New Economics Papers
on Collective Decision-Making
Issue of 2007‒04‒28
ten papers chosen by

  1. Size Approval Voting By Alcalde-Unzu Jorge; Vorsatz Marc
  2. Emergence and Persistence of Inefficient States By Daron Agemoglu; Davide Ticchi; Andrea Vindigni
  3. Election Studies in India By Kondo, Norio
  4. Ideology Without Ideologists By Lydia Mechtenberg
  5. Competitive Proposals to Special Interests By Ashish Chaturvedi; Amihai Glazer
  6. Legislative Process with Open Rules By Fahrenberger, Theresa; Gersbach, Hans
  7. Virtuous Circles and Contested Identities: on Collective Identification Procedures with Independent Qualified Certification By Stefano Vannucci
  8. How enforcement institutions affect markets By Benito Arruñada; Marco Casari
  9. An Economic Theory of Political Institutions: Foreign Intervention and Overseas Investments By Toke A. Aidt and Facundo Albornoz
  10. Should We Really Expect More from Our Friends? By Laussel, Didier; van Ypersele, Tanguy

  1. By: Alcalde-Unzu Jorge; Vorsatz Marc (METEOR)
    Abstract: We propose a new class of voting rules, called Size Approval Voting. According to this rule, the effective weight of a vote from a given individual depends on how many other alternatives the very same individual votes for. In particular, weights are assumed to be non-negative and weakly decreasing in the number of approved alternatives. Then, for a given profile of individual votes, all those alternatives with the maximal sum of weighted votes are elected. We show in our axiomatic analysis that the family of all Size Approval Voting is characterized by a set of natural properties.
    Keywords: Economics (Jel: A)
    Date: 2007
  2. By: Daron Agemoglu; Davide Ticchi; Andrea Vindigni
    Abstract: Inefficiencies in the bureaucratic organization of the state are often viewed as important factors in retarding economic development. Why certain societies choose or end up with such inefficient organizations has received very little attention, however. In this paper, we present a simple theory of the emergence and persistence of inefficient states. The society consists of rich and poor individuals. The rich are initially in power, but expect to transition to democracy, which will choose redistributive policies. Taxation requires the employment of bureaucrats. We show that, under certain circumstances, by choosing an inefficient state structure, the rich may be able to use patronage and capture democratic politics. This enables them to reduce the amount of redistribution and public good provision in democracy. Moreover, the inefficient state creates its own constituency and tends to persist over time. Intuitively, an inefficient state structure creates more rents for bureaucrats than would an efficient state structure. When the poor come to power in democracy, they will reform the structure of the state to make it more efficient so that higher taxes can be collected at lower cost and with lower rents for bureaucrats. Anticipating this, when the society starts out with an inefficient organization of the state, bureaucrats support the rich, who set lower taxes but also provide rents to bureaucrats. We show that in order to generate enough political support, the coalition of the rich and the bureaucrats may not only choose an inefficient organization of the state, but they may further expand the size of bureaucracy so as to gain additional votes. The model shows that an equilibrium with an inefficient state is more likely to arise when there is greater inequality between the rich and the poor, when bureaucratic rents take intermediate values and when individuals are sufficiently forward-looking.
    Keywords: bureaucracy, corruption, democracy, patronage politics, political economy, public goods, redistributive politics.
    JEL: P16 H11 H26 H41
    Date: 2006
  3. By: Kondo, Norio
    Abstract: The election system is the pillar of Indian democracy. The system consists of various levels of elections to the Lok Sabha (the House of Representatives of the Union), State Legislative Assemblies, and Panchayati Raj Institutions (local self-governing bodies under State Governments). This article includes a review of studies related to the elections of Lok Sabha and State Legislative Assemblies conducted up to the present time. Studies are divided into those based on aggregate data and those based on survey data of the individual electorate. This division has the advantage of providing data that may be used in different analytical areas. Voter turnout and votes polled by party are the two main variables to be explained. This review article thus shows what has been explained in voting behaviour in India up to the present time.
    Keywords: India, Election, Review, Statistical analysis, Lok Sabha, State Legislative Assembly, Parliaments
    Date: 2007–03
  4. By: Lydia Mechtenberg
    Abstract: Generally, Democrats do not increase military spending, and Republicans do not raise welfare payments. Mostly, ruling politicians stick to the manifesto of their party. The current paper provides a theoretical explanation for this phenomenon that does not assume politicians or voters to be ideologists. I explore an environment where both voters and politicians always prefer the policy that is adequate to the world state but contradicts the party manifesto over the policy that is in line with the manifesto but not adequate. I find that nevertheless, the inefficient manifesto-driven policy will often result from their interaction. Besides, I show that a high degree of agreement between the politician in office, his party basis and the voter makes efficient, informed policy rare or even impossible. But if homogeneity of convictions within parties is high, swing voter behavior can solve the problem.
    Keywords: Information transmission, signalling, ideology, intra-party politics, political opinion.
    JEL: D72 D78 D82
    Date: 2007–04
  5. By: Ashish Chaturvedi (Wissenschaftszentrum Berlin für Sozialforschung); Amihai Glazer (Department of Economics, University of California-Irvine)
    Abstract: We consider electoral competition between two political candidates. Each can target private benefits to some groups. A candidate has an incentive to offer high benefits in the initial period, to deter the other candidate from offering yet higher benefits to the same group in a later period. We describe the equilibrium strategies of the candidates, showing that candidates will intend to target different groups, that groups targeted in the initial period gain larger benefits than groups targeted later, and that the benefits to special interests vary with their number and size.
    Keywords: Special interests; Elections
    JEL: D72
    Date: 2007–04
  6. By: Fahrenberger, Theresa; Gersbach, Hans
    Abstract: We examine the legislative game with open rules proposed by Baron and Ferejohn (1989). We first show that the three-group equilibrium suggested by Baron and Ferejohn does not always obtain. Second, we characterize the set of stationary equilibria for simple and super majority rules. Such equilibria are either of the three-group or four-group type. The latter type tends to occur when the size of the legislature becomes larger. Moreover, four-group equilibria imply large delay costs.
    Keywords: bargaining in legislatures; Baron/Ferejohn model; open rules; three-group and four-group equilibria
    JEL: D7
    Date: 2007–04
  7. By: Stefano Vannucci
    Abstract: This paper studies Collective Identification Procedures in a finite lattice when the standard Independence axiom is dropped and replaced with an Independent Qualified Certification requirement
    JEL: D71 D72
    Date: 2007–04
  8. By: Benito Arruñada; Marco Casari
    Abstract: In an experiment we study market outcomes under alternative incentive structures for thirdparty enforcers. Our transactions resemble an anonymous credit market where lenders can give loans and borrowers can repay them. When borrowers default, judges are free to enforce repayment but are themselves paid differently in each of three treatments. First, paying judges according to lenders’ votes maximizes surplus and the equality of earnings. In contrast, paying judges according to borrowers’ votes triggers insufficient enforcement, destroying the market and producing the lowest surplus and the most unequal distribution of earnings. Lastly, judges paid the average earnings of borrowers and lenders achieve results close to those based on lender voting. We employ a steps-of-reasoning argument to interpret the performances of different institutions. When voting and enforcement rights are allocated to different classes of actors, the difficulty of their task changes, and arguably as a consequence they focus on high or low surplus equilibria.
    Keywords: impersonal exchange ; third-party enforcement ; experiments ; steps of reasoning ; judges’ incentives ; repeated interaction
    JEL: C91 C92 D63 D72 K40
    Date: 2007–04
  9. By: Toke A. Aidt and Facundo Albornoz
    Abstract: The recent literature on endogenous political institutions highlights domestic economic factors, such as recessions, economic growth and inequality, as key determinants of political transitions. We argue that international capital flows and the possibility that foreign governments, in order to protect specific economic interests, might seek influence on the regime choice in other countries are important, yet overlooked, additional determinants of political institutions. Building on Acemoglu and Robinson (2001), we develop a theory of political transitions in economies with access to international capital markets and show that the possibility of foreign intervention significantly affects regime dynamics and the set of sustainable political regimes
    Keywords: Political transitions, democracy, autocracy, foreign investments; foreign government intervention
    JEL: D72 D74 H71 O15 P16
    Date: 2007–03
  10. By: Laussel, Didier; van Ypersele, Tanguy
    Abstract: In the present paper, we analyze an original channel of interaction between politicians and lobbies i.e. the nuisance power of a lobby. Some lobbies are influencing public policies just because they are able to impact negatively the image of a politician. More particularly, we develop a setting in which unions may transmit some information to the voters about the quality of the government via a costly signal i.e. a strike. In our setting unions represent sectors of the economy. An incumbent government seeking reelection allocates a fixed budget among several unionized sectors. Strikes are costly and transmit information to voters about the quality of the government. The politician may have interest to distort the budget allocation away from the efficient one in order to maximize his/her probability of reelection. In most cases a hostile receive receives more than a neutral/friendly one.
    Keywords: Lobby; Political Economy; Strike
    JEL: D7
    Date: 2007–04

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