European Journal of Political Economy最新文献

People's trust in state and political institutions is a key foundation of a well-functioning economy. The question of whether direct elections affect trust remains open, especially in developing countries, due to a scarcity of studies with robust identification strategies. We estimate the impact of direct elections on people's trust in state and political institutions, using a major political reform in Indonesia as the source of exogenous variation. Pre-2005, regents, mayors, and governors were elected by the local legislative assembly. Starting in 2005, they must compete in an open election where voters directly choose their preferred leader. The historically and institutionally driven staggered implementation of these local direct elections enables us to identify the causal impact of the reform. We find that direct elections increase trust in all state and political institutions, except for the police and political parties. We find that trust only increased in districts where the elections were held with no or low hostility, implying that trust is strongly influenced by political situations during direct elections. We find that elections did not really improve well-being or satisfaction, implying that the absence of election hostility is a stronger explanation for the higher trust.

We create a database of officials who have been found guilty of corruption in China in the period 2012-21 with their personal characteristics and the amount of embezzled funds. We use it to investigate the correlates of corruption, estimate the effects of corruption on inequality, and find the expected increase in officials' income due to corruption and the gain in income distribution ranking. We find that the amount of corruption is positively associated with education, administrative (hierarchical) level of the official, and years of membership in the Communist Party. The sample of corrupt officials belongs to the upper income ranges of Chinese income distribution even without corruption. But corruption allows them to accede to an even higher position in income distribution. While only one-half of the corrupt officials would be in the top 5 percent of China's urban distribution without illegal incomes, practically all are in the top 5 percent when corrupt income is included.

This paper investigates the effects of global geopolitical risk on stock prices of 29 economies by using the local projections method for the monthly period between 1985M1-2023M9. The results show that a positive unit shock of global geopolitical risk (normalized to one standard deviation) reduces stock prices (normalized to one standard deviation) in a statistically significant way by 0.80 in Latvia, 0.71 in China, 0.62 in the Euro Area, 0.50 in Sweden, 0.42 in the United Kingdom, 0.39 in the United States, 0.38 in Switzerland, 0.34 in Israel, 0.28 in Canada, and 0.21 in Denmark in a year following the shock, whereas it increases those only in Iceland by 0.28 that can be used to hedge against any geopolitical risk. Subsample analyses further suggest that the negative effects of the same shock exist in several economies (including the United States, China and Euro Area) during the first half of the sample period that coincides with the geopolitical events that the United States is involved with, whereas they only exist in Russia, Poland, Euro Area and the United Kingdom for the second half of the sample period, suggesting that the Russo–Ukrainian War has mostly affected the stock prices in these nearby economies. It is implied that the geographical location of geopolitical events as well as the countries involved are important indicators to understand the effects of any global geopolitical risk on stock prices.

Firms and policy makers are increasingly looking at friend-shoring to make supply chains less vulnerable to geopolitical tensions. We test whether these considerations are shaping FDI flows, using investment-level data on over 300,000 instances of greenfield FDI between 2003 and 2022. Estimates from a gravity model, which controls for standard push and pull factors, show an economically significant role for geopolitical alignment in driving the geographical footprint of bilateral investments. This result is robust to the inclusion of standard bilateral drivers of FDI – such as geographic distance and trade flows – and the strength of the effect has increased since 2018, with the resurgence of trade tensions between the U.S. and China. Moreover, our results are not limited to greenfield FDI, but hold also for M&As.

In this paper, we shed light on the linkage between several global risks and stock market returns. We use a dataset including G7, BRICS, MENA, and SAHEL group countries for a period of more than 30 years. We explore the spillover effects on global stock markets fueled by geopolitical, climatic, and global health risks. We provide evidence of a significant negative impact of geopolitical shocks on stock markets across countries. Further, we document that geopolitical shocks contribute to the spillover transmission of stock market volatility We also document that climate change and the global health crisis constitute risks that should be considered as a factor that heightens geopolitical risk. Finally, we identify possible strategies to hedge against geopolitical risk using a specific set of financial assets such as artwork.

This study explores the impact of female political empowerment on air quality outcomes. Women’s stronger environmental concerns and pro-environmental behaviors may lead to better air quality as they progressively break the glass ceiling in politics. To test this hypothesis, we employ a novel data set on regional air pollutant emissions and women’s political empowerment for a sample of 230 European regions of 27 EU countries. We apply instrumental variables and partial identification methods to ensure that our results are not influenced by confounding variables. We find that female political empowerment is consistently associated with improved air quality.

This paper establishes the links between politician criminality and higher education provision by studying the causal impact of electing leaders with accusations of serious crimes on the opening of new publicly funded colleges in India. Using a regression discontinuity design with close elections between candidates accused of serious crimes and candidates not accused of serious crimes, I show that constituencies represented by state legislature members accused of serious crimes are less likely to witness openings of new state government funded colleges. Further, this effect is not compensated by openings of new private colleges. This negative impact is higher for constituencies with representatives aligned with the party governing at the state level, confirming the notion that access to power is essential for the ability to influence provision of higher education institutes. Finally, this study provides suggestive evidence that such lower provision of state government colleges is most likely to impact the lowest income groups in society.

We test the fiscal illusion hypothesis, which concerns whether an awareness of the government’s costs and benefits is linked to preferences for redistribution and social policy. We conduct an $N=2016$ survey experiment in Russia—a country where many taxpayers are not aware of social security contributions that are paid by employers on their behalf. The treatment consists of a video with a calculation of the total amount of taxes and social security contributions that typically arise from an individual’s salary. We show that for individuals who initially overestimated these payments, information provision increases preferences for redistribution, while overall, the awareness of these payments reduces preferences for state spending, possibly due to reduced trust in the government and lower satisfaction with state-provided services. This is consistent with the explanation that new information about taxes and social security contributions signals a low state quality. These results persist in a follow-up survey given six weeks later.

The past decade has witnessed an increase in populist movements across the world. Some of those movements have gained strong political support and formed populist governments promising new sets of economic and fiscal policies. This raises the pertinent policy question: how do such populist governments influence fiscal policy outcomes? We approach this question by looking at the case of Poland which according to several recent studies has experienced the highest level of populist rhetoric in recent years. We performed two types of analyses. First, standard time series estimations of fiscal sustainability parameters that are typical for literature on fiscal sustainability, for both full sample and rolling-windows. Second, a counter-factual analysis using the synthetic control method (SCM) which is a useful complementary framework for our analysis of populists’ economic performance. Overall, our estimates suggest that in the period of 2016–2019 fiscal sustainability parameters were the lowest since Poland joined the EU in 2004. The SCM analysis, in turn, showed that populist PiS fiscal policies might have been viable compared to the counter-factual data. At the same time, we also noted sensitivity of SCM across several dimensions and conclude that such sensitivity analysis might be useful or even necessary in future studies on populism.