New Economics Papers
on Collective Decision-Making
Issue of 2008‒04‒21
fourteen papers chosen by

  1. Elections Can be Manipulated Often By Ehud Friedgut; Gil Kalai; Noam Nisan
  2. Bribery or Just Desserts? Evidence on the Influence of Congressional Voting Patterns on PAC Contributions from Exogenous Variation in the Sex Mix of Legislator Offspring By Dalton Conley; Brian J. McCabe
  4. Strategy-Proofness and Single-Crossing By Alejandro Saporiti
  5. Central Bank Design with Heterogeneous Agents By Aleksander Berentsen; Carlo Strub
  6. Rethinking public auditing institutions: Empirical evidence from Swiss municipalities By Mark Schelker; Reiner Eichenberger
  7. Strategic Requirements with Indifference: Single-Peaked versus Single-Plateaued Preferences By Dolors Berga; Bernardo Moreno
  8. Condorcet Jury Theorem: The Dependent Case By Bezalel Peleg; Shmuel Zamir
  9. “Ingroup Love" and “Outgroup Hate" as Motives for Individual Participation in Intergroup Conflict: A New Game Paradigm By Nir Halevy; Gary Bornstein; Lilach Sagiv
  10. Major Challenges for Fishery Policy Reform: A Political Economy Perspective By Jon G. Sutinen
  12. Does taxation rhyme with democracy? By Pablo Zoido
  13. Foundational Economic Theories for Political-Scientific Inter-Branch Studies By Yannis Karagiannis
  14. Indicators of Potential Conflict By Mansoob Murshed

  1. By: Ehud Friedgut; Gil Kalai; Noam Nisan
    Abstract: The Gibbard-Satterthwaite theorem states that every non-trivial voting method between at least 3 alternatives can be strategically manipulated. We prove a quantitative version of the Gibbard-Satterthwaite theorem: a random manipulation by a single random voter will succeed with non-negligible probability for every neutral voting method between 3 alternatives that is far from being a dictatorship.
    Date: 2008–04
  2. By: Dalton Conley; Brian J. McCabe
    Abstract: Evidence on the relationship between political contributions and legislators' voting behavior is marred by concerns about endogeneity in the estimation process. Using a legislator's offspring sex mix as an exogenous variable, we employ a two-stage least squares estimation procedure to predict the effect of voting behavior on political contributions. Following previous research, we find that a legislator's proportion daughters has a significant effect on voting behavior for women's issues, as measured by score in the "Congressional Record on Choice" issued by NARAL Pro-Choice America. In the second stage, we make a unique contribution by demonstrating a significant impact of exogenous voting behavior on PAC contributions, lending credibility to the hypothesis that Political Action Committees respond to legislators' voting patterns by "rewarding" political candidates that vote in line with the positions of the PAC, rather than affecting or "bribing" those same votes -- at least in this high profile policy domain.
    JEL: H11 J18 K0
    Date: 2008–04
  3. By: Toke S. Aidt (University of Cambridge, Faculty of Economics); Francisco José Veiga (Universidade do Minho and NIPE, Escola de Economia e Gestão); Linda Gonçalves Veiga (Universidade do Minho and NIPE, Escola de Economia e Gestão)
    Abstract: The literature on political business cycles suggests that politicians systematically manipulate economic and fiscal conditions before elections. The literature on vote and popularity functions suggests that economic conditions systematically affect election outcomes. This paper integrates these two strands of literature. We use Rogoff (1990)’s model of the rational political business cycle to derive the two-way relationship between the win-margin of the incumbent politician and the size of the opportunistic distortion of fiscal policy. This relationship is estimated, for a panel of 275 Portuguese municipalities (from 1979 to 2001), as a system of simultaneous equations (by GMM). The results show that (1) opportunism pays off, leading to a larger win-margin for the incumbent; (2) incumbents behave more opportunistically when their win-margin is small. These results are consistent with the theoretical model.
    Keywords: Voting and popularity functions, opportunism, rational political business cycles, local government, system estimation, Portugal.
    JEL: D72 E32 H72
    Date: 2008–04
  4. By: Alejandro Saporiti (School of Social Sciences, University of Manchester, Arthur Lewis Building, M13 9PL Manchester, United Kingdom)
    Abstract: This paper analyzes strategy-proof collective choice rules when individuals have single-crossing preferences on a finite and ordered set of social alternatives. It shows that a social choice rule is anonymous, unanimous and strategy-proof on a maximal single-crossing domain if and only if it is an extended median rule with n - 1 fixed ballots located at the end points of the set of alternatives. As a by-product, the paper also proves that strategy-proofness implies the tops-only property. And it offers a strategic foundation for the so called "single-crossing version" of the Median Voter Theorem, by showing that the median ideal point can be implemented in dominant strategies by a direct mechanism in which every individual reveals his true preferences.
    Keywords: Strategy-proofness; single-crossing; median voter; positional dictators
    JEL: C72 D71 D78
    Date: 2008–03
  5. By: Aleksander Berentsen; Carlo Strub
    Abstract: We study alternative institutional arrangements for the determination of monetary policy in a general equilibrium model with heterogeneous agents, where monetary policy has redistributive effects. Inflation is determined by a policy board using either simple-majority voting, supermajority voting, or bargaining. We compare the equilibrium inflation rates to the first-best allocation.
    Keywords: Policy board, monetary policy, search
    JEL: E4 E5 D7
    Date: 2008–04
  6. By: Mark Schelker (University of Fribourg, Switzerland; CREMA); Reiner Eichenberger (University of Fribourg, Switzerland; CREMA)
    Abstract: In the economic literature various political institutions designed to control the government have been analyzed. However, an important institution has been neglected so far: independent auditing institutions with an extended mandate to analyze the budget draft and individual policy proposals. We argue that auditors with an extended mandate improve transparency and provide essential information on the impact of policy proposals on common pool resources. This leads to less wasteful spending and a more efficient allocation of public resources. We empirically analyze the policy impact of local auditors with an extended audit mandate in Switzerland. Auditors, who can evaluate and criticize policy proposals ex ante to policy decisions, significantly reduce the general tax burden and public expenditures. We find similar results with different datasets. These results are robust to various changes in the econometric specification
    Keywords: Auditor, audit court, special interests, political economics, public finance.
    JEL: D70 H10
    Date: 2008
  7. By: Dolors Berga (Departament d'Economia, Universitat de Girona); Bernardo Moreno (Department of Economic Theory, Universidad de Málaga)
    Abstract: We concentrate on the problem of the provision of one pure public good whenever agents that form the society have either single-plateaued preferences or single-peaked preferences over the set of alternatives. We are interested in comparing the relationships between different nonmanipulability notions under these two domains. On the single-peaked domain, under strategy-proofness, non-bossiness is equivalent to convexity of the range. Thus, minmax rules are the only strategy-proof non-bossy rules. On the single-plateaued domain, only constant rules are non-bossy or Maskin monotonic; but strategy-proofness and weak non-bossiness are equivalent to weak Maskin monotonicity. Moreover, strategy-proofness and plateau-invariance guarantee convexity of the range.
    Keywords: Strategy-proof, Single-plateaued preferences,Single-peaked preferences, Maskin monotonicity, Non-bossiness, Plateau-invariance
    JEL: D71
    Date: 2008–04
  8. By: Bezalel Peleg; Shmuel Zamir
    Abstract: <p>We provide an extension of the Condorcet Theorem. Our model includes both the Nitzan-Paroush framework of “unequal competencies” and Ladha’s model of “correlated voting by the jurors”. We assume that the jurors behave “informatively”, that is, they do not make a strategic use of their information in voting. Formally, we consider a sequence of binary random variables X = (X<sub>1</sub>,X<sub>2</sub>, ...,X<sub>n</sub>, ...) with range in {0,1} and a joint probability distribution P. The pair (X,P) is said to satisfy the <em>Condorcet Jury Theorem</em> (CJT) if lim<sub>n→∞</sub>P(∑X<sub>i</sub>>n/2)=1. For a general (dependent) distribution P we provide necessary as well as sufficient conditions for the CJT. Let p<sub>i</sub> = E(X<sub>i</sub>), <span style="text-decoration: overline">p</span><sub>n</sub> = (p<sub>1</sub> + p<sub>2</sub>, ...+ p<sub>n</sub>)/n and <span style="text-decoration: overline">X</span><sub>n</sub> = (X<sub>1</sub> +X<sub>2</sub>, ...+X<sub>n</sub>)/n. A consequence of our results is that the CJT is satisfied if lim√n(<span style="text-decoration: overline">p</span><sub>n</sub>-1/2)=∞ and ∑<sub>i</sub>∑<sub>j≠i</sub>Cov(X<sub>i</sub>,X<sub>j</sub>) ≤ 0 for n > N<sub>0</sub>. The importance of this result is that it establishes the validity of the CJT for a domain which strictly (and naturally) includes the domain of independent jurors. Given (X,P), let <u>p</u> = liminf <span style="text-decoration: overline">p</span><sub>n</sub>, and <span style="text-decoration: overline">p</span>= limsup<span style="text-decoration: overline">p</span><sub>n</sub>. Let <u>y</u>= liminf E(<span style="text-decoration: overline">X</span><sub>n </sub>-<sub> </sub><span style="text-decoration: overline">p</span><sub>n</sub>)<sup>2</sup>, <u>y<sup>*</sup></u>= liminf E|<span style="text-decoration: overline">X</span><sub>n </sub>-<sub> </sub><span style="text-decoration: overline">p</span><sub>n</sub>| and <span style="text-decoration: overline">y</span><u><sup>*</sup></u>= limsup E|<span style="text-decoration: overline">X</span><sub>n </sub>-<sub> </sub><span style="text-decoration: overline">p</span><sub>n</sub>|. Necessary conditions for the CJT are that <u>p</u> ≥1/2 + 1/2<u>y</u><sup>∗</sup>,<u>p</u> ≥ 1/2 + <u>y</u>, and also p ≥ 1/2 + y<sup>∗</sup>. We exhibit a large family of distributions P with liminf 1/n(n-1) ∑<sub>i</sub>∑<sub>j≠i</sub>Cov(X<sub>i</sub>,X<sub>j</sub>) > 0 which satisfy the CJT. We do that by ‘interlacing’ carefully selected pairs (X,P) and (X′,P′). We then proceed to project the distributions P on the planes (<u>p</u>,<u>y</u><sup>∗</sup>) and (<u>p</u>,<u>y</u>), and determine all feasible points in each of these planes. Quite surprisingly, many important results on the possibility of the CJT are obtained by analyzing various regions of the feasible set in these planes.</p>
    Date: 2008–03
  9. By: Nir Halevy; Gary Bornstein; Lilach Sagiv
    Abstract: What motivates individual self-sacrificial behavior in intergroup conflicts? Is it the altruistic desire to help the ingroup or the aggressive drive to hurt the outgroup? This paper introduces a new game paradigm, the Intergroup Prisoner’s Dilemma – Maximizing Difference (IPD-MD) game, designed specifically to distinguish between these two motives. The game involves two groups. Each group member is given a monetary endowment and can decide how much of it to contribute. Contribution can be made to either of two pools, one which benefits the ingroup at a personal cost, and another which, in addition, harms the outgroup. An experiment demonstrated that contributions in the IPD-MD game are made almost exclusively to the cooperative within-group pool. Moreover, pre-play intragroup communication increases intragroup cooperation but not intergroup competition. These results are compared with those observed in the Intergroup Prisoner's Dilemma (IPD) game, where group members' contributions are restricted to the competitive between-group pool.
    Date: 2007–12
  10. By: Jon G. Sutinen
    Abstract: A political economy perspective of fisheries governance is presented in this paper. In most countries, formal and informal linkages exist among four components of the governance system. The legislature passes laws that authorise the implementation of policies and programmes by a fisheries agency. The fisheries agency establishes a fisheries management authority. Stakeholders often have a formal role – from advising to decision-making – in the management plan development process and approved plans are implemented by the fisheries agency. In general, governance failure (that is, undesirable public policy outcomes) has been attributed to special interest effects, rational voter ignorance, bundling of issues, shortsightedness, decoupling of costs and benefits, and bureaucratic inefficiencies. No studies demonstrate whether private interests significantly influence fishery policies and regulations, but evidence from other sectors suggests that this is very likely. One of the features that distinguishes the fishing industry from other regulated activities is that often there are no strong property rights, and regulation seeks to prevent overexploitation of a common pool resource (CPR). Fishers, in effect, impose costs on each other rather than on consumers, in the absence of regulation. A laboratory experiment was designed to simulate lobbying to influence regulation of a CPR. Results show that competition for fishery earnings weakens the incentive to effectively lobby for regulations that maximise group well-being. More experienced participants believe that their contributions to changing a regulation are not worthwhile. Instead, they focus more on competing for earnings from their use of the CPR. Correcting or mitigating government failure in fisheries might be assisted by the introduction of strong property rights, the devolution of rights and responsibilities to user groups, the use of the cost recovery and sustainable financing mechanisms, and for shielding fishery managers from the shortsighted tendencies of elected officials. But these recommendations may have difficulty in being implemented in the face of strong opposition from private interests in the fishery. <P>Les grands défis de la réforme de la pêche : Économie politique de la réforme <BR>Une analyse de la gouvernance des pêcheries sous l’angle de l’économie politique est présentée dans ce document. Dans la plupart des pays, il existe des liens formels et informels entre les quatre composantes du système de gouvernance. Le Parlement vote des lois autorisant les autorités compétentes de la pêche à mettre en œuvre des politiques et des programmes. Ces autorités compétentes de la pêche établissent un organisme de gestion des pêches. Les parties prenantes jouent souvent un rôle officiel — variant du conseil à la prise de décision — dans le processus d’élaboration des plans de gestion ; les plans approuvés sont mis en œuvre par les autorités compétentes de la pêche. En général, les échecs de gouvernance (à savoir les résultats indésirables des mesures adoptées par les pouvoirs publics) sont mis sur le compte des intérêts particuliers, de l’ignorance des électeurs, du regroupement des problèmes, de l’absence de vision, du découplage des coûts et des avantages et de l’inefficacité bureaucratique. Bien qu’aucune étude n’ait démontré que les intérêts privés influaient sensiblement sur les politiques et la réglementation de la pêche, ce que l’on a pu observer dans d’autres secteurs laisse à penser que cette influence est très vraisemblable. Le secteur de la pêche se distingue d’autres activités réglementées notamment par l’absence fréquente de droits de propriété solidement établis et par le fait que la réglementation tente d’éviter la surexploitation de ressources communes. En l’absence de réglementation, les pêcheurs font en fait peser des coûts les uns sur les autres plus que sur les consommateurs. Une expérience en laboratoire a été conçue pour simuler les activités de groupes de pression destinées à influer sur la réglementation des ressources communes. Les résultats de l’expérience montrent que la compétition entre pêcheurs pour réaliser le maximum de profits diminue leur volonté de faire pression en faveur de règlements qui maximiseraient le bien-être du groupe. Des participants plus expérimentés estiment que leur contribution à la modification de la réglementation ne présente aucun intérêt. Ils s’attachent en fait davantage à se disputer les profits de l’exploitation de la ressource commune. L’introduction de droits de propriété solidement établis, la délégation des droits et des responsabilités aux groupes d’utilisateurs, le recours à la récupération des coûts et à des mécanismes durables de financement et la protection des gestionnaires des pêches contre la tendance des élus à raisonner à court terme pourraient contribuer à corriger et à réduire l’échec des pouvoirs publics. Néanmoins, ces recommandations risquent de ne pouvoir être mises en œuvre aisément face à la forte opposition des intérêts privés dans le secteur de la pêche.
    Date: 2008–03
  11. By: Nguéma-Affane, Thierry
    Abstract: This paper explores and supports the use of the principal components analysis to objectively establish countries’ relative economic size and determine variables’ weights in a new IMF quota formula. This approach shows a rebalancing of quotas shares in favor of developing countries over time but suggests that PCA-generated quota formulas can only guide and not determine IMF quota structure. The simulation of ad hoc quota increases using PCA-generated quota formulas indicates that a rebalancing of actual quota shares and voting power in favor of developing countries, while preserving low-income countries voting share, is achievable if advanced economies forego increases in their quotas and total basic votes are at least tripled.
    Keywords: International Monetary Fund; Quota Formula; Principal Components Analysis;
    JEL: F02 F53 C19 F33
    Date: 2008–03–10
  12. By: Pablo Zoido
    Abstract: Latin America has put its faith in democracy and the market economy. Efficient, fair and equitable fiscal policy can help foster development and consolidate democracy. * This Policy Insights is based on the Latin American Economic Outlook 2008.
    Date: 2007–10
  13. By: Yannis Karagiannis
    Abstract: Economic theories are increasingly popular in political science, and in particular in research on the relations between the legislative, the executive, and the judicial branches of government. Among these theories, principal-agent (´PA´) and transaction cost economics (´TCE´) feature particularly high in our research agenda. Yet, pushed by the view that "the content of ´science´ is primarily the methods and rules" (King et al. 1994: 9), and working with limited resources, political scientists have tended to neglect careful theorizing. PA and TCE are taken off-the-shelf without much prior scrutiny, and past conceptual mistakes are perpetuated. This paper aims at introducing and explaining the real PA, positive agency, TCE, and incomplete contracts theories for the purposes of political analysis. In a companion paper, I show the serious mistakes perpetuated by political scientists, and I argue that, faced with a choice between those four economic theories, we should place our bets on a revised version of TCE.
    Keywords: Theory of delegation, political science, principal-agent models, transaction costs economics
    Date: 2007–05–04
  14. By: Mansoob Murshed (Institute of Social Studies, The Hague)
    Abstract: This paper focuses on the main factors that contribute to the dangers of violent internal conflict erupting, or re-igniting after a peace has been concluded. The conflict literature has identified greed and grievance as the principle causes of conflict. But for either of them to take the form of large-scale violence there must be other factors at work, specifically a weakening of the 'social contract'. Such a viable social contract can be sufficient to restrain opportunistic behaviour such as theft of resource rents and violent expression of grievance. The social contract, therefore, refers to the mechanisms and institutions of peaceful conflict resolution. Three main risk factors are considered in this briefing: The breakdown of redistributive mechanisms, democratic transitions and lack of economic progress.
    Keywords: Conflict, civil war, greed versus grievance, social contract, democratic transition, redistributive mechanisms
    JEL: D72 D74 O10 O40
    Date: 2008

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