New Economics Papers
on Collective Decision-Making
Issue of 2009‒11‒21
nine papers chosen by

  1. Communication in a monetary policy committee: a note By Jan Marc Berk; Beata Bierut
  2. Testing Models of Distributive Politics using Exit Polls to Measure Voters Preferences and Partisanship By Valentino Larcinese; James M. Snyder; Cecilia Testa
  3. Does the Risk or Realization of a Federal Election Precipitate Canadian Output Growth? By J. Stephen Ferris; Marcel-Cristian Voia
  4. Deliberative democracy and its informational basis: what lessons from the Capability Approach By Robert Salais
  5. Romes without Empires: Urban Concentration, Political Competition, and Economic Growth By Cem Karayalcin; Mehmet Ali Ulubasoglu
  6. The lasting lack of direct universal suffrage for French metropolitan areas : a shackle that must be rapidly cancelled or a great asset that should be absolutely protected ? (In French) By Olivier THOMAS (LEREPS-GRES)
  7. Accountability and Cheap Talk By Di Maggio, Marco
  8. Securitization and moral hazard: evidence from a lender cutoff rule By Ryan Bubb; Alex Kaufman
  9. Third-Party Intervention in Conflicts and the Indirect Samaritan’s Dilemma By J. Atsu Amegashie

  1. By: Jan Marc Berk; Beata Bierut
    Abstract: This paper models monetary policy decisions as being taken by an interacting group of heterogeneous policy makers, organized in a committee. Disclosing the premises on which an individual view on the interest rate is based is likely to provide value added in terms of the quality of the collective decision over-and-above simultaneous voting on interest rates. However, this is not generally true, as communication also involves a trade-off in the quality of views of committee members, which can lead to a reduction in the quality of collective decisions below the outcome achieved under simple majority voting. Still, communication is a relatively effective way to implement the 'knowledge pooling' argument pro-collective decision-making, compared to expanding the size of the MPC.
    Keywords: committees; deliberations; correlated votes; simple majority voting.
    JEL: E58 D71 D78
    Date: 2009–11
  2. By: Valentino Larcinese (LSE); James M. Snyder (MIT); Cecilia Testa (University of London)
    Abstract: This paper tests various hypotheses about distributive politics by studying the distribution of federal spending across U.S. states over the period 1978-2002. We improve on previous work by using survey data to measure the share of voters in each state that are Democrats, Republicans, and independents, or liberals, conservatives and moderates. We find no evidence that the allocation of federal spending to the states is distorted by strategic manipulation to win electoral support. States with many swing voters are not advantaged compared to states with more loyal voters, nor do “battleground states” attract more federal funds. Moreover, we find that spending has little or no effect on voters’ choices, whereas partisanship and ideology have massive effects.
    Keywords: Ideological attitudes, partisanship, distributive politics, federal budget
    Date: 2009–11–17
  3. By: J. Stephen Ferris (Department of Economics, Carleton University); Marcel-Cristian Voia (Department of Economics, Carleton University)
    Abstract: This paper asks whether Canadian data is consistent with political opportunism, partisanship and/or political competition effects on real output growth since Confederation. Using data from the 1870 to 2005 time period, we find support for an electoral cycle only if actual election dates are replaced with the predicted election hazard (generated by from a Cox-proportional hazard model) in the test. On the other hand, we find strong evidence for the existence of partisan cycles in the data and mixed evidence with respect to whether changes in the degree of political competition have affected real output growth. Evidence in favour of such an effect arises only in more recent times, from 1924 onwards.
    Date: 2009–11–10
  4. By: Robert Salais (IDHE - Institutions et Dynamiques Historiques de l'Economie - CNRS : UMR8533 - Université Panthéon-Sorbonne - Paris I - Université Paris VIII Vincennes-Saint Denis - Université de Paris X - Nanterre - École normale supérieure de Cachan - ENS Cachan, CMB - Centre Marc Bloch - Ministère des Affaires étrangères et européennes - CNRS : USR3130 - Bundesministerium für Bildung und Forschung - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique)
    Abstract: Amartya Sen's works lead to focus theoretical issues relative to deliberative democracy, not only on optimal procedural rules, but upstream on the substantial content of the informational basis that serves as background to deliberation. The contribution explores the issues to take on board, especially questions on deliberative inquiries and the constitution of publics.
    Keywords: Deliberative Democracy; Capability; Inquiry; Informational Basis; Amartya Sen
    Date: 2009–07–16
  5. By: Cem Karayalcin; Mehmet Ali Ulubasoglu
    Abstract: Many developing economies are characterized by the dominance of a super metropolis. Taking historical Rome as the archetype of a city that centralizes political power to extract resources from the rest of the country, we develop two models of rent-seeking and expropriation which illustrate different mechanisms that relate political competition to economic outcomes. The "voice" model shows that rent-seeking by different interest groups (localized in different specialized cities/regions) will lead to low investment and growth when the number of such groups is small. The "exit" model allows political competition among those with political power (to tax or expropriate from citizens) over a footloose tax base. It shows that when this power is centralized in relatively few urban nodes, tax rates would be higher and growth rates lower. Our empirical work exploits the connection between urban wealth (with the political power it affords) and national soccer championships. By using a cross-country data set for 103 countries for the period 1960-99, we find strong and robust evidence that countries with higher concentrations in urban wealth-as proxied by the number of different cities with championships in national soccer leagues-tend to have lower long-run growth rates.
    Date: 2009–11–11
  6. By: Olivier THOMAS (LEREPS-GRES)
    Abstract: It is a long time since the problem of the lack of direct universal suffrage for the French metropolitan areas with own taxes (MAOT) has been pointed out. Nevertheless, nothing has ever been done to change this current situation, in spite of a wide agreement in favor of direct universal suffrage for French MAOT. This paper intends to understand the reasons of such a paradox. As a starting point, the arguments in favor of more democracy for MAOT, thanks to direct elections, have been underlined. Then, as these arguments are supposed to be relevant, the alternative “goods reasons” contended by national and local elected actors (mayors, senators, …), implicitly claiming for status quo, have been detailed: the will to preserve the fragile existence of MAOT, to preserve municipal boundaries as the best place for local democracy, as well as to save municipal mandates and to evade the law about plurality of mandates
    Keywords: local democracy – direct universal suffrage – metropolitan areas with own taxes – plurality of mandates – mayor
    JEL: H30 H73 R51
    Date: 2009
  7. By: Di Maggio, Marco
    Abstract: This paper analyzes a cheap talk model with heterogeneous receivers who are accountable for the correctness of their actions, showing that there exists a truth-revealing equilibrium. This sheds new light on the important role played by elections in shaping politicians' and, more surprisingly, advisor's behaviors in a cheap-talk setting. In deciding which message to send, the advisor is aware that he could use this message to affect the electoral outcome, the manipulation effect, or to shape the first period policy, the influence effect. When the first effect dominates the second there exists an informative equilibrium. In addition, I show that the presence of heterogeneous politicians leads to an increase in voters' welfare as a result of better-informed decisions. I allow the politician to delegate authority to the expert, showing that due to the signaling value of the politician's delegation decision, only corrupt or incompetent incumbents will delegate the second-period decision. Finally, I generalize the results in a number of different directions.
    Keywords: cheap talk; corruption; reputation; ideology.
    JEL: D73 D83 D82
    Date: 2009–11–15
  8. By: Ryan Bubb; Alex Kaufman
    Abstract: Credit score cutoff rules result in very similar potential borrowers being treated differently by mortgage lenders. Recent research has used variation induced by these rules to investigate the connection between securitization and lender moral hazard in the recent financial crisis. However, the conclusions of such research depend crucially on understanding the origin of these cutoff rules. We offer an equilibrium model in which cutoff rules are a rational response of lenders to per-applicant fixed costs in screening. We then demonstrate that our theory fits the data better than the main alternative theory already in the literature, which supposes cutoff rules are exogenously used by securitizers. Furthermore, we use our theory to interpret the cutoff rule evidence and conclude that mortgage securitizers were in fact aware of and attempted to mitigate the moral hazard problem posed by securitization.
    Keywords: Mortgage-backed securities ; Mortgage loans ; Credit scoring systems
    Date: 2009
  9. By: J. Atsu Amegashie (Department of Economics,University of Guelph)
    Abstract: I study a two-period model of conflict with two combatants and a third party who is an ally of one of the combatants. The third party is fully informed about the type of her ally but not about the type of her ally’s enemy. There is a signaling game between the third party and her ally’s enemy where preferences do not satisfy the single-crossing condition. There exist perfect Bayesian equilibria in which the third party’s intervention worsens the conflict by energizing her ally’s enemy wherein he (i.e., the enemy) pretends to be stronger than he actually is in order to discourage the third-party from assisting her ally. This creates a dilemma for the third party which may be referred to as the indirect Samaritan’s dilemma. I find that the expectation of a third-party’s military assistance to an ally coupled with the third-party’s limited information about the strength of her ally’s enemy can be strategically exploited by the enemy through pronouncements that would not have been credible if the third party was fully informed about her ally’s enemy. Remarkably, the third-party’s ally, who is fully informed about the enemy, is unable to counteract this behavior by using credible signals to reveal his information to the third party. In some cases, the third party and her ally are strictly better off if the third-party’s decision to withdraw from or stay in the conflict is based on her prior beliefs and not on the current conditions of the conflict even if observing the current conditions improves the third-party’s information. Unlike the standard Samaritan’s dilemma, a commitment by the third party to a given level of assistance may be welfare-improving.
    Keywords: Bayesian equilibrium, Grossman-Perry refinement, conflict, intuitive criterion, Samaritan’s dilemma.
    JEL: D72 D74
    Date: 2009

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