nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2014‒05‒17
fourteen papers chosen by
Stan C. Weeber
McNeese State University

  1. Electoral Rules and the Quality of Politicians: Theory and Evidence from a Field Experiment in Afghanistan By Andrew Beath; Fotini Christia; Georgy Egorov; Ruben Enikolopov
  2. Fairness in Tax compliance: A Political Competition Model By Ángel Solano García
  3. Elections and de facto Expenditure Decentralization in Canada By Mario Jametti; Marcelin Joanis
  4. Team Reasoning as a Guide to Coordination By Lahno, Amrei M.; Lahno, Bernd
  5. The Effect of Elections on Economic Growth: Results from a Natural Experiment in Indonesia By Moricz, Sara; Sjöholm, Fredrik
  6. Local sources of resilience: Working with social capital: By Bernier, Quinn; Meinzen-Dick, Ruth Suseela
  7. Gender difference in support for democracy in sub-Saharan Africa: Do social institutions matter? By Konte, Maty
  8. Heterogeneity and the formation of risk - sharing coalitions By Fernando Jaramillo; Hubert Kempf; Fabien Moizeau
  9. Fairness is Intuitive By Alexander W. Cappelen; Ulrik H. Nielsen; Bertil Tungodden; Jean-Robert Tyran; Erik Wengström
  10. How Blackwater Takes Uncle Sam for a Ride - and Why He Likes It By Fahn, Matthias; Hadjer, Tahmina Sadat
  11. Does Forest Certification in Developing Countries Have Environmental Benefits? Insights from Mexican Corrective Action Requests By Blackman, Allen; Raimondi, Alicia; Cubbage, Frederick
  12. Habemus Papam ?Polarization and Conflict in the Papal States By Francisco Pino; Jordi Vidal-Robert
  13. When Does Regulation Distort Costs? Lessons from Fuel Procurement in U.S. Electricity Generation By Steve Cicala
  14. Collaboration in innovation between foreign subsidiaries and local universities: evidence from Spain By Guimón, José; Salazar, Juan Carlos

  1. By: Andrew Beath; Fotini Christia; Georgy Egorov; Ruben Enikolopov
    Abstract: We examine the effect of electoral rules on the quality of elected officials using a unique field experiment which induced randomized variation in the method of council elections in 250 villages in Afghanistan. In particular, we compare at-large elections, with a single multi-member district, to district elections, with multiple single member districts. We propose a theoretical model where the difference in the quality of elected officials between the two electoral systems occurs because elected legislators have to bargain over policy, which induces citizens in district elections to vote strategically for candidates with more polarized policy positions even at the expense of candidates' competence. Consistent with the predictions of the model, we find that elected officials in at-large elections are more educated than those in district elections and that this effect is stronger in more heterogeneous villages. We also find evidence that elected officials in district elections have more biased preferences.
    JEL: D72 D78
    Date: 2014–05
  2. By: Ángel Solano García (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: This paper analyzes the political economy of income redistribution when voters are concerned about fairness in tax compliance. We consider a two stage-model where there is a two-party competition over the tax rate and over the intensity of the tax enforcement policy in the first stage, and voters decide about their level of tax compliance in the second stage. We find that if the concern about fairness in tax compliance is high enough, a liberal middle-income majority of voters may block any income redistribution policy. Alternatively, we find an equilibrium in which the preferences of the median voter are ignored in favor of a coalition formed by a group of relatively poor voters and the richest voters. In this equilibrium income redistribution prevails with no tax enforcement.
    Keywords: tax evasion, political parties, income redistribution, fairness.
    JEL: D72 H26
    Date: 2014–04–15
  3. By: Mario Jametti (University of Lugano); Marcelin Joanis (Université de Sherbrooke)
    Abstract: This paper empirically investigates the underlying determinants of expenditure decentralization, based on the predictions of a new political economy model of partial decentralization. The analysis is based on an agency model, in which two levels of government are involved in the provision of a public good and voters are imperfectly informed about each government's contribution to the good, creating a shared accountability problem. Under shared expenditure responsibility, the degree of decentralization is endogenous and depends on the relative political conditions prevailing at each level of government. Consistent with the model's predictions, empirical results from a panel of Canadian provinces show that decentralization in a province increases with the electoral strength of the provincial government and decreases with the electoral strength of the federal government, in addition to being affected significantly by the partisan affiliation of both levels of government. A series of alternative empirical specifications, including an IV regression exploiting campaign spending data, are presented to assess the robustness of these results.
    Keywords: Fiscal decentralization; Fiscal federalism; Vertical interactions; Partial Decentralization; Elections
    JEL: R50 H77 D72
    Date: 2014
  4. By: Lahno, Amrei M.; Lahno, Bernd
    Abstract: A particular problem of traditional Rational Choice Theory is that it cannot explain equilibrium selection in simple coordination games. In this paper we analyze and discuss the solution concept for common coordination problems as incorporated in the theory of Team Reasoning (TR). Special consideration is given to TR's concept of opportunistic choice and to the resulting restrictions in using private information. We report results from a laboratory experiment in which teams were given a chance to coordinate on a particular pattern of behavior in a sequence of HiLo games. A modification of the stage game offered opportunities to improve on the team goal through changing this accustomed pattern of behavior. Our observations throw considerable doubt on the idea of opportunistic team reasoning as a guide to coordination. Contrary to what TR would predict, individuals tend to stick to accustomed behavioral patterns. Moreover, we find that individual decisions are at least partly determined by private information not accessible to all members of a team. Alternative theories of choice, in particular cognitive hierarchy theory may be more suitable to explain the observed pattern of behavior.
    Keywords: team reasoning; collective agency; coordination; opportunistic choice; laboratory experiment
    JEL: C91 C92 D03 D70
    Date: 2014–04
  5. By: Moricz, Sara (Lund University); Sjöholm, Fredrik (Lund University)
    Abstract: Does democracy increase economic growth? Previous literature tends to find a positive effect but does also suffer from possible endogeneity problems: democratization is typically not random and might be affected by factors that also have an impact on economic growth. This paper narrows down the question to empirically estimating the causal effect of local elections on local economic growth in Indonesia by using a quasi-experimental research method. The first direct elections of district leaders in Indonesia were performed in a staggered manner, and decided such that the year of election is exogenous. Thus, growth in districts that have had their first elections of district heads can be compared with growth in districts that have not had a direct election, which more specifically is performed by using a difference-in-difference approach. Our estimations show no general effect of local elections on economic growth. The result is robust to various robustness tests and is supported by data that show small effects of elections on governance.
    Keywords: Democracy; Elections; Growth; Indonesia; Natural experiment
    JEL: H11 O10 O43
    Date: 2014–05–08
  6. By: Bernier, Quinn; Meinzen-Dick, Ruth Suseela
    Abstract: People have always faced shocks and have devised a variety of institutional responses to cope with, recover from, and prevent future impacts. Central to these shocks and this coping capacity, but often underexplored, is the role of social capital. Social capital includes “features of social organization, such as networks, norms, and social trust, that facilitate coordination and cooperation for mutual benefitâ€1 and can serve as an asset for communities, enabling them to engage in and benefit from collective action and cooperation. While social capital takes many forms, of particular interest here are localâ€level organizations and less formal social networks.
    Keywords: food security, Nutrition security, Community organizations, Networks, resilience, Social capital,
    Date: 2014
  7. By: Konte, Maty
    Abstract: Little investigation has been made to explain why women are less likely than are men to support democracy in sub-Saharan Africa. This gender difference in politics has been found in numerous studies and may hinder the much needed legitimation of democracy
    Keywords: support for democracy, gender difference, social institutions
    Date: 2014
  8. By: Fernando Jaramillo; Hubert Kempf; Fabien Moizeau
    Abstract: Abstract: We offer a new explanation of partial risk sharing based on coalition formation and segmentation of society in a risky environment, without assuming limited commitment and imperfect information. Heterogenous individuals in a society freely choose with whom they will share risk A partition belonging to the core of the membership game obtains. Perfect risk sharing does not necessarily arise. Focusing on mutual insurance rule and assuming that individuals only differ with respect to risk, we show that the core partition is homophily-based. The distribution of risk affects the number and size of these coalitions. Individuals may pay a lower risk premium in riskier societies. A higher heterogeneity in risk leads to a lower degree of risk sharing. We discuss how the endogenous partition of society into risk-sharing coalitions may shed light on empirical evidence on partial risk sharing. The case of heterogenous risk aversion leads to similar results.
    Keywords: Risk Sharing, Group Membership, Social Segmentation
    Date: 2013–09–02
  9. By: Alexander W. Cappelen (Department of Economics, Copenhagen University); Ulrik H. Nielsen (Department of Economics, Copenhagen University); Bertil Tungodden (Norwegian School of Economics); Jean-Robert Tyran (Department of Economics, Copenhagen University); Erik Wengström (Department of Economics, Copenhagen University)
    Abstract: In this paper we provide new evidence showing that fair behavior is intuitive to most people. We find a strong association between a short response time and fair behavior in the dictator game. This association is robust to controls that take account of the fact that response time might be affected by the decision-maker's cognitive ability and swiftness. The experiment was conducted with a large and heterogeneous sample recruited from the general population in Denmark. We find a striking similarity in the association between response time and fair behavior across groups in the society, which suggests that the predisposition to act fairly is a general human trait.
    Keywords: Response Time, Dictator Game, Experiment, Fairness
    JEL: C90 D03 D60
    Date: 2014–04–02
  10. By: Fahn, Matthias; Hadjer, Tahmina Sadat
    Abstract: Private Military and Security Companies (PMSCs) have been gaining increasing media and scholarly attention particularly due to their indispensable role in the wars in Afghanistan 2001 and Iraq 2003. Nevertheless, theoretical insights into the agency problems inherent when hiring PMSCs and how to optimally incentivize them are scarce. We study the complex relationship between intervening state, host state, and PMSC, taking into account the diverging interests of all involved parties as well as potential agency problems. We develop a theoretical model to characterize a state’s optimal choice whether to perform a task associated with an intervening mission itself, hire a PMSC and optimally design the contract, or completely abstain from it. We find that it might be optimal to hire PMSCs even if they are expected to do a worse job than the intervening state would do itself. This outcome is especially problematic for the host state, which prefers associated tasks to be done as good and carefully as possible. Furthermore, the often-heard call for transparency regarding agreements with PMSCs can lead to a situation where the latter’s performance gets even worse - namely because the ability to implicit reward PMSCs for a good performance in the past is reduced.
    Keywords: International Conflicts; Private Military and Security Companies; Moral Hazard; Relational Contracts
    JEL: C72 C73 F51 F53
    Date: 2014–05
  11. By: Blackman, Allen (Resources for the Future); Raimondi, Alicia; Cubbage, Frederick
    Abstract: Certification is intended to improve management of and environmental outcomes in developing country forests. Yet we know little about whether and how it actually generates such benefits. To address that question, we analyze 1,162 corrective action requests (CARs) issued after third-party inspections of a diverse set of 35 forests in Mexico certified by the Forest Stewardship Council (FSC). CARs detail the changes in procedures and on-the-ground conditions that forest managers must make to either obtain or retain certification. Our analysis indicates that a relatively small proportion of CARs required major changes in on-the-ground environmental conditions. The majority focused on social and legal issues, and the vast majority called for only minor procedural changes. In general, forest managers complied with CARs expeditiously, and the number of CARs they received declined over time. We hypothesize that these findings were at least partly driven by the tendency of FSC certification to attract already-sustainably managed forests and by the governance challenges of community forestry in developing countries. One implication is that policymakers using FSC certification to generate environmental benefits may want to target forests with less-than-stellar management—particularly in the case of reduced emissions from deforestation and degradation (REDD) initiatives that emphasize improvement beyond business-as-usual—and to build the community and legal institutions needed for sustainable forestry.
    Keywords: forest certification, ecolabel, corrective action request, Mexico
    JEL: Q23 Q56 Q57
    Date: 2014–03–31
  12. By: Francisco Pino; Jordi Vidal-Robert
    Abstract: We study the effect of divisions within the elite on the probability of internalconflict in the Papal States between 1295 and 1846. We assemble a new databaseusing information on cardinals that participated in conclaves during this period,and construct measures of polarization and fractionalization based on the cardinals’places of birth. The deaths of popes and cardinals provide plausible exogenousvariation in the timing of the conclave and the composition of the Collegeof Cardinals, which we exploit to analyze the causal effect of a divided conclaveon conflict. We find that an increase of one standard deviation in our measure ofpolarization raised the likelihood of internal conflict by between 2 and 3 percentin a given year and by up to 18 percent in a given papacy. The effect is largestin the initial years after the conclave, to gradually vanish over time. Our resultsconfirm that cardinals’ influence on the politics of the Papal States decreased afterreforms introduced between 1586 and 1588. Our measure of religious productivity,however, is negatively and significantly linked to polarization in the post-reformperiod. These reforms were successful in shifting the effect of divisions among theelite of one of the largest and oldest organizations from violent conflict to religiousmatters.
    JEL: D72 D74 N33 N43 Z12
    Date: 2014–05
  13. By: Steve Cicala
    Abstract: This paper evaluates changes in fuel procurement practices by coal- and gas-fired power plants in the United States following state-level legislation that ended cost-of-service regulation of electricity generation. I find that deregulated plants substantially reduce the price paid for coal (but not gas), and tend to employ less capital-intensive sulfur abatement techniques relative to matched plants that were not subject to any regulatory change. Deregulation also led to a shift toward more productive coal mines. I show how these results lend support to theories of asymmetric information, capital bias, and regulatory capture as important sources of regulatory distortion.
    JEL: D24 D72 D82 L11 L43 L51 L94 L98 Q4 Q48
    Date: 2014–05
  14. By: Guimón, José (Department of Economic Structure and Development Economics, Universidad Autónoma de Madrid); Salazar, Juan Carlos (Department of Economic Structure and Development Economics, Universidad Autónoma de Madrid)
    Abstract: Collaboration between foreign subsidiaries and universities is relevant for multinational companies that aim at absorbing knowledge from abroad, as well as for policymakers attempting to maximize the spillovers associated with FDI. In this paper, we explore how multinational companies collaborate with universities in the foreign countries where they locate and provide new empirical evidence for Spain as a host country. Using a probit model with panel data from the Community Innovation Survey, we failed to find significant differences between the propensity of foreign subsidiaries and comparable Spanish firms to collaborate with universities. Subsequently, building on a new survey and five case studies, we were able to relate the scale and scope of such collaborations with the dynamic mandates of foreign subsidiaries in global innovation networks and to explore further the variety of motivations that drive collaboration.
    Keywords: collaboration in innovation; FDI; foreign subsidiaries; global innovation networks; multinational companies; open innovation; spillovers; university-industry collaboration
    JEL: F23 O32
    Date: 2014–05–07

This nep-cdm issue is ©2014 by Stan C. Weeber. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.