New Economics Papers
on Collective Decision-Making
Issue of 2009‒08‒30
six papers chosen by

  1. Temporal aggregation in political budget cycles By Jorge M. Streb; Daniel Lema
  2. Persuasion: Empirical Evidence By Stefano DellaVigna; Matthew Gentzkow
  3. Decision Making Using Rating Systems: When Scale Meets Binary By Bargagliotti, Anna E.; Li, Lingfang (Ivy)
  4. Veto Power and Wealth: Analysis of the Development of the Swiss Old Age Security By Zenker, Christina G.
  5. Institution design in social dilemmas: How to design if you must? By Rockenbach, Bettina; Wolff, Irenaeus
  6. Designing Politicization: How control mechanisms in national parliaments affect parliamentary debates in EU policy-formulation By Pieter de Wilde

  1. By: Jorge M. Streb; Daniel Lema
    Abstract: While existing cross-country studies on political budget cycles rely on annual data, we build a panel with quarterly and monthly data from Latin American and OECD countries over the 1980-2005 period. Disaggregated data allow to center the electoral year more precisely, and show the effects are concentrated in a three-quarter window around elections. Cycles are statistically significant only in Latin America, but the pattern is similar to OECD countries: the budget surplus/GDP ratio falls in the election period and rises in the post-election period. In line with the logic of rational opportunistic manipulation, these effects cancel out.
    Keywords: temporal aggregation, electoral window, pre- and post-electoral effects, political budget cycles, rational opportunistic cycles
    JEL: D72 D78 H60
    Date: 2009–08
  2. By: Stefano DellaVigna; Matthew Gentzkow
    Abstract: We provide a selective survey of empirical evidence on the effects as well as the drivers of persuasive communication. We consider persuasion directed at consumers, voters, donors, and investors. We organize our review around four questions. First, to what extent does persuasion affect the behavior of each of these groups? Second, what models best capture the response to persuasive communication? In particular, we distinguish information-based models from preference-based models. Third, what are persuaders' incentives and what limits their ability to distort communications? Finally, what evidence exists on the equilibrium outcomes of persuasion in economics and politics?
    JEL: D11 D21 G14 L00
    Date: 2009–08
  3. By: Bargagliotti, Anna E.; Li, Lingfang (Ivy)
    Abstract: Rating systems measuring quality of products and services (i.e., the state of the world) are widely used to solve the asymmetric information problem in markets. Decision makers typically make binary decisions such as buy/hold/sell based on aggregated individuals' opinions presented in the form of ratings. Problems arise, however, when different rating metrics and aggregation procedures translate the same underlying popular opinion to different conclusions about the true state of the world. This paper investigates the inconsistency problem by examining the mathematical structure of the metrics and their relationship to the aggregation rules. It is shown that at the individual level, the only scale metric (1,. . . ,N) that reports people's opinion equivalently in the a binary metric (-1, 0, 1) is one where N is odd and N-1 is not divisible by 4. At aggregation level, however, the inconsistencies persist regardless of which scale metric is used. In addition, this paper provides simple tools to determine whether the binary and scale rating systems report the same information at individual level, as well as when the systems di®er at the aggregation level.
    Keywords: rating, ranking, preference, asymmetric information
    JEL: D70 D82
    Date: 2009–08–25
  4. By: Zenker, Christina G.
    Abstract: Switzerland was one of the last OECD-countries to introduce a program for old age security – the AHV. For many decades, expenditures both in absolute terms and as a portion of GDP remained low in OECD comparison. In the 1970ies however, expenditures exploded – within 10 years, the expenditures as a percentage of GDP doubled. This article explains this astonishing development by applying the veto player theory. Veto player theory is useful to determine changes in the policy stability. The higher the policy stability, the more difficult it is to move away from the political status quo. The lower the policy stability, the more probable it is that reforms and changes in government programs can be achieved. This article shows that the policy stability was particularly high in the constitution phase (from 1890 to 1947) and the consolidation phase (from 1974 to the present) and low in the phase in between (from 1948 to 1973), when the foundation for the expansion was set.
    Keywords: Veto player theory; Political Institutions; Direct Democracy; Social Spending
    JEL: H55 D02 D72
    Date: 2009–08
  5. By: Rockenbach, Bettina; Wolff, Irenaeus
    Abstract: Considerable experimental evidence has been collected on how to solve the public-good dilemma. In a 'first generation' of experiments, this was done by presenting subjects with a pre-specified game out of a huge variety of rules. A 'second generation' of experiments introduced subjects to two different environments and had subjects choose between those. The present study is part of a 'third generation', asking subjects not only to choose between two environments but to design their own rule sets for the public-good problem. Whereas preceding 'third-generation' experiments had subjects design and improve their strategies for a specified game, this study is the first to make an attempt at answering the question of how people would shape their environment to solve the public-good dilemma were they given full discretion over the rules of the game. We explore this question of endogenous institution design in an iterated design-and-play procedure. We observe a strong usage of punishment and redistribution components, which diminishes over time. Instead, subjects successfully contextualize the situation. Interestingly, feedback on fellow-players’ individual behavior tends to be rendered opaque. On average, rules do improve with respect to the welfare they elicit, albeit only to a limited degree.
    Keywords: Public good; strategy method; experiment; public choice
    JEL: C9 D7 D71 C92 D72 C72
    Date: 2009–07–17
  6. By: Pieter de Wilde
    Abstract: This paper asks how ex ante and ex post control mechanisms structuring the involvement of national parliaments in EU policy-formulation affect the size and scope of conflict of parliamentary debates. The direct and indirect effects of control mechanisms are assessed in a comparative case study on plenary parliamentary debates in the Danish Folketing and Dutch Tweede Kamer on the EU multiannual budgets Delors II, Agenda 2000 and Financial Perspectives 2007-2013. It finds that control mechanisms have direct effects on the size of parliamentary debate and indirectly on the scope of conflict. As control mechanisms structure the timing of debates, different interactions with the policy-formulation process and media coverage are created leading to different scopes of conflict. It finds that ex ante mechanisms trigger smaller, more partisan debates at an early stage of the policy-formulation process, whereas ex post mechanisms stimulate larger, later and intergovern-mental debates. If, from a normative democratic point of view, we value large, partisan debates, these findings present a problem as there appears to be a trade-off between high quantity on the one hand, and partisan conflict on the other hand.
    Keywords: agenda 2000; budget; Denmark; national parliaments; Netherlands
    Date: 2009–08–15

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