New Economics Papers
on Collective Decision-Making
Issue of 2012‒05‒15
six papers chosen by

  1. Government Spending and Re-election: Quasi-Experimental Evidence from Brazilian Municipalities By Stephan Litschig; Kevin Morrison
  2. Centralization and accountability: theory and evidence from the Clean Air Act By Federico Boffa; Amedeo Piolatto; Giacomo A. M. Ponzetto
  3. A generalized unification theorem for choice theoretic foundations: Avoiding the necessity of pairs and triplets By He, Junnan
  4. Institutionalization of Political Institutions and their Impact on Public Policy By Carlos Scartascini; Mariano Tommasi
  5. Heterogeneous Information and Trade Policy By Giacomo Ponzetto
  6. Welfare of Naive and Sophisticated Players in School Choice By Jose Apesteguia; Miguel A. Ballester

  1. By: Stephan Litschig; Kevin Morrison
    Abstract: Does additional government spending improve the electoral chances of incumbent political parties? This paper provides the first quasi-experimental evidence on this question. Our research design exploits discontinuities in federal funding to local governments in Brazil around several population cutoffs over the period 1982-1985. We find that extra fiscal transfers resulted in a 20% increase in local government spending per capita, and an increase of about 10 percentage points in the re-election probability of local incumbent parties. We also find positive effects of the government spending on education outcomes and earnings, which we interpret as indirect evidence of public service improvements. Together, our results provide evidence that electoral rewards encourage incumbents to spend part of additional revenues on public services valued by voters, a finding in line with agency models of electoral accountability.
    Keywords: Government spending, voting, regression discontinuity
    JEL: H40 H72 D72
    Date: 2012–02
  2. By: Federico Boffa (Università di Macerata & IEB); Amedeo Piolatto (Universitat de Barcelona & IEB); Giacomo A. M. Ponzetto (CREI, Universitat Pompeu Fabra & Barcelona GSE)
    Abstract: This paper studies fiscal federalism when voter information varies across regions. We develop a model of political agency with heterogeneously informed voters. Rent-seeking politicians provide public goods to win the votes of the informed. As a result, rent extraction is lower in regions with higher information. In equilibrium, electoral discipline has decreasing returns. Thus, political centralization efficiently reduces aggregate rent extraction. The model predicts that a region’s benefits from centralization are decreasing in its residents’ information. We test this prediction using panel data on pollutant emissions across U.S. states. The 1970 Clean Air Act centralized environmental policy at the federal level. In line with our theory, we find that centralization induced a differential decrease in pollution for uninformed relative to informed states.
    Keywords: Political centralization, government accountability, imperfect information, elections, environmental policy, air pollution
    JEL: D72 D82 H73 H77 Q58
    Date: 2012
  3. By: He, Junnan
    Abstract: This paper is concerned with the axiomatic foundation of the revealed preference theory. Many well-known results in literature rest upon the ability to choose over budget sets that contains only 2 or 3 elements, the situations which are not observable in real life. In order to give a more realistic approach, this paper shows that many of the famous consistency requirements, such as those proposed by Arrow, Sen, Samuelson etc., are equivalent if the domain of choice functions satisfy some set theoretical properties. And these properties, unions and inclusions for example, are proposed in a way that gives observability. --
    Keywords: Revealed preference theory,rationality,preference,choice functions
    JEL: B00 C00 D01 D11
    Date: 2012
  4. By: Carlos Scartascini; Mariano Tommasi
    Abstract: This paper argues that institutionalization is an equilibrium phenomenon and is associated with better policies and better results in terms of economic development. In support of this argument is presented a theoretical model that extends the space of feasible actions for political actors, including the possibility of investing in both institutionalized and non-institutionalized arenas. Thus, to visualize the process of institutionalization can be endogenous to the functioning of political institutions. In addition to this conceptual model, quantitative results are presented which show that low levels of institutionalization tend to weaken the results arising from the literature of more traditional political economy. That is, low institutionalization in the context of traditional political institutions, particularly those jure measures may not be relevant in explaining policy outcomes. Still, this work opens up more questions than it answers and leaves lines of research proposals that can help provide answers to them.
    JEL: D72 D73 D78
    Date: 2012–01
  5. By: Giacomo Ponzetto
    Abstract: Protectionism enjoys surprising popular support, in spite of deadweight losses. At the same time, trade barriers appear to decline with public information about protection. This paper develops an electoral model with heterogeneously informed voters which explains both facts and predicts the pattern of trade policy across industries. In the model, each agent endogenously acquires more information about his sector of employment. As a result, voters support protectionism, because they learn more about the trade barriers that help them as producers than those that hurt them as consumers. In equilibrium, asymmetric information induces a universal protectionist bias. The structure of protection is Pareto inefficient, in contrast to existing models. The model predicts a Dracula effect: trade policy for a sector is less protectionist when there is more public information about it. Using a measure of newspaper coverage across industries, I …find that cross-sector evidence from the United States bears out my theoretical predictions.
    Keywords: Protectionism, Voters, Imperfect information, Media coverage, Dracula effect, Pareto inefficiency
    JEL: F13 D72 D83
    Date: 2011–12
  6. By: Jose Apesteguia; Miguel A. Ballester
    Abstract: Two main school choice mechanisms have attracted the attention in the literature: Boston and deferred acceptance (DA). The question arises on the ex-ante welfare implications when the game is played by participants that vary in terms of their strategic sophistication. Abdulkadiroglu, Che and Yasuda (2011) have shown that the chances of naive participants getting into a good school are higher under the Boston mechanism than under DA, and some naive participants are actually better off. In this note we show that these results can be extended to show that, under the veil of ignorance, i.e. students not yet knowing their utility values, all naive students may prefer to adopt the Boston mechanism.
    Keywords: School Choice; Naive Players; Welfare; Veil of Ignorance
    JEL: C7 D0 D6
    Date: 2011–09

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