New Economics Papers
on Collective Decision-Making
Issue of 2008‒05‒17
sixteen papers chosen by

  1. Top Monotonicity: A Common Root for Single Peakedness, Single Crossing and the Median Voter Result By Salvador Barberà; Bernardo Moreno
  2. Strategic power indices: Quarrelling in coalitions By László Á. Kóczy
  3. The Role of Media Slant in Elections and Economics By John Duggan; Cesar Martinelli
  4. Flip-Flopping: Ideological Adjustment Costs in the United States Senate By DeBacker, Jason
  5. Voting the public expenditure: an experiment By Carla Marchese; Marcello Montefiori
  6. The Principle of Democratic Teleology in International Law By Niels Petersen
  7. Superpower Interventions and their Consequences for Democracy: An Empirical Inquiry By William Easterly; Shanker Satyanath; Daniel Berger
  8. Electoral Campaign Financing: The role of public contributions and party ideology By Portugal, Adriana C.; Bugarin, Maurício
  9. Researching gender democracy in the European Union: Challenges and prospects By Yvonne Galligan; Sara Clavero
  10. Learning, public good provision, and the information trap By Aleksander Berentsen; Esther Bruegger; Simon Loertscher
  11. Institutions and Behavior: Experimental Evidence on the Effects of Democracy By Pedro Dal Bó; Andrew Foster; Louis Putterman
  12. Optimal Democratic Mechanisms for Taxation and Public Good Provision By Felix Bierbrauer; Marco Sahm
  13. Size, Spillovers and Soft Budget Constraints By Ernesto Crivelli; Klaas Staal
  14. Constitutional Interests in the Face of Innovations: How Much Do We Need to Know about Risk Preferences? By U. Witt; C. Schubert
  15. Principio di corrispondenza fiscale, popolazione non residente e tributi locali By Simonetta Botarelli
  16. A non-dictatorial criterion for optimal growth models. By Alain Ayong Le Kama; Cuong Le Van; Katheline Schubert

  1. By: Salvador Barberà (Departament d'Economia i d'Historia Economica and CODE, Universitat Autonoma de Barcelona); Bernardo Moreno (Department of Economic Theory, Universidad de Málaga)
    Abstract: When the members of a voting body exhibit single peaked preferences, majority winners exist. Moreover, the median(s) of the preferred alternatives of voters is (are) indeed the majority (Condorcet) winner(s). This important result of Duncan Black (1958) has been crucial in the development of public economics and political economy, even if it only provides a sufficient condition. Yet, there are many examples in the literature of environments where voting equilibria exist and alternative versions of the median voter results are satisfied while single peakedness does not hold. Some of them correspond to instances where other relevant conditions, apparently not connected with single eakedness, are satisfied. For example preferences may satisfy the single-crossing property (Mirrlees, 1971, Gans and Smart, 1996, and Milgrom and Shannon, 1994), intermediateness (Grandmont, 1978) or order restriction (Rothstein, 1990). Still other interesting cases of existence of voting equilibria do not fall in any of these categories. We present a new and weak domain restriction which encompasses all the above mentioned ones, llows for new cases, still guarantees the existence of Condorcet winners and preserves a version of the median voter result. We illustrate how this new condition, that we call top monotonicity, arises naturally in different economic contexts.
    Keywords: Single peaked, single crossing and intermediate preferences, majority (Condorcet) winners
    JEL: D72 D71
    Date: 2008–05
  2. By: László Á. Kóczy (Budapest Tech)
    Abstract: While they use the language of game theory known measures of a priory voting power are hardly more than statistical expectations assuming voters behave randomly. Focusing on normalised indices we show that rational players would behave differently from the indices predictions and propose a model that captures such strategic behaviour.
    Keywords: Banzhaf index, Shapley-Shubik index, a priori voting power, rational players
    JEL: C72 C71 D72
    Date: 2006–05
  3. By: John Duggan (Department of Political Science and Department of Economics University of Rochester); Cesar Martinelli (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))
    Abstract: We formalize the concept of media slant as a relative emphasis on different issues of political interest by the media, and we illustrate the effects of the media choice of slant on political outcomes and economic decisions in a rational expectations model. In a two-candidate election, if the media is biased in favor of the underdog, then it will put more emphasis on issues with a large electoral impact, hoping that the news will deliver an upset victory. Whether citizens are better off with media biased in favor of the underdog or the frontrunner depends on the importance of choosing the "right" candidate for citizens versus the impact of political news on the private economic decisions of voters. Balanced media, giving each issue equal coverage, may be worse for voters than partisan media.
    Date: 2008–03
  4. By: DeBacker, Jason
    Abstract: Models of electoral competition in which candidates can change position at no cost predict the convergence of platforms in a two-candidate election. Such convergence is at odds with empirical observation. In this paper, I undertake a study of candidate positioning in the United States Senate and determine the extent to which electoral costs associated with changing position explain the ideological positions taken by Senators. Using over 50 years of roll call voting data, I use a simulated method of moments approach to estimate a dynamic model of candidate positioning for U.S. Senators. The findings support a model in which Senators face convex costs to changing position, with the best fitting model being one with linear costs of adjustment. The model thus predicts severe punishments for “flip-flopping” Senators (those who make large changes in position). As a result of the significant costs associated with adjusting position, the empirical validity of the Median Voter Theorem (which depends upon candidates being able to change position at no cost) is called into question.
    Keywords: spatial models; dynamic political economy; Senate; ideology
    JEL: H11 D72 C01
    Date: 2008–04–24
  5. By: Carla Marchese; Marcello Montefiori
    Abstract: This paper considers the problem of voting about the quantity of a public good. An experiment has been run in order to test the extent of the strategic bias that arises in the individual vote when the social choice rule is to select the mean of the quantities voted for; conflicting theoretical predictions are available in the literature on this purpose. The political implications of the mean rule and its effects upon efficiency are also discussed.
    Keywords: experiment, voting rule, public good
    JEL: C91 D72
    Date: 2008–05
  6. By: Niels Petersen (Max Planck Institute for Research on Collective Goods)
    Abstract: In the early 1990s, after the fall of the Berlin wall, legal scholars initiated a debate on the existence of a right to democratic governance in international law. Many of the adherents to the democratic entitlement school seem to assume that democratization is a simple shift in the political status, a change from one form of government to another. This contribution seeks to analyze this underlying assumption by taking a look at the current discussion on democratization theory in the political sciences. Through this lens, it will reconsider the international practice and the corresponding legal documents related to the existence of a possible democracy principle. In this respect, a special emphasis will be put on three areas of potential precedents – resolutions of the UN General Assembly, the practice of regional organizations such as the Organization of American States or the African Union, and military interventions in the name of democracy. The analysis will show that the legitimacy principle of international law is, at the same time, more modest and more demanding than the claim of the democratic entitlement school. It will be argued that democracy is no strict obligation, but rather a teleological principle. States are obliged to develop towards democracy and to consolidate and to optimize democracy, once electoral institutions have been established.
    Date: 2008–04
  7. By: William Easterly; Shanker Satyanath; Daniel Berger
    Abstract: Do superpower interventions to install and prop up political leaders in other countries subsequently result in more or less democracy, and does this effect vary depending on whether the intervening superpower is democratic or authoritarian? While democracy may be expected to decline contemporaneously with superpower interference, the effect on democracy after a few years is far from obvious. The absence of reliable information on covert interventions has hitherto served as an obstacle to seriously addressing these questions. The recent declassification of Cold War CIA and KGB documents now makes it possible to systematically address these questions in the Cold War context. We thus develop a new panel dataset of superpower interventions during the Cold War. We find that superpower interventions are followed by significant declines in democracy, and that the substantive effects are large. Perhaps surprisingly, once endogeneity is addressed, US and Soviet interventions have equally detrimental effects on the subsequent level of democracy; both decrease democracy by about 33%. Our findings thus suggest that one should not expect significant differences in the adverse institutional consequences of superpower interventions based on whether the intervening superpower is a democracy or a dictatorship.
    JEL: O1
    Date: 2008–05
  8. By: Portugal, Adriana C.; Bugarin, Maurício
    Date: 2007–10
  9. By: Yvonne Galligan; Sara Clavero
    Abstract: This paper outlines a research programme for the study of democracy in the European Union (EU) from a gender perspective. It takes as its point of departure the recent turn to deliberative democracy in the field of EU studies, and more particularly, the claim that these theories can provide a response to current debates on the problem of the democratic deficit within this complex polity. The paper then discusses the relevance of deliberative democracy to research on gender in the EU and the main challenges that arise in trying to operationalise its main theoretical tenets. Drawing on feminist revisions of deliberative democracy theory, as well as on previous applications of these theories to empirical research, the paper proposes a set of indicators that can be used for an assessment of gender and democratic deliberation in this supranational arena.
    Keywords: democracy
    Date: 2008–04–15
  10. By: Aleksander Berentsen; Esther Bruegger; Simon Loertscher
    Abstract: We consider an economy where decision maker(s) do not know the true production function for a public good. By using Bayes rule they can learn from experience. We show that the economy may learn the truth, but that it may also converge to an inefficient policy where no further inference is possible so that the economy is stuck in an information trap. We also show that our results are robust with respect to experimentation.
    Keywords: Public economics, learning, size of government
    JEL: D72 H10 D83
    Date: 2008–05
  11. By: Pedro Dal Bó; Andrew Foster; Louis Putterman
    Abstract: A novel experiment is used to show that the effect of a policy on the level of cooperation is greater when it is chosen democratically by the subjects than when it is exogenously imposed. In contrast to the previous literature, our experimental design allows us to control for selection effects (e.g. those who choose the policy may be affected differently by it). Our finding implies that democratic institutions may affect behavior directly in addition to having effects through the choice of policies. Our findings have implications for the generalizability of the results of randomized policy interventions.
    JEL: C10 C9 D7 O10
    Date: 2008–05
  12. By: Felix Bierbrauer (Max Planck Institute for Research on Collective Goods, Bonn); Marco Sahm (University of Munich)
    Abstract: We study the interdependence of optimal tax and expenditure policies. An optimal policy requires that information on preferences is made available. We first study this problem from a general mechanism design perspective and show that efficiency is possible only if the individuals who decide on public good provision face an own incentive scheme that differs from the tax system. We then study democratic mechanisms with the property that tax payers vote over public goods. Under such a mechanism, efficiency cannot be reached and welfare from public good provision declines as the inequality between rich and poor individuals increases.
    Keywords: Public goods, optimal taxation, two-dimensional heterogeneity, asymmetric information
    JEL: H41 D71 D72 D82
    Date: 2008–03
  13. By: Ernesto Crivelli (Max Planck Institute for Research on Collective Goods, Bonn); Klaas Staal (University of Bonn)
    Abstract: There is much evidence against the so-called "too big to fail" hypothesis in the case of bailouts to subnational governments. We look at a model where districts of different size provide local public goods with positive spillovers. Matching grants of a central government can induce so-cially-efficient provision, but districts can still exploit the intervening central government by induc-ing direct financing. We show that the ability and willingness of a district to induce a bailout and district size are negatively correlated. We also discuss the effect economies of scale in local public goods provision has on the bailout policies and argue that these policies can be subgame perfect equilibrium strategies.
    Keywords: bailouts, soft-budget constraints, district size, spillovers
    JEL: H4 H7 R1
    Date: 2008–04
  14. By: U. Witt; C. Schubert
    Abstract: In constitutional political economy, the citizens’ constitutional interests determine the social contract that is binding for the post-constitutional market game. However, following traditional preference subjectivism, it is left open what the constitutional interest are. Using the example of risk attitudes, we argue that this approach is too parsimonious with regard to the behavioral foundations to support a calculus of consent. In face of innovative activities with pecuniary and technological externalities in the post-constitutional phase, the citizens’ constitutional interests vary with their risk preferences. To determine what kind of social contract is generally agreeable, specific assumptions about risk preferences are needed.
    Keywords: constitutional preferences, social contract, original position, innovation, risk preferences Length 34 pages
    JEL: D72 H10 O33
    Date: 2008–05
  15. By: Simonetta Botarelli
    Abstract: According to the Decentralization Theorem, local governments are more efficient than centralized ones in providing local public services, since resident citizens’ needs differ from those of citizens from other places. Local governments may better meet residents’ needs than a central government can do. A crucial issue may arise from the presence of non-voting (that are “non-resident”) citizens amongst the local population, thus affecting the implementation of the equivalence principle (Olson, 1969). The manifold effects of the presence of NRP (non- resident population) may variously affect public budget management as well as private economy both of a municipality and of its resident population (RP). Since NRP has a serious impact on efficiency/efficacy of public expenditure for services, it would be also worth evaluating its capacity of funding local public expenditure in terms of both current and future taxation. In funding local bodies the central government may opt for charging residents with a heavier burden of taxation than NRP (i.e., by partly replacing transfers with a share in Irpef). On the other hand, NRP’s features together with a different composition of population across municipalities may induce governments to supply balancing transfers aimed to partly compensate differences between actual taxable incomes within the local environment. Incoming NRP flows may thus affect municipalities’ politics and some dynamics are likely to have critical impacts on equilibrium budgets, even if choices are often shaped by higher economic resources eventually available to municipalities themselves.
    Keywords: Taxation, State and Local Taxation, Local Government, Intergovernmental Relations, Geographic Labour mobility
    JEL: H2 H7 J6 R23
    Date: 2008–01
  16. By: Alain Ayong Le Kama (EQUIPPE, Université de Lille I); Cuong Le Van (Centre d'Economie de la Sorbonne et Paris School of Economics); Katheline Schubert (Centre d'Economie de la Sorbonne et Paris School of Economics)
    Abstract: There are two main approaches for defining social welfare relations for an economy with infinite horizon. The first one is to consider the set of intertemporal utility streams generated by a general set of bounded consumptions and define a preference relation between them. This relation is ideally required to satisfy two main axioms, the Pareto axiom, which guarantees efficiency and the Anonymity axiom, which guarantees equity. Basu and Mitra (2003) show that it is impossible to represent by a function a preference relation embodying both requirements, and Basu and Mitra (2007) propose and characterize a new welfare criterion called utilitarian social welfare relation. In the same framework, Chichilnisky (1996) proposes two axioms that capture the idea of sustainable growth : non-dictatorship of the present and non-dictatorship of the future, and exhibits a mixed criterion, adding a discounted utilitarian part, which gives a dictatorial role to the present, and a long term part, which gives a dictatorial role to the future. The drawback of Chichilnisky's approach is that it often does not allow to explicity characterize optimal growth paths with optimal control techniques. Our aim is less general than Chichilnisky's and Basu and Mitra's : we want to have a non-dictatorial criterion for optimal growth models. We restrict ourselves to the set of utilities of consumptions which are generated by a specific technology. We show that the undiscounted utilitarian criterion pioneered by Ramsey (1928) is not only convenient if one wants to solve an optimal growth problem but also sustainable, efficient and equitable.
    Keywords: Anonimity, intergenerational equity, natural resources, non-dictatorship of the future, non-dictatorship of the present, optimal growth models, Pareto, social welfare function, social welfare relation, sustainability, utilitarian undiscounted criterion.
    JEL: D60 D70 D90 Q0
    Date: 2008–04

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