New Economics Papers
on Collective Decision-Making
Issue of 2006‒07‒09
ten papers chosen by

  1. European Parliament Electoral Turnout in Post-Communist Europe By Christine Fauvelle-Aymar; Mary Stegmaier
  2. Separation of Powers and the Budget Process By Gene M. Grossman; Elhanan Helpman
  3. When is Democracy an Equilibrium?: Theory and Evidence from Colombia's La Violencia By Ragnar Torvik; James A. Robinson; Mario Chacón
  4. Media Freedom, Bureaucratic Incentives, and the Resource Curse By Georgy Egorov; Sergei Guriev; Konstantin Sonin
  5. Decentralization and Political Institutions By Ruben Enikolopov; Ekaterina Zhuravskaya
  6. Artificial States By Alberto Alesina; William Easterly; Janina Matuszeski
  7. Does the Size of the Legislature Affect the Size of Government? Evidence from Two Natural Experiments By Per Pettersson-Lidbom
  8. State growth empirics: the long-run determinants of state income growth By Paul W. Bauer; Mark E. Schweitzer; Scott Shane
  9. Protection for Sale with Imperfect Rent Capturing By Giovanni Facchini; Johannes Van Biesebroeck; Gerald Willmann
  10. EU-Enlargement and Beyond: A Simulation Study on EU and Russia Integration By Pekka Sulamaa; Mika Widgrén

  1. By: Christine Fauvelle-Aymar (LAEP - LAboratoire d'Economie Publique - [Université Panthéon-Sorbonne - Paris I]); Mary Stegmaier (University of Virgnia - Department of Economics - [University of Virginia])
    Abstract: The relatively low voter turnout rates in the June 2004 European Parliamentary elections in many of the post-communist states surprised observers. While the average turnout rate for these new-EU member states barely surpassed 30%, turnout exhibited much variance at the national and sub-national levels. In this article, we study the determinants of European Parliamentary election voter turnout rates in the post-communist countries at the regional level. Our central hypothesis is that regional turnout rates may be related to regional economic conditions and that in areas experiencing economic hardship, turnout will be lower. We also assess the extent that EU attitudes matter for turnout. A unique data set, compiled at the NUTS-3.
    Keywords: Economics of voting;participation;European Parliamentary election; post-communist countries.
    Date: 2006–07–05
  2. By: Gene M. Grossman; Elhanan Helpman
    Abstract: We study budget formation in a model featuring separation of powers. In our model, the legislature designs a budget bill that can include a cap on total spending and earmarked allocations to designated public projects. Each project provides random benefits to one of many interest groups. The legislature can delegate spending decisions to the executive, who can observe the productivity of all projects before choosing which to fund. However, the ruling coalition in the legislature and the executive serve different constituencies, so their interests are not perfectly aligned. We consider settings that differ in terms of the breadth and overlap in the constituencies of the two branches, and associate these with the political systems and circumstances under which they most naturally arise. Earmarks are more likely to occur when the executive serves broad interests, while a binding budget cap arises when the executive’s constituency is more narrow than that of the powerful legislators.
    JEL: H61 D78 H41
    Date: 2006–06
  3. By: Ragnar Torvik (Department of Economics, Norwegian University of Science and Technology, Norway); James A. Robinson (Department of Government, Harvard University); Mario Chacón (Yale University, Department of Political Scienc)
    Abstract: The conventional wisdom in political science is that for a democracy to be consolidated, all groups must have a chance to attain power. If they do not then they will subvert democracy and choose to fight for power. In this paper we show that this wisdom is, if not totally incorrect, seriously incomplete. This is so because although the probability of winning an election increases with the size of a group, so does the probability of winning a fight. Thus in a situation where all groups have a high chance of winning an election, they may also have a high chance of winning a fight. Indeed, in a natural model, we show that democracy may never be consolidated in such a situation. Rather, democracy may only be stable when one group is dominant. We provide a test of a key aspect of our model using data from La Violencia, a political conflict in Colombia during the years 1946-1950 between the Liberal and Conservative parties. Consistent with our results, and contrary to the conventional wisdom, we show that fighting between the parties was more intense in municipalities where the support of the parties was more evenly balanced.
    Date: 2006–04–16
  4. By: Georgy Egorov (Harvard University); Sergei Guriev (New Economic School/CEFIR and CEPR); Konstantin Sonin (New Economic School/CEFIR and CEPR)
    Abstract: How can a non-democratic ruler provide proper incentives for state bureaucracy? In the absense of competitive elections and separation of powers, the ruler has to gather information either from a centralized agency such as a secret service or a decentralized source such as media. The danger of using a secret service is that it can collude with bureaucrats; overcoming collusion is costly. Free media aggregate information and thus constrain bureaucrats, but might also help citizens to coordinate on actions against the incumbent. We endogenize the ruler’s choice in a dynamic model to argue that free media are less likely to emerge in resource-rich economies where the ruler is less interested in providing incentives to his subordinates. We show that this prediction is consistent with both cross-section and panel data.
    Keywords: media freedom, non-democratic politics, bureaucracy, resource curse
    JEL: P16 D72 D80 Q4
    Date: 2006–02
  5. By: Ruben Enikolopov (Harvard University and CEFIR); Ekaterina Zhuravskaya (New Economic School/CEFIR and CEPR)
    Abstract: Does fiscal decentralization lead to more efficient governance, better public goods, and higher economic growth? This paper tests Riker’s theory (1964) that the results of fiscal decentralization depend on the level of countries’ political centralization. We analyze crosssection and panel data from up to 75 developing and transition countries for 25 years. Two of Riker’s predictions about the role of political institutions in disciplining fiscally-autonomous local politicians are confirmed by the data. 1) Strength of national political parties significantly improves outcomes of fiscal decentralization such as economic growth, quality of government, and public goods provision. 2) In contrast, administrative subordination (i.e., appointing local politicians rather than electing them) does not improve the results of fiscal decentralization.
    Date: 2006–05
  6. By: Alberto Alesina; William Easterly; Janina Matuszeski
    Abstract: Artificial states are those in which political borders do not coincide with a division of nationalities desired by the people on the ground. We propose and compute for all countries in the world two new measures how artificial states are. One is based on measuring how borders split ethnic groups into two separate adjacent countries. The other one measures how straight land borders are, under the assumption the straight land borders are more likely to be artificial. We then show that these two measures seem to be highly correlated with several measures of political and economic success.
    JEL: F43 F50
    Date: 2006–06
  7. By: Per Pettersson-Lidbom
    Abstract: Previous empirical studies have found a positive relationship between the size of legislature and the size of government. Those studies, however, do not adequately address the concerns of endogeneity. In contrast, this paper uses variation in legislature size induced by statutory council size laws in Finland and Sweden to estimate the causal effect of legislature size on government size. These laws create discontinuities in council size at certain known thresholds of an underlying continuous variable, which make it possible to generate ?near experimental? causal estimates of the effect of council size on government size. In contrast to previous findings, I find a negative relationship between council size and government size: on average, spending and revenues are decreased by roughly 0.5 percent for each additional council member.
    Keywords: government size, legislature, regression-discontinuity design, natural experiment
    JEL: H00 H30 E60 P16 D70 K10 H10 C90 H70
    Date: 2004–12–01
  8. By: Paul W. Bauer; Mark E. Schweitzer; Scott Shane
    Abstract: Real average U.S. per capita personal income growth over the last 65 years exceeded a remarkable 400 percent. Also notable over this period is that the stark income differences across states have narrowed considerably: In 1939 the highest income state’s per capita personal income was 4.5 times the lowest, but by 1976 this ratio had fallen to less than 2 times. Since 1976, the standard deviation of per capita incomes at the state level has actually risen, as some higher-income states have seen their income levels rise relative to the median of the states. A better understanding of the sources of these relative growth performances should help to characterize more effective economic development strategies, if income growth differences are predictable. In this paper, we look for statistically and economically significant growth factors by estimating an augmented growth model using a panel of the 48 contiguous states from 1939 to 2004. Specifically, we control for factors that previous researchers have argued were important: tax burdens, public infrastructure, size of private financial markets, rates of business failure, industry structure, climate, and knowledge stocks. Our results, which are robust to a wide variety of perturbations to the model, are easily summarized: A state’s knowledge stocks (as measured by its stock of patents and its high school and college attainment rates) are the main factors explaining a state’s relative per capita personal income.
    Keywords: Economic development ; Income ; Education - Economic aspects
    Date: 2006
  9. By: Giovanni Facchini (University of Illinois and University of Milan); Johannes Van Biesebroeck (University of Toronto and NBER); Gerald Willmann (University of Kiel)
    Abstract: The Grossman and Helpman (1994) model explains tariffs as the outcome of a lobbying game between special interests and the government. Most empirical implementations of this framework use instead non-tariff barriers to measure the extent of protection. Importantly, while the former set of instruments allow the government to fully capture the rents from protection, the latter does not. As a result, structurally estimating the ‘protection for sale’ model using data on non-tariff barriers is likely to lead to biased parameter estimates. To address this problem, we augment Grossman and Helpman’s (1994) model by explicitly considering trade policy instruments allowing only partial capturing. Taking our specification to the data, we find that, on average, 72–75 percent of the rent is actually captured. Furthermore, we obtain more realistic, lower estimates of the implied share of the population involved in lobbying activities than in the previous literature, while the estimated weight of aggregate welfare in the objective function of the government is as high as in previous studies.
    Keywords: Protection for Sale, Non-tariff Barriers, Partial Rent Capturing
    JEL: F13
    Date: 2005
  10. By: Pekka Sulamaa; Mika Widgrén
    Abstract: This paper examines the economic effects of the opening of the Russian Federation. The analysis carried out in the paper is two-fold. First we simulate the impact of the eastern enlargement of the EU and, second, we analyse how deeper integration between the EU and Russia contributes to this. The analysis is carried out with GTAP computable general equilibrium model. We find that there is a trade-off between the two roads of European integration arrangements. Eastern enlargement seems, even in its very deep form, be beneficial for all EU regions without causing substantial welfare losses outside the Union. EU-Russia integration, on the other hand, has different impact. To be beneficial for Russia free trade between the EU and Russia requires improved productivity in the latter, which may be due to better institutions or increased FDI. This might make the negotiations of the agreement cumbersome and if agreed its implementation difficult.
    Keywords: Integration, Free Trade Agreement, GTAP, EU, Russia
    Date: 2004–12–16

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