nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2012‒08‒23
thirteen papers chosen by
Roland Kirstein
Otto von Guericke University Magdeburg

  1. Does immigration into their neighborhoods incline voters toward the extreme right? The case of the Freedom Party of Austria By Martin Halla; Alexander F. Wagner; Josef Zweimüller
  2. The Dark Side of the Vote: Biased Voters, Social Information, and Information Aggregation Through Majority Voting By Rebecca B. Morton; Marco Piovesan; Jean-Robert Tyran
  3. Bounded Rationality and Voting Decisions Exploring a 160-year Period By David Stadelmann; Benno Torgler
  4. Competition, cooperation, and collective choice By Thomas Markussen; Ernesto Reuben; Jean-Robert Tyran
  5. De Jure and De Facto Determinants of Power: Evidence from Mississippi By Bertocchi, Graziella; Dimico, Arcangelo
  6. Heuristic and exact solutions to the inverse power index problem for small voting bodies By Sascha Kurz; Stefan Napel
  7. Race and the Politics of Close Elections By Tom Vogl
  8. Central Banks' Voting Records and Future Policy By Roman Horváth; Kateřina Šmídková; Jan Zápal
  9. Breaking the wave of democracy: The effect of foreign aid on the incumbent's re-election probability By Grégoire ROTA-GRAZIOSI; Clémence VERGNE; Blanca MORENO DODSON
  10. Competition for a Majority By Barelli, Paulo; Govindan, Srihari; Wilson, Robert
  11. The Economic Consequences of Proxy Advisor Say-on-Pay Voting Policies By Larcker, David F.; McCall, Allan L.; Ormazabal, Gaizka
  12. The Need for Enemies By Leopoldo Fergusson; James A. Robinson; Ragnar Torvik; Juan F. Vargas
  13. Implementation without Incentive Compatibility: Two Stories with Partially Informed Planners By Makoto Shimoji and Paul Schweinzer

  1. By: Martin Halla; Alexander F. Wagner; Josef Zweimüller
    Abstract: This paper explores one potentially important channel through which immigration may drive support for extreme-right-wing parties: the presence of immigrants in the voters' neighborhoods. We study the case of the Freedom Party of Austria (FPÖ). Under the leadership of Jörg Haider, this party increased its share of votes from less than 5 percent in the early 1980s to 27 percent by the year 1999. Using past regional settlement patterns as a source of exogenous variation, we find a significantly positive effect on FPÖ votes of the residential proximity of immigrants and citizens, explaining roughly a quarter of the cross-community variance in those votes. It is the proximity of low- and medium-skilled immigrants that drives this result; high-skilled immigrants have no (or even a negative) effect on FPÖ votes.
    Keywords: Immigration, political economy, voting
    JEL: P16 J61
    Date: 2012–07
  2. By: Rebecca B. Morton (Department of Politics, NYU); Marco Piovesan (Harvard Business School); Jean-Robert Tyran (Department of Economics University of Vienna)
    Abstract: We experimentally investigate information aggregation through majority voting when some voters are biased. In such situations, majority voting can have a "dark side", i.e. result in groups making choices inferior to those made by individuals acting alone. We develop a model to predict how two types of social information shape efficiency in the presence of biased voters and we test these predictions using a novel experimental design. In line with predictions, we find that information on the popularity of policy choices is beneficial when a minority of voters is biased, but harmful when a majority is biased. In theory, information on the success of policy choices elsewhere de-biases voters and alleviates the inefficiency. In the experiment, providing social information on success is ineffective. While voters with higher cognitive abilities are more likely to be de-biased by such information, most voters do not seem to interpret such information rationally.
    JEL: C92 D7 D02 D03
    Date: 2012–08
  3. By: David Stadelmann (University of Fribourg); Benno Torgler (QUT)
    Abstract: Using a natural voting experiment in Switzerland that encompasses a 160-year period (1848–2009), we investigate whether a higher level of complexity leads to increased reliance on expert knowledge. We find that when more referenda are held on the same day, constituents are more likely to refer to parliamentary recommendations in making their decisions. This finding holds true even when we narrow our focus to referenda with a relatively lower voter turnout on days on which more than one referendum was held. We also show that when constituents face a higher level of complexity, they listen to parliament rather than interest groups.
    Keywords: Bounded rationality, voting, referenda attention, rules of thumb
    JEL: D03 D72 D83 H70
    Date: 2012–07–25
  4. By: Thomas Markussen (Department of Economics); Ernesto Reuben (Columbia University and IZA); Jean-Robert Tyran (University of Vienna, University of Copenhagen, and CEPR)
    Abstract: The ability of groups to implement efficiency-enhancing institutions is emerging as a central theme of research in economics. This paper explores voting on a scheme of intergroup competition which facilitates cooperation in a social dilemma situation. Experimental results show that the competitive scheme fosters cooperation. Competition is popular but the electoral outcome depends strongly on specific voting rules of institutional choice. If the majority decides, competition is almost always adopted. If likely losers from competition have veto power, it is often not, and substantial gains in efficiency are foregone.
    Keywords: public goods; competition; tournament; cooperation; voting
    JEL: D72 J33 H41
    Date: 2012–05–01
  5. By: Bertocchi, Graziella (University of Modena and Reggio Emilia); Dimico, Arcangelo (Queen's University Belfast)
    Abstract: We evaluate the empirical relevance of de facto vs. de jure determinants of political power in the U.S. South between the end of the nineteenth and the beginning of the twentieth century. We apply a variety of estimation techniques to a previously unexploited dataset on voter registration by race covering the counties of Mississippi in 1896, shortly after the introduction of the 1890 voting restrictions encoded in the state constitution. Our results indicate that de jure voting restrictions reduce black registration but that black disfranchisement starts well before 1890 and is more intense where a black majority represents a threat to the de facto power of white elites. Moreover, the effect of race becomes stronger after 1890 suggesting that the de jure barriers may have served the purpose of institutionalizing a de facto condition of disfranchisement.
    Keywords: race, voting, institutions, education, inequality
    JEL: J15 N41 O43 P16
    Date: 2012–07
  6. By: Sascha Kurz (University of Bayreuth); Stefan Napel (University of Bayreuth)
    Abstract: Power indices are mappings that quantify the influence of the members of a voting body on collective decisions a priori. Their nonlinearity and discontinuity makes it difficult to compute inverse images, i.e., to determine a voting system which induces a power distribution as close as possible to a desired one. The paper considers approximations to this inverse problem for the Penrose-Banzhaf index by hill-climbing algorithms and exact solutions which are obtained by enumeration and integer linear programming techniques. They are compared to the results of three simple solution heuristics. The heuristics perform well in absolute terms but can be improved upon very considerably in relative terms. The findings complement known asymptotic results for large voting bodies and may improve termination criteria for local search algorithms.
    Keywords: electoral systems, simple games, weighted voting games, square root rule, Penrose limit theorem, Penrose-Banzhaf index, institutional design
    JEL: C61 C71 D02
    Date: 2012–07–23
  7. By: Tom Vogl
    Abstract: Elections between black and white candidates tend to involve close margins and high turnout. Using a novel dataset of municipal vote returns during the rise of black mayors in U.S. cities, this paper establishes new facts about turnout and competition in close interracial elections. In the South, but not the North, close black victories were more likely than close black losses, involved higher turnout than close black losses, and were more likely than close black losses to be followed by subsequent black victories. These results are consistent with a model in which the historical exclusion of Southern blacks from politics made them disproportionately sensitive to mobilization efforts by political elites, leading to a black candidate advantage in close elections. The results contribute to a growing body of evidence that the outcomes of reasonably close elections are not always random, which suggests that detailed knowledge of the electoral context is a precondition to regression discontinuity analyses based on vote shares.
    JEL: C18 D72 J00
    Date: 2012–08
  8. By: Roman Horváth (Charles University, Prague and IOS, Regensburg); Kateřina Šmídková; Jan Zápal
    Abstract: We assess whether the voting records of central bank boards are informative about future monetary policy using data on five inflation targeting countries (the Czech Republic, Hungary, Poland, Sweden and the United Kingdom). We find that in all countries the voting records, namely the difference between the average voted-for and actually implemented policy rate, signal future monetary policy, making a case for publishing the records. This result holds even if we control for the financial market expectations; include the voting records from the period covering the current global financial crisis and examine the differences in timing and style of the voting record announcements.
    Keywords: monetary policy, voting record, transparency, collective decision-making
    JEL: D78 E52 E58
    Date: 2012–07
  9. By: Grégoire ROTA-GRAZIOSI (Centre d'Etudes et de Recherches sur le Développement International); Clémence VERGNE (Banque mondiale); Blanca MORENO DODSON
    Abstract: We investigate whether foreign aid affects the probability of incumbent's re-election and then the Schumpeterian quality of democracy in developing countries. We present a simple theoretical framework, which captures the competitiveness of elections through the Tullock's approach based on the Contest Success Function. We obtain an ambiguous theoretical effect of foreign aid on the incumbent probability to be reelected: Foreign aid increases the prize of the electoral contest stimulating the challenger to increase his campaign effort; But, the incumbent may divert part of the aid, improving his advantage and reducing political competition. We investigate empirically this effect using panel data from 60 aid-recipient countries between 1980 and 2005. Our analysis shows that foreign aid increases the incumbent's re-election probabilities. However, this effect depends on recipients' democratic level and on the nature of foreign aid, consistently with our theoretical framework. While financial aid increases the probability of incumbent's re-election, political aid, especially through assistances in developing competitive electoral systems, reduces this probability.
    Keywords: Foreign aid; Elections; Incumbent's advantage
    JEL: O11 F35 D72
    Date: 2012
  10. By: Barelli, Paulo (University of Rochester); Govindan, Srihari (University of Rochester); Wilson, Robert (Stanford University)
    Abstract: We define the class of two-player zero-sum games with payoffs having mild discontinuities, which in applications typically stem from how ties are resolved. For games in this class we establish sufficient conditions for existence of a value of the game and minimax or Nash equilibrium strategies for the players. We prove first that if all discontinuities favor one player then a value exists and that player has a minimax strategy. Then we establish that a general property called payoff approachability implies that the value results from equilibrium. We prove further that this property implies that every modification of the discontinuities yields the same value; in particular, for every modification, epsilon-equilibria exist. We apply these results to models of elections in which two candidates propose policies and a candidate wins election if a weighted majority of voters prefer his policy. We provide tie-breaking rules and assumptions on voters' preferences sufficient to imply payoff approachability, hence existence of equilibria, and each other tie-breaking rule yields the same value and has epsilon-equilibria. These conclusions are also derived for the special case of Colonel Blotto games in which each candidate allocates his available resources among several constituencies and the assumption on voters' preferences is that a candidate gets votes from those constituencies allocated more resources than his opponent offers. Moreover, for the case of simple-majority rule we prove existence of an equilibrium that has zero probability of ties.
    JEL: C62 C72 D72
    Date: 2012–06
  11. By: Larcker, David F. (Rock Center for Corporate Governance, Stanford University); McCall, Allan L. (Stanford University); Ormazabal, Gaizka (University of Navarra)
    Abstract: This paper examines changes in executive compensation programs made by firms in response to proxy advisory firm say-on-pay voting policies. Using proprietary models, proxy advisory firms, primarily Institutional Shareholder Services and Glass, Lewis & Co., provide institutional shareholders with a "for" (positive) or "against" (negative) recommendation on the required management say-on-pay proposal in the annual proxy statement. Analyzing a large sample of firms from the Russell 3000 that are subject to the initial say-on-pay vote mandated by the Dodd-Frank Act, we find three important results. First, proxy advisory firm recommendations have a substantive impact on say-on-pay voting outcomes. Second, a significant number of firms change their compensation programs in the time period before the formal shareholder vote in a manner consistent with the features known to be favored by proxy advisory firms apparently in an effort to avoid a negative recommendation. Third, the stock market reaction to these compensation program changes is statistically negative. Thus, the proprietary models used by proxy advisory firms for say-on-pay recommendations appear to induce boards of directors to make choices that decrease shareholder value.
    JEL: G10 G30 K20 L50
    Date: 2012–07
  12. By: Leopoldo Fergusson; James A. Robinson; Ragnar Torvik; Juan F. Vargas
    Abstract: We develop a political economy model where some politicians have a comparative advantage in undertaking a task and this gives them an electoral advantage. This creates an incentive to underperform in the task in order to maintain their advantage. We interpret the model in the context of fighting against insurgents in a civil war and derive two main empirical implications which we test using Colombian data during the presidency of Álvaro Uribe. First, as long as rents from power are sufficiently important, large defeats for the insurgents should reduce the probability that politicians with comparative advantage, President Uribe, will fight the insurgents. Second, this effect should be larger in electorally salient municipalities. We find that after the three largest victories against the FARC rebel group, the government reduced its efforts to eliminate the group and did so differentially in politically salient municipalities. Our results therefore support the notion that such politicians need enemies to maintain their political advantage and act so as to keep the enemy alive.
    JEL: D72
    Date: 2012–08
  13. By: Makoto Shimoji and Paul Schweinzer
    Abstract: We consider implementation problems under incomplete information without incentive compatibility. If the social choice functions do not satisfy incentive compatibility, full implementation is unattainable via the existing approaches. By focusing on the actual problems from Typhoon by Joseph Conrad and The Traveler's Dilemma by Kaushik Basu (1994, 2007), we provide a new approach to such implementation problems. For each problem, we first construct a mechanism which takes advantage of a unique feature of these problems, i.e., the planners possess some information regarding the actual state. We then provide a sufficient condition on players' beliefs for each problem under which every player has a unique rationalizable action. The conditions we identify however depend on the informational structures, suggesting that obtaining a general result within this type of frameworks is nontrivial.
    Keywords: Implementation, Rationalizability, Incentive Compatibility, Incomplete Information
    JEL: C72 D82
    Date: 2012–08

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