Economics of Public Policy – Page 2

Certain uncertainty? The response of Venezuelan banks to a political dilemma

Economics of Public Policy master project by Mary Armijos and Guillem Cuberta ’19

Editor’s note: This post is part of a series showcasing Barcelona School of Economics master projects. The project is a required component of all BSE Master’s programs.

Introduction

Our work focuses on the analysis of the Venezuelan banks, which have become more vulnerable. The leading causes of this vulnerability have been oil price shocks, political instability, pro-cyclical monetary conditions (i.e., interest rates), low level of financial intermediation, changing structure (e.g., consolidation, closure or nationalization), non-traditional bank transactions, high exposure to the public sector, and government intervention in their operations. (Blavy R., 2014) Hence, studying the response of banks to policy uncertainty becomes relevant. However, even more critical, in Venezuela’s context, would be to ask: do banks respond differently to uncertainty if they are politically connected?

To address this question, we construct two indices: the policy uncertainty index and political connection index. Our uncertainty index is in a monthly basis and bank-invariant; it is developed following the work previously done by Baker, Bloom, and David, on the Economic Policy Uncertainty Index (EPU Index) and by Ahir, Bloom, and Furceri, on the World Uncertainty Index (an extension of the EPU). Similar to Xu and Zhou (2008), for the case of the political connection index, we define the dummy variable connected bank equal one based on whether it is a state-owned bank. Alternatively, in case it is a private one if at least one of the board members has any connection with someone from the government. We adapt these criteria to the information there is available from Venezuela. We also look if one of the members is part of the ‘bolibourgeoisie’ ( a combination of the words Bolivarian and bourgeoisie, a term used to classify the businessmen and public officials linked to the government). For our dependent and micro-control variables (i.e., bank characteristics), we use monthly data from 2006 to 2018 obtained from SUDEBAN (Venezuela’s Superintendence of Banks). Moreover, for the macro-control variables, we obtain monthly data from the International Financial Statistics of the International Monetary Fund (IMF). The variables we choose for our specifications are based on the works done by Vera et al. (2019) and Bordo et al. (2016).

Our central hypothesis is that when there is high policy uncertainty, political connections may allow connected banks to smooth the effects of uncertainty. We believe that connected banks might respond differently to uncertainty because they have privileged information or preferential treatment from the government, which grants them a competitive advantage over non-connected banks. To test the response of banks, we look at their behavior respect to credit supply and provisions, and we also investigate banks’ profitability in periods of uncertainty through the ROA. Our identification strategy to investigate the causal effect of policy uncertainty and political connection considers the fact that the uncertainty index is a high-frequency time series, which makes it be almost an exogenous variable. Also, the political connection index is not endogenous as it does not vary over time.

In addition to that, we control for bank-invariant and time-specific factors that affect both the right-hand side and left-hand-side variables by adding bank and time fixed effects. Furthermore, to separate the impact of our primary explanatory variable (interaction) from other confounding factors, we control for a block of bank-specific covariates. We also consider different specifications with and without lags of these controls to mitigate the potential reverse-causality concern. Even though we know that all of these adjustments might not entirely correct for omitted variable bias, we consider it adjusts well enough to investigate this relationship. We consider that one of the significant sources of potential bias comes from monthly macro changes (i.e., exogenous shocks like oil prices or U.S. sanctions, and government decisions) that are accounted by including time fixed-effects.

**Figure 1**: Monthly Economic Policy Uncertainty Index for Venezuela (EPUV)

Results

In our main results, we find that politically connected banks acquire more risks when there is higher uncertainty as an increase of 10 percent in our uncertainty measure leads them to give on average, 0.0262 percent more credits than non-politically connected banks. This result corroborates similar results from the literature that establishes a positive value from being politically connected (Kostovetsky 2015). Also, we observe that an increase in the uncertainty index induces politically connected banks to hold more loss provisions in their portfolio than non-politically connected banks. A 10 percent increase in our uncertainty index prompts politically connected banks to hold 0.0192 percent more loss provisions than non-politically connected banks. Lastly, the effect of economic policy uncertainty for politically connected banks on ROA has a positive sign. A 10 percent increase in uncertainty increases the average returns on assets of politically connected banks by almost 11 percent compared to non-politically connected banks.

Summing up, connected banks can give more credit to the public in periods of higher uncertainty, at the same time that they hold more loss provisions. The first result is consistent with the ones shown by Cheng et al. (2017), where they find that banks supply much more credit when there is high uncertainty. However, our result of provisions does not coincide with theirs. Contrarily, they find that under higher uncertainty, connected banks reserve lower provisions than unconnected banks. In the case of the profitability analysis, connected banks have lower profits when there is high uncertainty. These results go along with the ones found by Dicko (2016).

We consider that this study presents new relevant findings regarding the literature of political connection and policy uncertainty, and for the Venezuelan economy overall. The political connection matters in periods of high uncertainty but until one point. From our results, we find that politically connected banks seem pro-risk as they give more credit when there is more policy uncertainty. However, on another level, it appears that they do receive privilege information form the government (bad news about the future) that makes them risk-averse at the same time as they also reserve more provisions. Additionally, the result of the relationship between uncertainty and profitability indicators, like ROA, indicates that being politically connected might not be extremely helpful to banks if they only benefit from having more information and do not receive any tangible benefit from the government. For further studies, it would be interesting to analyze how economic agents respond to policy uncertainty depending on the type of benefit they receive from being politically connected to some institutions.

Download the slides

About the BSE Master’s Program in Economics of Public Policy

The Zero Lower Bound was irrelevant

Blog post for AIER by Brian C. Albrecht ’14 (Economics of Public Policy)

Brian Albrecht is a PhD candidate at the University of Minnesota and a graduate of the Barcelona GSE Master’s Program in Economics of Public Policy, as well as a past editor of the Barcelona GSE Voice. He is also a contributor to the Sound Money Project, a blog from the American Institute for Economic Research (AIER).

In a recent post, Brian talks about a recent paper by Barcelona GSE professors Davide Debortoli, Jordi Galí, and Luca Gambetti, “On the Empirical (Ir)Relevance of the Zero Lower Bound Constraint.” He writes:

Many economics writers, including Ben Bernanke, Neil Irwin, and Justin Wolfers, worry that the Fed will not be able to combat the next recession. Current interest rates, the sad story goes, are already close to zero. Since a downturn will push the economy to the zero lower bound (ZLB), the Fed will not be able to lower rates further, thereby prolonging the recession.
Of course, for such a story to make sense, the ZLB must be a fundamental constraint that inhibits monetary policy. In a new NBER working paper, Davide Debortoli, Jordi Galí, and Luca Gambetti consider whether the ZLB was actually the problem during the last recession. They say the ZLB was irrelevant. The authors come to this conclusion by studying two types of evidence: measures of macro volatility, and the response of macro variables to aggregate shocks through a vector autoregression.
Brian C. Albrecht for Sound Money

Read Brian’s full post on this paper and find a list of all his recent posts over on the AIER website.

Brian C. Albrecht ’14 is a PhD candidate in Economics at the University of Minnesota. He is an alum of the Barcelona GSE Master’s in Economics of Public Policy.

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Green Public Procurement as a Leverage for Sustainable Development: Documental Analysis of 80 Practices in European Union

Book chapter by Daniele Alimonti ’16 (Economics of Public Policy)

While working as a research assistant at the Barcelona GSE, Daniele Alimonti ’16 (Economics of Public Policy) co-authored this chapter of the book “Green Public Procurement Strategies for Environmental Sustainability” curated by Rajesh Kumar Shakya (The World Bank, USA) and published by IGI Global. His co-authors are professors and researchers from Tor Vergata University in Rome, Italy.

Daniele shares this summary of the article:

The article aims to highlight the advantages of Green Public Procurement (GPP) practices to address the environmental and economic problems during the different stages of the tendering procedure. Laying on the experiences of the European countries, the research has the objective to reconstruct the state of the art of green public procurement through the lens of a cross-country comparative analysis. After introducing a systematic review of the literature and the core regulations of the GPP practice, the article underlines the results of a multidimensional analysis on a cluster of 80 practices, identified by the European Union and implemented by governments in 25 countries at a central, regional, or local government level. The framework of the analysis builds on several dimensions, mapping the main results on the following levels: geographic origin, government level, implementation period, main criteria used for implementation, as well as environmental and economic impact of such practices.

Daniele Alimonti is currently a research analyst at the Institute for Political Economy and Governance (IPEG) in Barcelona.

About the Barcelona GSE Master’s Program in Economics of Public Policy

Happy now? Lessons for economic policy makers from a focus on subjective well-being

Master’s in Economics of Public Policy alum George Bangham ’17 currently works as a policy analyst at the Resolution Foundation, an influential London-based think tank focused on living standards. In February George published a new report on subjective well-being in the UK, which marked the Foundation’s first detailed analysis of subjective well-being data and its lessons for economic policymakers.

The report received widespread media coverage in the UK Guardian, Times and elsewhere, as well as international coverage in France and India among other countries.

It was launched at an event in Westminster where speakers included the LSE’s Professor Paul Dolan, UK Member of Parliament Kate Green and former head of the UK Civil Service Lord Gus O’Donnell.

George Bangham ’17 presents his report for the Resolution Foundation in Westminster

Speaking to the Barcelona GSE Voice, George said that while researching and writing the paper he had drawn closely on the material he covered while studying for the Master’s in Economics of Public Policy, particularly the courses on panel data econometrics, on the analysis of social survey microdata, and on the use of subjective well-being data for policy analysis.

You can see more of George’s publications and blog posts on the Resolution Foundation website. Follow George on Twitter @georgebangham

The Impact of Non-contributory Pensions. A Case Study for Costa Rica

Economics of Public Policy master project by Hazel Elizondo, Sandra Flores and Alicia de Quinto ’18

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2018. The project is a required component of every master program.

Authors:

Hazel Elizondo, Sandra Flores and Alicia de Quinto

Master’s Program:

Economics of Public Policy

Paper Abstract:

Even when only 20% of the elder population in the world receives pension coverage (Pallares-Miralles, Romero and Whitehouse, 2012) which in addition is not always adequate according to ILO, non-contributory pensions are present only in a handful of developing countries. Moreover, the elderly population is currently growing as individuals tend to live longer, what further evidences the imperative need to apply this type of programs. Costa Rica implemented a non-contributory pension policy in 1975 to ensure the livelihood of those in economic need that were not able to save provisionary funds to confront the old age risks, so that elders aged above 65 living in extreme poverty are eligible for coverage. Additionally, Costa Rica adopted a 186% increase on the pension amount in 2007 in order to mitigate poverty. This study aims to provide further empirical evidence of the indirect effects of the non-contributory pensions in Latin America, through a study case for Costa Rica that explores the impact of this pension on employment and schooling, household composition, and changes in well-being for the period from 2001 to 2009.

The methodology applied includes a first difference-in-differences specification (DD) as a general model, which compares the group of receivers before and after 2007 with a control group aged above 65 years old. Secondly, we exploit the discontinuity on the treatment assignment regarding the age of the oldest household member to define a Regression Discontinuity Fuzzy Design (RD). This local analysis only identifies the effects of receiving the pension, so that we move towards a third Difference in Discontinuity Design (diff-in-disc) that combines the previous models, quantifying the impacts of the pension increase as well. The RD and diff-in-disc settings include an alternative sample where the treated are households with a member between 65 and 69 years, while the counterpart is aged between 61 and 64.

Conclusions and key results:

Our results show a generally positive picture of the Costa Rican non-contributory pension, if we consider that the policy was designed to provide an allowance to elder that never contributed to the formal system, allowing them to retire at age 65. However, conditional income transfers sometimes involve unintended consequences that characterize the policy as defective.

In the case of the DD sample, where the family structures are characterized by households with senior members and households where the recipient is father or mother of the household head, the results show major spillover effects on the remaining members, especially in terms of labor- related reactions. Indeed, the estimations show that those households that benefit from the non- contributory pension reduce significantly by 0.179 the number of individuals in the labor force, compared to non-beneficiaries. Individuals in the treated households work 1.747 hours less than their counterparts and receive a labor income 61.9 USD lower than those households that do not receive the pension. Given that the Costa Rican non-contributory pension policy requires leaving the labor market as a necessary condition for receiving the grant, we might relate the reduction in labor participation to perverse incentives, as the remaining household members might take advantage of this transfer to change their time allocation preferences between work and leisure.

Nonetheless, the results obtained in the RD and diff-in-diff models rule out our preliminary interpretation. Both estimates reveal no significant reactions at the household level for any of the outcomes analyzed, what means that households do not change their employment-related decisions in the short-run, even when the recipient must leave the labor market. In this case, the households with senior members predominate over other type of family structures, hence we would have expected a significant decreasing effect for labor force participation. Probably this is because unemployment and job instability hit the most vulnerable population groups, so that individuals with uncertain job prospects see in the non-contributory pension an opportunity to receive a steady income. Moreover, we do not find evidence neither for the incentive for other young members of the family to move in with the elderly participant, nor for the recipient to move out and live on her own.

Download the full paper [pdf]

More about the Economics of Public Policy Program at the Barcelona Graduate School of Economics

Money is a social contract

Brian Albrecht ’14 (Economics of Public Policy) offers both a normative and a positive view

In two recent articles, he talks about money as a social contract, both from a normative and a positive perspective:

“Both monetary theory and social contract theory consider a hypothetical situation (a model) in which people in a society come together and collectively agree on some social institution. I have argued that both social contract theorists and monetary theorists use these hypotheticals to draw normative conclusions about what types of institutions are preferable. However, part of monetary theory is also concerned with the positive (i.e., not normative) question “Where does money come from?” In a similar way, part of social contract theory is concerned with the positive question “Where does the state come from?”

Read both of Brian’s articles over on the AIER website:

He writes regularly for the site, so be sure to check out his previous work there as well!

Brian is on Twitter and his website is here

The Impact of a Cash Transfer Program on Life Outcomes: Evidence from Uruguay

Economics of Public Policy master project by Karina Colombo, Gabrielle Lohner, and Eric Ramirez-Diaz ’18

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2018. The project is a required component of every master program.

Authors

Karina Colombo, Gabrielle Lohner, and Eric Ramirez-Diaz

Master’s Program

Economics of Public Policy

Paper Abstract

Our paper analyzes the impact of a cash transfer program targeting households in extreme poverty in Uruguay, called the Tarjeta Uruguay Social (henceforth referred to as TUS). In the past decades, cash transfers have become one of the main social assistance policies used to address poverty and inequality in developing countries. Their objective is to reduce vulnerability by increasing and smoothing household income, although additional objectives are usually defined depending on the program and country, such as increasing access to health and education, and reducing food insecurity (DFID 2011; Honorati et al. 2015).

The impact of these programs on different life outcomes has been widely studied. Overall, positive impacts on poverty, food insecurity, child school enrollment, labor outcomes, health and social cohesion have been found (DFID 2011; ODI 2016). Nevertheless, more research is still needed to understand the channels and particular aspects that determine their success, since countries differ widely in the details of program design. In our research, by taking advantage of considerable design modifications since the implementation of TUS, we evaluate the impact of the amount of the transfer and the benefit duration on relevant outcomes.

The Tarjeta Uruguay Social (TUS) is a conditional cash transfer program implemented in 2009 which aims at assisting those in situations of extreme poverty in Uruguay. It targets the 60,000 worst-off households by providing them with a monthly cash transfer on a prepaid magnetic card. This card can be used to purchase food items, cleaning supplies, and hygiene products, excluding cigarettes and alcohol. Eligibility for the program is based on the Critical Needs Index (CNI), a proxy means test that evaluates household poverty, using variables associated to education, dwelling, access to durable goods and household composition. The program has undergone many modifications since its inception, including increasing the number of participants, changing the eligibility criteria, and a doubling of the benefit for half of the recipients. Our analysis begins in 2013, in which the program had 60,000 participants, and the poorest 30,000 according to the CNI received a doubling of their benefit, creating two benefit categories: Simple TUS and Double TUS. In our research, we exploit the doubling of the benefit based on the CNI by using a Fuzzy Regression Discontinuity Design to evaluate the impact of the amount of the benefit on life outcomes.

The availability of an extensive set of administrative data allowed us to evaluate the impact of the doubling on an array of outcomes. There are many different channels through which this cash transfer program could have positive effects, since the resources freed up by the relaxation of the household budget constraint could be used differently according to household preferences. Therefore, by taking advantage of a rich set of administrative data, we analyzed 65 outcomes: housing and living conditions, food insecurity, formal labor market work, education enrollment of children and adolescents, prenatal and birth health conditions, and family composition. Additionally, we analyze how the duration of the benefit affects the impact of the program by comparing the effects for beneficiaries who receive the transfer for different time periods. We analyze short-term outcomes for those who receive the transfer for less than a year; medium-term outcomes for those who receive the transfer for two to three years; and long-term outcomes for those who receive the transfer consistently for three years.

Conclusions

Probability of Receiving Double TUS According to Distance from Eligibility Threshold by Month, 2013. Analysis begins in May 2013.

Our results show than an increase in the amount of a cash transfer can in fact have important impacts on the life outcomes of recipients. Positive effects were found with regard to living conditions, with an increase in investment in durable goods and a betterment of housing conditions, such as purchasing water heaters or washing machines, adding a bathroom to the home, and upgrading from a trash roof to a concrete one. Additionally, results show positive impacts concerning individual outcomes, with improvements regarding prenatal care and months of formal work observed. Nevertheless, some negative results were found in the short-term, which could potentially be explained by an attempt of manipulation by the beneficiaries in order to ensure continued benefit provision under uncertainty. Results also show that the duration of the benefit has a considerable impact on how the transfer is spent. More positive significant household results are found in the medium-term, while individual results become stronger in the long-term. The increasing effects of more persistent benefits could potentially be explained due to uncertainty in the short-term regarding whether the benefit will continue to be provided, which decreases over time.

This study contributes to the literature of poverty alleviation policies by providing evidence which can be used to improve the design of cash transfer programs. The positive effects found in this paper from comparing different amounts of the transfer within the same program indicate that the monetary amount of the benefit is a relevant policy parameter with consequences for the effectiveness of the program. Additionally, the results for heterogeneous effects by benefit duration indicate that the persistence of the transfer is another relevant aspect of program design. The evidence provided in this paper indicates that a predefined duration upon entering the program together with a minimum duration of one year could constitute a good practice. This may mitigate negative effects regarding household manipulation attempts and potentiate positive effects by reducing income volatility and increasing housing investments. Our results suggest that further research on benefit size and timing is imperative for policy design of cash transfers, one of the main tools to reach universal social protection.

Download the full paper [pdf]

More about the EPP Program at the Barcelona Graduate School of Economics

The new wealth of our nation: the case for a citizen’s inheritance

George Bangham (Economics of Public Policy ’17) is an economic researcher at the Resolution Foundation, a London-based think-tank that carries out research and policy analysis to improve the living standards of people in the UK on low and middle incomes. In recent years the Foundation has been influential in advocating for a living wage and for policymakers to consider the intergenerational impact of public policy. George’s own work focuses on labour markets and social security policy, with his recent publications covering issues from working hours to tax reform.

One of his recent papers, “The new wealth of our nation: the case for a citizen’s inheritance,” has received international attention in the media and was featured in an article in La Vanguardia newspaper this May.

Report summary:

The Intergenerational Commission has identified two major trends affecting young adults today, beside the weak performance of their incomes and earnings, which barely featured in political debate for much of the 20^thcentury. The first is that risk is being transferred from firms and government to families and individuals, in their jobs, their pensions and the houses they live in. The second is that assets are growing in importance as a determinant of people’s living standards, and asset ownership is becoming concentrated within older generations – on average only those born before 1960 have benefited from Britain’s wealth boom to the extent that they have been able to improve on the asset accumulation of their predecessors. Both trends risk weakening the social contract between the generations that the state has a duty to uphold, as well as undermining the notion that individuals have a fair opportunity to acquire wealth by their own efforts during their working lives.

This paper, the 22^nd report for the Intergenerational Commission, makes the case for the UK to adopt a citizen’s inheritance – a universal sum of money made available to every young person when they reach the age of 25 to address some of the key risks they face – as a central component of a policy programme to renew the intergenerational contract that underpins society.

Policy recommendations from the report:

From 2030, citizen’s inheritances of £10,000 should be available from the age of 25 to all British nationals or people born in Britain as restricted-use cash grants, at a cost of £7 billion per year.
To reflect the experiences of those who entered the labour market during and since the financial crisis, and to minimise cliff edges between recipients and non-recipients, the introduction of citizen’s inheritances should be phased in, starting with 34 and 35 year olds receiving £1,000 in 2020. Each subsequent year, citizen’s inheritance amounts should then rise and be paid to younger groups, until the policy reaches a steady-state in 2030 when it is paid to 25 year olds only from then on.
The citizen’s inheritance should have four permitted uses: funding education and training or paying off tuition fee debt; deposits for rental or home purchase; investment in pensions; and start-up costs for new businesses that are also being supported through recognised entrepreneurship schemes.
The citizen’s inheritance should be funded principally by the new lifetime receipts tax, with additional revenues from terminating existing matched savings schemes – the Help to Buy and Lifetime ISAs.

Visit the Resolution Foundation’s website to download the full report

Press release from the Intergenerational Commission

Connect with George on LinkedIn

Barcelona GSE Master’s in Economics of Public Policy

Brexit: BGSE Community Analysis

We want to know what the BGSE community is thinking and reading about the Brexit.

We invite all Barcelona GSE students and alumni to share their early reflections on the potential economic consequences of the UK’s recent vote to leave the EU. Did you focus on a related topic in your master project? Are you working at a think tank, central bank, or consulting firm where your projects will be impacted by this decision? Have you seen any articles or links that you found useful for understanding what lies ahead?

Here are a couple of pieces we’ve found to get the discussion going:

After Brexit: What next for the EMU, EU and UK?
(ADEMU webinar)

The BGSE participates in A Dynamic Economic and Monetary Union (ADEMU), a project of the EU Horizon 2020 Program. Last week, ADEMU researchers held a webinar to discuss the Brexit.

Background:

Europe has grown out of its crises when reason and solidarity have prevailed, but it has also been devastated by its crises when fear and nationalism have taken the lead. Brexit, in the aftermath of the euro crisis, brings this dichotomy back to the foreground. Since 2010 there have been important advances in the development of the Economic and Monetary Union (EMU) and flexible forms of participation have allowed other EU countries, reluctant to join the euro, to share the basic principles that define the EU and have a common presence in the interdependent global world.

According to the panelists, Brexit raises 3 crucial questions:

Should the EMU be accelerated to become a centre of gravity within the EU, or slowed down to avoid a centrifugal diaspora? If accelerated, how?
Should an ‘exit’ country be allowed free entry to the single market and other EU public goods without accepting freedom of movement?
Should the EU remain as it is, or increase its capacity to offer common public services (Banking Union, border security, research funding, environment, etc.), or limit its scope of activity to the EU single and integrated market?

Webinar Panel:
– Joaquín Almunia (Former Vice-President of the European Commission, honorary president of the Barcelona GSE)
– Ramon Marimon (European University Institute and UPF – Barcelona GSE; ADEMU)
– Gorgio Monti (European University Institute; ADEMU)
– Morten Ravn (University College London; ADEMU)

Moderator:
Annika Zorn (European University Institute; Florence School of Banking & Finance)

From Brexit to the Future
(Joseph Stiglitz)

Nobel Laureate and Barcelona GSE Scientific Council member Joseph Stiglitz shares some reflections in the wake of the Brexit decision

What are you thoughts on Brexit?

We want to know what the BGSE community is thinking and reading about the Brexit. Please share your ideas, favorite sources for analysis, or observations from economists you respect in the comments below.

The rise of Voting Advice Applications – aquienvoto.org and the Spanish case

With over 700,000 users, data from the app aquienvoto.org suggests how VAAs could represent a whole new way of surveying the general public before an election and collecting data on the political position of the population.

With over 700,000 users, data from the app aquienvoto.org suggests how VAAs could represent a whole new way of surveying the general public before an election and collecting data on the political position of the population.

The creator of the app is BGSE alum Hugo Ferradáns ’15, graduate from the Economics of Public Policy Program. Follow him on Twitter @Hferradans.

The rise of the internet era opened a door for innovative ways to help voters be informed about their political choices prior to casting their ballot. During the past 2015 Spanish General Election, new tools such as aquienvoto.org (whodoivote.org in English), an app that matches users’ policy preferences with parties’ proposed policies, became an easy and straightforward alternative for users to explore their political position and compare it to that of the biggest parties. Its success, with over 800,000 users and more than 30 million responses, suggests how technology and the social sciences can work successfully together to create a more informed and accountable electorate, especially in a multiparty political system such as the Spanish one.

But encouraging are more informed electorate is not the only benefit of Voting Advice Applications. In fact, the large amount of data that is generated from online applications such as aquienvoto.org can be a source of analysis and study regarding why people make their choices¹, as well as a way to estimate what users care most about in a real-time basis before an election. This article, thus, will try to shed light on the usefulness of Voting Advice Applications to gather data on the political positioning of users. I will show some of the results that were acquired from aquienvoto.org, both on the policy preferences of users and on their most politically-aligned parties.

But first things first- What is exactly aquienvoto.org?

Aquienvoto.org is what is called in the field of political economy research a “Voting Advice Application” (VAA). VAAs are essentially an online test that matches users to parties depending on individual responses to policy-related statements. The user can either disagree or agree with the statements, as well as indicate whether that specific policy is important to him or her. After replying to several questions, the VAA gives the user a summary of what parties the user disagrees and agrees most with, mainly in the form of a ranking or a political map.

chart

Even though there some VAAs more sophisticated than others², all VAAs acquire essentially the same data:

the position of the user regarding a specific question (in a scale of completely agree to completely disagree with the statement in question),
whether that user gives importance to that question and
after answering all questions, the ranking of most preferred parties for each user.

Aquienvoto.org was able to gather information on 756,908 people, after dropping all users that did not complete at least level 1 (that is, replied to 31 questions).

What did users get as an advice from aquienvoto.org?

If we look at what party was the most first-ranked among users, we see that the centre-right Ciudadanos was the most preferred party throughout the whole period for roughly 33% of users. However, interestingly enough, the overall amount of people that voted for parties that are more leaned towards the left (Podemos,PSOE, United Left and Nós, representing 62.8% of votes) is much higher than those in line with liberal and conservative policies (Ciudadanos, PP, PNV and DiL, being 37.2% of users’ first choices), indicating that users from aquienvoto.org are consistently left-wing.

It is particularly noticeable the different layout that the results present when compared to the results from General Elections. For example, the conservative Partido Popular, which was ranked first in the elections with roughly 25% of votes, appeared last almost throughout the whole period for aquienvoto.org. It is clear that this might certainly come from the fact that VAA users are consistently younger and more left-wing than the average citizen, but it also poses a question that would be interesting to explore: do people vote in line with their policy preferences or are there other factors that are influencing voters’ decisions in the field of electoral politics?

How do people position themselves about certain issues and what they think are most important?

Unsurprisingly, the topics related to corruption were the ones users gave most importance to, with almost 10.67% of respondents (that is, 80,410 individuals) giving importance to the question “Politicians accused of corruption should resign and be illegitimated to run for office”, of which almost 93% of people responded that they agree or completely agree with the statement.

The second and third place of most-given-importance questions are related to the presence of religion in the political sphere (second place) and the presence of religion in the education curriculum (third place), for which both find a strong rejection towards religion. Furthermore, social policy is an area of much importance to individuals as well, surely very much related to Spain’s current economic woes. Indeed, Spanish law related to mass evictions over the past years³ takes fourth place in most-given importance question (8.06% of total questions replied), followed by a statement on the education budget (7,46%), for which most people agree that increasing the budget is a top priority within government policy. These results are roughly constant throughout time, although the amount of users that gave importance to questions declined (graph 2).

In terms of the most controversial topics out of all questions, where there are large amounts of people agreeing and disagreeing with the statement, we find the prohibition of bullfighting, the abolition of escuelas concertadas⁴ and the law regarding underage abortion⁵, having all of them a rather high rate of importance-responses as well.

Regarding what users are not interested on, that is, the questions that were least given importance to, it is seen that the four topics that are least important to users (starting from the least important) are the deficit and the ceiling of government expenditure, the legalization of prostitution, the regulation the financial sector, and the financing of the Autonomous Communities (the different regions of Spain).

What is the political position of the average user?

In order to give users the most interactive experience when analyzing their results, we created a map of their political position using eight different axis, as the Swiss VAA smartvote⁶ did. Using an algorithm, each response that a user gives contributes to create its “political map”, which can be later compared to the political map of the parties. Thus, using the responses from each user, we computed the political map for the average user, creating the image below.

As it can be seen, the average user is very much in favor of strong democratic institutions that condemn corruption at all levels, as it presents a rather high value for the axis related to democratic regeneration. Furthermore, it also presents a high value for welfare state and liberal society, and quite a low value for those questions supporting a liberal economy and a restrictive fiscal policy, which goes in line with the results mentioned above that users are more prone to identify themselves with left-wing policies.

Also, it can be seen that the average user rejects all statements related to regional nationalism, and favors those regarding state centralization. This changes, however, when comparing the average users from different regions, as people from Autonomous Communities such as Catalonia and the Basque Country strongly reject state centralization and favor regional nationalist policies.

What is left to be done from VAAs like aquienvoto.org?

Although VAAs can give academics a rich database, there are a number of methodological challenges that need to be overcome⁷, mainly regarding the representativeness of the sample. Indeed, if we want to make inferences on the positioning of the whole Spanish population, it is crucial that we acquire good quality data on the characteristics of users; something that has been proved difficult for online surveys. From aquienvoto.org, we are working to improve the process of data collection, providing users with the option to sign into an account where they can store their information and reply to surveys at any time. Nevertheless, we believe that more attention from Universities and governments should be given to these tools so that institutions and VAA organizations collectively work to make VAAs a better tool both for users and for the academia. Hopefully, that is what will happen in the next years to come.

For more information on the effect of VAAs on voting behavior, please check my article on Politikon

For inquiries on aquienvoto.org, please send an email to contacto@aquienvoto.org

El auge de las aplicaciones de orientación del voto y su efecto en el comportamiento electoral, Politikon, June 2016.
A review of the top Voter Advice Applications for the 2015 General Election, LSE British Politics and Policy Blog, April 2015.
“If a citizen cannot pay his/her mortgage, giving the house to the bank should cancel his/her debt”
An “escuela concertada” is a semi-private school that receives money from the government and at the same time charges fees to each student. It is unique to Spain.
Whether underage girls should have permission from their parents by law to be able to have an abortion.
https://www.smartvote.ch/
Pianzola (2014), Selection biases in Voting Advice Application research.