Electoral Incentives and Economic Policy across Political Regimes
AbstractThis paper provides a direct test of the causal link from electoral rules to economic policy. Our theoretical model delivers unambigous predictions on the interaction between institutions and a time varying event, namely the unemployment rate in pivotal and non-pivotal districts. We use local level data on unemployment rate and political competition to obtain an empirical specification which matches our model. First, we test the effect of electoral incentives under majority rule, by analyzing the US House representatives voting records on the 2009 Emergency Unemployment Compensation Extension Act, which increased unemployment benefit coverage and generosity. Second, we exploit the time-varying dimension of our theoretical prediction to test the causal effect on panel data. We use a dataset with local information on electoral competitiveness and unemployment rates for 29 OECD countries in 1980-2001 and employ panel analysis on different measures of UB generosity. The empirical evidence strongly supports our theoretical predictions.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7959.
Date of creation: Aug 2010
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Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
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