New Economics Papers
on Collective Decision-Making
Issue of 2011‒06‒11
ten papers chosen by

  1. The Political Cost of Reforms By Bonfiglioli, Alessandra; Gancia, Gino A
  2. Dissent in Monetary Policy Decisions By Alessandro Riboni; Francisco J. Ruge-Murcia
  3. Collective action, political parties and pro-development public policy By Keefer, Philip
  4. Informal Insurance with Endogenous Group Size By Stéphanie Weynants
  5. Anti-Poverty Programs and Presidential Election Outcomes: Familias en Acción in Colombia By Oskar Nupia
  6. Choosing High-Court Judges by Political Parties. By Nicolás Porteiro; Antonio Villar
  7. Presidential elections and the manipulation of exam success rate in Sub-Saharan Africa By Mireille NTSAMA ETOUNDI; Christian EBEKE
  8. Inequality, Development, and the Stability of Democracy -Lipset and Three Critical Junctures in German History By Jung, Florian; Sunde, Uwe
  9. Bayesian group belief. By Dietrich, Franz
  10. Inside the black box of collective reputation By Stefano Castriota; Marco Delmastro

  1. By: Bonfiglioli, Alessandra; Gancia, Gino A
    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: Asymmetric Information; Elections; Reforms; Uncertainty
    JEL: E6 H3
    Date: 2011–06
  2. By: Alessandro Riboni (Department of Economics, University of Montreal); Francisco J. Ruge-Murcia (Department of Economics, University of Montreal and Rimini Centre for Economic Analysis (RCEA))
    Abstract: Voting records indicate that dissents in monetary policy committees are frequent and predictability regressions show that they help forecast future policy decisions. In order to study whether the latter relation is causal, we construct a model of committee decision making and dissent where members' decisions are not a function of past dissents. The model is estimated using voting data from the Bank of England and the Riksbank. Stochastic simulations show that the decision-making frictions in our model help account for the predictive power of current dissents. The eect of institutional characteristics and structural parameters on dissent rates is examined using simulations as well.
    Keywords: Committees, voting models, political economy of central banking
    JEL: D7 E5
    Date: 2011–05
  3. By: Keefer, Philip
    Abstract: Broad consensus exists that the ability of political actors to make credible commitments is key to development. An important and little-explored determinant of the credibility of political commitments is the existence of organizations that facilitate citizen collective action to sanction political actors who renege. This paper focuses on one essential organization, the political party. Three measures of political parties are used to assess cross-country differences in the degree to which politicians facilitate the ability of citizens to act in their collective interest. Each of these measures is associated with superior development outcomes, above and beyond the effects of competitive elections. These results have implications for understanding the extraordinary economic success of some East Asian countries and notable lags among others: East Asian non-democracies exhibit more institutionalized ruling parties than other non-democracies, while East Asian democracies exhibit equally or less institutionalized parties. The evidence suggests that greater research and policy emphasis be placed on the organizational characteristics of countries that allow citizens to hold leaders accountable.
    Keywords: Parliamentary Government,Political Systems and Analysis,Politics and Government,Corporate Law,E-Government
    Date: 2011–06–01
  4. By: Stéphanie Weynants (Earth and Life Institute, Université Catholique de Louvain)
    Abstract: We present a theory of endogenous formation of insurance groups which combines heterogeneity on agents? risk aversion under asymmetric information and lack of enforceability of contracts. Income sharing inside the group is decided by majority voting and the size of the group adjusts to this decision through participation constraints. At equilibrium, all group members agree on the same imperfect level of income sharing, which yields a constrained-e¢ cient equilibrium. Comparative statics on the risk faced by the community provide interesting results. A mean preserving spread of income implies more income sharing and a larger group size. New members, and possibly even old members may be better o¤, while non-members are worse-o¤. These results have relevant policy implications.
    Date: 2011–05
  5. By: Oskar Nupia
    Abstract: Using a comprehensive data set for Colombian municipalities between 2002 and 2010, in this paper we study the effects of large anti-poverty programs on presidential election outcomes. In particular, we test for two of the main assumptions on voters’ behavior adopted by the political economics literature. First, we examine whether the incumbent governing coalition has been politically rewarded due to the expansion exhibited by the program during the last decade. Second, we test whether voters have been willing to tradeoff their ideological attachments in exchange of a higher level of income – obtained through the cash transfer payments provided by the program. Our estimates correct for potential simultaneity problems previously identified by the literature in this field. Our results provide empirical support for both hypotheses and open the discussion on how to prevent the use of large anti-poverty programs for political purposes.
    Date: 2011–03–21
  6. By: Nicolás Porteiro (Department of Economics, Universidad Pablo de Olavide); Antonio Villar (Department of Economics, Universidad Pablo de Olavide & IVIE)
    Abstract: This paper proposes a mechanism to overcome the possibility that political parties may block the nomination of High-Court judges when the Parliament is involved in their nomination and their mandate expires on a fixed date. This possibility arises when the default option is that the judge whose mandate expires holds office until an agreement is reached. Our proposal consists of changing the default option by a weighted lottery. We show that this mechanism is capable of solving the problem and implementing the socially optimal solution.
    Keywords: Negotiation, Political Competition, random protocols, legislative bargaining.
    JEL: D72
    Date: 2011–05
  7. By: Mireille NTSAMA ETOUNDI; Christian EBEKE
    Abstract: This paper investigates whether the exam success rate in Africa increases significantly in the months prior to the occurrence of the presidential elections. It hypothesizes that the incumbent is tempted to increase the exam success rate to retain a form of social cohesion and to ‘buy' votes. A sample of 15 francophone African countries observed from 1990 to 2009 yields three findings. First, post-exam presidential elections significantly increase the exam success rate by six percentage points. Second, the manipulation of the exam success rate is positively correlated with the re-election of the incumbent. Third, these results do not hold when elections occur before the exam dates or when the incumbent or a member of his/her party do not run for the presidential seat.
    Keywords: Sub-Saharan Africa, Exam success rate, Presidential elections
    JEL: O15 I2 D72
    Date: 2011
  8. By: Jung, Florian; Sunde, Uwe
    Abstract: This paper studies the endogenous emergence of political regimes in societies in which productive resources are distributed unequally and institutions do not ensure political commitments. The results imply that for any level of development there exists a distribution of resources such that democracy emerges in equilibrium, but there are distributions of resources for which democracy is infeasible in equilibrium irrespective of the level of development. The model also delivers results on the stability of democracy with regard to changes in the economic and demographic environment. The results are consistent with the different political regimes that emerged in Germany after 1871.
    Keywords: Coalition Formation; Democracy; Development; Income inequality
    JEL: H10 O10 P16
    Date: 2011–06
  9. By: Dietrich, Franz
    Abstract: If a group is modelled as a single Bayesian agent, what should its beliefs be? I propose an axiomatic model that connects group beliefs to beliefs of the group members. The group members may have different information, different prior beliefs and even different domains (algebras) within which they hold beliefs, accounting for differences in awareness and conceptualisation. As is shown, group beliefs can incorporate all information spread across individuals without individuals having to explicitly communicate their information (that may be too complex or personal to describe, or not describable in principle in the language). The group beliefs derived here take a simple multiplicative form if people's information is independent (and a more complex form if information overlaps arbitrarily). This form contrasts with familiar linear or geometric opinion pooling and the (Pareto) requirement of respecting unanimous beliefs.
    Date: 2010–10
  10. By: Stefano Castriota; Marco Delmastro
    Abstract: The literature on collective reputation is still in its infancy. Despite the existence of a (limited) number of valuable theoretical works studying the process of collective reputation building, there is still no comprehensive analysis of this concept. In addition, due to data limitation, there are no empirical studies testing the determinants of group reputation. This work intends to provide a comprehensive analysis of reputational equilibria within coalitions of agents. In order to do so, we design a static and dynamic (over 30 years) study on the universe of coalitions of companies, within the wine market, looking at the role exerted by the characteristics of the coalition itself (its age and size), the rules set and the actions put forward by the group of agents in order to reach and maintain a certain level of collective reputation, and the context in which they operate. Results shed new lights into this ubiquitous phenomenon.
    Keywords: reputation, collective reputation, asymmetric information, quality standards, wine.
    JEL: L14 L15
    Date: 2011–04–15

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