New Economics Papers
on Collective Decision-Making
Issue of 2009‒08‒02
six papers chosen by

  1. Does democracy reduce terrorism in developing nations? By Subhayu Bandyopadhyay; Javed Younas
  2. Predicting Elections from Biographical Information about Candidates By Armstrong, J. Scott; Graefe, Andreas
  3. Electoral Fraud, the Rise of Peron and Demise of Checks and Balances in Argentina By Lee J. Alston; Andrés A. Gallo
  4. Federalism, Party Competition and Budget Outcome: Empirical Findings on Regional Health Expenditure in Italy By Giardina, Emilio; Cavalieri, Marina; Guccio, Calogero; Mazza, Isidoro
  5. Reforming Institutions: Where to Begin? By M. Idrees Khawaja; Sajawal Khan
  6. The Structure of Unstable Power Systems By Joseph Abdou

  1. By: Subhayu Bandyopadhyay; Javed Younas
    Abstract: Understanding the causes of terrorism is important in predicting it and in developing an effective counterterrorism strategy. Data on the incidence of terrorist attacks and casualties suggest that domestic terrorism poses a substantially larger threat than transnational terrorism in developing countries. In spite of this fact, research has focused mostly on the latter. In analyzing both types, we find that political freedom and civil liberties affect domestic terrorism in a non monotonic way. Countries with either authoritarian regimes or with mature democratic systems experience less terrorism. This result has important policy implications: It suggests that one needs to be patient in the path to democracy, because the transition is likely to be associated with more violence. Interestingly, more religious fractionalization is associated with less terrorism in most of our specifications, while ethnic fractionalization raises domestic terrorism. On the other hand, poverty and lack of education do not appear to directly influence either domestic or transnational terrorism. All specifications show that “rule of law” reduces terrorism.
    Keywords: Terrorism
    Date: 2009
  2. By: Armstrong, J. Scott; Graefe, Andreas
    Abstract: Using the index method, we developed the PollyBio model to predict election outcomes. The model, based on 49 cues about candidates’ biographies, was used to predict the outcome of the 28 U.S. presidential elections from 1900 to 2008. In using a simple heuristic, it correctly predicted the winner for 25 of the 28 elections and was wrong three times. In predicting the two-party vote shares for the last four elections from 1996 to 2008, the model’s out-of-sample forecasts yielded a lower forecasting error than 12 benchmark models. By relying on different information and including more variables than traditional models, PollyBio improves on the accuracy of election forecasting. It is particularly helpful for forecasting open-seat elections. In addition, it can help parties to select the candidates running for office.
    Keywords: forecasting; unit weighting; Dawes rule; differential weighting
    JEL: C53 D72
    Date: 2009–06–23
  3. By: Lee J. Alston; Andrés A. Gallo
    Abstract: The future looked bright for Argentina in the early twentieth century. It had already achieved high levels of income per capita and was moving away from authoritarian government towards a more open democracy. Unfortunately, Argentina never finished the transition. The turning point occurred in the 1930s when to stay in power, the Conservatives in the Pampas resorted to electoral fraud, which neither the legislative, executive, or judicial branches checked. The decade of unchecked electoral fraud led to the support for Juan Peron and subsequently to political and economic instability.
    JEL: H11 K0 K11 N16 N26 N46 O11 O54 P48
    Date: 2009–07
  4. By: Giardina, Emilio; Cavalieri, Marina; Guccio, Calogero; Mazza, Isidoro
    Abstract: In the last decade, Italy has experienced a considerable decentralization of functions to the regions. This transformation has been especially relevant for the National Health System that has de facto assumed a federal system design. The federal reform aimed at disciplining public health expenditure, which drains a substantial share of the budget of Italian regions and is among the main causes of the regional deficits. Political economic analysis, however, suggests that impact of federalism on public expenditure depends on central and local government strategies to win in the electoral competition. Results derived in this preliminary study indicate that political competition actually works as a tool of fiscal discipline; it shows a restraining effect on public health expenditure.
    Keywords: Fiscal federalism; local budget; multi-level policy-making; public expenditure; political competition; health economics
    JEL: H51 H72 I18 D78 D72
    Date: 2009
  5. By: M. Idrees Khawaja (Pakistan Institute of Development Economics, Islamabad); Sajawal Khan (State Bank of Pakistan, Karachi)
    Abstract: No society is devoid of institutions but many live with poor institutions. Institutions promote growth. This is a view now held firmly and widely. The task then is to ‘engineer’ growth-promoting institutions. Endogeneity characterises institutions; for example, groups enjoying political power influence economic institutions, but political power itself is a function of wealth. Given endogeneity, if the task is to design institutional reforms, the question then arises, as to what to reform first. We use the theories of institutional evolution put forth by Douglas North, Darron Acemoglu and Dani Rodrik and the historical experiences of different countries in the context of development (or non-development) of institutions, to determine the starting-point of institutional reforms, if the objective is to design institutional reforms. We argue that in Pakistan, neither large commercial interest nor fiscal constraints can force the de jure power to reform institutions. Typically, large commercial interests in Pakistan have thrived on favours from de jure power, and therefore do not have teeth. Given strategic interests of foreign powers, foreign aid will alleviate the fiscal constraint and the ruler-citizens bargain—though reforming institution in exchange for tax revenue will remain a dream. The country does not seem ready for a revolution either; the thought process that typically precedes revolutions seems to have barely begun. The alternative, that remains, then is the gradualist approach preferred by North, Acemoglu, and Rodrik. Institutional reforms in Pakistan should begin with reform of the educational system—the introduction of a common educational system for all and sundry up to a certain level. Two reasons make us chose the educational system as the candidate to start the process of institutional reform. First, a common educational system will produce a shared value system which, in turn, will reduce the heterogeneity in the society. Lesser heterogeneity in society will then facilitate an agreement over the minimal set of institutional reforms. Second, politicians being myopic, the de jure power is more likely to concede to the demand for reform of the educational system as compared to the demand to, say, put an end to rent-seeking. The former will affect the de jure power a generation hence, while the latter will affect them today.
    Keywords: Institutional Evolution, Institutional Change, Human Behaviour
    JEL: D02 P16
    Date: 2009
  6. By: Joseph Abdou (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: A power system is modeled by an interaction form, the solution of which is called a settlement. By stability we mean the existence of some settlement for any preference profile. Like in other models of power structure, instability is equivalent to the existence of a cycle. Structural properties of the system like maximality, regularity, superadditivity and exactness are defined and used to determine the type of instability that may affect the system. A stability index is introduced. Loosely speaking this index measures the difficulty of the emergence of configurations that produce a deadlock. As applications we have a characterization of solvable game forms, an analysis of the structure of their instability and a localization of their stability index in case where solvability fails.
    Keywords: Interaction form, effectivity function, stability index, Nash equilibrium, strong equilibrium, solvability, acyclicity, Nakamura number, collusion.
    Date: 2009–05

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