New Economics Papers
on Collective Decision-Making
Issue of 2005‒06‒14
six papers chosen by

  1. Forms of Democracy, Policy and Economic Development By Persson, Torsten
  2. Commercial Television and Voter Information By Prat, Andrea; Strömberg, David
  3. Democratic Mechanisms: Double Majority Rules and Flexible Agenda Costs By Gersbach, Hans
  4. Betting on Hitler - The Value of Political Connections in Nazi Germany By Ferguson, Thomas; Voth, Hans-Joachim
  5. Party Discipline and Pork Barrel Politics By Gene M. Grossman; Elhanan Helpman
  6. Economics Ideas and Institutions in Historical Perspective: Cairú and Hamilton on Trade and Finance By Matias Vernengo

  1. By: Persson, Torsten
    Abstract: The paper combines insights from the recent research programs on constitutions and economic policy, and on history, institutions and growth. Drawing on cross-sectional as well as panel data, it presents new empirical results showing that the form of democracy (rather than democracy vs. non-democracy) has important consequences for the adoption of structural polices that promote long-run economic performance. Reforms into parliamentary (as opposed to presidential), proportional (as opposed to majoritarian) and permanent (as opposed to temporary) democracy appear to produce the most growth-promoting policies.
    Keywords: democratic institutions; economic performance; growth promoting policy
    JEL: F43 H11 O57
    Date: 2005–02
  2. By: Prat, Andrea; Strömberg, David
    Abstract: What is the effect of liberalizing a country’s broadcasting system on the level of information of its citizens? To analyse this question, we first construct a model of state monopoly broadcasting where the government selects the amount of television news coverage of different public policy outcomes, and then sets public policy and political rents. Voters vote retrospectively given the news provided. In equilibrium, the incumbent provides some news coverage, and more so to groups for which reducing policy uncertainty is more important. We then introduce a profit-maximizing commercial channel. It provides more news coverage to groups of voters valuable to advertisers or underprovided by the state monopoly. We test our predictions on a panel of individuals interviewed in the elections before and after the entry of commercial TV in Sweden. We find that people who start watching commercial TV news increase their level of political knowledge more than those who do not. They also increase their political participation more. The positive informational effects are particularly valuable since commercial TV news attracts ex ante uniformed voters.
    Keywords: commercial television; mass media; public service broadcasting; voter information
    JEL: L33
    Date: 2005–04
  3. By: Gersbach, Hans
    Abstract: We develop democratic mechanisms where individual utilities are not observable by other people at the legislative stage. We show that an appropriate combination of three rules can yield efficient provision of public projects: first, flexible and double majority rules where the size of the majority depends on the proposal and verifiable parameters and taxed and non-taxed individuals need to support the proposal; second, flexible agenda costs where the agenda-setter has to pay a certain amount of money if his proposal does not generate enough supporting votes; third, a ban on subsidies. We provide a rationale why double majority rules are used in practice. We also show that higher degrees of uncertainty about project parameters can make it easier to achieve first-best allocations and that universal equal treatment with regard to taxation is undesirable.
    Keywords: democratic constitutions; double majority rules; flexible agenda cost rules; unobservable utilities
    JEL: D62 D72 H40
    Date: 2005–04
  4. By: Ferguson, Thomas; Voth, Hans-Joachim
    Abstract: We examine the effect of close ties with the NSDAP on the stock price of listed firms in 1932-33. We consider not only links between the National Socialists and executives, as was common in earlier work, but also with supervisory board members – whose importance is hard to overestimate in the case of German industry. One implication of our work is that, weighted by stock market capitalization in 1932, more than half of listed firms on the Berlin stock exchange had substantive links with the NSDAP. Crucially, stock market investors recognized the value of these links, sending the share prices of connected firms up as the new regime became firmly established. While the market as a whole rose after Hitler’s accession to power, firms with board members known to favour the party (or backing it financially) outperformed the market by 5-10% between January and May 1933. We show that this finding is robust to a range of additional control variables and alternative estimation techniques.
    Keywords: market efficiency; Nazi party; political connections; stock market returns
    JEL: E60 G14 G18 N24
    Date: 2005–04
  5. By: Gene M. Grossman; Elhanan Helpman
    Abstract: Polities differ in the extent to which political parties can pre-commit to carry out promised policy actions if they take power. Commitment problems may arise due to a divergence between the ex ante incentives facing national parties that seek to capture control of the legislature and the ex post incentives facing individual legislators, whose interests may be more parochial. We study how differences in %u201Cparty discipline%u201D shape fiscal policy choices. In particular, we examine the determinants of national spending on local public goods in a three-stage game of campaign rhetoric, voting, and legislative decision-making. We find that the rhetoric and reality of pork-barrel spending, and also the efficiency of the spending regime, bear a non-monotonic relationship to the degree of party discipline.
    JEL: D72 H41
    Date: 2005–06
  6. By: Matias Vernengo
    Abstract: This paper deals with the role of economic ideas in institutional development. Conventional wisdom in Brazilian historiography suggests that, in part, the relative backwarderness of Brazil with respect to the United States was the result of the economic liberalism of its elites, represented by José da Silva Lisboa, the Viscount of Cairú. The paper argues that Cairú’s defense of an open economy, integrated to the world economy, in which agricultural production would prevail over the industrial interests, should be seen as a discourse for landowners and the mercantile class connected to the slave trade. It is also argued that, in contrast to Alexander Hamilton, Cairú and the Brazilian elites had a naive view of public finance that is central to understand the backwarderness of Brazilian financial markets. Political conservatism and a negative view of finance are seen as more relevant than liberalism in explaining the relative backwarderness of Brazil.
    Keywords: Cairú; Hamilton; brazil
    JEL: B12 B31 N16 N26
    Date: 2005–08

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