New Economics Papers
on Collective Decision-Making
Issue of 2007‒07‒20
six papers chosen by

  1. How Decisive Is the Decisive Voter? By Eric J. Brunner; Stephen L. Ross
  2. The Leader as Catalyst: On Leadership and the Mechanics of Institutional Change By Sumon Majumdar; Sharun Mukand
  3. A Test of Endogenous Trade Bloc Formation Theory on EU Data By Baldwin, Richard; Rieder, Roland
  4. Integrity and Agreement: Economics When Principles Also Matter By Lanse Minkler
  5. Governance Matters VI: Aggregate and Individual Governance Indicators, 1996-2006 By Kaufmann, Da niel; Kraay, Aart; Mastruzzi, Massimo
  6. A Comparison of Macroeconomic Performances of Governments in Turkey, 1987-2007 By Kibritçioğlu, Aykut

  1. By: Eric J. Brunner (Quinnipiac University); Stephen L. Ross (University of Connecticut)
    Abstract: This paper provides a new test of the political economy "as if" proposition that underlies nearly all empirical studies that utilize the median voter model. Specifically, we employ a unique dataset to examine whether the voter with the median income is decisive in local spending referenda. Previous tests of the median voter model have typically relied on aggregate cross sectional data to examine whether the voter with the median income is pivotal. These studies are likely biased because communities differ across a variety of unobservable dimensions that are likely correlated with both the cost of providing public services and with the distribution of income in each community. In contrast to previous studies we make use of a unique pair of California referendums to estimate a first difference specification that controls for jurisdiction unobservables. The first referendum proposed to lower the required vote share for passing local educational bonding initiatives from 67 to 50 percent, and the second referendum, which was held only six months later, proposed lowering the vote requirement from 67 to 55 percent. This pair of votes allows us to precisely test whether voters vote on each referendum "as if" future public service provision under the rules of that referendum would be determined by the income of the proposed decisive voter. This approach avoids the need to assume that public spending accurately captures public service levels and eliminates potential bias from time invariant district attributes that are likely correlated with median income. Our empirical results suggest that jurisdiction median income accurately captures the expected outcomes of majority votes on public service spending and that voters understand the impact of small changes in the identity of the decisive voter. The estimated effect of median income on voting are not present in counterfactuals estimated at the census tract and state assembly district level.
    Keywords: Median Voter Hypothesis, Voting, School Spending
    JEL: H4 H7 I2
    Date: 2007–07
  2. By: Sumon Majumdar (Queen's University); Sharun Mukand (Tufts University)
    Abstract: Individual leaders have been central to the transformation of organizations, political institutions and many instances of social and economic reform. In this paper we take a first step towards analyzing the role of leadership to ask: when and how does a leader engineer change? We show that while underlying structural conditions and institutions are important, there is an independent first-order role for individual agency in bringing about change and thus transforming the institutions. We emphasize the key nature of the symbiotic relationship between followers decisions' to willingly entrust their faith in the leader and the leader's initiative at leading them. This two-way interaction can endogenously give rise to threshold effects; slight differences in the leader's ability or the underlying structural conditions can dramatically improve the prospects for successful change. Given the centrality of this leader-follower relationship, we further explore conditions under which an individual may deliberately prefer to follow an ambitious leader with divergent interests rather than a benevolent one with congruent preferences. Thus by virtue of having followers, both `good' and `bad' leaders may be effective at bringing about change.
    Keywords: Leadership, Followers, Change
    JEL: P41 D72 D78 D83 O43
    Date: 2007–06
  3. By: Baldwin, Richard; Rieder, Roland
    Abstract: This paper empirically confronts one explanation of spreading regionalism with the European experience. The domino theory asserts that forming a preferential trade area, or deepening an existing one, produces trade diversion that generates new political-economy forces in third nations as third-nation exporters seek to redress the new discrimination and profit from newly deepened preferences. The pressure increases with the bloc’s size yet bloc size depends upon how many nations join, so a single incidence of regionalism may trigger several rounds of membership requests from nations that were previously happy to stay out. We estimate a time-series of EU trade creation and diversion over the last five decades and use these to estimate a model EU membership demands. The results provide broad support for the model and show that trade diversion has a more powerful impact on membership than trade creation.
    Keywords: Domino theory of regionalism; Endogenous trade bloc formation; EU enlargement
    JEL: F13 F15
    Date: 2007–07
  4. By: Lanse Minkler (University of Connecticut)
    Date: 2007–07
  5. By: Kaufmann, Da niel; Kraay, Aart; Mastruzzi, Massimo
    Abstract: This paper reports on the latest update of the Worldwide Governance Indicators (WGI) research project covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2006: voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption. This latest set of aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance taken from 33 data sources provided by 30 different organizations. The data reflect the views on governance of public sector, private sector, and nongovernmental organization experts, as well as thousands of citizen and firm survey respondents worldwide. The paper also explicitly reports the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. It finds that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons, as well as monitoring progress over time. In less than a decade, a substantial number of countries exhibit statistically significant improvements in at least one dimension of governance, while other countries exhibit deterioration in some dimensions. The decade-long aggregate indicators, together with the disaggregated individual indicators, are available in a newly-redesigned website at
    Keywords: Governance Indicators,Statistical & Mathematical Sciences,National Govern ance,Economic Policy, Institutions and Governance,Science Education
    Date: 2007–07–01
  6. By: Kibritçioğlu, Aykut
    Abstract: In this paper, a macroeconomic performance index (MEP10) which consists of selected ten indicators is proposed to evaluate the relative performance of Turkish governments by using monthly data for the period of December 1987 – April 2007. According to the multi-staged evaluation process applied in the study, the governments are grouped in three classes: (1) Relatively successful governments: 46. government (December 1987 – November 1989), 48. government (June 1991 – November 1991), 54. government (June 1996 – June 1997), and 59. government (March 2002 – April 2007), (2) Relatively unsuccessful governments: 47. government (November 1989 – June 1991), 49. government (November 1991 – June 1993), 55. government (June 1997 – January 1999) and 53. government (March 1996 – June 1996), and (3) Most unsuccessful governments: 50.-52. governments (June 1993 – March 1996) and 56.-57. governments (January 1999 – November 2002). The monthly performance index is also used to test some hypotheses regarding the relationship between the length of the governments’ term of office and their macroeconomic performances.
    Keywords: Okun's misery index; macroeconomic performance; macroeconomic stability; governments; political stability; general elections; economic crises; Turkish economy
    JEL: O53 E65 C43
    Date: 2007–07–10

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