New Economics Papers
on Collective Decision-Making
Issue of 2006‒12‒01
thirteen papers chosen by

  1. When is Democracy an Equilibrium?: Theory and Evidence from Colombia’s La Violencia By Mario Chacón; James A. Robinson; Ragnar Torvik
  2. Resisting Economic Integration when Industry Location is Uncertain By Gallo, Fredrik
  3. Axiomatisation of the Shapley value and power index for bi-cooperative games By Christophe Labreuche; Michel Grabisch
  4. Factoring out the impossibility of logical aggregation By Mongin, Philippe
  5. Why did (not) the East Extend the Franchise? Democracy, Intra-Elite Conflict and Risk Sharing By Sayantan Ghosal; Eugenio Proto
  6. Rent Seeking, Policy and Growth under Electoral Uncertainty: Theory and Evidence By Konstantinos Angelopoulos; George Economides
  7. Stable coalition structures in simple games with veto control By Ciftci,Baris; Dimitrov,Dinko
  8. Political Price Cycles in Regulated Industries: Theory and Evidence By Moita, Rodrigo M.; Paiva, Claudio
  9. Evolution des attentes sociales et comportement électoral : France, 1978-2002 By Elvire Guillaud; Stefano Palombarini
  10. Committed to Deficit: The Reverse Side of Fiscal Governance By Martin Gregor
  11. Tolerable Intolerance: An Evolutionary Model By Martin Gregor
  12. Science and Ideology in Economic, Political, and Social Thought By Hillinger, Claude
  13. Helping the meaner, hurting the nicer: The contribution versus distribution game By Staffiero, Gianandrea

  1. By: Mario Chacón (Yale University); James A. Robinson (Harvard University); Ragnar Torvik (Norwegian University of Science and Technology)
    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
  2. By: Gallo, Fredrik (Department of Economics, Lund University)
    Abstract: This paper analyses the political determination of transportation costs in a new economic geography model. In a benchmark case with certainty about where agglomeration takes place, a majority of voters favour economic integration and the resulting equilibrium is an industrialised core and a de-industrialised periphery. Allowing for uncertainty, a high level of trade costs may win the election and maintain the initial distribution of industry. The reason is that a coalition of risk-averse immobile factors of production votes for the status quo due to uncertainty about which region will attract industry if economic integration is pursued. Finally, the standard view that agglomeration is unambiguously beneficial to residents in the industrial centre is challenged by introducing costs of undertaking economic integration.
    Keywords: footloose entrepreneur model; majority voting; new economic geography; regional policy
    JEL: F12 F15 R12
    Date: 2006–11–16
  3. By: Christophe Labreuche (UMP CNRS/THALES - Unité mixte de physique CNRS/Thalès - [CNRS : UMR137][THALES]); Michel Grabisch (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: Bi-cooperative games have been introduced by Bilbao as a generalization of classical cooperative games, where each player can participate positively to the game (defender), negatively (defeater), or do not participate (abstentionist). In a voting situation (simple games), they coincide with ternary voting game of Felsenthal and Mochover, where each voter can vote in favor, against or abstain. In this paper, we propose a definition of value or solution concept for bi-cooperative games, close to the Shapley value, and we give an interpretation of this value in the framework of (ternary) simple games, in the spirit of Shapley-Shubik, using the notion of swing. Lastly, we compare our definition with the one of Felsenthal and Machover, based on the notion of ternary roll-call, and the Shapley value of multi-choice games proposed by Hsiao and Ragahavan.
    Keywords: Cooperative game theory, bi-cooperative games, power index, Shapley value.
    Date: 2006–11–13
  4. By: Mongin, Philippe
    Abstract: According to a theorem recently proved in the theory of logical aggregation, any nonconstant social judgment function that satisfies independence of irrelevant alternatives (IIA) is dictatorial. The author shows that the strong and not very plausible IIA condition can be replaced with a minimal independence assumption plus a Pareto-like condition. This new version of the impossibility theorem likens it to Arrow's and arguably enhances its paradoxical value.
    Keywords: logical aggregation;
    Date: 2006–10–01
  5. By: Sayantan Ghosal; Eugenio Proto
    Abstract: The process of enfranchisement is studied in a model of intra-elite conflict over the sharing of social surplus. The relative bargaining power of each elite, function of the surplus each elite is able to appropriate if the bargaining breaks down, is uncertain ex-ante. Accordingly, two competing elites can decide to enfranchise a weak but numerically large non-elite group in order to insure against future imbalances in relative bargaining power. The enfranchisement decision requires the non-elite group to be relatively weak and imperfectly informed about intra-elite bargaining power. Our results are robust to public good provision following enfranchisement when there is preference heterogeneity over the location of the public good across the different elites. A comparative analysis of the Indian Democracy is provided.
    Date: 2006–06
  6. By: Konstantinos Angelopoulos; George Economides
    Abstract: We construct an otherwise standard general equilibrium model of economic growth and endogenously chosen fiscal policy, in which individuals compete with each other for extra fiscal transfers and two political parties compete with each other for staying in power. The main prediction is that relatively large public sectors in pre-election periods distort incentives by pushing individuals away from productive work to rent seeking activities. In turn, distorted incentives hurt growth. We test this prediction by using a panel data set of a group of 25 OECD countries over the period 1982-1996, as well as a cross-section of 108 industrial and developing countries over the decade 1990-2000. There is evidence that electoral and/or political instability cause relatively large public sectors, which in turn increase rent seeking (as measured by the ICRG index), and this is bad for economic growth.
    Keywords: Political uncertainty, economic growth, incentives
    JEL: D7 D9 E6
    Date: 2005–06
  7. By: Ciftci,Baris; Dimitrov,Dinko (Tilburg University, Center for Economic Research)
    Abstract: In this paper we study hedonic coalition formation games in which players' preferences over coalitions are induced by a semi-value of a monotonic simple game with veto control. We consider partitions of the player set in which the winning coalition contains the union of all minimal winning coalitions, and show that each of these partitions belongs to the strict core of the hedonic game. Exactly such coalition structures constitute the strict core when the simple game is symmetric. Provided that the veto player set is not a winning coalition in a symmetric simple game, then the partition containing the grand coalition is the unique strictly core stable coalition structure.
    Keywords: Banzhaf value;hedonic game;semi-value;Shapley value;simple game;strict core
    JEL: D72 C71
    Date: 2006
  8. By: Moita, Rodrigo M.; Paiva, Claudio
    Date: 2006–10
  9. By: Elvire Guillaud; Stefano Palombarini
    Abstract: Cet article met en lumière de manière empirique la multi-dimensionalité et l'évolution de la demande politique d'agents hétérogènes. Dans ce but, on mène une analyse de données sur des sondages post-électoraux français de 1978 à 2002. L'analyse met en évidence les origines de la crise politique française de 2002, avec la présence au second tour du candidat d'extrême droite à l'élection présidentielle. L'élément clé est la cristallisation de groupes sociaux autour des thèmes économiques qui structurent l'espace politique. D'une part, les principales dimensions de la demande évoluent au cours du temps, d'autre part les alliances sociales se modifient autour de ces demandes. La crise économique dans la décennie 1980 et le processus d'intégration européenne au cours de la décennie 1990 conditionnent les demandes politiques et multiplient les lignes de fracture : les alliances sociales de soutien à la droite républicaine et à la gauche "de gouvernement" éclatent progressivement. ### [english abstract: This paper empirically identifies the multi-dimensionality and the evolution of the political demand of heterogeneous agents. For that purpose, we analyze French post-electoral surveys over the period 1978-2002. The analysis highlights the roots of the French political crisis, which occurred in 2002 while a Far Right candidate reached the second round of the Presidential elections. The key point is the gathering of socio-economic groups around the economic themes that design the political space. Since these themes are evolving over time, social alliances are moving, too. The economic crisis during the 80s and the European integration process of the 90s determine the political demands and multiply the break lines: the two social blocks that used to support the Republican Right and the governmental Left progressively break up.] ###
    Date: 2006
  10. By: Martin Gregor (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Common wisdom dictates that fiscal governance (i.e. procedural fiscal rules) improves fiscal discipline. We rather find that selected fiscal constraints protect the coalitional status quo from logrolling. In effect, fiscal governance may deteriorate fiscal position. In political economy with heterogeneous agents, we examine four procedural fiscal rules: limits on amendments in legislative committees, timing of a vote on the budget size, deficit targets, and spending level targets. We find that fiscal governance protects the budgetary contract of governing coalition from attractive compromises with the opposition. When parties are evenly distributed across single policy dimension, and minimum winning connected coalitions are equiprobable, this protection is shown to magnify volatility in taxes and spending. Moreover, the volatility may increase in more fragmented party systems. We conclude fiscal governance not always and not necessarily reduces fiscal costs of fragmentation.
    Keywords: Fiscal Governance; Party Fragmentation
    JEL: D78 H61 H62
    Date: 2005
  11. By: Martin Gregor (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: A cornerstone of liberal-democratic regimes is the right of free speech, granted even to nonliberals who manifestly oppose it. Communism and political Islamism are two primary examples of ideologies which are tolerated in spite of calls for the limits on the right of expression. Not surprisingly, it is often argued that a tolerant society needs laws preventing non-tolerant beliefs from attacking tolerance. Yet, does intolerance necessarily prosper in a tolerant society, or is deemed to decay? To address the question, I build an evolutionary model of competing (political and/or religious) beliefs. In the model, individuals are assumed to gain from having beliefs. The gain may increase with intolerance of the belief (premium). High intolerance, however, makes strong believers fragile in a society of tolerant people. Having examined evolutionarily stable states in two specifications, I demonstrate that (for any positive premium) heterogeneity cannot prevent intolerant beliefs from spreading out. A sufficiently small increase in intolerance, when premium exceeds losses from fragility, allows intolerance to spread. Intolerance is vulnerable only as long as the premium is non-positive. This finding can also be interpreted as follows: unless fundamentalist confessions are proved to be vital for individual human existence (positive premium), a tolerant society needs no intervention to preserve tolerance.
    Keywords: Evolutionary stability; Religion; Political ideology
    JEL: A13 C79 Z10
    Date: 2005
  12. By: Hillinger, Claude
    Abstract: This paper has two sources: One is my own research in three broad areas: business cycles, economic measurement and social choice. In all of these fields I attempted to apply the basic precepts of the scientific method as it is understood in the natural sciences. I found that my effort at using natural science methods in economics was met with little understanding and often considerable hostility. I found economics to be driven less by common sense and empirical evidence, then by various ideologies that exhibited either a political or a methodological bias, or both. This brings me to the second source: Several books have appeared recently that describe in historical terms the ideological forces that have shaped either the direct areas in which I worked, or a broader background. These books taught me that the ideological forces in the social sciences are even stronger than I imagined on the basis of my own experiences. The scientific method is the antipode to ideology. I feel that the scientific work that I have done on specific, long standing and fundamental problems in economics and political science have given me additional insights into the destructive role of ideology beyond the history of thought orientation of the works I will be discussing.
    Keywords: Business cycles; Ideology; Science; Voting; Welfare measurement
    JEL: B40 C50 D71 E32
    Date: 2006–11
  13. By: Staffiero, Gianandrea (IESE Business School)
    Abstract: Wide experimental evidence shows that people do care about their opponents' payoff during social interaction. Our research aims to shed light on the relative importance of different motives in non-selfish choices highlighted in the recent literature. After a standard public-good game, one player is given the possibility to increase or decrease his opponent's payoff. While our baseline treatment replicates the tendency to hurt richer but lower-contributing players and help poorer but higher-contributing players, if we add exogenous assignments we find substantial willingness to hurt the rich, even if they have contributed more, and to help the poor, even if they have contributed less. These results show a greater focus on correcting inequality than on punishing or rewarding particular behavior. Moreover, we also find that subjects disregard efficiency, in terms of the overall "pie" to be shared. Overall, our data support inequality aversion as a more robust phenomenon than reciprocity and efficiency considerations.
    Keywords: Fairness; Cooperation; Inequality; Reciprocity;
    JEL: C91 D63 H41
    Date: 2006–09–24

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