Theoretical Political Economy

Paper Session

Saturday, Jan. 7, 2017 8:00 AM – 10:00 AM

Hyatt Regency Chicago, Michigan 2
Hosted By: American Economic Association
  • Chair: Daniel Stone, Bowdoin College

Advance Voting and Political Competition

Mats Ekman
,
Hanken School of Economics

Abstract

This paper presents a simple analysis of political campaigning incentives when the electorate make their voting decisions at different moments before Election Day. Many jurisdictions accommodate such voters by accepting mail-in ballots or setting up polling places where individuals may vote early. Since politicians can thereby alter their campaign promises while citizens vote, they have incentives to cater to different segments of the electorate at different times. This implies that those segments of the electorate who tend to vote early will pay higher taxes and receive fewer transfers than what had been announced when they voted, while later-voting segments benefit.

Information Gatekeeping, Access Control and Media Bias

Hulya Eraslan
,
Rice University
Saltuk Ozerturk
,
Southern Methodist University

Abstract

This paper develops a multi-period electoral competition model to analyze how an incumbent politician's control of access to information sources affects a journalist's reporting strategy. In each period, an incumbent politician decides whether to grant access to a journalist with unknown integrity. If access is granted, the journalist can produce news that can affect the election outcome. The readership volume that the journalist can attract is driven her reporting strategy and by the public's beliefs about her type. Truthful reporting of bad news results in larger readership in a given current period, but can also cause loss of future access to the incumbent. We show that under certain conditions, there exists a double reputation equilibrium in which the journalist builds a sufficiently corrupt private reputation with the incumbent and a separate sufficiently honest public reputation in the eyes of the public to balance this trade-off. This equilibrium arises when (i) politicians are more likely to have low valence, (ii) there is sufficient initial public trust in the integrity of journalistic profession, (iii) there is also sufficient initial skepticism that journalistic profession is corrupt and, (iv) public can learn little from sources outside the news media.

A Soft Spot for Bailouts: Regional Affiliation in a Federal Government

Amedeo Piolatto
,
Barcelona Economics Institute
Willem Sas
,
University of Leuven

Abstract

This paper revisits the soft budget constraint problem, often stretching sub-central public borrowing to the limit in many federations. Focusing on institutional design and political practice, we add to the literature by introducing logrolling and regional affiliation at the federal level. In our inter-temporal model, voters are shown to elect federal representatives with a keener preference for debt accumulation than their own preference. As advocates of looser regional spending, such representatives are more likely to compensate for state excesses. Whenever rising interest payments start weighing on general welfare in their state, they readily tap the national common pool and bargain for increased federal grants. Knowing this in advance, voters turn this behaviour to their advantage by voting for precisely these generous types. Such strategic voting behaviour not only leads to overly generous bailout policies. Also, and compared to a setting where federal decision making does not follow from bargaining and regional affiliation, states over-borrow more inefficiently because of this federal generosity. Allowing for heterogeneity in state income and population does not affect this inefficient outcome lastly. Lower relative per capita incomes even boost federal generosity and subsequent over-borrowing by the states.

As such, and since large swaths of EU policy are settled in the European Council by consensus, our model reflects the European setting as well. A prediction would then be that poorer member states, in terms of per capita income, send more bailout-prone representatives to the table and over-borrow more. In this light, our model would partially rationalise the electoral rise of left-wing populism in the southern periphery of the EU.

Bias and Affective Polarization

Daniel Stone
,
Bowdoin College

Abstract

I propose a model of affective polarization (``that both Republicans and Democrats increasingly dislike, even loathe, their opponents,'' Iyengar et al, 2012). In the model, two agents repeatedly choose actions based on private interests, the social good, their own ``character'' (willingness to trade private for social gains) and beliefs about the other agent's character. I focus on the political application, with each agent representing a party, but the model could apply to other settings, such as spouses or business partners. Each agent Bayesian updates beliefs about the other's character, and dislikes the other more when its character is perceived as more self-serving. I characterize the dynamic and long-run effects of three biases: a prior bias against the other agent's character, the false consensus bias, and limited strategic thinking. Prior bias against the opponent remains constant or dissipates over time, and actions do not diverge. By contrast, the other two biases, which are not directly related to character, cause actions to become more extreme over time and repeatedly be ``worse'' than expected, causing affective polarization---even when both players are arbitrarily ``good'' (unselfish). For some parameter values, long-run affective polarization is unbounded, despite Bayesian updating. The results imply that affective polarization can be caused by cognitive bias, and that subtlety and unawareness of bias are key forces driving greater severity of this type of polarization.
Discussant(s)
Sergio Galletta
,
University of Lugano
Christopher Li
,
Princeton University
Atara Oliver
,
Rice University
Saltuk Ozerturk
,
Southern Methodist University
JEL Classifications
  • D0 - General
  • H0 - General