New Economics Papers
on Collective Decision-Making
Issue of 2010‒05‒02
eleven papers chosen by

  1. Serving the Public Interest By Thomas Markussen; Jean-Robert Tyran
  2. Fiscal federalism and electoral accountability By Toke S. Aidt; Jayasri Dutta
  3. Strategic Forecasting on the FOMC By Peter Tillmann
  4. A single minded European representation? From illusion and delusion to reality of a European single seat By Miguel Rocha de Sousa
  5. The Larger the Better? The Role of Interest-Group Size in Legislative Lobbying By Maik T. Schneider
  6. Monetary Policy Committees, Learning, and Communication By Anke Weber
  7. Fiscal equalization and political conflict By Maria Cubel
  8. How Would Your Kids Vote if I Open my Doors? Evidence from Venezuela By Francisco Rodriguez; Rodrigo Wagner
  9. Dilemmas of public election By Estrada, Fernando
  10. Modularity and Optimality in Social Choice By Gennaro Amendola; Simona Settepanella
  11. Dominant Strategy Compromises By Peter Postl

  1. By: Thomas Markussen (Department of Economics, University of Copenhagen); Jean-Robert Tyran (Department of Economics, University of Copenhagen)
    Abstract: We present a model of political selection in which voters elect a president from a set of candidates. We assume that some of the candidates are benevolent and that all voters prefer a benevolent president, i.e. a president who serves the public interest. Yet, political selection may fail in our model because voters cannot easily tell benevolent from egoistic candidates by observing their pre-election behavior. Egoistic types may strategically imitate benevolent types in the pre-election stage to extract rents once in office. We show that strategic imitation is less likely if the political system is likely to produce good governance. That is, if benevolent candidates are common, if the president has little discretionary power, and if the public sector is effective. We analyze the role of institutions like investigative media and re-election and show that they can improve or further hamper political selection, depending on the parameters of the political game.
    Keywords: political selection; elections; social preferences; political leadership
    JEL: D64 D72 D82 H0
    Date: 2010–04
  2. By: Toke S. Aidt (University of Cambridge); Jayasri Dutta (University of Birmingham)
    Abstract: We study the efficient allocation of spending and taxation authority in a federation in which federal politicians are exposed to electoral uncertainty. We show that centralization may, but need not, result in a loss of electoral accountability. We identify an important asymmetry between positive and negative externalities and show that centralization may not be efficient in economies with positive externalities even when regions are identical and centralization does not entail a loss of accountability. We also show that decentralization can only Pareto dominate centralization in economies with negative externalities.
    Keywords: Fiscal federalism, local public goods, externalities, performance voting,turnout uncertainty, electoral accountability
    JEL: D72 D78 H41
    Date: 2010
  3. By: Peter Tillmann (Justus Liebig University Gießen)
    Abstract: The Federal Open Market Committee (FOMC) of the Federal Reserve consists of voting- and non-voting members. Apart from deciding about interest rate policy, members individually formulate regular inflation forecasts. This paper uncovers systematic differences in individual inflation forecasts submitted by voting and non-voting members. Based on a data set with individual forecasts recently made available it is shown that non-voters systematically overpredict inflation relative to the consensus forecast if they favor tighter policy and underpredict inflation if the favor looser policy. These findings are consistent with non-voting member following strategic motives in forecasting, i.e. non-voting members use their forecast to influence policy deliberation.
    Keywords: inflation forecast, forecast errors, monetary policy, monetary committee, Federal Reserve
    JEL: E43 E52
    Date: 2010
  4. By: Miguel Rocha de Sousa (Universidade de Évora, Departamento de Economia e NICPRI-UE)
    Abstract: We justify why a single seat from European members in international fora might be preferable than a multitude of seats. Leech and Leech (2005), Eichengreen (2008) proposed this reform at the IMF. Why? Even though nowadays European Union has an aggregate voting power that is higher than its? respective (expected) share in world output or population weight; If the single seat is obtained, more coordinated expected outcomes can be achieved. This line of reasoning is compatible with the single mindedness theory created by Mulligan and Sala-I-Martin and further extended by Canegrati. Focusing in one policy gives more political power for the single European seat.
    Keywords: Coordination, EU, International Organizations Reform, IMF, Political economy models, Single European seat , Single mindedness theory, Voting power.
    JEL: D71 D72 D78 F33
    Date: 2010
  5. By: Maik T. Schneider (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: We develop a model of legislative lobbying where policy proposals are endogenous. We show that a policy proposer with preferences tilted towards one lobby may be induced by an increase in that interest group's size to propose policies geared towards the opposing lobby. Hence, a larger lobby size can have adverse effects on policy outcomes for this same lobby. This provides another rationale as to why some interests do not organize. Moreover, we find that a second-mover advantage in Groseclose and Snyder (1996)-type lobbying models with exogenous policy proposals can turn into a second-mover disadvantage when the proposal is endogenous.
    Keywords: legislative lobbying, vote buying, legislatures, interest groups, political economy
    JEL: D72 P16
    Date: 2010–03
  6. By: Anke Weber
    Abstract: This paper considers optimal communication by monetary policy committees in a model of imperfect knowledge and learning. The main policy implications are that there may be costs to central bank communication if the public is perpetually learning about the committee's decision-making process and policy preferences. When committee members have heterogeneous policy preferences, welfare is greater under majority voting than under consensus decision-making. Furthermore, central bank communication under majority voting is more likely to be beneficial in this case. It is also shown that a chairman with stable policy preferences who carries significant weight in the monetary policy decision-making process is welfare enhancing.
    Keywords: Announcements , Central banks , Economic models , Monetary policy , Private sector , Public information ,
    Date: 2010–04–02
  7. By: Maria Cubel (University of Barcelona & IEB)
    Abstract: In this paper we analyze the political viability of equalization rules in the context of a decentralized country. In concrete terms, we suggest that when equalization devices are perceived as unfair by one or more regions, political conflict may emerge as a result. Political conflict is analysed through a non cooperative game. Regions are formed by identical individuals who, through lobbying, try to impose their regional preferences on the rest of the country, and political conflict is measured as the total contribution to lobbying. We conclude that the onset of conflict depends on the degree of publicness of the regional budget. When regional budgets are used to provide pure public goods, proportional equalization is politically feasible. However, no equalization rule is immune to conflict when budgets are used to provide private goods or a linear combination of private and public goods.
    Keywords: political conflict, lobbying, equalization grants, social decision rules
    JEL: D74 D31 H77 R51
    Date: 2010
  8. By: Francisco Rodriguez (Human Development Report Office of the United Nations Development Programme); Rodrigo Wagner (Economics Department of Harvard University)
    Abstract: For how long does cultural heritage persist? Do the culturally inherited values of immigrants dilute as generations pass? We answer these question by studying the relationship between revealed political behavior of immigrant families and the culture of the place where they migrated from, either one or many generations ago. Using surnames as indicators of region of origin of Italians in Venezuela, we study the effect of cultural heritage on two indicators of revealed political behavior: (i) propensity for civic engagement, and (ii) propensity for redistribution. A well established literature documents greater propensity for civic engagement and lower propensity for redistribution among Northern Italians. In Venezuela, we measure the former by turnout before the era of political polarization and the latter by signing behavior against Hugo Chávez in the 2004 recall referendum drive. Despite the fact that the wave of Italian immigration to Venezuela occurred more than half a century before the events studied in this paper, we do not find a greater propensity for civic engagement nor preference against redistribution among descendants from Northern as opposed to Southern Italians, suggesting that cultural assimilation may be a strong determinant of political behavior in the long run.
    Keywords: Social capital, political incorporation of immigrants, family economics, redistribution, political preferences, civic engagement, Latin America
    JEL: Z1 F22 P26
    Date: 2009–08
  9. By: Estrada, Fernando
    Abstract: In this brief comment, the public choice theory aims to distinguish the dilemmas and conflicts in formal and empirical. The hypothesis argues that the reality more complex than the principles of choice of Pareto and Liberalism*. Both the ethics and politics are taking decisions that are not always in line with the requirements of rationality and complete information
    Keywords: Public choice theory; public election; rational choice; social welfare; economic psychology.
    JEL: D70 D7 B21 D71 C7 C72
    Date: 2010–04
  10. By: Gennaro Amendola; Simona Settepanella
    Abstract: Marengo and the second author have developed in the last years a geometric model of social choice when this takes place among bundles of interdependent elements, showing that by bundling and unbundling the same set of constituent elements an authority has the power of determining the social outcome. In this paper we will tie the model above to tournament theory, solving some of the mathematical problems arising in their work and opening new questions which are interesting not only from a mathematical and a social choice point of view, but also from an economic and a genetic one. In particular, we will introduce the notion of u-local optima and we study it both from a theoretical and a numerical/probabilistic point of view; we will also describe an algorithm that computes the universal basin of attraction of a social outcome in O(M^3 log M) time (where M is the number of social outcomes)
    Keywords: Social rule, modularity, object, optimum, hyperplane arrangement, tournament, algorithm
    JEL: D71 D72
    Date: 2010–04–22
  11. By: Peter Postl
    Abstract: We study dominant strategy implementation in a variant of the canonical public good provision model, as proposed by Borgers and Postl (2009). In this set up, we fully characterize the set of budget-balanced dominant strategy deterministric mechanisms, which are simple threshold rules. For probabilistic mechanisms that are continuously differentiable we provide a necessary and sufficient condition for dominant strategy implementation. When allowing for discontinuities in the mechanism, our necessary condition remains valid, but additional requirements must be met in order to ensure sufficiency.
    Keywords: Compromise, Dominant Strategy Implementation
    JEL: C72 D70 D80
    Date: 2010–04

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