New Economics Papers
on Collective Decision-Making
Issue of 2009‒05‒02
seven papers chosen by

  1. Long Term Changes in Voting Power and Control Structure following the Unification of Dual Class Shares By Lauterbach, Beni; Yafeh, Yishay
  2. The Good, the Bad and the Populist: A Model of Political Agency with Emotional Voters By Colin Jennings
  3. Electoral Accountability and Corruption: Evidence from the Audits of Local Governments By Claudio Ferraz; Frederico Finan
  4. How does party fractionalization convey preferences for redistribution in parliamentary democracies ?. By Bruno Amable; Donatella Gatti; Elvire Guillaud
  5. Gender Interactions within Hierarchies: Evidence from the Political Arena By Gagliarducci, Stefano; Paserman, Daniele
  6. Extreme Bounds of Democracy By Martin Gassebner; Michael J. Lamla; James Raymond Vreeland
  7. e-Participation in Austria: Trends and Public Policies By Aichholzer, Georg; Allhutter, Doris

  1. By: Lauterbach, Beni; Yafeh, Yishay
    Abstract: We follow the evolution of ownership structure in a sample of 80 Israeli companies that unified their dual-class shares in the 1990s, and compare it with a control sample of firms that maintained their dual share structure at least until 2000. Our main findings are as follows. First, controlling shareholders offset the dilution of voting rights they incurred upon unification by: 1) increasing their holdings prior to the unification (ex-ante preparation), and 2) by buying shares afterwards; by the end of the sample period their voting power was only marginally lower than in the control sample. This suggests that marginal voting rights are important to controlling shareholders even beyond the 50% threshold. Second, share unifications were not associated with much change in the identity of controlling shareholders. Third, the proportion of firms affiliated with pyramidal business groups in the sample of unifying firms was lower than in the population of listed firms as a whole and not different from that in the control sample, suggesting that pyramidal ownership structures did not replace dual class shares. Finally, unifying firms did not exhibit a substantial improvement in their performance and valuation in comparison with the control sample. We conclude that the regulatory attempt to enforce one share-one vote yielded, at best, a minor improvement in corporate governance.
    Keywords: Corporate Governance; Dual class shares
    JEL: G30 G32
    Date: 2009–04
  2. By: Colin Jennings (Department of Economics, University of Strathclyde)
    Abstract: This paper attempts to extend existing models of political agency to an environment in which voting may be divided between informed and instrumental, informed and ‘expressive’ (Brennan and Lomasky (1993)) and uninformed due to ‘rational irrationality’ (Caplan (2007)). It constructs a model where politicians may be good, bad or populist. Populists are more willing than good politicians to pander to voters who may choose inferior policies in a large-group electoral setting because their vote is insignificant compared with those that voters would choose were their vote decisive in determining the electoral outcome. Bad politicians would ideally like to extract tax revenue for their own ends. Initially we assume the existence of only good and populist politicians. The paper investigates the incentives for good politicians to pool with or separate from populists and focuses on three key issues – (1) how far the majority of voter’s preferences are from those held by the better informed incumbent politician (2) the extent to which the population exhibits rational irrationality and expressiveness (jointly labelled as emotional) and (3) the cost involved in persuading uninformed voters to change their views in terms of composing messages and spreading them. This paper goes on to consider how the inclusion of bad politicians may affect the behaviour of good politicians and suggests that a small amount of potential corruption may be socially useful. It is also argued that where bad politicians have an incentive to mimic the behaviour of good and populist politicians, the latter types of politician may have an incentive to separate from bad politicians by investing in costly public education signals. The paper also discusses the implications of the model for whether fiscal restraints should be soft or hard.
    Keywords: Political Agency, Expressive Voting, Rational Irrationality, Democratic Inefficiency, Populism
    JEL: D72
    Date: 2009–04
  3. By: Claudio Ferraz; Frederico Finan
    Abstract: Political institutions can affect corruption. We use audit reports from an anti-corruption program in Brazil to construct new measures of political corruption in local governments and test whether electoral accountability affects the corruption practices of incumbent politicians. We find significantly less corruption in municipalities where mayors can get reelected. Mayors with re-election incentives misappropriate 27 percent fewer resources than mayors without re-election incentives. These effects are more pronounced among municipalities with less access to information and where the likelihood of judicial punishment is lower. Overall our findings suggest that electoral rules that enhance political accountability play a crucial role in constraining politician’s corrupt behavior.
    JEL: D72 D78 H41 O17
    Date: 2009–04
  4. By: Bruno Amable (Centre d'Economie de la Sorbonne et CEPREMAP); Donatella Gatti (CEPN - Université Paris 13, PSE et IZA); Elvire Guillaud (Centre d'Economie de la Sorbonne)
    Abstract: In this paper, we highlight the link between the political demand and social policy outcome while taking into account the design of the party system. The political demand is measured by indivudual preferences and the design of the party system is defined as the extent of party fractionalization. This is, to our knowledge, the first attempt in the literature to empirically link the political demand and the policy outcome with the help of a direct measure of preferences. Moreover, we account for an additional channel, so far neglected in the literature : The composition effect of the demand. Indeed, the heterogeneity of the demand within countries, more than the level of the demand itself, is shown to have a positive impact on welfare state generosity. This impact increases with the degree of fractionalization of the party system. We run regressions on a sample of 18 OECD countries over 23 years, carefully dealing with the issues raised by the use of time-series cross-section data.
    Keywords: Political demand, party fractionalization, redistribution, time-series-cross-section data.
    JEL: D78 H10 H53 C33
    Date: 2008–11
  5. By: Gagliarducci, Stefano (CEMFI, Madrid); Paserman, Daniele (Boston University)
    Abstract: This paper studies gender interactions within hierarchical organizations using a large data set on the duration of Italian municipal governments elected between 1993 and 2003. A municipal government can be viewed as a hierarchy, whose stability over time depends on the degree of cooperation between and within ranks. We find that in municipalities headed by female mayors, the probability of early termination of the legislature is higher. This result persists and becomes stronger when we control for municipality fixed effects as well as non-random sorting of women into municipalities using regression discontinuity in gender-mixed electoral races decided by a narrow margin. The likelihood that a female mayor survives until the end of her term is lowest when the council is entirely male, and in regions with less favorable attitudes towards working women. The evidence is suggestive that female mayors are less able at fostering cooperation among men, or alternatively, that men are more reluctant to be headed by women. Other interpretations receive less support in the data. Our results may provide an alternative explanation for the underrepresentation of women in leadership positions.
    Keywords: cooperativeness, gender, discrimination, government stability, hierarchies, mayors
    JEL: D74 J16 H72 M54
    Date: 2009–04
  6. By: Martin Gassebner (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Michael J. Lamla (KOF Swiss Economic Institute, ETH Zurich, Switzerland); James Raymond Vreeland (Georgetown University, Edmund A. Walsh School of Foreign Service)
    Abstract: There are many stories of democracy but little consensus over which variables robustly determine its emergence and survival. We apply extreme bounds analysis to test the robustness of 59 factors proposed in the literature, evaluating over 3 million regressions. The most robust determinants of the transition to democracy are GDP growth (a negative eect), past transitions (a positive eect), and OECD membership (a positive eect). There is some evidence that fuel exporters and Muslim countries are less likely to see democracy emerge, although the latter finding is driven entirely by oil producing Muslim countries. Regarding the survival of democracy, the most robust determinants are GDP per capita (a positive effect) and past transitions (a negative effect). There is some evidence that having a former military leader as the chief executive has a negative effect, while having other democracies as neighbors has a reinforcing effect.
    Keywords: democracy, extreme bounds analysis, regime transition
    JEL: C23 F59 O11 P16 P48
    Date: 2009–04
  7. By: Aichholzer, Georg; Allhutter, Doris
    Abstract: The paper is a first step to assess the status of e-participation within the political system in Austria. It takes a top-down perspective focusing on the policy framework related to citizens’ rights in the digital environment, the role of public participation and public policies on e-participation in Austria. The analysis of the development of e-participation in Austria as well as of social and political trends regarding civic participation in general and its electronic embedding, show a remarkable recent increase of e-participation projects and related initiatives. The paper identifies main institutional actors actively dealing with or promoting e-participation and reviews government initiatives as well as relevant policy documents specifically addressing and relating to e-participation or e-democracy. Finally, it takes a look at the state of the evaluation of e-participation. A major conclusion is that e-participation has become a subject of public policies in Austria; however, the recent upswing of supportive initiatives for public participation and e-participation goes together with ambivalent attitudes among politicians and administration towards e-participation.
    Keywords: e-participation, e-democracy, citizens’ rights, institutional actors, public policies, government initiatives, evaluation
    Date: 2009–02–15

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