New Economics Papers
on Collective Decision-Making
Issue of 2013‒10‒25
fourteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Identification and estimation of preference distributions when voters are ideological By Antonio Merlo; Aureo de Paula
  2. Political budget cycles and the organization of political parties By Hanusch, Marek; Keefer, Philip
  3. Promises, promises : vote-buying and the electoral mobilization strategies of non-credible politicians By Hanusch, Marek; Keefer, Philip
  4. Imperfectly Informed Voters and Strategic Extremism By Enriqueta Aragonès; Dimitrios Xefteris
  5. Identifying Structural Models of Committee Decisions with Heterogeneous Tastes and Ideological Bias By Yonghong An; Xun Tang
  6. Political Economics of External Sovereign Defaults By Carolina Achury; Christos Koulovatianos; John Tsoukalas
  7. Do More Educated Leaders Raise Citizens' Education? By Diaz-Serrano, Luis; Pérez, Jessica
  8. Statistical formats to optimize evidence-based decision making: a behavioral approach By Iván Arribas; Irene Comeig; Amparo Urbano Salvador; Jose E. Vila
  9. Incumbency Advantage in an Electoral Contest By Tuvana Pastine; Ivan Pastine; Matthew T. Cole
  10. Incomplete Contracts and the Internal Organisation of Firms By Phillipe Aghion; Nicholas Bloom; John Van Reenen
  11. Rewiring the network. What helps an innovation to diffuse? By Katarzyna Sznajd-Weron; Janusz Szwabinski; Rafal Weron; Tomasz Weron
  12. Competition through Cooperation? The Case of the German Postal Market By Toufic M. El Masri
  13. The Role of Knowledge Variety and Intensity for Regional Innovative Capability - Swedish evidence By Mohammad Tavassoli; Nunzia Carbonara
  14. Neo-Liberalism and Protest in West Bengal: An Analysis through the Media lens By Bandhyopadhyay, Tirthankar; Dinda, Soumyananda

  1. By: Antonio Merlo; Aureo de Paula (Institute for Fiscal Studies and University College London)
    Abstract: This paper studies the nonparametric identification and estimation of voters' preferences when voters are ideological. We establish that voter preference distributions and other parameters of interest can be identified from aggregate electoral data. We also show that these objects can be consistently estimated and illustrate our analysis by performing an actual estimation using data from the 1999 European Parliament elections.
    Date: 2013–10
  2. By: Hanusch, Marek; Keefer, Philip
    Abstract: This paper introduces a new explanation for political budget cycles: politicians have stronger incentives to increase spending around elections in the presence of younger political parties. Previous research has shown that political budget cycles are larger when voters are uninformed about politician characteristics and when politicians are less credible. The effects of party age can be traced to organizational differences between younger and older parties that also affect voter information and politician credibility. Parties organized around particular individuals, rather than around policy labels or a party machine, are less likely to survive the departure of party leaders, to adopt organizational attributes that promote voter information and political credibility, and to limit political budget cycles. Previous research has also shown larger political budget cycles in younger democracies. Evidence presented here indicates that party age accounts for this effect.
    Keywords: Civic Participation and Corporate Governance,Politics and Government,Political Systems and Analysis,Public Sector Expenditure Policy,Consumption
    Date: 2013–10–01
  3. By: Hanusch, Marek; Keefer, Philip
    Abstract: Vote-buying is pervasive, but not everywhere. What explains significant variations across countries in the greater use of pre-electoral transfers to mobilize voters relative to the use of pre-electoral promises of post-electoral transfers? This paper explicitly models the trade-offs that politicians incur when they decide between mobilizing support with vote-buying or promises of post-electoral benefits. Politicians rely more on vote-buying when they are less credible, target vote-buying to those who do not believe their political promises, and only buy votes from those who would have received post-electoral transfers in a world of full political credibility. The enforcement of a prohibition on vote-buying reduces the welfare of those targeted with vote-buying, but improves the welfare of all other groups in society.
    Keywords: Politics and Government,Civic Participation and Corporate Governance,Wages, Compensation&Benefits,Political Systems and Analysis,State Owned Enterprise Reform
    Date: 2013–10–01
  4. By: Enriqueta Aragonès; Dimitrios Xefteris
    Abstract: We analyze a unidimensional model of two-candidate electoral competition where voters have imperfect information about the candidates' policy proposals, that is, voters cannot observe the exact policy proposals of the candidates but only which candidate offers the most leftist/rightist platform. We assume that candidates are purely office motivated and that one candidate enjoys a valence advantage over the other. We characterize the unique Sequential Equilibrium in very-weakly undominated strategies of the game. In this equilibrium the behavior of the two candidates tends to maximum extremism, due to the voters' lack of information. But it may converge or diverge depending on the size of the advantage. For small values of the advantage candidates converge to the extreme policy most preferred by the median and for large values of the advantage candidates strategies diverge: each candidate specializes in a different extreme policy. These results are robust to the introduction of a proportion of well informed voters. In this case the degree of extremism decreases when the voters become more informed.
    Keywords: Downsian model, imperfect information, advantaged candidate, maximum differentiation
    JEL: D72
    Date: 2013–10
  5. By: Yonghong An (Department of Economics, University of Connecticut); Xun Tang (Department of Economics, University of Pennsylvania)
    Abstract: We study the nonparametric identification and estimation of a structural model for committee decisions. Members of a committee share a common information set, but differ in ideological bias while processing multiple information sources and in individual tastes while weighing multiple objectives. We consider two cases of the model where committee members have or don't have strategic incentives for making recommendations that conform with the committee decision. For both cases, pure-strategy Bayesian Nash equilibria exist, and we show how to use variations in the common information set to recover the distribution of members' private types from individual recommendation patterns. Building on the identification result, we estimate a structural model of interest rate decisions by the Monetary Policy Committee (MPC) at the Bank of England. We find some evidence that recommendations from external committee members are less distorted by strategic incentives than internal members. There is also evidence that MPC members differ more in their tastes for multiple objectives than in ideological bias.
    Keywords: Committee decisions, nonparametric identification, MPC at the Bank of England
    JEL: C14 D71
    Date: 2013–10–07
  6. By: Carolina Achury (Exeter School of Business, University of Exeter); Christos Koulovatianos (CREA, University of Luxembourg); John Tsoukalas (Department of Economics, University of Glasgow)
    Abstract: We study how excessive debt-GDP ratios affect political sustainability of prudent fiscal policy in country members of a monetary union. We develop a model with free choice of distinct rent-seeking groups to cooperate (or not) in providing public goods, in seeking rents, and in austere debt issuing through international markets. Noncooperation of rent-seeking groups on fiscal prudence triggers collective fiscal impatience: fiscal debt is issued excessively because each group expropriates extra rents before other groups do so, too. Such collective fiscal impatience leads to a vicious circle of high international interest rates and external-debt default. Our calibration suggests that debt-GDP ratios below 137% foster cooperation among rent-seeking groups, which avoids collective fiscal impatience and default. Our analysis helps in understanding the politicoeconomic sustainability of sovereign rescue packages, emphasizing the need for fiscal targets and for possible debt haircuts.
    Keywords: sovereign debt, rent seeking, world interest rates, international lending, incentive compatibility, tragedy of the commons, EU crisis
    JEL: H63 F34 F36 E44 E43 D72
    Date: 2013
  7. By: Diaz-Serrano, Luis (Universitat Rovira i Virgili); Pérez, Jessica (Universitat Rovira i Virgili)
    Abstract: This paper looks at the contribution of political leaders to enhance citizens' education and investigate how the educational attainment of the population is affected while a leader with higher education remains in office. For this purpose, we consider educational transitions of political leaders in office and find that the educational attainment of population increases when a more educated leader remains in office. Furthermore, we also observe that the educational attainment of the population is negatively impacted when a country transitions from an educated leader to a less educated one. This result may help to explain the previous finding that more educated political leaders favor economic growth.
    Keywords: political leaders, primary education, school achievement, political institutions
    JEL: I21 I25 I28
    Date: 2013–09
  8. By: Iván Arribas (ERI-CES, University of Valencia, Ivie); Irene Comeig (LINEEX, University of Valencia); Amparo Urbano Salvador (ERI-CES, University of Valencia); Jose E. Vila (ERI-CES, University of Valencia)
    Abstract: Statistical information is crucial for managerial decision making. The decision-making literature in psychology and mathematical cognition documents how different statistical formats can facilitate certain types of decisions. The present analysis is the first of its kind to assess the impact of statistical formats in the presentation of data from market research on both the optimality of market decisions and the time required to perform the decision-making process. An economic experiment provides the data for this study. The experiment presents statistical information in simple frequencies and relative frequencies using numerical and pictorial representations in the context of different informational environments. The key findings are that statistical information presented in terms of relative frequency formats gives rise to more accurate decision making than data presented in terms of simple frequencies, independently of the informational environments. When time is the relevant variable, numerical formats lead to a faster interpretation than pictorial ones. Since the number of factors defining the four statistical formats and the different informational environments is quite large, an orthogonal design offers a suitable experimental design. This design keeps the experiment manageable without substantially reducing its analytical power
    Keywords: Economic experiments, Statistical formats, Probability judgment, Orthogonal design, Judgment under uncertainty
    Date: 2013–10
  9. By: Tuvana Pastine (Department of Economics Finance and Accounting, National University of Ireland, Maynooth); Ivan Pastine (Unviersity College Dublin); Matthew T. Cole (Florida International University)
    Abstract: In a campaign spending contest model, this paper investigates whether the sources of incumbency advantage are able to generate the observed pattern of campaign spending and incumbent re-election rates in US elections and assesses the degree to which campaign finance reform can mitigate the negative repercussions of incumbency advantage. The paper extends the existing literature by allowing the electoral benefit to the candidate’s visibility to be stochastic which is intuitively appealing since one dollar of extra spending should not take a candidate from a certain loser to a certain winner. Officeholders’ ability to generate free media exposure alone is shown to be unable to match empirical regularities. Incumbent’s superior fundraising efficiency is the key to matching the observed patterns. In contrast to previous literature, the model predicts that campaign finance legislation can help reduce the challenger scare-off effect of incumbency advantage.
    Date: 2013
  10. By: Phillipe Aghion; Nicholas Bloom; John Van Reenen
    Abstract: We survey the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making within firms. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap.
    Keywords: uncertainty
    JEL: E3
    Date: 2013–03
  11. By: Katarzyna Sznajd-Weron; Janusz Szwabinski; Rafal Weron; Tomasz Weron
    Abstract: A fundamental question related to innovation diffusion is how the social network structure influences the process. Empirical evidence regarding real-world influence networks is very limited. On the other hand, agent-based modeling literature reports different and at times seemingly contradictory results. In this paper we study innovation diffusion processes for a range of Watts-Strogatz networks in an attempt to shed more light on this problem. Using the so-called Sznajd model as the backbone of opinion dynamics, we find that the published results are in fact consistent and allow to predict the role of network topology in various situations. In particular, the diffusion of innovation is easier on more regular graphs, i.e. with a higher clustering coefficient. Moreover, in the case of uncertainty – which is particularly high for innovations connected to public health programs or ecological campaigns – a more clustered network will help the diffusion. On the other hand, when social influence is less important (i.e. in the case of perfect information), a shorter path will help the innovation to spread in the society and – as a result – the diffusion will be easiest on a random graph.
    Keywords: Diffusion of innovation; Opinion dynamics; Network structure; Watts-Strogatz network;
    JEL: C63 D70 O33
    Date: 2013–10–20
  12. By: Toufic M. El Masri (Leuphana University Lueneburg, Germany)
    Abstract: How can small and medium-sized German postal providers ensure nationwide geographical coverage without the aid of the former monopolist? A closer look at the industry revealed that postal providers in Germany engage in different types of cooperation in order to expand their geographical coverage independently from the market leader. In order to shed light on the effects of cooperation, I conducted a theoretical analysis using a spatial economic model complemented by a brief game-theoretical discussion. Moreover, I provide the first descriptive and case study evidence from unique data collected in 2010 and 2011, within the framework of a German postal market survey. I found that small postal providers cooperate with each other in order to extend their geographical service area and to succeed in the market. Furthermore, I also found – in both the theoretical analysis as well as in the evidence – that there is a negative counter-effect stemming from this cooperation.
    Keywords: Cooperation, Competition, Germany, Network Industries, Postal Sector
    JEL: D24 L22 L51 L97
    Date: 2013–10
  13. By: Mohammad Tavassoli; Nunzia Carbonara
    Abstract: This paper analyses the effect of variety and intensity of knowledge on the innovative capability of regions. Employing data for Swedish functional regions, the paper tests the role of the variety (related and unrelated) and intensity of (i) internal knowledge generated within the region and also (ii) external knowledge networks flowing into the region in explaining regional innovative capability, as measured by patent applications. The empirical analysis provides robust evidence that both the variety and intensity of internal and external knowledge matter for regions’ innovative capability. When it comes to variety, related knowledge variety plays a superior role.
    Keywords: Knowledge intensity, Knowledge variety, Related variety, Unrelated variety, Internal knowledge, External knowledge, Patent applications, Functional regions
    JEL: O32 F14 R12
    Date: 2013–10
  14. By: Bandhyopadhyay, Tirthankar; Dinda, Soumyananda
    Abstract: Neo-liberalism is revival of liberalism that is radically dismantling the state and sifting power to the private sector. People favour welfare state and oppose any move against it. This paper attempts to gauge the protest in West Bengal against neo-liberalism. The recent protest in West Bengal that led to the electoral defeat of the Left Front is not only about land acquisition and loss of livelihood. Instead, it goes to the core of over three decades of left rule and raises serious questions about the policies adopted by the Left Front governments. This paper demonstrates that land reform and decentralisation of rural power, through institutions of local government, consolidated the authority of the CPI-M in the state but were detrimental to capital formation, necessary for industrialisation. Lack of adequate capital forced the left leadership to lure private investors to cope with the instability caused by increased aspiration in a globalised set up coupled with technological innovation. This being paradoxical to the political doctrine of the left resulted in a tension in the midst of an already unstable situation caused by economic stagnation and lack of adequate job creation in the state. The actions of the government to ward off the protests raise moral questions as to whether the CPI-M has the authority to claim to be representing the poor.
    Keywords: Land acquisition, land reform, decentralisation, political doctrine, left leadership, economic stagnation, lack of jobs, intellectual support
    JEL: B51 B52 N60 Z1
    Date: 2013–05–08

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