New Economics Papers
on Collective Decision-Making
Issue of 2011‒10‒09
six papers chosen by

  1. Does Political Reservation Affect Voting Behavior? Empirical Evidence from India By Yuko Mori; Takashi Kurosaki
  2. The Exercise of Shareholder Rights: Country Comparison of Turnout and Dissent By Paul Hewitt
  3. Are Claims Of Transparency All They Are Cracked Up To Be? By Philip J. Grossman; Mana Komai; Evelyne Benie
  4. Gefangen im Dilemma? Ein strategischer Ansatz der Wahl- und Revolutionsteilnahme By Möller, Marie
  5. Media, Institutions, and Government Action: Prevention vs. Palliation in the Time of Cholera By Chongwoo Choe; Paul A. Raschky
  6. Political Uncertainty and Risk Premia By Lubos Pastor; Pietro Veronesi

  1. By: Yuko Mori; Takashi Kurosaki
    Abstract: Using microdata from the National Election Study of the 2004 parliamentary elections in India, we empirically examine the impact of political reservation for disadvantaged castes and tribes on voting behavior. We find that in a reserved constituency, where only members of the disadvantaged castes can stand for election, voters of the disadvantaged castes are encouraged to vote. On the other hand, the system of constituency reservation does not have any impact on the turnout of voters belonging to other groups, including relatively upper caste voters. These voters, however, tend to change political party to vote for in reserved constituencies. These findings imply that there is a general acceptance of political reservation in the Indian electoral system.
    Keywords: Political Reservation, Voter Turnout, Castes, India
    Date: 2011–09
  2. By: Paul Hewitt
    Abstract: The scope of this research is to examine the degree to which investors use their share voting rights to register their concerns with companies on corporate issues. Analysis has been hindered by poor disclosure by companies of turnout figures and more nuanced reporting of resolution outcomes (e.g. disclosing withheld votes). A country comparison which includes OECD countries and Brazil highlights patterns of dissent that suggest remuneration and issues of capital structure are the resolutions that attract most consistent shareholder dissent. Australia, Chile and Germany are singled out for enhanced analysis. The study points to the need for further research at the investor and issuer level about the role of voting in the engagement process and the barriers to the effectiveness and transparency of voting.
    Keywords: corporate governance, shareholder voting, shareholder rights, remuneration
    JEL: G30 G34
    Date: 2011–08
  3. By: Philip J. Grossman; Mana Komai; Evelyne Benie
    Abstract: The current “buzzword” among leaders is “transparency.” Hardly a day goes by that a group leader (politician, manager, or administrator) doesn’t state that he values transparency and will provide full disclosure of his information and actions. This project tests experimentally whether or not leaders, when given a choice, actually reveal a preference for transparency. Our experiment is based on a theoretical model by Komai, Stegeman, and Hermalin (2007). Fifteen subjects are randomly assigned to five groups of three. Each group separately participates in an investment game with three possible return scenarios (high, average, and low) that are equally likely to happen. Investing in the low-return scenario is not profitable to either individual group members or the whole group. In the average-return scenario, group well-being is maximized if all the group members invest in the project, but full cooperation may not be achieved simply because the dominant strategy of the individuals is to free ride on others. In the high-return scenario full cooperation is also optimal for the group, but subjects may or may not coordinate on full cooperation because they may fail to coordinate their efforts with the others. We consider a leader-follower setting. Only one member of the group (the leader) observes the scenario. The leader moves before the rest of the group members and first decides whether or not to invest in the project. The leader then chooses between two information regimes: revealing his decision and the return scenario to the rest of the group or revealing his decision but not the return scenario. Absent any information provided by their leader, followers know only the possible return scenarios and their likelihoods. They do not know which scenario is assigned to their group. Given the leaders’ information choices and investment decisions, the relevant information will be conveyed to the followers. The followers then will separately and simultaneously decide whether or not to invest in the project (followers do not know anything about the different information regimes). This is realistic in many real-world circumstances because in many business or political environments the leaders have exclusive access to critical information and are in charge of deciding whether or not to reveal the details of their information and actions to their potential followers; in many circumstances it is practically difficult for the followers to verify the real information or the leaders’ actions.
    Keywords: Transparency, leading by example, free-riding, cooperation.
    Date: 2011–09
  4. By: Möller, Marie
    Abstract: Die Abwahl einer Regierung sowie die Entmachtung eines Diktators per Revolution können daran scheitern, dass kein individueller Teilnahmeanreiz besteht. Als Lösungsmöglichkeit wird ein strategischer Ansatz entwickelt, der zeigt, dass sich die Kollektivgutproblematik bei der Wahlteilnahme als ein N Personen Chicken Game darstellen und sich durch die Einführung von selektiven Anreizen lösen lässt, insofern als dass ein Nash- Gleichgewicht existiert, in dem alle einen individuellen Anreiz zur Teilnahme haben. Bei der Revolutionsteilnahme dagegen besteht ein klassisches N Personen Gefangenendilemma, welches in ein Koordinationsproblem überführt werden kann, allerdings nur, wenn das dabei bestehende First-Mover-Problem gelöst wird. Im Ergebnis ist die Machterhaltungsrestriktion in einer Demokratie bindend, in einer Diktatur dagegen nicht. Der Aufsatz liefert damit eine weitere theoretische Erklärung für die positive Korrelation zwischen Demokratie und Wohlstand, die sich im Querschnittsvergleich zeigt. -- The voting out of a government or the disempowerment of a dictator may fail if there is no incentive for the individual to participate. A strategic approach is developed which shows the election-participation-decision as an N person chicken-game. With the introduction of selective benefits, the problem is solved insofar as there is only one Nash-equilibrium in which everyone participates. The participation in a revolution can be represented as an N per-son prisoner's dilemma, which can be transformed into a coordination problem - though only if the first-mover-problem that arises can be solved. The result of the strategic approach is that the stay-in-power-restriction is mandatory for democratic governments only. Therefore this paper provides one more theoretical explanation for the positive correlation between the de-gree of democracy and prosperity in cross section comparisons.
    JEL: D72 D74 C70
    Date: 2011
  5. By: Chongwoo Choe; Paul A. Raschky
    Abstract: This paper studies how media and the quality of institutions affect government action taken before and after a natural disaster. The key elements in this relationship are the media's role as the provider of information to voters about government action, the quality of democracy that pertains to how relevant election results are, and corruption that reduces the efficacy of government action. Provided that more media activity is focused on post-disaster government action, we show that more media activity and more democratic institutions both contribute positively to the government's palliative effort after the disaster, although corruption has a negative effect that decreases as media activity increases. On the preventive effort before the disaster, however, media and democracy both have a negative effect, as does corruption. We provide empirical evidence based on major cholera epidemics around the world, which lends some support to these hypotheses.
    Keywords: Media, democracy, corruption, government action, natural disaster
    JEL: D23 H40 L82
    Date: 2011–09
  6. By: Lubos Pastor; Pietro Veronesi
    Abstract: We study the pricing of political uncertainty in a general equilibrium model of government policy choice. We find that political uncertainty commands a risk premium whose magnitude is larger in poorer economic conditions. Political uncertainty reduces the value of the implicit put protection that the government provides to the market. It also makes stocks more volatile and more correlated when the economy is weak. In addition, we find that government policies cannot be judged by the stock market response to their announcement. Announcements of deeper reforms tend to elicit less favorable stock market reactions.
    JEL: G12 G18
    Date: 2011–09

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