New Economics Papers
on Collective Decision-Making
Issue of 2009‒09‒19
twelve papers chosen by

  1. It Takes Two to Tango: Lobbies and the Political Business Cycle By Horgos, Daniel; Zimmermann, Klaus W.
  2. Candidate nomination procedures andpolitical selection: evidence from LatinAmerican parties By Fernando Aragon
  3. Immigration Policy with Partisan Parties By Humberto Llavador; Angel Solano-García
  4. Direkte Demokratie und Menschenrechte By Gebhard Kirchgässner
  5. Caste and punishment : the legacy of caste culture in norm enforcement By Hoff, Karla; Kshetramade, Mayuresh; Fehr, Ernst
  6. Did the « Pax Electrica » agreements reduce the Suez’ power relationship on Elia, the Belgian electricity grid manager ? By Marc Levy
  7. Do Small States Get More Federal Monies?Myth and Reality About the US SenateMalapportionment By Valentino Larcinese; Leonzio Rizzo; Cecilia Testa
  8. Tax avoidance, endogenous social norms, and the comparison income effect By Alessandro Balestrino
  9. Soldiers or Bureaucrats? Conflict and the Military’s Role in Policy-Making By Gabriel Leon
  10. On Rent Seeking and Inclusiveness By Richard L. Carson
  11. Professionals Do Not Play Minimax: Evidence from Major League Baseball and the National Football League By Kenneth Kovash; Steven D. Levitt
  12. Pet Overpopulation: An Economic Analysis By Stephen Coate; Brian Knight

  1. By: Horgos, Daniel (Helmut Schmidt University, Hamburg); Zimmermann, Klaus W. (Helmut Schmidt University, Hamburg)
    Abstract: With interest groups significantly affecting economic performance (according to Mancur Olson) and a vital interest of governments in economic growth and low unemployment in order to win elections, there should be a link between political business cycles and the evolution of lobbies over time which has totally been ignored in the literature up to now. In modeling this link in a theoretical and empirical way we try to answer two questions: Is it possible to interpret Olson´s Law of Interest Groups not only as a long run phenomenon but also in a short-run perspective, integrating it into the theory of political business cycles? And: is there any empirical evidence that a typical pattern of lobby behavior and macroeconomic status exists which is consistent over a couple of election periods? In order to investigate these issues, we first analyze some literature that is usually ignored in the more technical contributions evaluating Olson´s law, but proves to be highly important as background for answering the above mentioned questions. We then illustrate how a model consisting of Olson´s interest-groups theory and the endeavors of governments to win the majority of votes in elections could look like, before we perform a time-series-analysis based on the lobby-list of the German Bundestag in order to gain some more insights into the relationships between lobbies, governments and voters. As a result we discover a consistent behavior of the lobbies over the cycle that boils down to some kind of non-aggression pact between the lobbies and the governments irrespective of their political alignments.
    Keywords: interest groups; political business cycles; growth; unemployment; inflation
    JEL: D72 D78
    Date: 2009–09–07
  2. By: Fernando Aragon
    Abstract: This paper explores empirically the role of nomination procedures on politicalselection and the determinants for adopting contestable selection methods such asprimaries. Using data from Latin American parties, I find evidence that politicalcompetition increases probability of primary adoption. Moreover, primarynominated candidates obtained larger vote shares and during their mandatecountries experienced improvements in several measures of quality of government.The results exploit within party variation and are robust to relevant identificationconcerns. Together, these findings suggest that nomination procedures matter forpolitical selection and that the quality differences are significant enough to influenceelectoral and economic outcomes.
    Keywords: Primaries, political selection, political competition, quality of politicians.
    JEL: D72 D73 H39 O12
    Date: 2009–01
  3. By: Humberto Llavador; Angel Solano-García
    Abstract: This paper analyzes the political economy of immigration when the salient electoral issue is the level of immigrants and the relevant immigration policy is the expenditure in immigration control. We consider that immigration affects voters’ welfare through economic and non economic factors. We model political competition à la Wittman with the ideology of parties endogenously determined at equilibrium. Numerical simulations provide the levels of immigration proposed by the two parties and the composition of parties’ constituencies. At equilibrium, parties propose different levels of immigration, located to the left and to the right of the median voter’s ideal point. We find that improvements in the efficacy of immigration control increases the probability of victory of the party proposing a tighter immigration policy and decreases the disparity in parties’ policy proposals.
    Keywords: Immigration, ideological parties, unskilled and skilled labor
    JEL: J61 F22 D72
    Date: 2009–08
  4. By: Gebhard Kirchgässner
    Abstract: There is a basic tension between the principle of democracy and the rule of law. This becomes obvious whenever the Swiss citizens accept an initiative that is incompatible with the European Convention on Human Rights. First, we discuss the traditions behind these two principles before we survey the empirical papers about the relation between direct democracy and minority rights in the US as well as in Switzerland. Then we discuss the literature on the relation between direct democracy and death penalty. There, the conflict becomes rather obvious. Solutions, which will always involve compromises between these two principles, necessitate some role of the Supreme Court, at the cost of some, but only minor limitations of direct popular rights.
    Keywords: Direct Democracy, Human Rights, Constitution, Rule of Law
    JEL: H11 H72 H74
    Date: 2009–09
  5. By: Hoff, Karla; Kshetramade, Mayuresh; Fehr, Ernst
    Abstract: Well-functioning groups enforce social norms that restrain opportunism, but the social structure of a society may encourage or inhibit norm enforcement. This paper studies how the exogenous assignment to different positions in an extreme social hierarchy - the caste system - affects individuals'willingness to punish violations of a cooperation norm. Although the analysis controls for individual wealth, education, and political participation, low-caste individuals exhibit a much lower willingness to punish norm violations that hurt members of their own caste, suggesting a cultural difference across caste status in the concern for members of one’s own community. The lower willingness to punish may inhibit the low caste’s ability to sustain collective action and so may contribute to its economic vulnerability.
    Keywords: Gender and Social Development,Corruption&Anitcorruption Law,Anthropology,Access to Finance,Social Inclusion&Institutions
    Date: 2009–09–01
  6. By: Marc Levy (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels.)
    Abstract: The company Elia, which manages the grid system of electricity in Belgium, is mainly controlled by the principal producer of electricity, Electrabel, and by political powers. The Belgian state has recently constrained the French group to yield 3% of its stake in Elia as foreseen in the Pax Electrica agreements. This article studies the impact of this transfer by means of the Banzhaf index that measures the intensity of control. The results show that theoretically these agreements change the power relationship on the manager of the grid.
    Keywords: Ownership and control, Electricity market, Banzhaf index
    JEL: G32 L12 L22 L94
    Date: 2009–09
  7. By: Valentino Larcinese; Leonzio Rizzo; Cecilia Testa
    Abstract: We analyze the relationship between senate malapportionment and the allocation ofthe US federal budget to the states during the period 1978-2002. A substantialliterature originating from the influential paper by ?) finds that small andoverrepresented states get significantly larger shares of federal funds. We show thatthese studies suffer from fundamental identification problems and grosslyoverestimate the impact of malapportionment. Most of the estimated impact is not ascale but a change effect. Rather than evidence of "small state advantage", we findthat states with fast growing population are penalized in the allocation of the federalbudget independently of whether they are large or small.
    Keywords: federal budget, malapportionment, small state advantage,overrepresentation
    JEL: D72 H61 H77
    Date: 2009–04
  8. By: Alessandro Balestrino
    Abstract: We analyse a model of income tax avoidance with heterogenous agents; we assume the presence of a comparison income e¤ect and of a psychic cost (disutility) of tax dodging. In this context, we show two sets of results. First, we study the policy preferences of the agents, and identify a median-agent political equilibrium. Paralleling previous ?ndings in the optimal taxation literature, we show that the comparison income e¤ect calls for a high degree of progressivity of the income tax; additionally, we ?nd that this tendence is strenghtened by the psychic cost of avoidance. Second, we model the endogenous formation of the stigma attached to the act of avoidance as a "conformism game", and propose a "modal-agent social equilibrium". We also argue that, in general, the stigma is motivated by the desire to make redistribution more e¤ective, as well as by the need to facilitate social competition.
    Keywords: tax avoidance, social norms, conformism, comparison income, median voter
    JEL: D72 H26 H31 Z13
    Date: 2009–06
  9. By: Gabriel Leon
    Abstract: One of the most striking institutional features of many less developed countries is that their militaries are closely involved in policy-making, potentially having a large impact on economic outcomes. This paper examines the role of the military in setting policy. For this purpose it develops one of the first models of the military, where its political involvement can take two forms: direct when the military runs the government, and indirect when it influences policy without governing directly. We focus on civilian regimes and find that war decreases the payoff to the military from both forms of involvement, but also makes staging successful coups easier. In equilibrium, an increase in the likelihood of war makes indirect involvement less likely; its impact on coups, which are aimed at establishing direct control, is non-monotonic. We show empirical evidence for this non-monotonic relationship, withcoups being least likely for low and high probabilities of war.
    Keywords: institutions, conflict, political economy, military, war, coups
    JEL: O38 O17 H11 H56 D72
    Date: 2009–07
  10. By: Richard L. Carson (Department of Economics, Carleton University)
    Abstract: Using an extension of a standard rent-seeking model, this paper shows that "inclusiveness", as defined and measured in the text, is the property of a political system that motivates government to deter destructive rent seeking. Highly-inclusive polities are likely to be democracies since dictatorships lack a key prerequisite for inclusiveness. However, democracies are not necessarily highly inclusive.
    Keywords: Rent seeking, inclusiveness
    JEL: D72 H00 H19
    Date: 2009–08–26
  11. By: Kenneth Kovash; Steven D. Levitt
    Abstract: Game theory makes strong predictions about how individuals should behave in two player, zero sum games. When players follow a mixed strategy, equilibrium payoffs should be equalized across actions, and choices should be serially uncorrelated. Laboratory experiments have generated large and systematic deviations from the minimax predictions. Data gleaned from real-world settings have been more consistent with minimax, but these latter studies have often been based on small samples with low power to reject. In this paper, we explore minimax play in two high stakes, real world settings that are data rich: choice of pitch type in Major League Baseball and whether to run or pass in the National Football League. We observe more than three million pitches in baseball and 125,000 play choices for football. We find systematic deviations from minimax play in both data sets. Pitchers appear to throw too many fastballs; football teams pass less than they should. In both sports, there is negative serial correlation in play calling. Back of the envelope calculations suggest that correcting these decision making errors could be worth as many as two additional victories a year to a Major League Baseball franchise, and more than a half win per season for a professional football team.
    JEL: D01 D82
    Date: 2009–09
  12. By: Stephen Coate; Brian Knight
    Abstract: This paper considers the problem of pet overpopulation. It develops a tractable dynamic model whose positive predictions square well with key features of the current U.S. market for pets. The model is used to understand, from a welfare economic perspective, the sense in which there is \overpopulation" of pets and the underlying causes of the problem. The paper also employs the model to consider what policies might be implemented to deal with the problem. A calibrated example is developed to illustrate these corrective policies and quantify the welfare gains they produce.
    Date: 2009

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