political identity and policy...

Tutorial 11

Political Identity and Policy Outcome

Pande, Rohini (2003): Can Mandated Political Representation Increase Policy Influence for Disadvantaged Minorities?

Theory and Evidence from India. American Economic Review 93(4).

Dipl.Kfm. Johannes Metzler

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Introduction

Economic standing of historically disadvantaged minorities– Important issue in any kind of society, may be especially severe in

societies with high inequality (often developing countries)

– Arguments for improving this standing?

– Ways to improve standing?

– Possible barriers?

Pande: Effect of mandated political representation in India?

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India

Caste system– religious origins (4 hierarchical castes plus outlaws)

– complicated social order system, hereditary & endogamous

India‘s Independence– secularity: seperation between religion and state

– discrimination based on caste legally forbidden

– difference in behaviour between between rural and urban areas

– but: positive discrimination policy by the state

• for backward classes: Scheduled Castes, Scheduled Tribes and OtherBackward Classes

• reservations in universities, public sector according to population share

• new tension

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Indian Caste System

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India

1950 Indian Constitution– Specified jurisdictions are reserved for disadvantaged castes and

tribes in elections

– Whole electorate votes on candidates from those castes only

– Goal: Altering legislator identity without affecting voter identity to increase political representation of disadvantaged groups

Argument for reservation?– Candidate identity is irrelevant for policy process if candidates can be

committed to carry out announced policies after election

– If not, and if policy interests of minorities are adversely affected byoffice capture of non-minority individuals case for reservation

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Model of Political Representation

Large population of N, differing in their income, yrich > ypoor

Different castes with population share

– low castes are a minority (λL < ½) and more likely to be poor:

Tax rate t on income, budget-balancing redistribution in two ways

– general transfer T to all individuals (rich poor)

– targeted transfer δ at low-caste individuals (high-caste low-caste)

Utility increasing in after-tax income

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Rich low caste favors redistribution if

– share of poor low-castes small ( have to share less)

– avg income of high-castes is high enough ( gain more)

– lower difference between the incomes of the rich and poor ( loose less)

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1. 2 parties, choosing one candidate per jurisdiction (of which there are Z)

2. Election of one legislator per jurisdiction

3. Elected legislators choose type and extent of redistribution

Backward description:

3. the policy influence of a legislator is proportional to, and increasing in, the group size of legislators which share her policy preferences.

2. Fraction α of voters rational, remaining 1- α noise voters

Rational voters know whether or not parties can commit their candidates to policies, and vote accordingly. So with policy commitment candidate identity is irrelevant

With full policy commitment a rational voter directly conditions his vote on the policies associated with a candidate.

Without commitment a candidate will pursue his own preferred policies and a rational voter will condition his vote on both the candidate’s party and group identity.

Noise voters: choice of candidate uncorrelated with the policies associated with him

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1. Candidate selection by two parties J Є (R, P)

Ideological differentiation along income membership according to income

Depending on party membership costs individuals will join their favouriteparty (acc. to income) or none

Parties max. avg. member utility

share of low-caste party members

Parties only choose the share of jurisdictions in which to field low-castes

Political Equilibrium: pair of entry decisions which are best responses

Every equilibrium has a probability distribution over policy outcomes

Effect of party membership on outcome

Only members can be candidates

Party‘s utility (and thus preferred policies) depends on caste-composition

Low-caste underrepresentation if they face rel. higher membership costs

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Result 1: If the proportion of low caste members in each party is below their population share then an equilibrium with no low caste candidates and no targeted redistribution exists.– Low and high-castes differ in preference for targeted redistribution

– Low caste under-representation in a party implies that, relative to their population share, the party payoff function gives ‘too high’ a weight to the policy preferences of high caste individuals

– Potential electoral gain for either party from deviating away from only fielding high caste candidates (or equivalently, committing its candidates to zero targeted redistribution) is strictly less than the utility loss it incurs from the increased likelihood of targetedredistribution.

India’s motivation to introduce political reservation

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Result 2: If parties can commit their candidates to policies then political reservation does not affect policy outcomes. However, if such commitment is absent then, relative to an equilibrium with no low caste candidates, political reservation increases the likelihood of targeted redistribution.– Political reservation forces parties to field low caste candidates in a

certain fraction of jurisdictions.

– If possible, a party will commit its candidates, both high- and low-caste, to its preferred policies which depend on the caste composition of its membership pool and the demographic composition of the electorate.

– Since neither are affected by political reservation a party’s preferred policies are invariant to the introduction of reservation. Hence, with full policy commitment electoral and policy outcomes are not affected by reservation.

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Result 2: If parties can commit their candidates to policies then political reservation does not affect policy outcomes. However, if such commitment is absent then, relative to an equilibrium with no low caste candidates, political reservation increases the likelihood of targeted redistribution.– Poor low caste individuals favor targeted redistribution. Reservation causes

party P to field poor low caste candidates who, if elected, will implement targeted redistribution without full policy commitment. Since both parties enjoy a positive probability of winning reservation increases the likelihood of targeted redistribution. However, the magnitude of this increase will vary with the composition of the electorate.

– If the population share of poor low castes is below λ* then all low caste individuals favor targeted redistribution. with reservation targeted redistribution will occur with certainty.

– Otherwise rich low caste individuals, like their high caste counterparts, oppose redistribution. Reservation will, therefore, only alter the policies associated with party P candidates. Here, with reservation, the likelihood of targeted redistribution equals the probability of party P’s electoral success.

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a statistically significant link between changes in thefraction of jurisdictions reserved for a minority group and the extent of redistribution targeted towards the same groupcan be interpreted as evidence that political parties cannotenforce policy commitment on part of their candidates and that the bargaining procedure adopted in the legislatureallows these legislators influence over policy.

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Institutional Background

1950 Indian Constitution: Specified jurisdictions are reservedfor disadvantaged castes and tribes in elections– State governments directed to use public policy to improve well-

being of these (economically backward) groups

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Institutional Background

In a jurisdiction reserved for scheduled castes (scheduled tribes), only a SC (ST) individual may stand for election. The entire electorate, however, participates in choosing among candidates so qualified.

– Election Commission and Delimitation Commission responsible

– When selecting reserved jurisdictions prefer those with a higher population share of the group to be favoured

– Variation over time in the extent of political reservation enjoyed by a group according to population share

• change in reservation after new census estimate (or institutional change)

• constant since 1980 due to a national decision

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Data

16 major Indian states (95% of population), 1960-1992

Political reservation: fraction of jurisdictionsreserved

Population share: census data (irregular) and annual data (interpolated)

State govts‘ quite free in spending policies– general policies:

• Size of state government

• Spending on education

• Land reform (dummy variable)

– targeted policies:

• Targeted SC/ST spending (e.g. housing)

• Job quotas

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Estimation

policy outcome, sth state at time t

vector with elements on SC and ST reservation

state fixed effects (unobserved, constant effects at state level)

year fixed effects (unobserved national events, affecting all states)

State-specific changes on reservation are used to identify the effect γ of reservation on policy outcomes

Main possible problem:

– omitted effects of the factors which determine reservation

– most likely: lagged population effects

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Estimation

Main possible problem:

– omitted effects of the factors which determine reservation

– most likely: lagged population effects

Solution:

– expand the set of covariates

SC and ST census population shares

SC and ST current population shares

• state income p.c. lagged (may affect fertility rates or migration)

• state population densities (likely to affect population growth)

• election year dummy (pick up election year effect)

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Interpreting coefficients, revisited

If a variable is a share of something (population share, share of total spending, …), i.e. Є [0,1] (with a ‚percentage meaning‘), it does notexactly have the log-interpretation

– share is a ‚level‘ variable, increase/decrease is thus strictly speaking not byso-and-so many % (multiplicative meaning) but by so-and-so manypercentage points (additive meaning)

– e.g. y=log(spending), x=population share Є [0,1], β=0.5

change in x of 0.01 (1 perc. point) increases y by 0.5*100*0.01=0.5 %

%∆y = β %∆x

%∆y = 100 β∆x

∆y = β∆x

Coeff. interpretationExplanatory var.Dependent var.

log(x)log(y)log – log

xlog(y)log – level

xylevel - level

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Results

Total spending: log real state p.c. expenditure

Education: share of total spending

Land reform: dummy variable

SC/ST reservation/population variables: share of total state posts/population

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Results – General Policies

Increases in ST but not SC reservation increase total spending

(4) 1 perc. point increase in ST reservation increases total spending by 0.02 %

ST reservation with significant negative impact on education spending

(8) 1 perc. point increase in ST reservation decreases educ. spending by 0.4 perc. points

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Results – Targeted Policies

Positive correlation between SC reservation and (only) job quotas: (1)-(4)

(4) 1 perc. point increase in SC reservation increases job quotas by ~0.7 perc. points

ST reservation with sign. positive impact (only) on ST welfare spending: (9)-(12)

(8) 1 p.p. incr. in ST reservation increases ST-targeted spending share by 0.9 perc. p.

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Interpretation

SC reservation increases job quotasST reservation increases spending on ST-targeted welfareprogramsExplanation: different group characteristics– SC individuals are more educated and more geographically dispersed

• Relative returns from individual-specific policies (job quotas) higher– ST benefit from localized welfare programs, such as housing

schemes• Targeted redistribution at the expense of general redistribution

(increases total spending, decreases spending on education)

Also, SC are politically more important, ST still marginalized– SC current population share higher job quotas, lower ST spending– ST current population share neg. correlation with most policy

variables

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Robustness Tests

Sensitivity of results to introductionof more controls for variables thatmay determine reservation

Reservation of group is a nonlinearfunction of the group‘s lagged(census) population share

(1) quadratic controls not significant. statistical significance partly reduced, e.g. ST reservation and educ. spending, but economic magnitudeunchanged

(2) also largely unchanged

Add robustness checks in table 8 (not reported), also in Pande (1999): results robust to more variables incl. migration and 2SLS procedure

Table 8 (excerpt)

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Conclusion

Changes in legislator identity in India have exerted a significant influence on state-level policies in a way that is consistent with a model of political competition in which parties cannot commit their candidates to policies– Increase in targeted spending to minorities significant

Is reservation welfare-enhancing?

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