Political Economy

Members of the NBER's Program on Political Economy met April 27 in Cambridge. Program Director Alberto F. Alesina of Harvard University organized the meeting. These researchers' papers were presented and discussed:

Vincent Pons, Harvard University, and Clémence Tricaud, Polytechnique, Paris-Saclay University

Expressive Voting and its Cost: Evidence from Runoffs with Two or Three Candidates

In French parliamentary and local elections, candidates ranked first and second in the first round automatically qualify for the second round, while a third candidate qualifies only when selected by more than 12.5 percent of registered citizens. Using a fuzzy RDD around this threshold, Pons and Tricaud find that the third candidate's presence substantially increases the share of registered citizens who vote for any candidate and reduces the vote share of the top two candidates. It disproportionately harms the candidate ideologically closest to the third and causes his defeat in one fifth of the races. These results suggest that a large fraction of voters value voting expressively over voting strategically for the top-two candidate they dislike the least to ensure her victory, and that absent a party-level agreement leading to their dropping out, many third candidates value the benefits associated with competing in the second round more than influencing its outcome.

Daron Acemoglu, MIT and NBER; Giuseppe De Feo, University of Strathclyde; and Giacomo De Luca, University of York

Weak States: Causes and Consequences of the Sicilian Mafia (NBER Working Paper No. 24115)

Acemoglu, De Feo, and De Luca document that the spread of the Mafia in Sicily at the end of the 19th century was in part shaped by the rise of socialist Peasant Fasci organizations. In an environment with weak state presence, this socialist threat triggered landholders, estate managers and local politicians to turn to the Mafia to resist and combat peasant demands. The researchers show that the location of the Peasant Fasci is significantly affected by an exceptionally severe drought in 1893, and using information on rainfall, they establish the causal effect of the Peasant Fasci on the location of the Mafia in 1900. The researchers provide extensive evidence that rainfall before and after this critical period has no effect on the spread of the Mafia or various economic and political outcomes. In the second part of the paper, they use the source of variation in the location of the Mafia in 1900 to estimate its medium-term and long-term effects. They find significant and quantitatively large negative impacts of the Mafia on literacy and various public goods in the 1910s and 20s. The researchers also show a sizable impact of the Mafia on political competition, which could be one of the channels via which it affected local economic outcomes. They document negative effects of the Mafia on longer-term outcomes (in the 1960s, 70s and 80s) as well, but these are in general weaker and often only marginally significant. One exception is its persistent and strong impact on political competition.

Michel Serafinelli, University of Toronto, and Guido Tabellini, IGIER

Creativity over Time and Space

Creativity is often highly concentrated in time and space, and across different domains. What explains the formation and decay of clusters of creativity? Serafinelli and Tabellini match data on thousands of notable individuals born in Europe between the XIth and the XIXth century with historical data on city institutions and population. After documenting several stylized facts, the researchers show that the formation of creative clusters is not preceded by increases in city size or wages. Instead, the emergence of city institutions protecting economic and political freedoms facilitates the attraction and production of creative talent.

Sascha O. Becker, University of Warwick; Irena Grosfeld and Ekaterina Zhuravskaya, Paris School of Economics; Pauline Grosjean, The University of New South Wales; and Nico Voigtländer, University of California, Los Angeles and NBER

Forced Migration and Human Capital Accumulation: Evidence from Post-WWII Population Transfers (NBER Working Paper No. 24704)

Becker, Grosfeld, Grosjean, Voigtländer, and Zhuravskaya exploit a unique historical setting to study the long-run effects of forced migration on investment in education. After World War II, the Polish borders were redrawn, resulting in large-scale migration. Poles were forced to move from the Kresy territories in the East (taken over by the USSR) and were resettled mostly to the newly acquired Western Territories, from which Germans were expelled. The researchers combine historical censuses with newly collected survey data to show that, while there were no pre-WWII differences in education, Poles with a family history of forced migration are significantly more educated today. Descendants of forced migrants have on average one extra year of schooling, driven by a higher propensity to finish secondary or higher education. This result holds when the researchers restrict ancestral locations to a subsample around the former Kresy border, and when including fixed effects for the destination of migrants. Because Kresy migrants were of the same ethnicity and religion as other Poles, the researchers can bypass these typical confounding factors in other cases of forced migration. Labor market competition with natives or selection of migrants are also unlikely to affect the results. Instead, survey evidence complements the results on education, suggesting that forced migration led to a shift in preferences, away from material possessions and towards investment in a mobile asset – human capital. The effects persist over three generations.

Boaz Abramson, Stanford University, and Moses Shayo, Hebrew University

Grexit vs. Brexit: International Integration under Endogenous Social Identities

Abramson and Shayo offer a first step towards introducing social identity into international economics. They develop a simple framework to study the interaction between identity politics and international integration, allowing identities themselves to be endogenous. Contrary to widespread intuitions, the researchers find that a robust union does not require that all members share a common identity. Nor is a common identity likely to emerge as a result of integration. Furthermore, while national identification in the periphery leads to premature breakup, a common identity can sometimes lead to excessively large unions. A union is more fragile when periphery countries have high ex-ante status. Low-status countries are less likely to secede, even when between-country economic differences are large and although union policies impose significant hardship. Abramson and Shayo trace the implications of the model for likely entrants and defectors from the E.U. and the Euro.

Laurent Bouton, Georgetown University and NBER; Micael Castanheira, Universite libre de Bruxelles (ECARES); and Allan Drazen, University of Maryland and NBER

A Theory of Small Campaign Contributions (NBER Working Paper No. 24413)

Bouton, Castanheira, and Drazen present a model of electorally-motivated, small campaign contributions. The analysis uncovers interesting interactions among small donors and has novel implications for the effect of income inequality on total contributions and election outcomes. Moreover, it helps explain a number of empirical observations that seem anomalous when contributions are driven by the consumption or the influence motives. The researchers also study the impact of different forms of campaign finance laws on contribution behavior, probabilities of electoral outcomes, and welfare. The results are consistent with more behaviorally motivated donors when contributions are driven by the parties' strategic solicitation of funds. The researchers also indicate how the model and its results may have important implications for empirical work on campaign contributions.

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