2023 Workshop on Empirical Models in Political Economy

Date
Feb 24, 2023Feb 25, 2023
Location
California Institute of Technology
Event Description

The Workshop on Empirical Models in Political Economy (EMPE) is a collaboration between Princeton's Research Program in Political Economy and Caltech's HSS, and an UPPER event. The goal of the workshop is to provide a forum where economists and political scientists discuss research that emphasizes the connection between theory and empirical analysis in political economy. The first edition of the EMPE workshop will be held in Caltech on February 24-25, 2023.

 

Program

1. Nathan Canen (Houston ECO). "Lobbying as Insurance Against Policy Uncertainty", with Kristy Buzard and Sebastian Saiegh.  

Abstract: "Elections resolve policy uncertainty, but these effects are heterogeneous across firms. In particular, the effects differ across lobbying and non-lobbying firms. This paper examines the role of lobbying as an insurance mechanism used by firms to protect themselves against policy uncertainty. Our arguments are both empirical and theoretical. First, we use option prices for nearly 4000 individual firms, 500 SIC codes, and the 77 lobbying issues tracked under the Lobbying Disclosure Act whose lives spanned the 2020 U.S. Presidential election. We compare the implied volatility of option contracts for firms that lobby and those that do not, for contracts that span the election versus nearby contracts that do not span the election. The results show that firms that lobby have a lower implied volatility, although that is heterogeneous across sectors. We rationalize these findings through an equilibrium model where heterogeneous firms can choose production, as well as whether to enter lobbying, and how much to spend in lobbying if they do so. We structurally estimate this model and decompose the role of selection versus benefits from lobbying in explaining firms' choices, and their decreased volatility."

Discussant: In Song Kim (MIT POL)


2. Sergio Montero (Rochester POL). "How do Gender Quotas Impact Electoral Accountability?", with Zuheir Desai and Varun Karekurve-Ramachandra. 

Abstract: How do gender quotas affect electoral accountability?  While the consequences of gender quotas for descriptive representation have been widely studied, their impact on accountability remains relatively unexplored.  We develop a dynamic empirical model of political accountability with moral hazard and adverse selection in which gender quotas impose probabilistic term limits on male candidates.  We estimate the model using a novel dataset that captures constituent evaluations of politician performance in Mumbai, India, where gender quotas are randomly assigned.  Through counterfactual exercises, we quantify the differential effect gender quotas have on disciplining candidates and evaluate whether gender quotas result in selection of better women at the expense of “mediocre" men.  We also examine the extent to which voters and parties discriminate against women, whether discrimination is expressive or based on perceived differences in politician quality, and how this interacts with gender quotas.  Our results highlight the welfare implications of gender quotas, separate from any normative descriptive considerations, with the aim of illuminating tradeoffs for institutional design.

Discussant: Holger Sieg (Penn ECO)


3. Christian Cox (Yale Jackson School). "Campaign Finance in the Age of Super PACs."

Abstract:  The United States Supreme Court 2010 decision in Citizens United v. Federal Election Commission led to a major deregulation of election campaign finance law. A new political action committee emerged, known as the Super PAC, with a relatively unfettered ability to raise and spend money in elections. I characterize the influence of Super PACs on  U.S. Congressional elections by estimating a novel election model. The model provides a comprehensive and tractable framework to analyze the effects of multiple heterogeneous players on election outcomes, incorporating endogenous candidate entry, candidate policy, committee entry, and committee spending across  both the primary and general elections.  I allow for unobserved heterogeneity in candidate quality and committee costs. Results indicate that Super PACs have small  effects on voting outcomes and did, on average, slightly help Republicans.  Super PACs also have modest effects on committee behavior, candidate policy platforms, and entry.

Discussant: TBA. 


4. Bernardo Silveira (UCLA ECO). "Risk and Information in Dispute Resolution", with Yunmi Kong and Xun Tang. 

Abstract: This paper provides a structural analysis of arbitration, a widespread dispute resolution method. We develop an arbitration model where disputing par- ties choose strategic actions given asymmetric risk attitudes and learning by the arbitrator. We identify the parties’ information structure and risk attitudes from the distribution of observed offers and arbitration awards. We estimate the model using public sector wage disputes in New Jersey, which changed its arbitration design from final-offer (FOA) to conventional (CA) during our sample period. Im- portantly, CA is a cheap-talk game, while FOA is not. Leveraging the estimated information structure, we develop an empirical metric of the precision of informa- tion communicated in CA relative to FOA, finding it less than half as precise. FOA also leads to less divergent offers but higher-variance awards. Finally, counterfactual simulations show risk aversion can weaken a party’s position in the dispute despite making them more likely to win in arbitration.

Discussant: Tasos Kalandrakis (Rochester POL)


5. Gregory Martin (Stanford GSB). TBA. 

Abstract: TBA. 

Discussant: Yi Xin (Caltech HSS)


6. Karam Kang (Carnegie Mellon Tepper School of Business). "Narrowing the Digital Divide: Political Incentives and Provider Competition", with Mo Xiao.

Abstract: This paper provides both a theory and empirical evidence of firms’ strategic use of their investment in preempting unfavorable government policies in the context of U.S. broadband investment. The “digital divide”—or an uneven access to high-speed Internet across geographical areas and socio-economic groups—has been recognized as one of the pressing policy issues. We compile all state financial or regulatory policies regarding the broadband industry, such as grant or loan programs, tax incentives, and right-of-way or infrastructure access accommodations, as well as local-level broadband investment data in 2010–2019.  Using these data, we document a robust empirical pattern that large firms make more investments in electorally competitive counties, controlling for various local attributes. We argue that the firms’ intention to influence future policies can explain this pattern by showing that (1) the electoral incentives of governors matter for broadband policies, and (2)  pro-broadband policies are not beneficial to large firms. Specifically, we show that governors are more likely to implement pro-broadband policies when they face re-election pressure. Using the variation in governors’ term limits and their voter support as exogenous shifters to alleviate policy endogeneity, we find that pro-broadband policies increase entry or investment by relatively small firms, with little effects on investment by large, incumbent firms. Based on these findings, we build a dynamic model of an incumbent politician choosing pro-broadband policies for voter support and firms making investment in anticipation of its impact on voter support for the next period’s incumbent politician and accordingly his policy. The comparative statics in the model are consistent with the empirical findings, and the model illustrates how the firms' incentives to influence policies can further widen the digital divide by shifting investment from rural areas, which tend to be not electorally competitive, and lower competition.

Discussant: Zhao Li. (Princeton POL)


7. Mike Gibilisco (Caltech HSS). "Tug of War: The Heterogeneous Effects of Outbidding between Terrorist Groups", with Casey Crisman-Cox. 

Abstract: We introduce a dynamic game of outbidding where two groups use violence to compete for evolving public support in a tug-of-war fashion. We fit the model to the canonical outbidding rivalry between Hamas and Fatah, using newly collected data on Palestinian support for these groups. Competition produces heterogeneous effects, and we demon- strate that intergroup competition can deter violence. Competition from Hamas leads Fatah to use more terrorism than it would in a world where Hamas abstains from ter- rorism, but competition from Fatah can lead Hamas to attack less than it otherwise would. Likewise, making Hamas more capable or interested in competing increases over- all violence, but making Fatah more capable or interested discourages violence on both sides. This deterrent effect of competition on violence is unexpected by current outbid- ding theories and emerges through the asymmetric contest: Fatah more effectively uses terrorism to boost its support although Hamas has smaller attack costs.

Discussant: Kris Ramsay (Princeton POL)


8. Gabriel Lopez-Moctezuma (Caltech HSS). "Reputation in a Committee with Multiple Principals: The Case of the FOMC", with Matias Iaryczower and Paola Moscariello. 

Abstract: We study how the career concerns of a committee of experts affect policy outcomes and political accountability under different appointment systems.  To do this, we combine a natural experiment in the the Federal Open Market Committee (FOMC) due to an unexpected change in the observability of members’ actions with a structural estimation approach. In the model, committee members have a conflict between signaling ability to the market and preference alignment to their political principals. We consider the equilibrium of the model when actions are taken behind closed doors and under public deliberation. This allows us to (1) estimate the value that  governors (appointed by the President) and  Fed presidents  (appointed by a regional board of directors)  put on signaling quality vs. preference alignment, (2) quantify how these competing forces affect monetary policy decisions, and (3) compute counterfactual policy experiments designed to improve the quality of decision-making in the FOMC.

Discussants: Hulya Eraslan (Rice ECO)


9. Jennifer Larson (Vanderbilt POL). "Reducing Prejudice Towards Refugees in Uganda: Evidence that Social Networks Influence Attitude Change"

Abstract: Interventions aimed at reducing prejudice towards refugees have shown promise in industrialized countries. However, the vast majority of refugees are in developing countries. Moreover, while these interventions focus on individual processes of attitude change, attitudes often do not shift in isolation; people are embedded in rich social networks. To test whether a perspective-taking intervention that has reduced prejudice towards refugees in the United States is also effective in a developing country, and to assess the relevance of social processing after the intervention, we conducted a field experiment in northwestern Uganda -- which hosts roughly one million refugees from South Sudan. We find that in all four study villages, perspective-taking changed short-term, individual attitudes to be warmer towards refugees on average. We also find that the treatment effect not only spills over from treated households to control ones along social ties, but peoples' attitudes change based on informal conversations with others after the treatment. The findings show the importance of understanding the social process that can reinforce or unravel individual-level attitude change towards refugees; it appears essential to designing interventions with a lasting effect on attitudes.

Discussant: John Marshall (Columbia POL)


10. Cesi Cruz (UCLA POL). "Making Policies Matter: Voter Response to Campaign Promises". 

Abstract: Can voters in clientelist countries be swayed by programmatic campaign promises? We combine a structural model and a large-scale field experiment disseminating candidate policy platforms in Philippine mayoral elections to show how voters respond to campaign promises. Voters who randomly received information about current campaign promises are more likely to vote for candidates closer to their own preferences; those also informed about past promises reward incumbents who fulfilled them. The structural model shows that information about campaign promises affects both the salience of policies and voter beliefs about candidate quality and policy platforms.

Discussant: Matt Shum (Caltech HSS)


 

Sponsor
RPPE & Caltech