New Economics Papers
on Collective Decision-Making
Issue of 2008‒07‒05
eight papers chosen by

  1. Ambiguity and Extremism in Elections By Alberto F. Alesina; Richard T. Holden
  2. Direct Democracy and Local Public Goods: Evidence from a Field Experiment in Indonesia By Benjamin A. Olken
  3. Democracy, Autocracy and the Likelihood of International Conflict By Tangerås, Thomas
  4. State of Governance in Bangladesh: Problems and Prospects. By Ahmad, Sayed Javed
  5. Foreign Influence and Welfare By Pol Antràs; Gerard Padró i Miquel
  6. A Political Economy Model of Merger Policy in International Markets By Motta, Massimo; Ruta, Michele
  7. Democratization and Growth By Elias Papaioannou; Gregorios Siourounis
  8. Political Polarization and the Size of Government By Lindqvist, Erik; Östling, Robert

  1. By: Alberto F. Alesina; Richard T. Holden
    Abstract: We analyze a model in which voters are uncertain about the policy preferences of candidates. Two forces affect the probability of electoral success: proximity to the median voter and campaign contributions. First, we show how campaign contributions affect elections. Then we show how the candidates may wish to announce a range of policy preferences, rather than a single point. This strategic ambiguity balances voter beliefs about the appeal of candidates both to the median voter and to the campaign contributors. If primaries precede a general election, they add another incentive for ambiguity, because in the primaries the candidates do not want to reveal too much information, to maintain some freedom of movement in the policy space for the general election. Ambiguity has an option value.
    JEL: H1
    Date: 2008–06
  2. By: Benjamin A. Olken
    Abstract: This paper presents an experiment where 48 Indonesian villages were randomly assigned to choose development projects through either representative-based meetings or direct election-based plebiscites. Plebiscites resulted in dramatically higher satisfaction among villagers, increased knowledge about the project, greater perceived benefits, and higher reported willingness to contribute. Changing the political mechanism had much smaller effects on the actual projects selected, with some evidence that plebiscites resulted in projects chosen by women being located in poorer areas. The results show that direct participation in political decision making can substantially increase satisfaction and legitimacy, even when it has little effect on actual decisions.
    JEL: D72
    Date: 2008–06
  3. By: Tangerås, Thomas (Research Institute of Industrial Economics (IFN))
    Abstract: This is a game-theoretic analysis of the link between regime type and international conflict. The democratic electorate can credibly punish the leader for bad conflict outcomes, whereas the autocratic selectorate cannot. For the fear of being thrown out of office, democratic leaders are (i) more selective about the wars they initiate and (ii) on average win more of the wars they start. Foreign policy behaviour is found to display strategic complementarities. The likelihood of interstate war, therefore, is lowest in the democratic dyad (pair), highest in the autocratic dyad with the mixed dyad in between. The results are consistent with empirical findings.
    Keywords: Democracy; Autocracy; War; Maximal Equilibrium
    JEL: D72 D74 D82
    Date: 2008–06–13
  4. By: Ahmad, Sayed Javed
    Abstract: This paper discusses the problems and issues on the political failures in Bangladesh as well as identifies some possible solutions. The approach here is analytical mostly reviewing current news, reports and other related materials. A comparative study is also done between the present and proposed system to get a quick glimpse on the overall situation. The idea here is to seek out reasonable and practical solutions that would yield better result for Bangladesh and bring about positive changes in the political scenario that would allow the country to move forward as a successful and dignified nation. I’ve kept the scope of this paper limited to political party, elections and governance.
    Keywords: Governance; Good governance; Public Policy; Public Administration; Elections; Parliament; etc.
    JEL: A39 H11 H83 D78 D8 J18 Y4 D73 O2 D02 I3 R5 D74 F5 G38 D72 I28
    Date: 2008
  5. By: Pol Antràs; Gerard Padró i Miquel
    Abstract: How do foreign interests influence the policy determination process? What are the welfare implications of such foreign influence? In this paper we develop a model of foreign influence and apply it to the study of optimal tariffs. We develop a two-country voting model of electoral competition, where we allow the incumbent party in each country to take costly actions that probabilistically affect the electoral outcome in the other country. We show that policies end up maximizing a weighted sum of domestic and foreign welfare, and we study the determinants of this weight. We show that foreign influence may be welfare-enhancing from the point of view of aggregate world welfare because it helps alleviate externalities arising from cross-border effects of policies. Foreign influence can however prove harmful in the presence of large imbalances in influence power across countries. We apply our model of foreign influence to the study of optimal trade policy. We derive a modified formula for the optimal import tariff and show that a country's import tariff is more distorted whenever the influenced country is small relative to the influencing country and whenever natural trade barriers between the two countries are small.
    JEL: D72 D74 F11 F13 F51 F59 H23 P16
    Date: 2008–06
  6. By: Motta, Massimo; Ruta, Michele
    Abstract: This paper looks at the political economy of merger policy under autarky and in international markets. We assume that merger policy is decided by antitrust authorities (whose objective is to maximize welfare) but can be influenced by governments, which are subject to lobbying by the firms (be they insiders or outsiders to the merger). We argue that political economy distortions may explain some of the recently observed merger policy conflicts between authorities and politicians, as well as between institutions belonging to different countries. We illustrate our analysis with applications motivated by recent merger cases, which have been widely debated in the international press.
    Keywords: Antitrust policy; European Union; Lobbying; Mergers
    JEL: D72 F59 H11 L40
    Date: 2008–06
  7. By: Elias Papaioannou; Gregorios Siourounis
    Abstract: This paper challenges cross-sectional findings that democracy has a negligible effect on growth. We employ a new dataset of political transitions during the Third Wave of Democratization and examine the within effect of democratization in countries that abandoned autocracy and consolidated representative institutions. The panel estimates imply that on average democratizations are associated with a one half increase in annual per capita growth. The dynamic analysis reveals that: while during the transition growth is slow, in the medium and long run it stabilizes at a higher level. This evidence favours development theories of democratic rule and Friedrich Hayek (1960)’s idea that the merits of democracy appear in the long run..
    Keywords: event study, institutions, political economy, democracy, annual growth.
    Date: 2008
  8. By: Lindqvist, Erik (Research Institute of Industrial Economics (IFN)); Östling, Robert (Stockholm School of Economics)
    Abstract: We study the effect of political polarization on government spending and redistribution using the dispersion of self-reported political preferences as our measure of polarization. Politically polarized countries have lower levels of redistribution and government consumption. The relationship between political polarization and the size of government is stronger in democratic countries, indicating that the effect goes through the political system. The results are robust to a large set of controlvariables, including GDP per capita and income inequality.
    Keywords: Political Polarization; Social Cohesion; Ethnic Fractionalization; Social Capital; Size of Government
    JEL: H11 H20 H41
    Date: 2008–05–15

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