New Economics Papers
on Collective Decision-Making
Issue of 2010‒08‒14
five papers chosen by

  1. Government Purchases Over the Business Cycle: the Role of Economic and Political Inequality By Ruediger Bachmann; Jinhui Bai
  2. Democracy and Consumer Strength: Direct Evidence from Regulatory Reform in Developing Countries By Weymouth, Stephen
  3. Endogenous Timing in General Rent-Seeking and Conflict Models By Hoffmann, Magnus; Rota Graziosi, Gregoire
  4. On the Evolution of Organizational Government By Roger D. Congleton
  5. The Logic of Collective Action and Australia's Climate Policy By Pezzey, John C.V.; Mazouz, Salim; Jotzo, Frank

  1. By: Ruediger Bachmann; Jinhui Bai
    Abstract: This paper explores the implications of economic and political inequality for the business cycle comovement of government purchases. We set up and compute a heterogeneous-agent neoclassical growth model, where households value government purchases which are financed by income taxes. A key feature of the model is a wealth bias in the political aggregation process. When calibrated to U.S. wealth inequality and exposed to aggregate productivity shocks, such a model is able to generate milder procyclicality of government purchases than models with no political wealth bias. The degree of wealth bias that matches the observed mild procyclicality of government purchases in the data, is consistent with cross-sectional data on political participation.
    JEL: E30 E32 E60 E62 H30
    Date: 2010–08
  2. By: Weymouth, Stephen
    Abstract: The distributional implications of antitrust regulation imply a political cleavage between consumers and producers. I argue that the relative strength of these two groups depends on the level of democracy. In particular, an expansion of the franchise and competitive elections will increase the relative political weight of consumers, resulting in policies that favors their interests. An empirical implication of the argument is that the likelihood of effective competition policy reform increases with democracy. I test this proposition in two stages using an original dataset measuring competition agency design in 156 developing countries covering the period 1975-2007. First, I estimate hazard models on the timing of competition policy reform. Second, since “laws on the books” do not necessarily indicate a commitment to effective policy, I create an original index measuring governments’ commitments to antitrust policy. The index captures the independence of the agency, resource (budget and staffing) allocations, expert perceptions, and actual legal actions. The results of the empirical analysis support the proposition that democracy improves governments’ commitments to competition policy.
    Date: 2010–06
  3. By: Hoffmann, Magnus; Rota Graziosi, Gregoire
    Abstract: This paper examines simultaneous versus sequential choice of effort in a two player contest with a general contest success function. The timing of moves, determined in a pre-play stage prior to the contest-subgame, as well as the value of the prize is allowed to be endogenous. Contrary to endogenous timing models with an exogenously fixed prize the present paper finds the following. (1) Players may decide to choose their effort simultaneously in the subgame perfect equilibrium (SPE) of the extended game. (2) The SPE does not need to be unique, (3) in particular, there is no unique SPE with sequential moves if costs of effort are exclusively endogenously determined. (4) If the unique SPE is sequential play, the win probability in the NE is in no way crucial for the determination of an endogenous leadership. (5) Finally, symmetry among players does not rule out incentives for precommitment to effort locally away from the Nash-Cournot level.
    Keywords: Contests; Endogenous timing; Endogenous prize
    JEL: D23 D30 C72
    Date: 2010–07–23
  4. By: Roger D. Congleton
    Abstract: This paper analyzes the design, refinement, and evolution of organizational policymaking processes, that is to say, organizational governance. Governance procedures like other aspects of organization are refined through time to advance formeteur interests. Several mechanisms of evolution are explored in this paper. First, formal organizations have a beginning. They are founded. As a consequence, governance templates initially tend to maximize formeteur control over their organizations. Second, formeteurs may subsequently revise the initial distribution of authority. There are often good reasons for formeteurs to exchange some of their initial authority for services and resources that advance organizational interests. Third, there are the constraints of survivorship, which require an organization to attract sufficient resources to be self sustaining. This paper suggests that the results of these processes of refinement tend to be rule-driven, divided governments, many of which will be based on the king and council template. That template facilitates the emergence of relatively effective forms of organizational governance, because it can be adjusted at a large number of margins without changing the essential architecture of governance.
    Keywords: Length 37 pages
    Date: 2010–07
  5. By: Pezzey, John C.V.; Mazouz, Salim; Jotzo, Frank
    Abstract: We analyse the long-term efficiency of the emissions target and of the provisions to reduce carbon leakage in the Australian Government's Carbon Pollution Reduction Scheme, as proposed in March 2009, and the nature and likely cause of changes to these features in the previous year. The target range of 5-15% cuts in national emission entitlements during 2000-2020 was weak, in that on balance it is too low to minimise Australia's long-term mitigation costs. The free allocation of outputlinked, tradable emission permits to Emissions-Intensive, Trade-Exposed (EITE) sectors was much higher than proposed earlier, or shown to be needed to deal with carbon leakage. It plausibly means that EITE emissions can rise by 13% during 2010-2020, while non-EITE sectors must cut emissions by 34-51% (or make equivalent permit imports) to meet the national targets proposed, far from a cost-effective outcome. The weak targets and excessive EITE assistance illustrate the efficiencydamaging power of collective action by the 'carbon lobby'. Resisting this requires new national or international institutions to assess lobby claims impartially, and more government publicity about the true economic importance of carbon-intensive sectors. Published in the Australian Journal of Agricultural and Resource Economics, volume 54, pages 185-202.
    Keywords: Environment
    Date: 2010–01

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