New Economics Papers
on Collective Decision-Making
Issue of 2009‒04‒05
seventeen papers chosen by

  1. Strategic Voting and Multinomial Choice In US Presidential Elections By Myoung-jae Lee; Sung-jin Kang
  2. Efficiency of Fairness in Voting Systems By František Turnovec
  3. EC Controversy: What are the Issues? EC Controversy: What Are the Issues By Ramaswamy R. Iyer
  4. Measuring Power and Satisfaction in Societies with Opinion Leaders: Properties of the Qualified Majority Case By René Van Den Brink; Agnieszka Rusinowska; Frank Steffen
  5. A Median Voter Model of the Vertical Fiscal Gap By Dahlby, Bev; Rodden, Jonathan; Wilson, Sam
  6. Should We Tax or Cap Political Contributions? A Lobbying Model with Policy Favors and Access By Christopher Cotton
  7. Vote-Buying and Reciprocity By Frederico Finan
  8. The Politics of Social Protection: Social Expenditure versus Markets’ Regulation By Debora Di Gioacchino; Laura Sabani
  9. Access Fees in Politics By Christopher Cotton
  10. Smith and Rawls Share a Room: Stability and Medians By Bettina Klaus; Flip Klijn
  11. Political Cycles in Active Labor Market Policies By Mechtel, Mario; Potrafke, Niklas
  12. The President and the Distribution of Federal Spending By Christopher R. Berry; Barry C. Burden; William G. Howell
  13. Ordering infinite utility streams comes at the cost of a non-Ramsey set By Luc LAUWERS
  14. Religion, Clubs, and Emergent Social Divides By Makowsky, Michael
  15. The Architecture of Federations: Constitutions, Bargaining, and Moral Hazard By Kessler, Anke; Luelfesmann, Christoph; Myers, Gordon M
  16. Contractually stable networks By CAULIER, Jean-Franois; MAULEON, Ana; VANNETELBOSCH, Vincent
  17. Voting on Punishment Systems Within a Heterogeneous Group By Noussair, C.N.; Tan, F.

  1. By: Myoung-jae Lee (Department of Economics, Korea University, Seoul, South Korea); Sung-jin Kang (Department of Economics, Korea University, Seoul, South Korea)
    Abstract: Ross Perot was a relatively viable third party candidate in the 1992 US presidential election, but he was not any more in the 1996 election. This provides a good opportunity to analyze strategic voting behavior?voting for a candidate not most preferred by the voter?in the US presidential elections with panel data drawn from NES (National Election Studies). First, the 1992 election is analyzed with multinomial choice estimators. Second, using the estimates, each individual¡¯s choice is predicted for the 1996 election. Third, those who were predicted to vote for Perot in 1996 but did not are identified as strategic voters and their profile is drawn. In addition to the main task of analyzing the strategic voting behavior, this paper does two additional tasks. First, analyzing the 1992 data with multinomial choice estimators, t is found that the following variables mattered significantly for the US presidential election: respondent and candidate ideology, personal finance, age, education, income, sex, abortion stance, health insurance policy, and welfare program policy. Second, critical mistakes in the literature in applying multinomial probit to election data are pointed.
    Keywords: strategic voting, presidential election, multinomial logit, multinomial probit
    Date: 2009
  2. By: František Turnovec (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Fair representation of voters in a committee representing different voters’ groups is being broadly discussed during last few years. Assuming we know what the fair representation is, there exists a problem of optimal quota: given a “fair” distribution of voting weights, how to set up voting rule (quota) in such a way that distribution of relative a priori voting power is as close as possible to distribution of relative voting weights. Together with optimal quota problem a problem of trade-off between fairness and efficiency (ability of a voting body to change status quo) is formalized by a fairness-efficiency matrix.
    Keywords: Committee system, efficiency, fairness, fairness-efficiency matrix, indirect voting power, optimal quota, power indices, voting system
    JEL: C71 D72 H77
    Date: 2009–03
  3. By: Ramaswamy R. Iyer
    Abstract: A comprehensive and logically rigorous analysis of the issues raised by the recommendation of the Chief Election Commissioner N.Gopalaswami for the removal of Election Commissioner Navin Chawla, the President’s rejection and the developments that followed.
    Keywords: Election Commission of India, EC, Election commissioner, removal of Election Commissioner, Political institutions, democracy, elections, Political Science
    Date: 2009
  4. By: René Van Den Brink (Tinbergen Institute - Tinbergen Institute); Agnieszka Rusinowska (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Frank Steffen (ULMS - University of Liverpool Management School - University of Liverpool Management School)
    Abstract: A well known and established model in communication policy in sociology and marketing is that of opinion leadership. It is based on the idea of a two-step flow of communication. Opinion leaders are actors in a society who are able to affect the behavior of other members of the society called followers. Hence, opinion leaders might have a considerable impact on the behaviorof markets and other social agglomerations being made up of individual actors choosing among a number of alternatives. For marketing purposes it appears to be interesting to investigate the effect of different opinion leader-follower structures in markets or any other collective decision-making situations in a society.We study a two-action model in which the members of a society are to choose one action, for instance, to buy or not to buy a certain joint product, or to vote yes or no on a specific proposal. Each of the actors has an inclination to choose one of the actions. By definition opinion leaders have some power over other actors, their followers, and they exercise this power by influencing the behavior of their followers, i.e. their choice of action. After all actors have chosen their actions, a decision-making mechanism determines the collective choice resulting out of the individual choices. The structure of the relations between the actors can be represented by a bipartite digraph. We analyze such digraphs investigating satisfaction and power distributions within societies with and without the opinion leaders. Moreover, we study common properties of the satisfaction and power measures and illustrate our findings and some marketing implications for a society with five members.
    Keywords: Bipartite digraph; influence; inclination; collective choice; opinion leader; follower; satisfaction; power
    Date: 2009
  5. By: Dahlby, Bev (University of Alberta, Department of Economics); Rodden, Jonathan (Stanford University); Wilson, Sam (University of Alberta, Department of Economics)
    Abstract: A median voter model is developed to explain the size of the vertical fiscal gap in a federation, i.e. the extent to which subnational governments' expenditures exceed their own-source tax revenues. In our model, individuals vote in subnational elections and in federal elections to determine tax rates and spending on public services by each level of government and transfers to the subnational governments. In the resulting political equilibrium, intergovernmental transfers from the central government are affected by the tax sensitivity of the tax bases of the central and subnational governments, the degree of inequality in the tax bases of the subnational governments, the allocation of spending responsibilities between the central and subnational governments, and whether the federal legislature is unicameral or bicameral.
    Keywords: intergovernmental grants; median voter model; fiscal federalism; vertical fiscal gap; vertical fiscal imbalance
    JEL: H71 H72 H77
    Date: 2009–01
  6. By: Christopher Cotton (Department of Economics, University of Miami)
    Abstract: This paper develops a model of political contributions in which a politician can either sell policy favors, or sell access. Access allows interest groups to share hard information with the politician in support of their preferred policy. Here selling access maximizes policy utility, while selling policy favors maximizes total contributions. Imposing a binding contribution limit makes it more likely that the politician sells access, which can improve expected constituent welfare. However, a contribution limit distorts the signals associated with the contributions, which tends to result in worse policy. Alternatively, a tax on political contributions can ensure that the politician sells access without distorting his information. Therefore, from the viewpoint of a representative constituent, a tax on contributions is strictly preferred to a contribution limit or no reform. The politician, however, may prefer regulation in the form of a contribution limit, even when a tax is better for the constituent.
    Keywords: Lobbying, campaign ï¬nance reform, political access, bid caps, verfiable information, evidence disclosure
    JEL: D72 D44 D82 D78
    Date: 2008–12
  7. By: Frederico Finan
    Abstract: In this paper, how social preferences overcome the commitment problems implicit in vote-buying is examined. Data used for the study is a survey information on vote-buying experienced in a 2006 municipal election in Paraguay, with information on behavior in experiments carried out in 2002. [Working Paper No. 214].
    Keywords: vote buying, elections, paraguay, data, reciprocity, politicians, politics, economists, economic behavior, social preferences, altruism,
    Date: 2009
  8. By: Debora Di Gioacchino; Laura Sabani
    Abstract: Recently, it has been argued that the notion of a European social model is misleading and that there are in fact different European social models with different features and different performances in terms of efficiency and equity. In this paper, we look at the welfare state from a political economy point of view and interpret the different regimes as possible outcomes of a political process through which votersf heterogeneous preferences are aggregated. In our model, agents differ in two respects: income and socioeconomic vulnerability. Policy-makers must decide on two policies: a proportional income tax to finance a social transfer, providing equal benefits to all citizens, and a market regulation policy which benefits only vulnerable workers, providing them with additional protection against unemployment risk. Market regulation is inefficient since it decreases aggregate resources. Individualsf heterogeneity generates a conflict over policies. We feature the political process as a two-party electoral competition in a citizen-candidate model with probabilistic voting. We show that an inefficient equilibrium exists and this outcome is more likely the greater are income inequality and the proportion of vulnerable workers. Intuitively, greater inequality raises the level of redistributive spending desired by the poor, making, at the same time, the rich more adverse to the welfare state. In this framework, both the rich and the poor, in order to win the election and realize the fiscal gain, have an incentive to support market restrictions, in the attempt to capture the votes of the vulnerable minority, who benefit from these policies.
    Keywords: welfare state, social protection, market regulations, political process, political economy.
    JEL: D72 H53 L5 J65
    Date: 2009–01
  9. By: Christopher Cotton (Department of Economics, Cornell University)
    Abstract: This paper develops a game-theoretic model of lobbying in which a politician sells access to interest groups. The politician sets an access fee, or the minimum contribution necessary to secure access, and an interest group that pays this fee can share verifiable evidence in favor of its preferred policy. The more the politician knows about interest group evidence, the better able he is to identify and implement the welfare-maximizing policy. In equilibrium, a wealthy interest group must pay more for access than an otherwise similar poor group; and a group involved with an important issue must pay less than an otherwise similar group involved with a less-important issue. The politician sets higher-than-optimal access fees in order to increase contributions. A contribution limit can improve constituent welfare by lowering the price of access, which tends to result in a more-informed politician. However, a limit can also decrease the range of issues for which the politician is willing to sell access, thereby reducing politician information and constituent welfare. Although the optimal limit is binding for some issues, it is never optimal to ban contributions.
    Keywords: Lobbying, campaign contributions, contribution limits, political access, hard information, evidence disclosure
    JEL: D72 D78 D82
    Date: 2008–06–09
  10. By: Bettina Klaus (Harvard Business School, Negotiation, Organizations & Markets Unit); Flip Klijn (Institute for Economic Analysis (CSIC), Campus UAB, Barcelona, Spain)
    Abstract: We consider one-to-one, one-sided matching (roommate) problems in which agents can either be matched as pairs or remain single. We introduce a so-called bi-choice graph for each pair of stable matchings and characterize its structure. Exploiting this structure we obtain as a corollary the "lone wolf" theorem and a decomposability result. The latter result together with transitivity of blocking leads to an elementary proof of the so-called stable median matching theorem, showing how the often incompatible concepts of stability (represented by the political economist Adam Smith) and fairness (represented by the political philosopher John Rawls) can be reconciled for roommate problems. Finally, we extend our results to two-sided matching problems.
    Keywords: fairness, matching, median, stability.
    JEL: C62 C78
    Date: 2009–02
  11. By: Mechtel, Mario; Potrafke, Niklas
    Abstract: This paper examines a framework in which politicians can decrease unemployment via active labor market policies (ALMP). We combine theoretical models on partisan and opportunistic cycles and assume that voters are ignorant of the necessary facts to make informed voting decisions. The model predicts that politicians have incentives for a strategic use of active labor market policies that leads to a political cycle in unemployment and budget deficit. We test the hypotheses predicted by the theoretical model using data from German states from 1985:1 to 2004:11. The results illustrate that opportunistic behavior of politicians can explain the development of ALMP approximated by job-creation schemes.
    Keywords: active labor market policies; political cycles; labor market expenditures; opportunistic politicians; partisan politicians
    JEL: J08 E62 H72 H61 P16
    Date: 2009
  12. By: Christopher R. Berry; Barry C. Burden; William G. Howell
    Abstract: Empirical research on distributive politics emphasizes party and committee leaders in Congress. This paper highlights the president, who most credibly fills the role of the proposer in Baron and Ferejohn’s (1989) seminal model, and who has further opportunities to influence the distribution of federal outlays both later in the appropriations process and after a final bill is enacted. We analyze a large database that tracks the geographic spending of nearly every domestic program over a 21-year period. Using a district fixed-effects estimation strategy, we find only sporadic evidence that committee chairs, party leaders, and majority party members receive larger shares of federal outlays. Instead, we find consistent and robust evidence that districts receive systematically more spending when they are represented by legislators in the president’s party.
    Keywords: political party, distribution, federal spending
    Date: 2009–02
  13. By: Luc LAUWERS
    Abstract: The existence of a Paretian and finitely anonymous ordering in the set of infinite utility streams implies the existence of a non-Ramsey set (a nonconstructive object whose existence requires the axiom of choice). Therefore, each Paretian and finitely anonymous quasi-ordering either is incomplete or does not have an explicit description. Hence, the possibility results of Svensson (1980) and of Bossert, Sprumont, and Suzumura (2006) do require the axiom of choice.
    Keywords: Intergenerational justice; Pareto; Multi-period social choice; Axiom of choice; Constructivism.
    JEL: D60 D70 D90
    Date: 2009–02
  14. By: Makowsky, Michael
    Abstract: Arguments for and against the existence of an American cultural divide are frequently placed in a religious context. This paper seeks to establish that, all politics aside, the American religious divide is real, that modern religious polarization is not a uniquely American phenomenon, and that religious divides can be understood as naturally emergent within the club theory of religion. Analysis of the 2005 Baylor Religion reveals a bimodal distribution of religious commitment in the US. International survey data reveals bimodal distributions in twenty-eight of thirty surveyed countries. The club theory of religion, when applied in a multi-agent model, generates bimodal distributions of religious commitment whose emergence correlates to substitutability of club goods for standard goods and the mean population wage rate. Ramifications of religious bimodality include potential instability of majority rule electoral outcomes. Median estimators, such as majority rule democracy, are non-robust with bimodal distributions. When religion is politically salient and polarized, small errors can disproportionately shift the election result from the preferences of the median voter.
    Keywords: Culture Divide; Religious Divide; Club Theory; Multi-Agent Model; Sacrifice
    JEL: Z12 D71 C63
    Date: 2009–03–30
  15. By: Kessler, Anke; Luelfesmann, Christoph; Myers, Gordon M
    Abstract: The paper studies a federal system where a region provides non-contractible essential inputs for the successful implementation of a local public policy project with spill-overs, and where bargaining between different levels of government may ensure efficient decision making ex post. We ask whether the authority over the public policy measure should rest with the local government or with the central government, allowing financial relationships within the federation to be designed optimally. Centralization is shown to dominate when governments are benevolent. With regionally biased governments, both centralization and decentralization are suboptimal as long as political bargaining does not take place. With bargaining, however, the first best can often be achieved under decentralization, but not under centralization. At the root of this result is the alignment of decision making over essential inputs and project size under decentralized governance.
    Keywords: Constitutions; Decentralization; Federalism; Grants; Political Bargaining
    JEL: D23 D78 H21 H77
    Date: 2009–03
  16. By: CAULIER, Jean-Franois; MAULEON, Ana (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); VANNETELBOSCH, Vincent (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: We develop a theoretical framework that allows us to study which bilateral links and coalition structures are going to emerge at equilibrium. We define the notion of coalitional network to represent a network and a coalition structure, where the network specifies the nature of the relationship each individual has with his coalition members and with individuals outside his coalition. To predict the coalitional networks that are going to emerge at equilibrium we propose the concept of contractual stability which requires that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. We show that there always exists a contractually stable coalitional network under the simple majority decision rule and the component-wise egalitarian or majoritarian allocation rules. Moreover, requiring the consent of group members may help to reconcile stability and efficiency.
    Keywords: networks, coalition structures, contractual stability, allocation rules.
    JEL: A14 C70
    Date: 2008–12
  17. By: Noussair, C.N.; Tan, F. (Tilburg University, Center for Economic Research)
    Abstract: We consider a voluntary contributions game, in which players may punish others after contributions are made and observed. The productivity of contributions, as captured in the marginal-per-capita return, differs among individuals, so that there are two types: high and low productivity. Every two or eight periods, depending on the treatment, individuals vote on a punishment regime, in which certain individuals are permitted, but not required, to have punishment directed toward them. The punishment system can condition on type and contribution history. The results indicate that the most effective regime, in terms of contributions and earnings, is one that allows punishment of low contributors only, regardless of productivity. Nevertheless, only a minority of sessions converge to this system, indicating a tendency for the voting process to lead to suboptimal institutional choice.
    Keywords: Voting;Punishment;Voluntary Contributions;Heterogeneity;Experiment
    JEL: C92 D74 H41
    Date: 2009

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.