2005.
In the theory of judgment aggregation on logically connected propositions, an important question remains open: Which aggregation rules are manipulable and which are strategy-proof? We define manipulability and strategy-proofness in judgment aggregation, characterize all strategy-proof aggregation rules, and prove an impossibility theorem similar to the Gibbard-Satterthwaite theorem. Among other escape-routes from the impossibility, we discuss weakening strategy-proofness itself. Comparing two prominent aggregation rules, we show that conclusion-based voting is strategy-proof, but generates incomplete judgments, while premise-based voting is only strategy-proof for "reason-oriented" individuals. Surprisingly, for "outcome-oriented" individuals, the two rules are strategically equivalent, generating identical judgments in equilibrium. Our results introduce game-theoretic considerations into judgment aggregation and have implications for debates on deliberative democracy.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp09.pdf

Political Selection and the Quality of Government: Evidence from South India

Timothy Besley, Rohini Pande, Vijayendra Rao

PEPP 08. August 2005.
This paper uses household data from India to examine the economic and socialstatus of village politicians, and how individual and village characteristics a®ectpolitician behavior while in o±ce. Education increases the chances of selectionto public o±ce and reduces the odds that a politician uses political poweropportunistically. In contrast, land ownership and political connections enableselection but do not a®ect politician opportunism. At the village level, changesin the identity of the politically dominant group alters the group allocation ofresources but not politician opportunism. Improved information °ows in thevillage, however, reduce opportunism and improve resource allocation.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp08.pdf

Handcuffs for the Grabbing Hand? Media Capture and Government Accountability

Timothy Besley, Andrea Prat

PEPP 07. August 2005.
It has long been recognized that the media play an essential role in governmentaccountability. However, even in the absence of censorship, the government mayinfluence news content by maintaining a “cozy” relationship with the media. Thispaper develops a model of democratic politics in which media capture is endogenous.The model offers insights into the features of the media market that determine theability of the government to exercise such capture and hence to influence politicaloutcomes

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp07.pdf

Fiscal Restraints and Voter Welfare

Timothy Besley, Michael Smart

PEPP 06. July 2005.
This paper explores the logic of fiscal restraints in a political agency model with both moral hazard and adverse selection. The role of the political process is both to discipline incumbents who may act against the public interest and to sort in those politicians who are most likely act in voters' interests. We use the model to examine the optimality of inefficient taxation, limits on the size of government, increasing transparency, and yardstick competition. Some conclusions are surprising. For example, we show that some forms of fiscal restraint can only be desirable when incumbents are su¢ ciently likely to be benevolent. We are grateful to Jim Hines and a number of seminar participants for insightful comments.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp06.pdf

Political Competition and Economic Performance:Theory and Evidence from the United States

Timothy Besley, Torsten Persson, Daniel M. Sturm

PEPP 05. June 2005.
One of the most cherished propositions in economics is that marketcompetition by and large raises consumer welfare. But whether politicalcompetition has similarly virtuous consequences is far less discussed. Thispaper formulates a model to explain why political competition may enhanceeconomic performance and uses the United States as a testing ground for themodel’s implications. It finds statistically robust evidence that politicalcompetition has quantitatively important effects on state income growth,state policies, and the quality of Governors.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp05.pdf

Implementation of Anti-Discrimination Policy:Does Judicial Selection Matter?

Timothy Besley, A. Abigail Payne

PEPP 04. August 2005.
One of the most striking changes in labor market policy of the past fifty years has comein the form of legislation to limit discrimination in the workplace based on race, gender,disability and age. If such measures are to be effective in ending discrimination, theyneed to be enforced. The latter is dependent on state and federal agencies such as theEqual Employment Opportunities Commission and ultimately the willingness of courts tofind in favor of plaintiffs. Courts also play an important role in the evolution of antidiscriminationpolicy since past decisions create future precedent. This paper askswhether the number of charges filed with government agencies depends on the method bywhich judges are selected. Popularly elected judges should be expected to have more proemployeepreferences (selection) and should move closer to employee preferences(incentives). This should result in fewer anti-discrimination charges being filed in statesthat appoint their judges. In line with this prediction, this paper uses data on the numberof employment discrimination charges filed for the period 1973-2000 and finds that statesthat appoint their judges have fewer anti-discrimination charges being filed.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp04.pdf

Allocating the US Federal Budget to the States: the Impact of the President

Valentino Larcinese, Leonzio Rizzo, Cecilia Testa

PEPP 03. June 2005.
This paper provides new evidence on the determinants of the US federal budget allocation to the states. Departing from the existing literature that gives prominence to Congress, we carry on an empirical investigation on the impact of Presidents during the period 1982-2000. Our findings suggest that the distribution of federal outlays to the States is affected by presidential politics. First, presidential elections matter. States that heavily supported the incumbent President in past presidential elections tend to receive more funds, while marginal and swing states are not rewarded. Second, party affiliation also plays an important role since states whose governor has the same political affiliation of the President receive more federal funds, while states opposing the president's party in Congressional elections are penalized. These results show that presidents are engaged in tactical distribution of federal funds and also provide good evidence in support of partisan theories of budget allocation.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp03.pdf

Advanced Purchase Commitments for a Malaria Vaccine: Estimating Costs and Effectiveness

PEPP 02. April 2005.
To overcome the problem of insufficient research and development (R&D) on vaccines for diseases concentrated in low-income countries, sponsors could commit to purchase viable vaccines if and when they are developed. One or more sponsors would commit to a minimum price that would be paid per person immunized for an eligible product, up to a certain number of individuals immunized. For additional purchases, the price would eventually drop to short-run marginal cost. If no suitable product were developed, no payments would be made. We estimate the offer size which would make the revenues from R&D investments on a malaria vaccine similar to revenues realized from investments in typical existing commercial pharmaceutical products, as well as the degree to which various contract models and assumptions would affect the cost-effectiveness of such a commitment for the case of a malaria vaccine. Under conservative assumptions, we document that the intervention would be highly cost-effective from a public health perspective. Sensitivity analyses suggest most characteristics of a hypothetical malaria vaccine would have little effect on the cost-effectiveness, but that the duration of protection against malaria conferred by a vaccine strongly affects potential cost-effectiveness. Readers can conduct their own sensitivity analyses employing a web-based spreadsheet tool.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp02.pdf

Does Political Knowledge Increase Turnout? Evidence from the 1997 British General Election

Valentino Larcinese

PEPP 01. February 2005.
A number of recent formal models predict a positive effect of politicalknowledge on turnout. Both information acquisition and turnout, however,are likely to be determined by a similar set of variables, rendering hard theidentification of a causal link in empirical investigations. Availableempirical regularities should therefore be interpreted as mere correlations. Iaddress this problem by using an instrumental variables approach, where theinstruments are represented by various proxies of information supply onmass media. Using survey data from the 1997 British General ElectionStudy, I show that political knowledge has a sizeable influence on theprobability of voting and that mass media play an important role ininfluencing political participation.

Full article: http://sticerd.lse.ac.uk/dps/pepp/pepp01.pdf