New Economics Papers
on Collective Decision-Making
Issue of 2006‒09‒30
sixteen papers chosen by

  1. Fairness and Direct Democracy: Theory and Evidence By Sanjit Dhami; Ali al-Nowaihi
  2. Voting as a Credible Threat By John Londregan; Andrea Vindigni
  3. Reliability and Responsibility: A Theory of Endogenous Commitment By Matteo Triossi
  4. The Looks of a Winner: Beauty, Gender and Electoral Success By Berggren, Niclas; Jordahl, Henrik; Poutvaara, Panu
  5. A spatial analysis of the XIII Italian Legislature By Massimiliano Landi; Riccardo Pelizzo
  6. Constitutions and the resource curse By Jørgen Juel Andersen; Silje Aslaksen
  7. Interpreting the Predictive Uncertainty of Presidential Elections By Ray C. Fair
  8. Budget Processes: Theory and Experimental Evidence By Karl-Martin Ehrhart; Roy Gardner; Juergen von Hagen; Claudia Keser
  9. Generalized Utilitarianism and Harsanyi's Partial Observer Theorem By Simon Grant; Atsushi Kajii; Ben Polak; Zvi Safra
  10. Identification of Peer Effects Using Group Size Variation By Laurent Davezies; Xavier d’Haultfoeuille; Denis Fougère
  11. The Social Contract with Endogenous Sentiments By Matteo Cervellati; Joan Esteban; Laurence Kranich
  12. Lobbying, Corruption and Political Influence By Nauro F. Campos; Francesco Giovannoni
  13. Leading the Party: Coordination, Direction, and Communication By Torun Dewan; David P. Myatt
  14. Agreeing to disagree without the countable additivity axiom By Jo˜ao Correia-da-Silva
  15. A Theory of Rent Seeking with Informational Foundations By Johan N.M. Lagerlöf
  16. Implementation with State Dependent Feasible Sets and Preferences: A Renegotiation Approach By Matteo Triossi; Luis Corchón

  1. By: Sanjit Dhami; Ali al-Nowaihi
    Abstract: The median voter model (direct democracy) has wide applicability in economics. However, it is based on selfish voters i.e. voters who derive utility solely from 'own' payoff. We examine the implications of introducing fair voters who, in addition, also have a preference for fairness (or other regarding preferences) as in Fehr and Schmidt (1999). Within a simple general equilibrium model, we demonstrate the existence of a Condorcet winner for fair voters using the single crossing property of voters’ preferences. In a fair voter model, unlike a selfish voter model, poverty can lead to increased redistribution. Mean preserving spreads of income increase equilibrium redistribution. Greater fairness leads to greater redistribution. The introduction of selfish voters in an economy where the median voter is fair can have a large impact on the redistributive outcome. Empirical evidence based on OECD economies clearly brings out the high importance of fairness, relative to income inequality, in explaining redistribution. We also find support for American Exceptionalism.
    Keywords: Redistribution; other regarding preferences; single peaked preferences; single crossing property; income inequality; American Exceptionalism
    JEL: D64 D72 D78
    Date: 2006–09
  2. By: John Londregan; Andrea Vindigni
    Abstract: We offer a rationale for elections that take place in the shadow of power. Factions unhappy with policy can threaten violence. But when they lack common knowledge about (i) one another's rationality, and (ii) their chances of victory at arms, mutual overconfidence can precipitate civil war. We argue that elections can clarify the likely consequences of violence, and so facilitate peaceful resolution. Our theory is based on the recognition that both voting and fighting are intrinsically correlated actions: individuals who undertake the individually irrational act of voting are unusually prone the individually irrational act of voluntary combat.
    Date: 2006
  3. By: Matteo Triossi
    Abstract: A common assumption in Political Science literature is policy commitment: candidates maintain their electoral promises. We drop such assumption and we show that costless electoral campaign can be an effective way of transmitting information to voters. The result is robust to relevant equilibrium refinements. An unavoidable proportion of ambiguous politicians emerges.
    Keywords: Information Transmission, Electoral Campaign, Endogenous Commitment.
    JEL: D72 P16 C73
    Date: 2006
  4. By: Berggren, Niclas (The Ratio Institute); Jordahl, Henrik (Research Institute of Industrial Economics); Poutvaara, Panu (University of Helsinki)
    Abstract: We study the role of beauty in politics. For the first time, focus is put on differences in how women and men evaluate female and male candidates and how different candidate traits relate to success in real and hypothetical elections. We have collected 16,218 assessments by 2,772 respondents of photos of 1,929 Finnish political candidates. Evaluations of beauty explain success in real elections better than evaluations of competence, intelli-gence, likability, or trustworthiness. The beauty premium is larger for female candidates, in contrast to findings in previous labor-market studies.
    Keywords: Beauty; gender; elections; political candidates; beauty premium
    JEL: D72 J45 J70
    Date: 2006–09–21
  5. By: Massimiliano Landi (School of Economics and Social Sciences, Singapore Management University); Riccardo Pelizzo (School of Economics and Social Sciences, Singapore Management University)
    Abstract: We present a spatial map of the Italian House during the XIII Leg-islature obtained by applying the Poole and Rosenthal methodology to roll call data. We obtain coordinates for almost all the 650 MPs that were on the House's °oor at the time, and we aggregate them according to parties. We ¯nd that voting patters generate basically a two dimensional political space. The ¯rst dimension represents loyalty to either the ruling coalition or the opposing one. The second dimension may describe differences at the constitutional level. This finding is consistent with the exceptional case of the party Northern League, which at the time did not belong to either coalition, and presented itself as a northern and anti-system party. Last, we compute the average dispersion of party coordinates along each dimension and compare them with the Rice index of cohesion, the agreement index (which takes into account abstention), and one other index we construct to account for absence from voting. We ¯nd that absence is significantly correlated with the dispersion of parties along the second dimension. We use this to motivate the importance of further analysis on the massive absence in Italian Parliament from voting sessions.
    Date: 2005–11
  6. By: Jørgen Juel Andersen (Department of Economics, Norwegian University of Science and Technology); Silje Aslaksen (Department of Economics, Norwegian University of Science and Technology)
    Abstract: Recent advances in the political economy literature suggests that constitutional arrangements determine a wide range of economic pol icy outcomes. In particular, it is argued that different forms of government (presidential versus parliamentary) induce more or less 'growth promoting' policies. However, effects on long run growth have proved harder to identify. We exploit the fact that natural resources are randomly distributed to identify differences in the long-term performance of economies with different constitutional forms. Existing theory suggests that the presence of vast natural resources should affect growth differently in countries with different constitutional designs. Empirically we find strong support for this hypothesis - constitutions indeed seem to matter for how natural resource abundance affects long run growth. In fact, the form of government matters more than democratic rule. We also find interaction effects of electoral rules (majority versus proportional voting) and resource abundance on growth, although these effects are less clear-cut and less robust.
    Keywords: Growth; Political economy; Constitution; Resource curse; Institutions.
    JEL: E61 F43 O13 P51 Q32
    Date: 2006–04–29
  7. By: Ray C. Fair
    Date: 2006–09–22
  8. By: Karl-Martin Ehrhart (University of Karlsruhe); Roy Gardner (Indiana University Bloomington); Juergen von Hagen (University of Bonn); Claudia Keser (IBM T.J. Watson Research Center)
    Abstract: This paper studies budget processes, both theoretically and experimentally. We compare the outcomes of bottom-up and top-down budget processes. It is often presumed that a top-down budget process leads to a smaller overall budget than a bottom-up budget process. Ferejohn and Krehbiel (1987) showed theoretically that this need not be the case. We test experimentally the theoretical predictions of their work. The evidence from these experiments lends strong support to their theory, both at the aggregate and the individual subject level.
    Keywords: budget processes, voting equilibrium, experimental economics
    JEL: H61 C92
    Date: 2006–09
  9. By: Simon Grant; Atsushi Kajii; Ben Polak; Zvi Safra
    Date: 2006–09–22
  10. By: Laurent Davezies (DEPP and CREST-INSEE); Xavier d’Haultfoeuille (ENSAE, CREST-INSEE and Université Paris I-Panthéon-Sorbonne); Denis Fougère (CNRS, CREST-INSEE, CEPR and IZA Bonn)
    Abstract: This paper considers the semiparametric identification of endogenous and exogenous peer effects based on group size variation. We show that Lee (2006)’s linear-in-means model is generically identified, even when all members of the group are not observed. While unnecessary in general, homoskedasticity may be required in special cases to recover all parameters. Extensions to asymmetric responses to peers and binary outcomes are also considered. Once more, most parameters are semiparametrically identified under weak conditions. However, recovering all of them requires more stringent assumptions. Eventually, we bring theoretical evidence that the model is more adapted to small groups.
    Keywords: social interactions, linear-in-means model, semiparametric identification
    JEL: C14 C21 C25
    Date: 2006–09
  11. By: Matteo Cervellati (University of Bologna, IAE Barcelona and IZA Bonn); Joan Esteban (IAE Barcelona); Laurence Kranich (University at Albany, SUNY)
    Abstract: In this paper we present a model of rational voting over redistribution where individual selfesteem and relative esteem for others are endogenously determined. Individuals differ in their productivities, and their behaviour and political views are influenced by moral standards concerning work. Agents determine what they take to be proper behaviour and they judge others, and themselves, accordingly, increasing their esteem (or self-esteem) for those who perform in excess of the standard and decreasing their esteem for those who work less. The desired extent of redistribution depends both on individual income and on individual attitudes toward others. The model has two types of equilibria. In a “cohesive” equilibrium, all individuals conform to the standard of proper behaviour, income inequality is low and social esteem is not biased toward any particular type. Under these conditions equilibrium redistribution increases in response to larger inequality. In a “clustered" equilibrium skilled workers work above the mean while unskilled workers work below. In such an equilibrium, income inequality is large and sentiments are biased in favor of the industrious. As inequality increases, this bias may eventually overtake the egoistic demand for greater taxation and equilibrium redistribution decreases. The type of equilibrium to emerge crucially depends on inequality. We contrast the predictions of the model with data on inequality, redistribution, work values and attitudes toward work and toward the poor for a set of OECD countries.
    Keywords: social contract, endogenous sentiments, voting over taxes, social norms, redistribution, inequality, politico-economic equilibrium
    JEL: D64 D72 Z13 H3 J2
    Date: 2006–09
  12. By: Nauro F. Campos (Brunel University, CEPR and IZA Bonn); Francesco Giovannoni (CMPO, University of Bristol)
    Abstract: Conventional wisdom suggests that lobbying is the preferred mean for exerting political influence in rich countries and corruption the preferred one in poor countries. Analyses of their joint effects are understandably rare. This paper provides a theoretical framework that focus on the relationship between lobbying and corruption (that is, it investigates under what conditions they are complements or substitutes). The paper also offers novel econometric evidence on lobbying, corruption and influence using data for about 4000 firms in 25 transition countries. Our results show that (a) lobbying and corruption are substitutes, if anything; (b) firm size, age, ownership, per capita GDP and political stability are important determinants of lobby membership; and (c) lobbying seems to be a much more effective instrument for political influence than corruption, even in poorer, less developed countries.
    Keywords: lobbying, corruption, transition, institutions
    JEL: E23 D72 H26 O17 P16
    Date: 2006–09
  13. By: Torun Dewan; David P. Myatt
    Abstract: Party activists face a coordination problem: a critical mass (a barrier to coordination) must advocate a single policy alternative if the party is to succeed. The need for direction is the degree to which the merits of the alternatives respond to the underlying mood of the party. An individual`s ability to assess the mood is his sense of direction. These factors combine to form an index of both the desirability and the feasibility of leadership: we call this index Michels` Ratio. A sovereign party conference gives way to leadership by an individual or oligarchy if and only if Michels` Ratio is sufficiently high. Leadership enhances the clarity of intra-party communication, but weakens the response of policy choices to the party`s mood.
    Keywords: Leadership, Direction, Coordination, Communication, Oligarchy
    JEL: D7 D8 H1
    Date: 2006
  14. By: Jo˜ao Correia-da-Silva
    Date: 2006–09–22
  15. By: Johan N.M. Lagerlöf (Department of Economics, Royal Holloway, University of London)
    Abstract: I develop a model of rent seeking with informational foundations and an arbitrary number of rent seekers, and I compare the results with Tullock's (1980) classic model where the influence activities are "black-boxed." Given the microfoundations, the welfare consequences of rent seeking can be studied. In particular, I show that competition among rent seekers can be socially beneficial, since the additional information that the decision maker gets access to makes the increase in rent-seeking expenditures worthwhile. However, the analysis also highlights a logic that, under natural parameter assumptions, makes the rent seekers spend more resources on rent seeking than is in society's interest, which is consistent with the spirit of the rent-seeking literature.
    Keywords: Rent seeking, competition, lobbying, information acquisition, disclosure, welfare
    JEL: D42 D43 D72 D83 L13
    Date: 2006–09
  16. By: Matteo Triossi; Luis Corchón
    Abstract: In this paper we present a model of implementation based on the idea that agents renegotiate unfeasible allocations. We characterize the maximal set of Social Choice Correspondences that can be implemented in Nash Equilibrium with a class of renegotiation functions that do not reward agents for unfeasibilities. This result is used to study the possibility of implementing the Walrasian Correspondence in exchange economies and several axiomatic solutions to problems of bargaining and bankruptcy.
    Keywords: State Dependent Feasible Sets, Renegotiation, Implementation.
    JEL: C72 D60 D78
    Date: 2006

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