New Economics Papers
on Collective Decision-Making
Issue of 2008‒11‒18
eight papers chosen by

  1. Storable Votes and Agenda Order Control. Theory and Experiments By Alessandra Casella
  2. Electoral rules, political competition and fiscal spending : regression discontinuity evidence from Brazilian municipalities By Marcos Chamon; João Manoel Pinho de Mello; Sergio Firpo
  3. The Impact of Council Voting Rules on EU Decision-Making By Mika Widgrén
  4. Those with blue hair please step forward: An economic theory of group formation and application to Cajas Rurales in Honduras By Elias, Carlos; Alwang, Jeffrey
  5. Explaining Institutional Change: Why Elected Politicians Implement Direct Democracy By David Hugh-Jones
  6. Do Benevolent Aspects Have Room Explaining EU Bydget Receipts? By Heikki Kauppi; Mika Widgrén
  7. A computational voting model By Luigi Maregno; Corrado Pasquali
  8. Strategic power indices: Quarrelling in coalitions By László Á. Kóczy

  1. By: Alessandra Casella
    Abstract: The paper studies a voting scheme where members of a committee voting sequentially on a known series of binary proposals are each granted a single extra bonus vote to cast as desired - a streamlined version of Storable Votes. When the order of the agenda is exogenous, a simple sufficient condition guarantees the existence of welfare gains, relative to simple majority voting. But if one of the voters controls the order of the agenda, does the scheme become less efficient? The endogeneity of the agenda gives rise to a cheap talk game, where the chair can use the order of proposals to transmit information about his priorities. The game has multiple equilibria, differing systematically in the precision of the information transmitted. The chair can indeed benefit, but the aggregate welfare effects are of ambiguous sign and very small in all parameterizations studied. The theoretical conclusions are tested through laboratory experiments. Subjects have difficulty identifying the informative strategies, and tend to cast the bonus vote on their highest intensity proposal. As a result, realized payoffs are effectively identical to what they would be if the agenda were exogenous. The bonus vote matters; the chair's control of the agenda does not.
    JEL: C9 D02 D7 D8
    Date: 2008–11
  2. By: Marcos Chamon (International Monetary Fund); João Manoel Pinho de Mello (Department of Economics PUC-Rio); Sergio Firpo (Escola de Economia de São Paulo, FGV)
    Abstract: We exploit a discontinuity in Brazilian municipal election rules to investigate whether political competition has a causal impact on policy choices. In municipalities with less than 200,000 voters mayors are elected with a plurality of the vote. In municipalities with more than 200,000 voters a run-off election takes place among the top two candidates if neither achieves a majority of the votes. At a first stage, we show that the possibility of runoff increases political competition. At a second stage, we use the discontinuity as a source of exogenous variation to infer causality from political competition to fiscal policy. Our second stage results suggest that political competition induces more investment and less current spending, particularly personnel expenses. Furthermore, the impact of political competition is larger when incumbents can run for reelection, suggesting incentives matter insofar as incumbents can themselves remain in office.
    Keywords: Electoral Systems; Strategic Voting; Political Competition; Regression Discontinuity; Fiscal Spending. JEL Codes: H72; D72; C14; P1
    Date: 2008–10
  3. By: Mika Widgrén
    Abstract: ABSTRACT : This paper deals with the design of voting rules in the EU Council. Both internal and external impact of the voting rules are examined. Internal impact affects the distribution of power among the member states and external impact affects power relations between the main decision-making bodies in the EU. One of the main lessons of the analysis is that voting rules matter. This clearly explains why the design of Council voting rules has required so much bargaining and cumbersome marathon negotiations. The internal decision-making rules in the Council have substantial impact on both the national distribution of power in the Council and inter-institutional power between the EU´s decision-making bodies.
    Keywords: European integration, Council of Ministers, power
    JEL: C70 D71 H77
    Date: 2008–11–10
  4. By: Elias, Carlos; Alwang, Jeffrey
    Abstract: This paper presents an economic model of group formation with an application to data collected from an agricultural credit program in western Honduras. We formulate a simple theory of group formation using the concept of centers of gravity to explain why individuals join a group. According to our theory, prospective members join based on the potential benefits and costs of group membership, and based on their perception of social distance between themselves and other group members. Social distance is unobservable by outsiders but known by the individual: if you are in then you know who has blue hair. Thus, we argue that social distance helps explain preferences for group formation. To test our theory we analyze data collected from members and non-members of PRODERT, a program that has helped create 188 €܃ajas Rurales€ݠ(CRs). Using conjoint analysis we test for differences in preferences between members and non-members for the main attributes of the CR. We find that members and non-members exhibit similar preferences for the attributes of the CR; therefore non-membership is not related to supply factors. Using information gathered by executing field experiments, we estimate a proxy for social distance. We use this proxy to run a group formation equation and find that it explains, along with individual characteristics, participation in the CR. Finally we offer suggestions on how to balance performance and coverage in programs in which beneficiaries decide who joins. Small cohesive groups may show exceptional performance at the cost of low coverage, and the opposite may be true.
    Keywords: Agricultural Finance, Institutional and Behavioral Economics,
    Date: 2008
  5. By: David Hugh-Jones (Max Planck Institute of Economics, Jena)
    Abstract: In existing models of direct democratic institutions, the median voter beneï¬ts, but representative politicians are harmed since their policy choices can be overridden. This is a puzzle, since representative politicians were instrumental in creating these institutions. I build a model of direct democracy that explains why a representative might beneï¬t from tying his or her own hands in this way. The key features are (1) that voters are uncertain about their representative's preferences; (2) that direct and representative elections are complementary ways for voters to control outcomes. The model shows that some politicians beneï¬t from the introduction of direct democracy, since they are more likely to survive representative elections: direct democracy credibly prevents politicians from realising extreme outcomes. Historical evidence from the introduction of the initiative, referendum and recall in America broadly supports the theory, which also explains two empirical results that have puzzled scholars: legislators are trusted less, but reelected more, in US states with direct democracy. I conclude by discussing the potential for incomplete information and signaling models to improve our understanding of institutional change more generally.
    Keywords: direct democracy, institutional change, referendums
    JEL: D72
    Date: 2008–11–10
  6. By: Heikki Kauppi; Mika Widgrén
    Abstract: ABSTRACT : The member states have self-interested objectives and they use their voting power in the Council of Ministers (CM) to maximize their shares from the EU budget, whereas European Parliament (EP) uses its power to support benevolent objectives and equality between member states. Given the current decision procedures of the EU, EP has effective power on non-compulsory expenditure covering structural spending, but not on compulsory expenditure consisting mainly of agricultural spending. We use this fact to assess how the assumed benevolent objectives of EP turn into member states´ budget receipts in a power politics based model.
    JEL: C71 D70 D72
    Date: 2008–11–06
  7. By: Luigi Maregno; Corrado Pasquali
    Abstract: Social choice models usually assume that choice is among exogenously given and non decomposable alternatives. Often, on the contrary, choice is among objects that are constructed by individuals or institutions as complex bundles made of many interdependent components. In this paper we present a model of object construction in majority voting and show that, in general, by appropriate changes of such bundles, different social outcomes may be obtained, depending upon initial conditions and agenda, intransitive cycles and median voter dominance may be made appear or disappear, and that, finally, decidability may be ensured by increasing manipulability or viceversa.
    Keywords: Social choice; object construction power; agenda power; intran- sitive cycles; median voter theorem.
    JEL: D71 D72
    Date: 2008–11–11
  8. By: László Á. Kóczy (Department of Economics, Maastricht University)
    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 in-dices predictions and propose a model that captures such strategic behaviour.
    Keywords: Banzhaf index, Shapley-Shubik index, a priori voting power, rational players
    JEL: C71 D72
    Date: 2008–11

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