Political Turnover Research Articles

Political turnover and corporate research and development: evidence from China

ABSTRACT This paper documents cycles in corporate research and development corresponding with the timing of political turnover. Utilising the data on local government officials and research and development activities at the firm level in China, firms’ intensity of research and development input is found to be negatively associated with a turnover in local political leaders. We investigate several potential explanations and find evidence supporting that political turnover reduces the incentives of firms to invest in research and development until the uncertainty is resolved.

Does political turnover affect corporate investment? Evidence from China

This paper adopts the dual perspectives of party/government officials and provincial/city officials to study the effect of political turnover on corporate investment in China. This paper finds that the turnover of both provincial party secretaries and city party secretaries inhibit corporate investment, while the turnover of governors and mayors have no effect on corporate investment. Investment irreversibility, not financial friction, is the mechanism through which local party secretaries' turnover reduces corporate investment. Moreover, ownership structure, the ultimate controller's hierarchy level, and the city's hierarchy level play moderating roles. The effects of provincial secretaries' turnover are more robust than those of city secretaries' turnover in additional tests and robustness checks.

The effect of political turnover on firms’ strategic change in the emerging economies: The moderating role of political connections and financial resources

Do external uncertainties hold back or accelerate firms’ strategic change? To examine this issue, we develop a theoretical framework on the relationship between policy uncertainty caused by political turnover and the level of a firm’s strategic change and also theorize how political connections and financial resources affect firms’ response in the form of strategic change to environmental uncertainty. We test our framework with 16,451 firm-year observations of listed firms in China from 2008 to 2015 and find that political turnover has a negative influence on the level of a firm’s strategic change. Moreover, this influence is mitigated by political connections and/or financial resources.

Political turnover, public employment, and local economic development: New empirical evidence on the impact of local political dynasties in the Brazilian “Nordeste”

Political turnover, public employment, and local economic development: New empirical evidence on the impact of local political dynasties in the Brazilian “Nordeste”

Does political turnover stifle or stimulate corporate innovation?

This paper investigates how political turnover affects firm innovation activities. In contrast to the literature documenting negative effects of local leader turnover on innovation output, I find that uncertainty over provincial leader turnover encourages firm patent filings. Local leader changes cause, on average, an increase of approximately 3.4% firm patent filings. The turnover effect is stronger in state-owned enterprises, in firms located in provinces featured with worse business environment (with more government-dominated markets), in firms facing fierce market competition, and in firms subject to higher growth opportunities. My findings suggest that the real effects of local political uncertainty depend on firms’ ownership structure, business environment, market competition, and growth opportunities.

Fiscal incentives and land finance cycles of prefectures in China

AbstractLand finance has become one of the important major sources of fiscal revenue for Chinese local governments. The spatial allocation of land use constitutes a land‐leasing policy operation of local officials, contributing to local economic development and fluctuation. Applying data from 283 prefectural units from 2003 to 2012, this paper explores the existence of land finance cycles, focussing on the changes of the amount (as in ‘area’) of land‐leasing by negotiation or by auction. The empirical results suggest that land finance cycles synchronise with the PCCP (Provincial Congress of the Communist Party) cycles, in which a prefectural leader decreases the amount of land leased through negotiation and increases that of land leased through auction prior to the year of the PCCP. The findings of empirical results are consistent with the prediction of our theoretical model. Additionally, due to the existence of high uncertainty of prefectural leaders’ tenure and political turnover, the effect of prefectural leaders’ tenure on land finance cycles is more apparent in the early years of their tenure. The results indicate that Chinese leaders’ fiscal strategies are likely to be driven by career concerns for the purpose of maximising a measured economic performance and fiscal rents.

Институт интеллектуальной собственности в культурно-историческом и стратегическом залоге

Relevance. The rapid expansion of the space of action of the relations of the «knowledge economy», the institution of intellectual property (IP) is enhanced by «digitalization», the whole economic architecture of the world is changing. The high dynamics and complexity of changes in economic systems and the world order, «knowledge circulation », complicate effective adaptation and constructive participation in these processes. The world is faced with the need to assess the cultural, historical and strategic consequences of all the effects of the institutionalization of IP relations. Methods. The article uses a systemic, cultural and historical analysis, based on global political economy and historical («old») institutionalism. The initial formulation of questions in this area should be of a qualitative, conceptual nature. This article uses this approach, but relying on available statistics and the possibility of a qualitative comparison of the consequences of the institutionalization of IP rights. Results. The contours of the institutionalization process, the introduction of IP relations into the global political and economic turnover, its main groups of interests and beneficiaries are considered. Qualified consequences for the economic architecture of the world and the redistribution of «world knowledge». The role of the Agreement on IP Regimes (TRIPS) in the formation of intellectual-monopoly capitalism has been determined. The effects generated by the regime of «closed science» and «closed markets» are highlighted. The mechanism of making a profit based on IP rights is considered. Signified of the importance of the advanced development of the ability to use the appropriate institutions, adequate to features of historical Russia’s cultural ecumene and civilizational characteristics of the peoples of Eurasia, and the need for a strategic transformation of personnel training systems. Discussion. The change in the economic architecture of the world and the unforeseen effects of the redistribution of «world knowledge» as a result of formation of intellectual-monopoly capitalism is an indisputable historical fact. Its consequences for the future of humanity have not been studied, uncertainty and risks are growing. It requires its awareness, consideration of the cultural and historical significance of the effects, requires the involvement of researchers from various subjects and civilizational perspectives.

The discontinuous effect of economic performance on political turnover

ABSTRACT This paper re-examines the asymmetric marginal effect of economic variables on voting. By applying the comprehensive cross-country panel data of democracies from 1975 to 2016, the empirical results demonstrate that there is a striking discontinuity in the relationship between economic performance and political turnover, in the sense that voters are sensitive to incumbents’ economic performance when the countries are during the economic prosperity but are less sensitive during the economic recession. The results are robust no matter we use the absolute growth rate or relative growth rate of the country, and no matter voters’ reaction in response to political turnover is conditional on the institutional factor or not.

Promotion for Performance? The working incentive of Chinese provincial environmental agency heads in pollution reduction

Promotion is argued to be the primary working incentive for Chinese officials. Different from previous studies that focus on the provincial governors and party secretaries, this paper makes the first attempt to examine whether the career turnover of China’s provincial environmental agency heads (PEAHs) is affected by the environmental performance within their jurisdictions. The results show that the performance in reducing nationally targeted pollutants—i.e., sulfur dioxide (SO 2 ) and chemical oxygen demand (COD)—is not necessarily correlated with political turnover, which only depends on political factors such as the age when assuming office, tenure of the office, and if they are local people. Therefore, a lack of promotion incentive is found among China’s PEAHs in local environmental management. Their working incentive is straightforward top-down control, making them merely the implementers of economy-dominated local public policy. A more robust and transparent performance management system, to connect the provincial environmental performance with the PEAH’s political career, is supposed to be beneficial for China’s environmental management.

Promotion for Performance? The working incentive of Chinese provincial environmental agency heads in pollution reduction

Promotion is argued to be the primary working incentive for Chinese officials. Different from previous studies that focus on the provincial governors and party secretaries, this paper makes the first attempt to examine whether the career turnover of China's provincial environmental agency heads (PEAHs) is affected by the environmental performance within their jurisdictions. The results show that the performance in reducing nationally targeted pollutants—i.e., sulfur dioxide (SO2) and chemical oxygen demand (COD)—is not necessarily correlated with political turnover, which only depends on political factors such as the age when assuming office, tenure of the office, and if they are local people. Therefore, a lack of promotion incentive is found among China's PEAHs in local environmental management. Their working incentive is straightforward top-down control, making them merely the implementers of economy-dominated local public policy. A more robust and transparent performance management system, to connect the provincial environmental performance with the PEAH's political career, is supposed to be beneficial for China's environmental management.

Collusion, political connection, and tax avoidance in China

AbstractOur paper is the first to examine the impact of government‐firm collusion on firm tax avoidance in China by applying an instrumental variable approach. We take political turnover of local leaders as an external shock to the existing collusion and investigate firms' tax avoidance activities during local leadership transition. By using data on political turnover of prefectural leaders and listed firms from 2007 to 2014, we find that political turnover leads to the instability of existing collusion, and consequently a decrease in firm tax avoidance. This provides evidence of the pre‐existing collusion between government and firms. We then rule out the possibility that such change is driven by the effect of political uncertainty or tax competition by considering the heterogeneous effect of firms and cities. Finally, we show that firms' political connections, captured by political ties and ownership of firms, stabilize the existing collusion and help firms maintain their advantage while facing external political shocks.

China's Local Political Turnover in the Twenty-First Century.

This paper provides empirical evidence on the incentive role of personnel control in China in the twenty-first century. Employing the city-level turnover data of political leaders in China between 2000 and 2018 and utilizing the fixed effects ordered logit model, we find that the likelihood of promotion of local leaders rises with their economic performance. This relationship holds more firmly in the municipal party secretary. The probability is also found to decrease with the economic performance of their immediate predecessors and neighboring cities. This finding is robust to various robustness tests. We interpret the finding as evidence that the relative economic performance (peer effects) also contributes to the local political turnover, in particular within a province. Moreover, after the Third Plenary Session of the 18th CPC Central Committee, a material change in the personnel arrangement within the party arises and this promotion mechanism shows a dynamic change. Our study sheds some light on the growing literature emphasizing the relationship between political turnover and economic performance.

Political turnover, regime type, and investment behavior

ABSTRACT Firms and individuals condition their investment choices on domestic political factors in host countries. Existing research describes how government preferences and policy choices influence investment behavior. Some have argued that investors take a cautious approach in response to possible government turnover. We argue that the results of domestic political competition also matter. Domestic turnover creates uncertainty about the future direction of policy in a variety of areas relevant to investment decisions – e.g., changes in privileged relationships between the state and certain domestic producers or industries, trade barriers, and tax policies. Investors and firms should therefore hesitate to invest following domestic turnover in potential host countries. However, various institutional features of democracies should mitigate the extent to which domestic turnover causes uncertainty and deters investment. Our statistical analysis suggests that while non-democracies see less foreign direct investment in the wake of a change in the source of leader support, investment to democracies does not change significantly following domestic turnover. The note enhances our understanding of the determinants of investment and provides further evidence that democratic institutions matter for conditioning the effects of domestic turnover in a new empirical domain.

The effect of uncertain political turnover on air quality: Evidence from China

We investigate the effect of frequency and predictability of turnover among Chinese city officials on air quality in their jurisdiction. Existing studies examining the relationship between the political cycle and pollution assume that local officials have perfect information on the turnover timing. We relax this crucial assumption by explicitly accounting for a turnover anticipation effect which we proxy via a nonparametric model. Based on city panel data, we find that there is a spike in air pollution in the year prior to the leadership turnover, but only if the turnover is anticipated by the incumbent. Beyond this cyclical anomaly, less frequent turnovers are generally conducive to lower air pollution. A key contribution of this study is the incorporation of the anticipation effect, which turns out to be critical for understanding the effect of turnover on air pollution. Our findings offer refinement to previous studies, indicating that when turnover is frequent and predictable, local leaders are more likely to focus on policies that encourage economic activity to signal their competence to upper-level authority, at the cost of damaging air quality.

The Intersection of Problems, Policy, and Politics: The Adoption of an HPV Vaccine School-Entry Requirement in Puerto Rico

Persistent human papillomavirus (HPV) infections can cause cancer (e.g., cervical/vaginal/penile/anal/oropharyngeal). The HPV vaccine prevents cancer, yet U.S. vaccination rates remain low. We explored sociopolitical factors in the adoption of Puerto Rico's HPV vaccine school-entry requirement. Multiple streams framework explains how the intersection of problems, policy, and politics streams influence policy adoption. Policy entrepreneurs work on joining these streams. Interviews (n = 20) were conducted with stakeholders (e.g., physicians/researchers/nonprofit organizations' leaders). Data were analyzed using applied thematic analysis. High incidence of HPV and HPV-related cancers in Puerto Rico were indicators of problems. Focusing events included Rhaiza's case and the HPV-Advisory Panel Report. During summer 2017, a policy window opened; the Department of Health (DOH) adopted the requirement in summer 2018. Stakeholders discussed policy initiatives. Political turnover positively influenced the process. Policy entrepreneurs created an extended period of intersection resulting in the adoption of the requirement. Findings can inform policy initiatives to improve HPV vaccination rates and reduce HPV-related cancers.

Corruption and politicians’ horizon

This paper presents cross-country evidence about the relationship between politicians’ horizon and their rent-seeking behavior. Using information from CIA’s World Factbook and from the National Elections across Democracy and Autocracy dataset, we construct variables of term limits, term length and political turnover at the top executive level. We simultaneously estimate the correlations between these three variables and corruption—measured using a corruption index—from pooled cross-sections of 137 developed and developing countries observed from 2000 to 2015. We find a positive correlation between corruption and: (i) term limits at low level of term length, (ii) term length in the absence of term limits, and (iii) political turnover. Results suggest that politicians behave best if there are no term limits and frequent elections. We also provide evidence that the downward sloping part of a U-shape relationship between political turnover and corruption previously found in empirical papers can be explained by accountability and observability technologies. Theoretical mechanisms that can explain these findings are discussed.

The impact of bailouts on political turnover and sovereign default risk

This paper develops a stochastic dynamic politico-economic model of sovereign debt to analyze the impact of bailouts on political turnover and sovereign default risk. We consider a small open economy in which the government has access to official loans conditional on the implementation of austerity policies. There is a two-party system in which both parties care about the population’s welfare but differ in an exogenous utility cost of default. Political turnover is the endogenous outcome of the individual voting behavior. In a quantitative application to the Greek economy, we find that bailouts amplify political turnover risk, which, in turn, elevates sovereign interest spreads. While stricter conditionality fosters the probability of political turnover and sovereign default in the short run, it may mitigate political turnover and default risk in the long run. The frequency of political turnover is U-shaped in the strength of conditionality.

Mandatory spending, political polarization, and macroeconomic volatility

This paper studies the impact of political polarization on macroeconomic volatility in a political economy model of optimal fiscal policy. I introduce the distinction between mandatory and discretionary public spending in a model where consumers disagree on the size of the public sector. In the presence of political turnover and political polarization, public policies that affect individual decision-making lead to macroeconomic volatility. I show that the legislative requirements behind the changes in mandatory public spending can reduce macroeconomic volatility caused by political polarization and political turnover. The numerical simulations of the model suggest that in the presence of a binding constraint on the changes in mandatory spending, an increase in the political polarization is associated with an increase in the share of mandatory spending and a decrease in the macroeconomic volatility, consistent with the U.S. data.

Sovereign default, political instability and political fragmentation

AbstractThis paper studies sovereign borrowing and default in an economy in which self‐interested political parties bargain over the budget and there is political turnover. The model generates an endogenous distribution of resources that depends on borrowing decisions, and policymakers become short‐sighted. The party in power, as well as the coalition members, obtain a higher share of aggregate consumption as leverage increases. Very small changes in these shares generate non‐negligible shifts in the default/repayment sets. This mechanism provides an explanation for why governments increase their leverage and default more frequently, in comparison to a model with a constant distribution of resources.

Echoic survivals: Re-documenting pre-1975 Vietnamese music as historical sound/tracks of re-membering

Following the contested fall of Sài Gòn in 1975, several South Vietnamese veterans found their existence and contributions during the Việt Nam War erased. Even after 45 years of diasporic displacement, or what I refer to as the involuntary and forceful exilic removal and geographical scattering of a group due to political turnover and turmoil, the histories, stories, and legacies of South Việt Nam and the Republic of Việt Nam have largely been forgotten in the present and political landscapes of both postwar Việt Nam and the United States. Based on what I describe as a diasporic re-reading of the lyrics and re-listening of selective pre-1975 Vietnamese music, this article explores the enduring corpus of musical sounds in nhạc vàng, or pre-1975 yellow music, specifically songs that focus on war and người lính (“soldiers”). By examining its historical and spatial trajectories, I argue that Vietnamese music can be heard and described as historical sources, much of which has been overlooked in the West, that document the many erased and discounted experiences, stories, and peril of South Vietnamese veterans. As I argue, diasporic sounds echoed in Vietnamese music are crucial to understanding the history and continued peril of South Vietnamese veterans in the current geopolitical landscape. The following analysis shows that Vietnamese music contextually becomes a diasporic source for re-membering the disremembered, the forgotten, and the silenced. Vietnamese music shifts from modern music to diasporic sounds of war remembrance and loss that underscore their continued postwar plight. In this essay, I also interviewed a South Vietnamese veteran. For him, music becomes a mode of survival, representing the unfading nostalgia and memories of the Việt Nam War.