New Economics Papers
on Collective Decision-Making
Issue of 2014‒01‒24
seventeen papers chosen by
Stan C. Weeber, McNeese State University

  1. A Carrot and Stick Approach to Agenda-Setting By Dahm, Matthias; Glazer, Amihai,
  2. The indirect effects of direct democracy: Local government size and non-budgetary voter initiatives By Asatryan, Zareh
  3. Mind What Your Voters Read: Media Exposure and International Economic Policy Making By Giovanni Facchini; Tommaso Frattini; Cora Signorotto
  4. Special Interests and the Media: Theory and an Application to Climate Change By Jesse M. Shapiro
  5. The effect of direct democracy on the level and structure of local taxes By Asatryan, Zareh; Baskaran, Thushyanthan; Heinemann, Friedrich
  6. Information Transmission within Federal Fiscal Architectures: Theory and Evidence By Axel Dreher; Kai Gehring; Christos Kotsogiannis; Silvia Marchesi
  7. Strengthening Corporate Governance in India - A Review of Legislative and Regulatory Initiatives in 2013 By Balasubramanian, Bala N.
  8. Powerful Independent Directors By Kathy Fogel; Liping Ma; Randall Morck
  9. Cursed beliefs with common-value public goods By Cox, Caleb
  10. Exploring the Evolution of Innovation Networks in Science-driven and Scale-intensive Industries: New Evidence from a Stochastic Actor-based Approach By T. Buchmann; D. Hain; Muhamed Kudic; M. Müller
  11. Capitalist transformation without political participation: German capitalism in the first half of the 19th century By Wegner, Gerhard
  12. Temptation with Uncertain Normative Preferences By Stovall, John
  13. The impact of fiscal and political decentralization on local public investments in Indonesia By Krisztina Kis-Katos; Bambang Suharnoko Sjahrir
  14. State-Owned Enterprise Governance: A Stocktaking of Reforms and Challenges in Southern Africa By Sara Sultan Balbuena
  15. Linkage of Greenhouse Gas Emissions Trading Systems: Learning from Experience By Matthew Ranson; Robert Stavins
  16. Comment-based discussion communities In the Russian livejournal and their topical coherence By Olessia Y. Koltsova; Sergei N. Koltcov; Sergey I. Nikolenko
  17. A wake-up call: information contagion and strategic uncertainty By Ahnert, Toni; Bertsch, Christoph

  1. By: Dahm, Matthias; Glazer, Amihai,
    Abstract: This paper models a legislature in which the same agenda setter serves for two periods, showing how he can exploit a legislature (completely) in the first period by promising future benefits to legislators who support him. In equilibrium, a large majority of legislators vote for the first-period proposal because they thereby maintain the chance of belonging to the minimum winning coalition in the future. Legislators may therefore approve policies by large majorities, or even unanimously, that benefit few, or even none, of them. The results are robust; but institutional arrangements (such as entitlements) can reduce the agenda setter's power by reducing his discretion to reward and punish legislators, and rules (such as sequential voting) can increase a legislator's ability to resist exploitation. Keywords: Legislative bargaining, distributive politics, agenda-setting, proposal power. JEL C72, D72, D78.
    Keywords: Jocs no-cooperatius (Matemàtica), 32 - Política,
    Date: 2013
  2. By: Asatryan, Zareh
    Abstract: Recently a wide and empirically-backed consensus has emerged arguing that direct democratic control over government's spending decisions through initiatives and referenda constrains government size. But what happens if budgetary matters are excluded from the voters' right of the initiative? I study this question by extending the analysis to German direct democracy reforms of the mid-1990s, which granted voters wide opportunities to initiate referenda on local issues, but neither the right, nor the responsibility of voting on the implied costs of these initiatives. By exploiting a novel dataset containing detailed information on close to 2,300 voter initiatives in the population of around 13,000 German municipalities from 2002 to 2009, I show that in this sample and in contrast to the Swiss and US evidence direct democracy causes an expansion of local government size by up to 8% in annual per capita expenditure and revenue per observed initiative (on economic projects). The main empirical challenge is the endogeneity of voters' unobserved preferences which simultaneously determine both their propensity towards exploiting their direct democracy rights and their preferences for local public policies. To address this issue I use state- and municipality-varying legislative thresholds on the minimum number of signatures required to initiate referenda and the time to collect these signatures as strong and exogenous instruments for observed initiatives. --
    Keywords: direct democracy,local public finances,Germany
    JEL: D72 D78 H70
    Date: 2014
  3. By: Giovanni Facchini (University of Nottingham, University of Milan, CEPR, CES-Ifo, CrEAM, IZA and); Tommaso Frattini (University of Milan, CrEAM, IZA and Centro Studi Luca d’Agliano); Cora Signorotto (University of Milan and Centro Studi Luca d’Agliano)
    Abstract: e investigate the role of constituents’ preferences in shaping the voting behavior of elected representatives on immigration and trade policy. Using a novel dataset spanning the period 1986-2004, in which we match individual opinion surveys with congressmen roll call votes, we find that greater exposure to media coverage tends to increase a politician’s accountability when it comes to migration policy making, while we find no effect for trade policy. Our results thus suggest that more information on the behavior of elected officials affects decisions only when the policy issue is perceived to be salient by the electorate.
    Keywords: Trade Reforms, Immigration Reforms, Individual preferences, Media exposure
    JEL: F22 J61
    Date: 2013–10–13
  4. By: Jesse M. Shapiro
    Abstract: I present a model in which competing special interests seek policy influence through the news media. In the model a journalist reports on expert opinion to a voter. Two competing interested parties can invest to acquire credentialed advocates to represent their positions in the press. Because advocates are easier to obtain when expert opinion is divided, the activities of special interests can reveal useful information to the voter. However, competition among special interests can also reduce the amount of information communicated to the voter, especially on issues with large economic stakes and a high likelihood of a scientific consensus. The model provides an account of persistent voter ignorance on climate change and other high-stakes scientific topics.
    JEL: D72 D83 Q54
    Date: 2014–01
  5. By: Asatryan, Zareh; Baskaran, Thushyanthan; Heinemann, Friedrich
    Abstract: We study the effect of direct democracy on local taxation. Our setting is the German federal state of Bavaria, where in 1995 a state-wide referendum introduced the possibility to initiate direct democratic legislation into the local government code. Relying on a sample of all Bavarian municipalities over the period 1980-2011, we hypothesize that complementing a representative form of government with direct democratic elements leads to (i) higher local tax rates and (ii) a shift of the local tax mix from taxes with broader (property taxes) to taxes with narrower bases (business taxes). For identification, we implement selection on observables and difference-in-discontinuity designs. Our results show that both actual direct democratic activity measured by the number of initiatives and the ease with which direct democratic legislation can be implemented measured by signature and quorum requirements increase local tax rates and shift the tax mix toward taxes with narrower bases. --
    Keywords: direct democracy,taxation,regression discontinuity,Bavaria
    JEL: D72 D78 H71
    Date: 2014
  6. By: Axel Dreher (Heidelberg University); Kai Gehring (University of Göttingen); Christos Kotsogiannis (University of Exeter); Silvia Marchesi (University of Milan Bicocca and Centro Studi Luca d’Agliano)
    Abstract: This paper explores the role of information transmission and misaligned interests across levels of government in explaining variation in the degree of decentralization across countries. Within a two-sided incomplete information principal-agent framework, it analyzes two alternative policy-decision schemes –‘decentralization’ and ‘centralization’– when ‘knowledge’ consists of unverifiable information and the quality of communication depends on the conflict of interests between the government levels. It is shown that, depending on which level of policy decision-making controls the degree of decentralization, the extent of misaligned interests and the relative importance of local and central government knowledge affects the optimal choice of policy-decision schemes. The empirical analysis shows that countries’ choices depend on the relative importance of their private information and the results differ significantly between unitary and federal countries.
    Keywords: delegation, centralization, communication, fiscal decentralization, state and local government
    JEL: H7 H77 D82 D83 C23
    Date: 2013–10–31
  7. By: Balasubramanian, Bala N.
    Abstract: The passing of the long awaited Companies Act in 2013 is probably the single most important development in India's history of corporate legislation, next only to the monumental Companies Act 1956 which it replaces. While significant improvements have been effected in required standards of corporate governance, there is also some concern of possible overreach making life more difficult for companies as well as their independent directors. Among the major provisions of the Act are those of restraining voting rights of interested shareholders on related party transactions, recognition of board accountability to stakeholders besides shareholders, and extension of several good governance requirements to relatively large unlisted corporations.
  8. By: Kathy Fogel; Liping Ma; Randall Morck
    Abstract: Shareholder valuations are economically and statistically positively correlated with more powerful independent directors, their power gauged by social network power centrality measures. Sudden deaths of powerful independent directors significantly reduce shareholder value, consistent with independent director power “causing” higher shareholder value. Further empirical tests associate more powerful independent directors with fewer value-destroying M&A bids, more high-powered CEO compensation and accountability for poor performance, and less earnings management. We posit that more powerful independent directors can better detect and counter managerial missteps because of their better access to information, their greater credibility in challenging errant top managers, or both.
    JEL: D85 G02 G3 G34 G38 K22 L2 Z13
    Date: 2014–01
  9. By: Cox, Caleb
    Abstract: I show how improper conditioning of beliefs can lead to under-contribution in public goods environments with interdependent values. I consider a simple model of a binary, excludable public good. In equilibrium, provision of the public good is good news about its value. Naive players who condition expectations only on their private information contribute too little, despite the absence of free-riding incentives. In a laboratory experiment, subjects indeed under-contribute relative to equilibrium. Using modified games with different belief conditioning effects, I verify that under-contribution is due to improper belief conditioning. I find little evidence of learning over multiple rounds of play.
    Keywords: Public goods; experiments; cursed equilibrium; game theory
    JEL: C72 C92 D71 H41
    Date: 2014–01–21
  10. By: T. Buchmann; D. Hain; Muhamed Kudic; M. Müller
    Abstract: Our primary goal is to analyse the drivers of evolutionary network change processes by using a stochastic actor-based simulation approach. We contribute to the literature by combining two unique datasets, concerning the German laser and automotive industry, between 2002 and 2006 to explore whether geographical, network-related, and techno-logical determinants affect the evolution of networks, and if so, as to what extent these determinants systematically differ for science-driven industries compared to scale-intensive industries. Our results provide empirical evidence for the explanatory power of network-related determinants in both industries. The ‘experience effect’ as well as the ‘transitivity effects’ are significant for both industries but more pronounced for laser manufacturing firms. When it comes to ‘geographical effects’ and ‘technological ef-fects’ the picture changes considerably. While geographical proximity plays an important role in the automotive industry, firms in the laser industry seem to be less dependent on geographical closeness to cooperation partners; instead they rather search out for cooperation opportunities in distance. This might reflect the strong dependence of firms in science-driven industries to access diverse external knowledge, which cannot necessarily be found in the close geographical surrounding. Technological proximity negatively influences cooperation decisions for laser source manufacturers, yet has no impact for automotive firms. In other words, technological heterogeneity seems to ex-plain, at least in science-driven industries, the attractiveness of potential cooperation partners.
    Keywords: network evolution, innovation network, automotive industry, laser industry, SIENA
    JEL: O32 C41 D85
    Date: 2014–01
  11. By: Wegner, Gerhard
    Abstract: The paper analyzes the political economy of capitalist transformation in Germany during the first half of the 19th century. Current approaches in institutional economics stress the dependency of economic and political institutions in 'open access orders', which makes economic freedom without political freedom unsustainable. However, the emergence of capitalism in the German states after 1806 gives an example that economic freedom can precede political freedom, which implies that the political power of the 'dominant coalition' remains intact for a longer period of time. The paper argues that the German transformation towards modern capitalism was in stigated by competition among the European states; it was conducive to the monopolization of the coercive power of the state. This competition drove a wedge between the interests of the monarch and his supporting dominant coalition (landed gentry). Accordingly, the monarch had to find a bargain which established capitalist institutions in order to promote economic growth without compromising the interests of the landed gentry. Namely the public administration in Prussia which was deeply influenced by Adam Smith's ideas organized that bargain; it established economic freedom in various sectors but took the economic interests of the landed gentry into account. At the same time, public administration and the legal system gained more independence from the monarch. In various aspects the sweeping institutional change was Pareto-superior for groups, which made capitalism also acceptable for the elite group. Later institutional improvements have relaxed still existing constraints so that high industrialization which brought the German economy to the top of international markets could take place. --
    Date: 2013
  12. By: Stovall, John (University of Warwick)
    Abstract: We model a decision maker who anticipates being a ected by temptation but is also uncertain about what is normatively best. Our model is an extended version of Gul and Pesendorfer's (2001) where there are three time periods: in the ex-ante period the agent chooses a set of menus, in the interim period she chooses a menu from this set, and in the nal period she chooses from the menu. We posit axioms from the ex-ante perspective. Our main axiom on preference states that the agent prefers to have the option to commit in the interim period. Our representation is a generalization of Dekel et al.'s (2009) and identi es the agent's multiple normative preferences and multiple temptations. We also characterize the uncertain normative preference analogue to the representation in Stovall (2010). Finally, we characterize the special case where normative preference is not uncertain. This special case allows us to uniquely identify the representations of Dekel et al. (2009) and Stovall (2010). Key words: JEL classification:
    Date: 2014
  13. By: Krisztina Kis-Katos; Bambang Suharnoko Sjahrir (Department of International Economic Policy, University of Freiburg)
    Abstract: We investigate the effects of the Indonesian decentralization and democratization process on budget allocation at the sub-national level. Based on panel data for 271 Indonesian districts for the years of 1994 to 2009, we address the determinants of local investment expenditures in public infrastructure in the sectors of education, health, and physical infrastructure. We find that after the dramatic expenditure decentralization of 2001, districts with relatively lower levels of public infrastructure started to invest more in these sectors. In contrast to the marked budgeting changes following the fiscal and administrative decentralization, we find no consistent effects of the democratization process on local public investments. Our results reflect initial improvements in local targeting but show no evidence of increasing electoral accountability.
    Keywords: Decentralization, democratic elections, budget allocation, Indonesia
    JEL: H72 H75
    Date: 2014–01
  14. By: Sara Sultan Balbuena
    Abstract: This report is the first known stocktaking of its kind to provide a regional overview of state-owned enterprise (SOE) governance reforms and challenges across the Southern African Development Community (SADC) region. Part One summarises the challenges and governance practices related to state-ownership across SADC economies; it draws conclusions on how to address common regional priorities. Part Two of the report is organised around country profiles providing a fact-based assessment of SOE reform policies and practices in 14 economies. The report was prepared at the request of the Southern Africa Network on Governance of State-Owned Enterprises – a regional cooperation initiative aimed at improving the corporate governance of SOEs, and mainly covering the member economies of the SADC region. The stocktaking was prepared based on information self-reported by authorities in participating economies and supplemented by desk research.
    Keywords: government policy and regulation, restructuring, merger and acquisition, financial economics, corporate governance
    JEL: G3 G30 G34 G38 G39
    Date: 2014–01–15
  15. By: Matthew Ranson; Robert Stavins
    Abstract: The last ten years have seen the growth of linkages between many of the world’s cap-and-trade systems for greenhouse gases (GHGs), both directly between systems, and indirectly via connections to credit systems such as the Clean Development Mechanism. If nations have tried to act in their own self-interest, this proliferation of linkages implies that for many nations, the expected benefits of linkage outweighed expected costs. In this paper, we draw on the past decade of experience with carbon markets to test a series of hypotheses about why systems have demonstrated this revealed preference for linking. Linkage is a multi-faceted policy decision that can be used by political jurisdictions to achieve a variety of objectives, and we find evidence that many economic, political, and strategic factors – ranging from geographic proximity to integrity of emissions reductions – influence the decision to link. We also identify some potentially important effects of linkage, such as loss of control over domestic carbon policies, which do not appear to have deterred real-world decisions to link. These findings have implications for the future role that decentralized linkages may play in international climate policy architecture. The Kyoto Protocol has entered what is probably its final commitment period, covering only a small fraction of global GHG emissions. Under the Durban Platform for Enhanced Action, negotiators may now gravitate toward a hybrid system, combining top-down elements for establishing targets with bottom-up elements of pledge-and-review tied to national policies and actions. The incentives for linking these national policies are likely to continue to produce direct connections among regional, national, and sub-national cap-and-trade systems. The growing network of decentralized, direct linkages among these systems may turn out to be a key part of a future hybrid climate policy architecture.
    JEL: Q28
    Date: 2014–01
  16. By: Olessia Y. Koltsova (National Research University Higher School of Economics); Sergei N. Koltcov (National Research University Higher School of Economics); Sergey I. Nikolenko (National Research University Higher School of Economics)
    Abstract: We study the structure of online discussions in order to uncover latent communities of socially important debate. Our research reveals that discussion communities defined by mutual commenting in the Russian language blogosphere are centered mainly around blog authors as opinion leaders and, to a lesser extent, around a shared topic or topics. We have derived these conclusions from the dataset of 17386 full text posts written by top 2000 LiveJournal bloggers and over 520,000 comments that result in about 4.5 million edges in the network of co-commenting
    Keywords: Comment-based communities, online discussion, blogs, Russia
    JEL: Z19
    Date: 2013
  17. By: Ahnert, Toni (Bank of Canada); Bertsch, Christoph (Monetary Policy Department, Central Bank of Sweden)
    Abstract: A successful speculative attack against one currency is a wake-up call for speculators elsewhere. Currency speculators have an incentive to acquire costly information about exposures across countries to infer whether their monetary authority's ability to defend its currency is weakened. Information acquisition per se increases the likelihood of speculative currency attacks via heightened strategic uncertainty among speculators. Contagion occurs even if speculators learn that there is no exposure. Our new contagion mechanism offers a compelling explanation for the 1997 Asian currency crisis and the 1998 Russian crisis, both of which spread across countries with seemingly unrelated fundamentals and limited interconnectedness. The proposed contagion mechanism applies generally in global coordination games and can also be applied to bank runs, sovereign debt crises, and political regime change.
    Keywords: contagion; coordination failure; global games; information acquisition
    JEL: C70 D82 F31 G01
    Date: 2013–10–01

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