Electoral Incentives and Economic Policy Across Political Regimes

43 Pages Posted: 16 Aug 2010

See all articles by Vincenzo Galasso

Vincenzo Galasso

Centre for Economic Policy Research (CEPR); Bocconi University; University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER); CESifo (Center for Economic Studies and Ifo Institute); Bocconi University - Baffi Carefin Centre

Salvatore Nunnari

Bocconi University; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: August 2010

Abstract

This 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.

Keywords: Economic Policy, Electoral Rules, Pivotal Districts, Unemployment Benefits

JEL Classification: D72, D78, H53, J65

Suggested Citation

Galasso, Vincenzo and Galasso, Vincenzo and Nunnari, Salvatore, Electoral Incentives and Economic Policy Across Political Regimes (August 2010). CEPR Discussion Paper No. DP7959, Available at SSRN: https://ssrn.com/abstract=1658285

Vincenzo Galasso (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Bocconi University ( email )

Via Roetgen 1
20136 Milan, MI 20136
Italy

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER)

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Milan, 20136
Italy
+39 02 5836 5319 (Phone)
+39 02 5836 5318 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Bocconi University - Baffi Carefin Centre ( email )

Via Roentgen 1
Milan
Italy

Salvatore Nunnari

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Via Roentgen 1
Milan, 20136
Italy

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