Flip-flopping and Electoral Concerns

Abstract : Politicians who change their mind on a policy issue are often confronted with the accusation of being flip-floppers. However, a changing environment sometimes makes policy revisions necessary. The present analysis suggests that flip-flopping on a policy issue is detrimental to a politician’s reputation because it sends a bad signal on the accuracy of his information. As a result, electorally concerned politicians can have the incentive to stick to their initial policy choice, despite it being inefficient, in order to avoid the stigma of flip-flopping. This distorted behaviour is not only damaging in terms of policy welfare, but also in terms of a worse selection of competent politicians through elections. I also discuss benefits and costs of several possible ways to address the unwillingness of politicians to respond to information: these include a single-term limit rule, the effect of media varying the transparency of actions and consequences as well as delegation of one of the actions to an independent agent.

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Power Politics: Electoral Cycles in German Electricity Prices

Abstract : We provide evidence that German public energy providers, over which municipality-level politicians hold substantial sway, systematically adjust the pricing of electric energy in response to local electoral cycles. In the run-up to elections, electricity prices set by these public utilities systematically decrease compared to the prices set by privatized utilities which are unconnected to local politicians. In the three years after an election, public utilities set relatively higher prices than private energy providers. This pattern is in line with both, an artificial reduction in prices before an election that needs to be countermanded by future price increases, and an artificial postponement of market-driven price increases until after the election is over. To establish these results, we make use of a unique and novel dataset that covers the universe of German electricity prices between 2003 and 2013. Identification of the electoral cycle in electricity prices is facilitated by the rich variation in municipal elections dates and the existence of a comparable group of non-public utilities. Our results suggest that government-controlled firms may represent a viable alternative to - often unavailable - standard public-finance instruments for local politicians to influence their popularity before elections.

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What Makes Politicians to Work Harder? Inter– Vs. Intraparty Electoral Advantage

Abstract : In this paper we attempt to demonstrate that „security‟ of political tenure leads to lower efforts exerted by deputies and, hence, weaker political performance. We draw on arguments of standard labor market theories asserting that provision of employment protection deteriorates employees‟ performance. The novel approach of this paper lies in the fact that we approximate the security of political tenure by both inter - and intra - party electoral advantage. Whereas the former aspect captures the strength of a deputy‟s party vis - à - vis other parties in a district, the intra - party component measures the advantage of a deputy vis - à - vis deputies from the same party list (co - partisans) . This conceptualization of the security of political tenure is particularly valid in an open - list proportional representation (PR) system, where a p a rty wins s eats based on the collective vo t e s earned by its list and w here seats are distributed within a party list based on the number of votes cast for specific candidates. Based on the data from the lower chamber of parliament in Poland collected for the period 2005 - 2017, w e provide evidence that intra - party electoral advantage seem s to be the most crucial in determining the effort and political perf ormance of deputies. Large advantage of a deputy vis - à - vis his or her co - partisans leads to a decrease in the number of parliamentary speeches, interpellations and statements. The intra - party advantage is also negatively associated with voting presence . It seems therefore that the deputies whose political survival is less uncertain work less hard than the deputies with un secured political „employment‟.

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Political Hazards and the Choice of Contracting: the Case of Municipal Bonds

Abstract : We study the impact of political contestability on the choice of rule-based contracts through the municipal bond market. We provide evidence that when the probability of losing office is high, mayors are more likely to issue revenue bonds over general obligation bonds, and to choose competitive bidding over negotiated sales. This effect is stronger for elected mayors than for city managers, and as elections approach. We utilize two referenda---one failed and one succeeded---regarding the required supermajority to issue general obligation bonds in California to assess the causal relationship between political hazards and the choice of security type.

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