New Economics Papers
on Collective Decision-Making
Issue of 2008‒10‒28
thirteen papers chosen by

  1. Does Direct Democracy Reduce the Size of Government? New Evidence from Historical Data, 1890-2000 By Patricia Funk; Christina Gathmann
  2. Electoral Uncertainty and Public Goods By Aidt, T.S.; Dutta, J.
  3. The Welfare Effects of Tax Competition Reconsidered: Politicians and Political Institutions By Janeba, Eckhard; Schjelderup, Guttorm
  4. Leadership in Collective Action By Joan Esteban; Esther Hauk
  5. The Democratic Transition. A study of the causality between income and the Gastil democracy index By Erich Gundlach; Martin Paldam
  6. Media Bias and Influence: Evidence from Newspaper Endorsements By Brian G. Knight; Chun-Fang Chiang
  7. Future Rent-Seeking and Current Public Savings By Ricardo J. Caballero; Pierre Yared
  8. Electoral Participation as a Measure of Social Inclusion for Natives, Immigrants and Descendants in Sweden By Bevelander, Pieter; Pendakur, Ravi
  9. Rent Seeking Behavior and Optimal Taxation of Pollution in Shallow Lakes By Salerno, Gillian; Beard, Rodney; McDonald, Stuart
  10. Heterogeneous Lobbying Efficiency By Julien Vauday
  11. La gouvernance etat des lieux et controverses conceptuelles (State of the art and conceptual contreverses) By Cheikh Ndiaye
  12. Explaining Public Attitudes on State Legislative Professionalism By Jeffrey Milyo; David M. Konisky; Lilliard E. Richardson, Jr.
  13. Selfish and Prospective: Theory and Evidence of Pocketbook Voting By Elinder, Mikael; Jordahl, Henrik; Poutvaara, Panu

  1. By: Patricia Funk; Christina Gathmann
    Abstract: Using historical data for all Swiss cantons from 1890 to 2000, we estimate the causal effect of direct democracy on government spending. The main innovation in this paper is that we use fixed effects to control for unobserved heterogeneity and instrumental variables to address the potential endogeneity of institutions. We find that the budget referendum and lower costs to launch a voter initiative are effective tools in reducing canton level spending. However, we find no evidence that the budget referendum results in more decentralized government or a larger local government. Our instrumental variable estimates suggest that a mandatory budget referendum reduces the size of canton spending between 13 and 19 percent. A 1 percent lower signature requirement for the initiative reduces canton spending by up to 2 percent.
    Keywords: Direct Democracy, Fiscal Policy, Switzerland
    JEL: H11 N43
    Date: 2007–12
  2. By: Aidt, T.S.; Dutta, J.
    Abstract: This paper argues that uncertain or random voter turnout plays a key role in mediating conflicts of interest between voters and politicians on the one hand and heterogenous groups of voters on the other. Random voter turnout creates an incentive for politicians to seek con- sensus because it is unclear ex ante who will hold the majority among those who turn out to vote. We argue that this leads to efficient provision of public goods and that it protects minority groups against the tyranny of the majority. We also argue that compulsory voting may not be desirable because it reduces randomness in turnouts.
    Keywords: Political Agency, Performance Voting, Turnout Uncertainty, Public Finance
    JEL: D72 D78 H41
    Date: 2008–08
  3. By: Janeba, Eckhard (Dept. of Economics, University of Mannheim); Schjelderup, Guttorm (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: The views on the welfare effects of tax competition differ widely. Some see the fiscal externalities as the cause for underprovision of public goods, while others see tax competition as means to reduce government inefficiencies. Using a comparative politics approach we show that tax competition among presidential-congressional democracies is typically welfare improving, while harmful among parliamentary democracies if under the latter the marginal benefit of the public good is sufficiently high. The results hold when politicians seek re-election because of exogenous benefits of holding office. By contrast, when politicians hold office only to extract rents, tax competition is harmful if politicians are sufficiently patient.
    Keywords: Tax competition; welfare effects; comparative politics approach
    JEL: H24
    Date: 2008–10–17
  4. By: Joan Esteban; Esther Hauk
    Abstract: We extend the model of collective action in which groups compete for a budged by endogenizing the group platform, namely the specific mixture of public/private good and the distribution of the private good to group members which can be uniform or performance-based. While the group-optimal platform contains a degree of publicness that increases in group size and divides the private benefits uniformly, a success-maximizing leader uses incentives and distorts the platform towards more private benefits - a distortion that increases with group size. In both settings we obtain the anti-Olson type result that win probability increases with group size.
    Keywords: collective contests, leadership, group platform, incentives, sharing rules
    JEL: D70 D72 D74
    Date: 2008–10–13
  5. By: Erich Gundlach; Martin Paldam (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: The paper considers the transformation of the political system as countries pass through the Grand Transition from a poor developing country to a wealthy developed country. In the process most countries change from an authoritarian to a democratic political system. This is shown by using the Gastil democracy index from Freedom House. First, the basic pattern of correlations reveals that a good deal of the short- to medium-run causality appears to be from democracy to income. Then a set of extreme biogeographic instruments is used to demonstrate that the long-run causality is from income to democracy. The long-run result survives various robustness tests. We show how the Grand Transition view resolves the seeming contradiction between the long-run and the short- to medium-run effects.
    Keywords: Paths of development, democracy, biogeography
    JEL: B25 O1
    Date: 2008–10–21
  6. By: Brian G. Knight; Chun-Fang Chiang
    Abstract: This paper investigates the relationship between media bias and the influence of the media on voting in the context of newspaper endorsements. We first develop a simple econometric model in which voters choose candidates under uncertainty and rely on endorsements from better informed sources. Newspapers are potentially biased in favor of one of the candidates and voters thus rationally account for the credibility of any endorsements. Our primary empirical finding is that endorsements are influential in the sense that voters are more likely to support the recommended candidate after publication of the endorsement. The degree of this influence, however, depends upon the credibility of the endorsement. In this way, endorsements for the Democratic candidate from left-leaning newspapers are less influential than are endorsements from neutral or right-leaning newspapers, and likewise for endorsements for the Republican. These findings suggest that voters do rely on the media for information during campaigns but that the extent of this reliance depends upon the degree and direction of any bias.
    JEL: D7 H0
    Date: 2008–10
  7. By: Ricardo J. Caballero; Pierre Yared
    Abstract: The conventional wisdom is that politicians' rent-seeking motives increase public debt and deficits. This is because myopic politicians face political risk and prefer to extract political rents as early as possible. An implication of this argument is that governments will under-save during a boom, leaving the economy unprotected in the event of a downturn. This view motivates a number of fiscal rules which are aimed at cutting deficits and constraining borrowing so as to limit the size of this political distortion. In this paper we study the determination of government debt and deficits in a dynamic model of debt which characterizes political distortions. We find that in our model the conventional wisdom always applies in the long run, but only does so in the short run when economic volatility is low. Instead, when economic volatility is high, a rent-seeking government over-saves and over-taxes along the equilibrium path relative to a benevolent government. Paradoxically, the over-saving bias can also be solved in this case by a rule of capping deficits, although the mechanism operates through its effect on expectations of future rent extraction rather than though the contemporary constraint. However, these rules are ineffective in solving the high taxation problem caused by the political friction, which in the short run is more acute in the high income volatility scenario.
    JEL: E6 H2 H6
    Date: 2008–10
  8. By: Bevelander, Pieter (Malmö University); Pendakur, Ravi (University of Ottawa)
    Abstract: Three decades ago, Sweden extended municipal and county voting privileges to non-citizen residents arguing that it would increase political influence, interest and self-esteem among foreign citizens. Three decades later, electoral participation on the part of immigrants is perceived as being substantially lower than for native born citizens and questions have arisen regarding the degree to which this may be symptomatic of a larger integration issue. The aim of this paper is to explore the determinants of voting within the context of social inclusion by comparing immigrants, their descendants and native citizens in Sweden while controlling for a range of socio-economic, demographic characteristics and contextual factors. We use two unique sets of data to conduct our research. The 2006 Electoral Participation Survey contains information on individual electoral participation in national, county and municipal elections. We match this information to registry data from Statistics Sweden which contains socio-demographic information for every Swedish resident. From these two sources, we are able to create a database which matches voting behaviour to individual characteristics for more than 70,000 residents of whom almost 13,000 are not citizens. We find that after controlling for demographic, socio-economic and contextual characteristics, acquisition of citizenship makes a real difference to the odds of voting and is therefore, a likely and powerful indicator of social inclusion. Immigrants who obtain citizenship are far more likely to vote than those who do not. Arguably, some of this may be attributed to the number of years of residency in the country. However, even non-citizens born in Sweden have substantially lower odds of voting. Country of birth also makes a difference. Immigrants from the Americas and those born in Sweden with immigrant parents are more likely to vote than immigrants from other countries. Somewhat surprisingly, age at immigration does not make a substantial difference to the odds of voting.
    Keywords: political participation, immigrants, descendants, electoral participation, human capital, citizenship, social inclusion
    JEL: D72 J15 J61
    Date: 2008–10
  9. By: Salerno, Gillian; Beard, Rodney; McDonald, Stuart
    Abstract: In this paper we extend earlier work on the economics of shallow lakes by M\"aler, Xepapadeas and de Zeeuw (2003) to the case where two communities have incommensurable preferences about lake eutrophication. In the case of incommensurable preferences interest group behavior arises, we therefore consider the case where society is divided into two interest groups and is thus unable to agree on a single management objective. In particular, the communities that share the use of the lake disagree on the relative importance of the shallow lake acting as a waste sink for phosphorus run-off as opposed to other ecosystem services. A dynamic game in which communities maximize their use of the lake results in a Nash equilibrium where the lake is in a eutrophic state when in fact the Pareto optimum would be for the lake to be in an oligotrophic state. Our paper differs from previous work by considering two communities or interest groups with different preferences for environmental services. The tax that would induce, in a noncooperative context, all of society's members to behave in such a way as to achieve a Pareto optimal outcome is derived under the assumption that a social planner does not favor one community or another. We then ask whether or not such a tax rate would in fact be implemented if each community were able to bear political pressure on the social planner and the social planner were a public representative seeking re-election. In this case both types of communities lobby to have their preferred level of tax applied based on their relative preferences for a clean lake and phosphorus loading. The effects of the lobbying on the application of the optimal tax are investigated numerically for particular values of relative preferences and the relative size of each group. The representative seeking election proposes a different tax rate in order to maximize their probability of electoral success. This problem is solved numerically assuming that the lake is in a eutrophic equilibrium. It is shown that political representatives have an incentive to propose tax rates that are insufficient to achieve a return to an oligotrophic steady-state
    Keywords: Pollution of shallow lakes; optimal eco-taxation; dynamic rent seeking.
    JEL: Q52 C63 Q53 C61 C73
    Date: 2007
  10. By: Julien Vauday (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: Firms are actively involved in the formation of policies. So far, the literature has focused on the relationship between exposure to the competition and the level of protection. The ability of lobbies to achieve a more favorable policy is then directly related to the reaction of their welfare to the policy. This monotonic relationship contradicts the idea that all lobbies do not have the same efficiency. Indeed, this efficiency cannot be uniquely driven by the exposure to competition. This paper proposes an original approach of the lobbying activity taking into account that lobbies' efficiency is heterogeneous. Just as there are some skilled and unskilled cards players. This paper highlights two types of efficiency, the passive and the active. First, according to the sensitivity of the government to the policy, two lobbies equally affected by the policy may pay different contributions to obtain the same protection level. Second, if the active efficiency is introduced, then two lobbies exhibiting the same sensitivity to the policy may obtain two different equilibrium policies.
    Keywords: Endogeneous policy decision, strategic lobbying, heterogeneous efficiency.
    Date: 2008–09
  11. By: Cheikh Ndiaye (Department of Economics, Grandiose University)
    Abstract: La diversité des connotations attachées à la notion (ou aux notions) de gouvernance ne pouvait manquer de susciter l’appétit des chercheurs désireux de renouveler leurs outils d’analyse face à un monde en mutation accélérée (mondialisation, déréglementation, rapports entre puissances, décentralisation, …). La gouvernance est une notion qui a pris en deux décennies une importance considérable et fait florès dans les discours politiques et scientifiques. Ce document fait l’état des lieux sur les différentes approches et théories faites de ce concept, sous ses multiples domaines et disciplines d’application et depuis divers lieux. Si la notion de gouvernance prouve d’indéniables qualités stratégiques et politiques, son usage sans précaution dans l’analyse scientifique peut se révéler périlleux. For several years, Governance has become a concept arousing the interest of economists and of the political community. Since twenty years, it has taken a major importance and it is at the center of political and scientific speeches. In a changing world, researchers have to renew their analysis tools on this topic (globalization, deregulation, decentralization, etc). This document focuses on the approaches and theories of governence. The concept of governance presents strategic and political qualities, but its use without precaution in the scientific analysis may be perilous.
    Keywords: governance, developing countries, democracy
    JEL: K00 O19 F53
    Date: 2008–02
  12. By: Jeffrey Milyo (Department of Economics, University of Missouri-Columbia); David M. Konisky; Lilliard E. Richardson, Jr.
    Abstract: Scholars have long argued that state legislative professionalism, or the provision of staff, legislator salary, and session length, has behavioral incentives for legislators and implications for legislative capacity. Scant attention, however, has been devoted to public attitudes on the provision of these legislative resources. Using survey data on preferences for features associated with a citizen legislature versus a professional legislature, we examine the contours of public attitudes on professionalism and test models on the factors associated with these attitudes. Results suggest partisanship, trust, and approval of the local delegation matter, but the factors differ by the legislative professionalism of the respondents state and for low versus high knowledge citizens.
    Keywords: Legislative Professionalism, Public Opinion, Political Economy
    JEL: D72 H79
    Date: 2008–10–17
  13. By: Elinder, Mikael (Uppsala University); Jordahl, Henrik (Research Institute of Industrial Economics); Poutvaara, Panu (University of Helsinki)
    Abstract: We present and test a theory of prospective and retrospective pocketbook voting. Focusing on two large reforms in Sweden, we establish a causal chain from policies to sizeable individual gains and losses and then to voting. The Social Democrats proposed budget cuts affecting parents with young children before the 1994 election, but made generous promises to the same group before the 1998 election. Since parents with older children were largely unaffected we use a difference-in-differences strategy for identification. We find clear evidence of prospective pocketbook voting. Voters respond to campaign promises but not to the later implementation of the reforms.
    Keywords: elections, economic voting, pocketbook voting, self-interest, prospective voting, retrospective voting, child care
    JEL: C21 D72 H50
    Date: 2008–10

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.