New Economics Papers
on Collective Decision-Making
Issue of 2012‒09‒30
eight papers chosen by

  1. Centralization and Accountability: Theory and Evidence from the Clean Air Act By Federico Boffaa; Amadeo Piollatto; Giacomo Ponzetto
  2. The Voter's Blunt Tool By Bowen, T. Renee; Mo, Cecilia Hyunjung
  3. Deliberation, Leadership and Information Aggregation By Javier Rivas; Carmelo Rodriguez-Alvarez
  4. Prediction for the 2012 United States Presidential Election using Multiple Regression Model By Sinha, Pankaj; Sharma, Aastha; Singh, Harsh Vardhan
  5. The Elimination of Broker Voting in Director Elections By Ali Akyol; Konrad Raff; Patrick Verwijmeren
  6. Rethinking the Political Economy of Decentralization: How Elections and Parties Shape the Provision of Local Public Goods By Raúl A. Ponce-Rodríguez; Charles R. Hankla; Jorge Martinez-Vazquez; Eunice Heredia-Ortiz
  7. On the Political Determinants of Intergovernmental Grants in Decentralized Countries: The Case of Spain By Pablo Simón-Cosano; Santiago Lago-Peñas; Alberto Vaquero
  8. Citizenry Accountability in Autocracies: The Political Economy of Good Governance in China By Gilli, Mario; Li, Yuan

  1. By: Federico Boffaa; Amadeo Piollatto; Giacomo Ponzetto
    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 environ- mental 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, interregional heterogeneity, elections, environmental policy, air pollution
    JEL: D72 D82 H73 H77 Q58
    Date: 2012–04
  2. By: Bowen, T. Renee (Stanford University); Mo, Cecilia Hyunjung (Stanford University)
    Abstract: When do voters win? Democracies have appealing properties, but failures of democracies to produce policies that benefit the voter abound. What conditions determine the success of the unorganized voter who only possess a blunt tool-- the vote-- versus an organized special interest group or firm? In this paper we derive with minimal assumptions conditions under which a democracy will produce policies that favor the voter. The model predictions are consistent with Besley, Persson and Sturm (2010), who show that increasing political competition leads to policies that benefit the voter. In addition, we show that increasing office holding benefits, decreasing potential rents to firms and increasing the salience of policy also leads to policies that benefit the voter. We find a positive interaction between the effect of political competition and office holding benefits. We support the model with data from the United States and find empirical evidence that increasing governors' salary decreased taxes paid by individuals through income tax relative to corporate tax, and increasing Governor salary increased minimum wages.
    Date: 2012–08
  3. By: Javier Rivas; Carmelo Rodriguez-Alvarez
    Abstract: We analyze committees of voters who take a decision between two options as a two stage process. In a discussion stage, voters share non verifiable information about a private signal concerning what is the best option. In a voting stage, votes are cast and one of the options is implemented. We introduce the possibility of leadership whereby a certain voter, the leader, is more influential than the rest at the discussion stage even though she is not better informed. We study information transmission and find, amongst others, a non-monotonic relation between how influential the leader is and how truthful voters are at discussion stage.
    Date: 2012–09
  4. By: Sinha, Pankaj; Sharma, Aastha; Singh, Harsh Vardhan
    Abstract: This paper investigates the factors responsible for predicting 2012 U.S. Presidential election. Though contemporary discussions on Presidential election mention that unemployment rate will be a deciding factor in this election, it is found that unemployment rate is not significant for predicting the forthcoming Presidential election. Except GDP growth rate, various other economic factors like interest rate, inflation, public debt, change in oil and gold prices, budget deficit/surplus and exchange rate are also not significant for predicting the U.S. Presidential election outcome. Lewis-Beck and Rice (1982) proposed Gallup rating, obtained in June of the election year, as a significant indicator for forecasting the Presidential election. However, the present study finds that even though there exists a relationship between June Gallup rating and incumbent vote share in the Presidential election, the Gallup rating cannot be used as the sole indicator of the Presidential elections. Various other non-economic factors like scandals linked to the incumbent President and the performance of the two parties in the midterm elections are found to be significant. We study the influence of the above economic and non-economic variables on voting behavior in U.S. Presidential elections and develop a suitable regression model for predicting the 2012 U.S. Presidential election. The emergence of new non-economic factors reflects the changing dynamics of U.S. Presidential election outcomes. The proposed model forecasts that the Democrat candidate Mr. Barack Obama is likely to get a vote percentage between 51.818 % - 54.239 %, with 95% confidence interval.
    Keywords: USA Presidential election; forecasting; regression; Gallup rating; Congress; Scandal;macroeconomic variable; midterm election;
    JEL: C53 C5 E17 D72 C01 C2
    Date: 2012–08–05
  5. By: Ali Akyol (University of Melbourne); Konrad Raff (VU University Amsterdam); Patrick Verwijmeren (VU University Amsterdam, Duisenberg school of finance, and University of Glasgow)
    Abstract: After pressure from shareholder activists, proxy advisory firms, and the New York Stock Exchange, the Securities and Exchange Commission has eliminated uninstructed broker voting in director elections. We observe that average director approval rates remain high after the change in regulation, while the probability of a director being voted off the board remains low. In addition, we find no evidence of significant wealth effects of the change in regulation. We do find that firms are increasingly letting shareholders ratify their auditors after the change in regulation, which helps in establishing a quorum.
    Keywords: Broker voting; shareholder empowerment; Securities and Exchange Commission; board effectiveness
    JEL: G34 G38
    Date: 2012–09–14
  6. By: Raúl A. Ponce-Rodríguez (Department of Economics, Universidad Autónoma de Ciudad Juárez); Charles R. Hankla (Department of Political Science, Georgia State University); Jorge Martinez-Vazquez (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University); Eunice Heredia-Ortiz (Development Alternatives Inc., DAI Author)
    Abstract: Decentralization is among the most important global trends of the new century, yet there is still no consensus on how to design political institutions to realize its benefits. In this paper, we investigate the political conditions under which decentralization will improve the delivery of public goods. We begin by incorporating insights from political science and economics into a rigorous and formal extension of the “decentralization theorem”. Our extension assumes inter-jurisdictional spillovers and suggests that the interaction of democratic decentralization (popularly elected sub-national governments) and party centralization (the power of national party leaders over subnational office-seekers) will produce the best outcomes for public service delivery. To test this argument empirically, we make use of a new dataset of sub-national political institutions created for this project. Our analyses, which allow us to examine educational outcomes in more than 125 countries across more than 25 years, provide support for our theoretical expectations.
    Date: 2012–08–11
  7. By: Pablo Simón-Cosano (Universitat Pompeu Fabra); Santiago Lago-Peñas (REDE, IEB and University of Vigo); Alberto Vaquero (University of Vigo)
    Abstract: This paper studies the effect of political variables on the gains obtained by Spanish regions in periodical bargaining of the intergovernmental financing agreements and on the regional distribution of discretional earmarked grants over the period 1987-2008. First, we find that the relationship between gains in transferred revenues and on regional public debt stocks depends on the period and the specific issues discussed in the corresponding negotiation, aside from political affinity. Second, we show that the most discretional program of earmarked grants is strongly driven by electoral strategy. National incumbents tend to allocate intergovernmental transfers where there are competitive regional elections. Moreover, we show that earmarked grants are allocated in those regions where the incumbent performs better in national elections and, especially, in those where there are more seats to be won. Hence we prove that both strategies are complementary rather than exclusive.
    Keywords: Intergovernmental grants, party systems, elections, subcentral public debt.
    Date: 2012–09–19
  8. By: Gilli, Mario (Department of Economics, University of Milan-Bicocca); Li, Yuan (China Economic Research Center)
    Abstract: Do citizens have a role in constraining the policies of autocratic governments? Usually political and economic literature models autocracy as if citizens have no role in constraining a leader's behavior, when in fact autocratic governments are afraid of potential citizen revolts. In this paper we build a three player political agency model to study citizenry accountability in autocracies. We show that the citizens can effectively discipline the leader due to the threat of revolution notwithstanding the size of the selectorate, though this may result in a failed state when the costs of revolution and the size of the selectorate are small. Our model and results provide a useful framework for interpreting the political logic of the China's economic reform after the "Tiananmen incident".
    Keywords: Autocracy; Accountability; Revolt; Chinese Economic Reform
    JEL: D02 D74 H11 P30
    Date: 2012–09–20

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