Political Economy

November 3, 2017
Alberto A. Alesina of Harvard University, Organizer

Stelios Michalopoulos, Brown University and NBER, and Melanie Meng Xue, Northwestern University


Folklore is the collection of traditional beliefs, customs, and stories of a community, passed through the generations by word of mouth. This vast expressive body, studied by the corresponding discipline of folklore, has evaded the attention of economists. In this study Michalopoulos and Meng Xue do four things that reveal the tremendous potential of this corpus for understanding comparative development, culture and its transmission. First, they introduce a unique dataset of folklore that codes the presence of thousands of motifs for roughly 1,000 pre-industrial societies. Second, they use a dictionary-based approach to elicit the group-specific intensity of various traits related to its natural environment, institutional framework and mode of subsistence. Researches establish that such measures are in accordance with the ethnographic record suggesting the usefulness of folklore in quantifying currently non-extant characteristics of pre-industrial societies including the importance of trade. Third, they use folklore to test various influential conjectures among anthropologists including the culture of honor among pastoralists, the role of women in plough-using groups and the intensity of rule-following norms in centralized societies. Finally, Michalopoulos and Meng Xue explore how cultural norms inferred via text analysis of oral traditions predict contemporary attitudes and beliefs.

Paola Giuliano, the University of California at Los Angeles and NBER, and Nathan Nunn, Harvard University and NBER

Understanding Cultural Persistence and Change (NBER Working Paper No. 23617)

When does culture persist and when does it change? Giuliano and Nunn examine a determinant that has been put forth in the anthropology literature: the variability of the environment from one generation to the next. A prediction, which emerges from a class of existing models from evolutionary anthropology, is that following the customs of the previous generation is relatively more beneficial in stable environments where the culture that has evolved up to the previous generation is more likely to be relevant for the subsequent generation. They test this hypothesis by measuring the variability of average temperature across 20-year generations from 500-1900. Looking across countries, ethnic groups, and the descendants of immigrants, researchers find that populations with ancestors who lived in environments with more stability from one generation to the next place a greater importance in maintaining tradition today. These populations also exhibit more persistence in their traditions over time.

Alberto F. Alesina; Bryony Reich, Northwestern University; and Alessandro Riboni, École Polytechnique

Nation-Building, Nationalism and Wars (NBER Working Paper No. 23435)

The increase in army size observed in early modern times changed the way states conducted wars. Starting in the late 18th century, states switched from mercenaries to a mass army by conscription. In order for the population to accept to fight and endure war, the government elites began to provide public goods, reduced rent extraction and adopted policies to homogenize the population with nation-building. Alesina, Reich, and Riboni explore a variety of ways in which nation-building can be implemented and studies its effects as a function of technological innovation in warfare.

Julia Cage, Sciences Po, and Yasmine Bekkouche, Paris School of Economics

The Price of a Vote: Evidence from France, 1993-2014

What is the price of a vote? This paper investigates this consequential controversy by analyzing a new comprehensive dataset of all French municipal and legislative elections over the 1993-2014 period. Cage and Bekkouche begin by documenting the evolution of campaign finance in France, and show that both the amount and sources of campaign contributions vary widely from one candidate to another, in particular depending on their political party. They then turn to the empirical analysis and tackle a number of empirical challenges. First, researchers rely on recent methodological innovations to handle the special characteristics of multiparty data. Second, to overcome the endogenous nature of campaign spending, they propose a new instrument based on a change in legislation. Cage and Bekkouche find that an increase in spending per voter consistently increases a candidate's vote share both for municipal and legislative elections, and that the effect is heterogeneous depending on the parties and on the sources of campaign funding. According to their estimations, the price of a vote is about 6 euros for the legislative elections, and 32 euros for the municipal ones. Simulations show that small changes in spending patterns and caps can have a large impact on electoral outcomes and seats. Their results suggest that political finance needs to be tightly regulated.

Ufuk Akcigit, the University of Chicago and NBER; Salomé Baslandze, Einaudi Institute for Economics and Finance; and Francesca Lotti, Bank of Italy

Connecting to Power: Political Connections, Innovation, and Firm Dynamics

Do political connections affect firm and industry dynamics? Akcigit, Baslandze, and Lotti study the Italian firms and their workers to answer this question. Their analysis uses a brand-new data spanning the period from 1993 to 2014 where they merge: (i) firm-level balance sheet data, (ii) universe of social security data on workers, (iii) patent data from the European Patent Office, (iv) registry of local politicians, and (v) detailed data on local elections in Italy. Researchers find that firm-level political connections are widespread, especially among large firms, and that the industries with more politically connected firms feature worse firm dynamics. Market leaders are much more likely to hire a politician and less likely to innovate, compared to their competitors. In addition, connections relate to higher survival and growth in employment and sales but not in productivity. They build a firm dynamics model where researchers allow firms to invest in innovation and/or rent-seeking to advance their productivity and to overcome regulatory or bureaucratic burden. The model highlights an interaction between static gains and dynamic losses from rentseeking for aggregate productivity.

James E. Alt, Harvard University; David Lassen, the University of Copenhagen; and Sebastian Barfort, London School of Economics and Political Science

The Effect of Income and Unemployment Shocks on Political Preferences

Individuals' political preferences are the result of a combination of self- interest and beliefs about how the world works. While it is broadly accepted that expectations about social mobility in the long-run can affect political preferences today, much less is known about how voters update their preferences when reality does not match expectations. The goal of this paper is to understand the dynamics of political preferences over redistribution as new information about individual voters' economic circumstances and experiences arrives in the form of unanticipated shocks to two key determinants of individual welfare: employment and income. Alt, Lassen, and Barfort elicit and validate subjective probabilistic expectations over future employment and incomes in the short term and construct measures of anticipated and unanticipated shocks comparing expectations with realized outcomes, measured from third party reports, in a large panel. Their main result is that unanticipated economic shocks affect preferences, while anticipated shocks do not. In particular, unanticipated unemployment shocks increase support for unemployment benefits, while realizing expected unemployment has no effects; unanticipated negative income shocks cause voters to diverge, with pro-market voters moving further to the right as a consequence of negative shocks, while anticipated changes have no effect; unanticipated negative economic shocks affect vote intentions, while anticipated shocks do not.

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