New Economics Papers
on Collective Decision-Making
Issue of 2010‒12‒11
eleven papers chosen by

  1. Compulsory Voting and Public Finance By Roland Hodler
  2. Growth of Electoral Fraud in Non-Democracies: The Role of Uncertainty By Dmitriy Vorobyev
  3. What drives US Immigration Policy? Evidence from Congressional Roll Call Votes By Giovanni Facchini; Max Steinhardt
  4. The political cost of reforms By Alessandra Bonfiglioli; Gino Gancia
  5. Political Institutions and War Initiation: The Democratic Peace Hypothesis Revisited By Michelle R. Garfinkel
  6. Lessons to Be Learned: Political Party Research and Political Party Assistance By Gero Erdmann
  7. Bolivia’s New Constitution: Towards Participatory Democracy and Political Pluralism? By Almut Schilling-Vacaflor
  8. The Vote is Cast: The Effect of Corporate Governance on Shareholder Value By Vicente Cuñat; Mireia Gine; Maria Guadalupe
  9. Tacit Lobbying Agreements: An Experimental Study By Großer, Jens; Reuben, Ernesto; Tymula, Agnieszka
  10. The Theory of Constitutional Synthesis. A Constitutional Theory for a Democratic European Union By John Erik Fossum; Agustín José Menéndez
  11. Leviathan as a Minority Shareholder: A Study of Equity Purchases by the Brazilian National Development Bank (BNDES), 1995-2003 By Lazzarini, Sergio G.; Musacchio, Aldo

  1. By: Roland Hodler (Study Center Gerzensee)
    Abstract: Conventional wisdom suggests that compulsory voting lowers the influence of specialinterest groups and leads to policies that are better for less privileged citizens, who often abstain when voting is voluntary. To scrutinize this conventional wisdom, I study public goods provision and rents to specialinterest groups in a probabilistic voting model with campaign contributions in which citizens can decide how much political information to acquire, and whether to vote or abstain. I find that compulsory voting, modeled as an increase in abstention costs, raises the share of poorly informed and impressionable voters, thereby making special-interest groups more influential and increasing their rents. Total government spending and taxes increase as well, while the effect on public goods provision is ambiguous. Compulsory voting may thus lead to policy changes that harm even less privileged citizens.
    Date: 2010–11
  2. By: Dmitriy Vorobyev
    Abstract: Electoral fraud has become an integral part of electoral competition both in established democracies and less-than-democratic regimes. In this paper I study electoral fraud in the non-democratic setting. First, I present evidence of fraud sustainability and growth over the lifetime of non-democratic regimes in post-Soviet and Sub-Saharan countries. Second, I provide a theoretical model that explains the observed tendency of growing fraud. Specifically, in a probabilistic voting model of electoral competition with falsifications, a corrupt incumbent faces two types of uncertainty: uncertainty about voters’ attitude towards fraud and uncertainty about his true support, captured by a purely random component in the voters’ utility over candidates. The model predicts that when uncertainty is sufficiently large, higher uncertainty about voters’ fraud intolerance provides weaker incentives to commit fraud. Over time the incumbent becomes more certain about voters’ reaction to fraud because of learning through Bayesian updating and, thus, as the deterrent role of fraud intolerance uncertainty declines, the incentives to commit fraud become stronger, providing a growing fraud profile.
    Keywords: election; voting; fraud; learning
    JEL: D72 D73 D83
    Date: 2010–10
  3. By: Giovanni Facchini (Erasmus University Rotterdam, University of Milan, Centro Studi Luca d’Agliano, CEPR and CES-Ifo); Max Steinhardt (Hamburg Institute of International Economics (HWWI), Centro Studi Luca d’Agliano and ECARES)
    Abstract: Immigration is today one of the most hotly debated policy issues in the United States. Despite marked divergence of opinion even within political parties, several important reforms have been in-troduced in the post 1965 era. The purpose of this paper is to carry out a systematic analysis of the drivers of the voting behavior of US representatives on immigration policy in the period 1970-2006, and in particular to assess the role of economic factors at the district level. Our findings suggest that representatives from more skilled labor abundant districts are more likely to support an open immi-gration policy towards the unskilled, whereas the opposite is true for representatives from more un-skilled labor abundant districts. This evidence is robust to the introduction of an array of additional economic and non-economic characteristics of the districts, and suggests that a simple factor analy-sis model can go a long way in explaining the voting behavior on immigration policy.
    Keywords: Immigration policy, Voting, Political Economy
    JEL: F22 J61
    Date: 2010–07–31
  4. By: Alessandra Bonfiglioli; Gino Gancia
    Abstract: This paper formalizes in a fully-rational model the popular idea that politicians perceive an electoral cost in adopting costly reforms with future benefits and reconciles it with the evidence that reformist governments are not punished by voters. To do so, it proposes a model of elections where political ability is ex-ante unknown and investment in reforms is unobservable. On the one hand, elections improve accountability and allow to keep well-performing incumbents. On the other, politicians make too little reforms in an attempt to signal high ability and increase their reappointment probability. Although in a rational expectation equilibrium voters cannot be fooled and hence reelection does not depend on reforms, the strategy of underinvesting in reforms is nonetheless sustained by out-of-equilibrium beliefs. Contrary to the conventional wisdom, uncertainty makes reforms more politically viable and may, under some conditions, increase social welfare. The model is then used to study how political rewards can be set so as to maximize social welfare and the desirability of imposing a one-term limit to governments. The predictions of this theory are consistent with a number of empirical regularities on the determinants of reforms and reelection. They are also consistent with a new stylized fact documented in this paper: economic uncertainty is associated to more reforms in a panel of 20 OECD countries.
    Keywords: Elections, Reforms, Asymmetric Information, Uncertainty.
    JEL: E6 H3
    Date: 2010–01
  5. By: Michelle R. Garfinkel (Department of Economics, University of California-Irvine)
    Abstract: This chapter analyzes the influence of democratic institutions---specifically, the effects of (i) electoral uncertainty when individuals within a nation have different preferences over public peaceful investment and (ii) greater checks and balances that lead to a more effective mobilization of resources for both public peaceful investment and arming---on a nation's incentive to arm and willingness to initiate war. The analysis is based on a model where nations contest some given resource and where they cannot commit to their future allocations to arming; yet, the victor in a conflict today gains an advantage in future conflict and thus realizes a savings in future arming. These assumptions imply that, despite the short-term incentives to settle peacefully, one or both nations might choose to initiate war. In such a setting, electoral uncertainty tends to make a democracy more peaceful relative to an autocracy, whereas greater checks and balances tend to make a democracy less peaceful. Thus, while two democracies might be more peaceful than two autocracies when paired against each other in a contest over a given resource, this is not necessarily the case. Even under conditions where democracies are most likely to be peaceful with one another, democracies are at least as likely to be in war with autocracies as autocracies are likely to be in war each other.
    Keywords: International conflict; Domestic conflict; Peaceful settlement; Political institutions
    JEL: D30 D70 D72 D74 D78 F51
    Date: 2010–12
  6. By: Gero Erdmann
    Abstract: Generally speaking, the effects of international political party assistance are viewed nega-tively, or at least controversially. This study attributes some of the shortcomings of political party aid to the poor relationship between assistance providers and political science party research. They simply operate in different worlds. Party assistance lacks clear-cut concepts and strategies in practice, which makes it difficult to adequately evaluate it. At issue is its “standard method,” with its “transformative” intention to change the party organization of the assistance receivers. At the same time, the scholarship on political parties can provide only limited help to assistance providers due to its own conceptual and methodological re-strictions, such as the Western European bias underlying its major concepts, the predomi-nance of a functionalist approach, and the scant empirical research on political parties out-side of Europe and the US. Taking a cue from recent political party research, we could begin to question the overarching role of political parties in the transition and consolidation proc-ess of new democracies. Other research findings emphasize the coexistence of different types of party organizations, and the possibility of different organizational developments, which might all be consistent with consolidating democracy. All this suggests the necessity of aban-doning the controversial aim of the “transformative impact” of political party aid.
    Keywords: democratization, democracy promotion, political party assistance, political party research
    Date: 2010–10
  7. By: Almut Schilling-Vacaflor
    Abstract: In Bolivia, rights to increased political participation and the recognition of indigenous political systems are interrelated. The new constitution of 2009, a prime example of the “new Andean constitutionalism,” defines Bolivia as a representative, participatory and communitarian democracy. It incorporates enhanced mechanisms and institutions for participatory democracy. Moreover, new social rights have been anchored in the constitution and a plurinational state is supposed to be constructed. The article raises the question of whether the new constitution will change the relations between state and civil society considerably and whether a new democratic model is being established in Bolivia. I argue that there are many limiting factors when it comes to putting the emancipatory elements of the constitution into practice. These include the increased strength of the executive branch, the intent of the government to co-opt civil society organizations and to exclude dissident views, the resistance of the conservative opposition to loosing some of its privileges, the deep-rooted social inequality, the social conflicts and polarization, the resource dependence of the current economic model, and the authoritarian characteristics of indigenous self-governance structures. The article demonstrates that the new Bolivian constitution cannot create a new society but that the processes around the elaboration of a new basic law have contributed to considerable changes in the social, political and symbolic order.
    Keywords: Bolivia, constitution, participatory democracy, indigenous peoples, social rights, political pluralism
    Date: 2010–07
  8. By: Vicente Cuñat; Mireia Gine; Maria Guadalupe
    Abstract: This paper estimates the effect of corporate governance provisions on shareholder value and long-term outcomes in S&P1500 firms. We apply a regression discontinuity design to shareholder votes on governance proposals in annual meetings. A close-call vote around the majority threshold is akin to a random outcome, allowing us to deal with prior expectations and the endogeneity of internal governance rules. Passing a corporate governance provision generates a 1.3% abnormal return on the day of the vote with an implied market value per provision of 2.8%. We also find evidence of changes in investment behavior and long-term performance improvements.
    JEL: D21 G14 G34
    Date: 2010–12
  9. By: Großer, Jens (Florida State University); Reuben, Ernesto (Columbia University); Tymula, Agnieszka (New York University)
    Abstract: We experimentally study the common wisdom that money buys political influence. In the game, one lobbyist has the opportunity to influence redistributive tax policies in her favor by transferring money to two competing candidates. The success of the lobbying investment depends on whether or not the candidates are willing to respond and able to collude on low-tax policies that do not harm their relative chances in the elections. In the experiment, we find that lobbying is never successful when the lobbyist and candidates interact just once. By contrast, it yields substantially lower redistribution in about 40% of societies with finitely-repeated encounters. However, lobbying investments are not always profitable, and profit-sharing between the lobbyist and candidates depends on prominent equity norms. Our experimental results shed new light on the complex process of buying political influence in everyday politics and help explain why only relatively few corporate firms do actually lobby.
    Keywords: lobbying, redistribution, elections, bargaining, collusion
    JEL: D72 H10 K42
    Date: 2010–11
  10. By: John Erik Fossum; Agustín José Menéndez
    Abstract: This paper puts forward the main elements of the theory of constitutional synthesis as a constitutional theory of European integration. Constitutional synthesis is both a political philosophy of European integration (which dilucidates what kind of polity the Union is an what is its basis of legitimacy) and a theoreticalframework capable of guiding constitutional adjudication in hard cases (such as the resolution of conflicts between European and national constitutional law). In essence, constitutional synthesis refers to aprocess in which already established constitutional states integrate through constitutional law, without losing their institutional structure and identity. We claim that there are three basic insights in constitutional synthesis. The first is that the constitutional law which frames and contributes to steer integration is characterised by the central role played by the constitutions of the participating states (by the regulatory ideal of a common constitutional law). The second is that the supranational legal order comes hand in hand with a supranational institutional structure which is only partially established at the founding, takes time to be rendered functional in aprocess where different national institutional cultures and structures try to leave their mark on the supranational level, and its structureis necessarily rendered more complicated as new institutions anddecision-making processes are added up to handle new policies. The third is that while supranational law is one, there are several institutions that apply the supranational law in an authoritative manner. In the last section of the paper, we complete the exposition of constitutional synthesis by considering how it is placed and how it relates to other political and legal theories of integration.
    Keywords: Constitution for Europe; Europeanization; integration theory; law; political science
    Date: 2010–12–15
  11. By: Lazzarini, Sergio G.; Musacchio, Aldo
    Date: 2010–10

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