New Economics Papers
on Collective Decision-Making
Issue of 2014‒06‒02
sixteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Political Competition and the Limits of Political Compromise By Cunha, Alexandre B.; Ornelas, Emanuel
  2. The Weather Effect: estimating the effect of voter turnout on electoral outcomes in Italy By Alessandro Sforza
  3. Community mobilization around social dilemmas: evidence from lab experiments in rural Mali By Maria Laura Alzua; Juan Camilo Cardenas; Habiba Djebbari
  4. Voluntary Public Health Insurance By Goulão, Catarina
  5. The Politics of Compromise By Bonatti, Alessandro; Rantakari, Heikki
  6. A Cultural Clash View of the EU Crisis By Guiso, Luigi; Herrera, Helios; Morelli, Massimo
  7. Who do Unions Target? Unionization over the Life-Cycle of U.S. Businesses By Emin Dinlersoz; Jeremy Greenwood; Henry Hyatt
  8. Local Funds and Political Competition: Evidence from the National Rural Employment Guarantee Scheme in India By Gupta, Bhanu; Mukhopadhyay, Abhiroop
  9. Emergence and Persistence of Extreme Political Systems By Buchheim, Lukas; Ulbricht, Robert
  10. Social Capital, Government Expenditures, and Growth By Ponzetto, Giacomo AM; Troiano, Ugo
  11. Endogenous Assembly Rules, Senior Agenda Power, and Incumbency Advantage By Jon X. Eguia; Kenneth A. Shepsle
  12. An allegory of the political influence of the top 1% By De Donder, Philippe; Roemer, John E
  13. Husbands and Wives. The powers and perils of participation in a microfinance cooperative for female entrepreneurs By Prof dr Erik Stam; Felix Meier zu Selhausen, MSc MA
  14. Technological Foundations of Political Instability By Dagaev, Dmitry; Lamberova, Natalia; Sobolev, Anton; Sonin, Konstantin
  15. X-Games By Eliaz, Kfir; Spiegler, Rani
  16. The socio-economic power of renewable energy production cooperatives in Germany: Results of an empirical assessment By Debor, Sarah

  1. By: Cunha, Alexandre B.; Ornelas, Emanuel
    Abstract: We consider an economy where competing political parties alternate in office. Due to rent-seeking motives, incumbents have an incentive to set public expenditures above the socially optimum level. Parties cannot commit to future policies, but they can forge a political compromise where each party curbs excessive spending when in office if they expect future governments to do the same. We find that, if the government cannot manipulate state variables, more intense political competition fosters a compromise that yields better outcomes, potentially even the first best. By contrast, if the government can issue debt, vigorous political competition can render a compromise unsustainable and drive the economy to a low-welfare, high-debt, long-run trap. Our analysis thus suggests a legislative tradeoff between restricting political competition and constraining the ability of governments to issue debt.
    Keywords: efficient policies; political turnover; public debt
    JEL: E61 E62 H30 H63
    Date: 2014–03
  2. By: Alessandro Sforza
    Abstract: This paper examines the effect of variation in voter turnout to electoral outcomes in Italy. I use data on spatial distribution of turnout for 2008 and 2013 to examine how it can affect differences in electoral outcomes. Exploiting the exogenous variation in weather conditions across municipalities I use rainfalls to instrument for turnout levels: if non-voters systematically differ from habitual voters in terms of their characteristics or preferences, the effect of turnout on the electoral outcome can generate "extreme" outcomes. I find that bad weather decreases turnout and that a higher turnout favours the Movimento 5 Stelle, while both the Democrats and the Centre are negatively affected.
    JEL: D72 P16
    Date: 2014
  3. By: Maria Laura Alzua (CEDLAS, Universidad Nacional de La Plata and Consejo Nacional de Ciencia y Tecnologia); Juan Camilo Cardenas (Universidad de Los Andes); Habiba Djebbari (Aix-Marseille University and Laval University)
    Abstract: Community mobilization is a key feature of community-based development projects. Community mobilization requires facilitating communication between village members and between leaders and the rest of the community. Is communication an effective device through which mobilization may foster collective action? Does informing the community on how to reach a better social outcome key? Should we expect the effectiveness of community-based programs to depend on the quality of leadership in the community? In rural communities of Mali, we find evidence of high levels of cooperation as measured by a standard public good game. Communication between players increases contributions to the public good. Passing of information through a random community member also improves cooperation, and leadership skills matter. We also find suggestive evidence that changes in behavior are mediated through changes in beliefs. The experiments are embedded in a larger randomized controlled trial designed to evaluate the impact of a community-based sanitation intervention. As such, our results are relevant for a large population. Finally, we find that the program help strengthen the capacity for collective action.
    JEL: D78 C93 H41
    Date: 2014–05
  4. By: Goulão, Catarina
    Abstract: We look at the consequences of allowing public health insurance (PuHI) to be voluntary when its coverage can be supplemented in the market. PuHI redistributes with respect to risk and income, and the market is affected by adverse selection. We argue that making PuHI voluntary does not lead to its collapse since there are always individuals participating in it. Additionally, in some cases, a voluntary PuHI scheme creates an increase in market efficiency because participation in it becomes a sign of an individual's type. The welfare consequences depend on the status quo. If in the status quo there is no political support for a compulsory PuHI, making it voluntary constitutes a Pareto improvement, and in some cases all individuals are strictly better off. If, instead, the status quo implements compulsory PuHI, making it voluntary then results in less redistribution.
    Keywords: Public health insurance, adverse selection, majority voting
    JEL: D72 H23 H42 H50
    Date: 2014–03–17
  5. By: Bonatti, Alessandro; Rantakari, Heikki
    Abstract: A team must select among competing projects that differ in their payoff consequences for its members. Each agent chooses a project and exerts costly effort affecting its random completion time. When one or more projects are complete, agents bargain over which one to implement. A consensus requirement can (but need not) induce the efficient balance between compromise in project selection and equilibrium effort. Imposing deadlines for presenting counteroffers is beneficial, while delegating decision-making to an impartial third party leads agents to select extreme projects. Finally, hiring agents with opposed interests can foster both effort and compromise in project selection.
    Keywords: bargaining; compromise; conflict; consensus; deadlines; free-riding
    JEL: C72 D71 D83
    Date: 2014–03
  6. By: Guiso, Luigi; Herrera, Helios; Morelli, Massimo
    Abstract: If voters of different countries adhere to different and deeply rooted cultural norms, when these countries interact their leaders may find it impossible to agree on effcient policies especially in hard times. Political leaders’actions are bound by a “conformity constraint”that requires them to express policies that do not violate these norms. This inhibits politicians from adopting the optimal policies as they may clash with either one or the other of the cultures of the interacting countries. We model this mechanism and argue that conformity constraints and cultural clash can help us understand the poor management of the Greek crisis and the resulting European Sovereign debt crisis. We show the conditions under which the introduction in Europe of a fiscal union can be obtained with consensus and be beneficial. Perhaps counter-intuitively, cultural diversity makes a fiscal union even more desirable.
    Keywords: Conformity constraint; Culture; Debt crisis; Fiscal union
    JEL: D72
    Date: 2013–10
  7. By: Emin Dinlersoz; Jeremy Greenwood; Henry Hyatt
    Abstract: What type of businesses do unions target for organizing? A dynamic model of the union organizing process is constructed to answer this question. A union monitors establishments in an industry to learn about their productivity, and decides which ones to organize and when. An establishment becomes unionized if the union targets it for organizing and wins the union certification election. The model predicts two main selection effects: unions organizing occurs in larger and more productive establishments early in their life-cycles, and among the establishments targeted for organizing, unions are more likely to win elections in smaller and less productive ones. These predictions find support in union certification election data for 1977-2007 matched with data on establishment characteristics.
    JEL: D24 E23 J5 J50 J51 L23 L25
    Date: 2014–05
  8. By: Gupta, Bhanu (University of Michigan); Mukhopadhyay, Abhiroop (Indian Statistical Institute)
    Abstract: This paper examines how local politics affects public fund allocations. It uses the context of the National Rural Employment Guarantee Scheme (NREGS) in India which was introduced by the Indian National Congress (INC). Using longitudinal data on funds sanctioned and election results from three rounds of elections in Rajasthan, a state in India, we find an inverted U-shaped relationship between existing vote share of INC and subsequent fund allocations at the block level. To address the issue of endogeneity, we instrument vote shares by their lagged values. The results using only close elections are however distinct as higher funds are allocated to blocks where the INC has lower vote share. We give evidence of a mechanism which highlights the role of a political representative in the funds sanctioning process. Further, we show that the strategy by INC was beneficial in gaining vote share.
    Keywords: political economy, local elections, National Rural Employment Guarantee Scheme
    JEL: D72 J08 H53 H75
    Date: 2014–05
  9. By: Buchheim, Lukas; Ulbricht, Robert
    Abstract: We investigate the dynamics of political systems in a framework where transitions are driven by reforms and revolts, and where political systems are a priori unconstrained, ranging continuously from single-man dictatorships to full-scale democracies. The dynamics are governed by the likelihood of transitions and their outcome, which are both determined endogenously. We find that reforms and revolts result in extreme political systems - reforms by enfranchising the majority of the population leading to democracies, and revolts by installing autocracies. Reinforcing this polarization, extreme political systems are persistent across time: Democracies are intrinsically stable, leading to long episodes without political change. Autocracies, in contrast, are subject to frequent regime changes. Nevertheless they are persistent, since ensuing revolts lead to autocracies comparable to their predecessors. Taken together, our results suggest that the long-run distribution of political systems is bimodal with mass concentrated on the extremes. The dynamics are consistent with cross-country data.
    Keywords: Endogenous dynamics of political systems; invariant distribution; persistence of regime types; polarization; transition paths; unrestricted polity space.
    JEL: D74 D78 P16
    Date: 2014–02–01
  10. By: Ponzetto, Giacomo AM; Troiano, Ugo
    Abstract: The impact of social capital on economic growth is empirically well documented. Yet the reasons for this relationship remain theoretically understudied. We present a tractable stochastic endogenous growth model that explains how social capital influences economic development. In our model, social capital increases citizens' awareness of government activity. As a consequence, we find it alleviates the electoral incentives to under-invest in education, whose returns are delayed in time and relatively less visible to voters. In the dynamic equilibrium, higher social capital increases both the amount and the efficiency of public investment in education, permanently raising the growth rate. Our theory predicts that higher and more homogeneously distributed social capital should increase public expenditure on education. We provide suggestive cross-country evidence consistent with these predictions.
    Keywords: Economic Growth; Education Expenditures; Elections; Government Expenditures; Imperfect Information; Social Capital
    JEL: D72 D83 H52 I22 I25 O43 Z13
    Date: 2014–03
  11. By: Jon X. Eguia; Kenneth A. Shepsle
    Abstract: We study repeated legislative bargaining in an assembly that chooses its bargaining rules endogenously, and whose members face an election after each legislative term. An agenda protocol or bargaining rule assigns to each legislator a probability of being recognized to make a policy proposal in the assembly. We predict that the agenda protocol chosen in equilibrium disproportionately favors more senior legislators, granting them greater opportunities to make policy proposals, and it generates an incumbency advantage to all legislators.
    Keywords: Seniority, incumbency advantage, endogenous agenda, recognition rule, legislative bargaining, bargaining rules
    JEL: C78 D72
    Date: 2014–05
  12. By: De Donder, Philippe; Roemer, John E
    Abstract: We study how rich shareholders can use their economic power to deregulate firms that they own, thus skewing the income distribution towards themselves. Agents differ in productivity and choose how much labor to supply. High productivity agents also own shares in the productive sector and thus earn capital income. All vote over a linear tax rate on (labor and capital) income whose proceeds are redistributed lump sum. Capital owners also lobby in order to ease the price cap imposed on the private firm. We solve analytically for the Kantian equilibrium of this lobbying game together with the majority voting equilibrium over the tax rate, and we perform simulations. We obtain numerically that, as the capital income distribution becomes more concentrated among the top productivity individuals, their increased lobbying effort generates efficiency as well as equity costs, with lower labor supply and lower average utility levels in society.
    Keywords: Kantian equilibrium; lobbying; political economy; regulatory capture
    JEL: D72 H31
    Date: 2013–11
  13. By: Prof dr Erik Stam; Felix Meier zu Selhausen, MSc MA (PhD Candidate, Utrecht University)
    Abstract: Participation in microfinance and in production cooperatives has been identified as a means to improve income and empower female entrepreneurs in developing economies. This study on female entrepreneurs in Western Uganda tests how participation of the husband in the same microfinance cooperative affects gender empowerment. Participation by female entrepreneurs in a microfinance cooperative turns out not to be an unconditional blessing: even though it does deliver higher household incomes, it also deteriorates the female’s household decision-making power when her husband participates in the same self-help group of the microfinance cooperative. This offers new insights for development policy and for entrepreneurship scholars to study the bright and dark sides of microfinance.
    Date: 2014–05
  14. By: Dagaev, Dmitry; Lamberova, Natalia; Sobolev, Anton; Sonin, Konstantin
    Abstract: There has been a wide-spread belief that elections with a wide franchise following removal of an oppressive dictator lead to establishment of a government that is not vulnerable to mass protest. At the same time, most of the post-World War II non-constitutional exits of recently-installed autocratic leaders were caused by elite coups, rather than popular protests. The recent experience of Egypt, where the democratic post-Mubarak government, a result of the Arab Spring, collapsed after having had almost uninterrupted protests since its first day in office, offers a striking counterexample to both of these patterns. We demonstrate that this is a general phenomenon: the same technological shock, arrival of social media, that makes the incumbent vulnerable, lays foundation for continuous instability of the subsequent democratic government. Our theoretical model, which incorporates protest into a Downsian framework, takes into account specific features of modern protests: the significant role of social media and the absence of the partisan or personalized leadership during popular unrest. Case studies of the Arab countries with and without large-scale protests corroborate our theoretical findings.
    Keywords: Arab Spring; autocracy; collective action; regime change; social media
    JEL: C42 D74 L96
    Date: 2013–12
  15. By: Eliaz, Kfir; Spiegler, Rani
    Abstract: What is common to the following situations: incentivizing collective action in the presence of social preferences, monopoly pricing when consumers are loss averse, arms races when players are privately informed of their armament costs? We present a simple formalism, called X-games, which unifies these situations as well as others, and use it to unify and extend the separate analyses that they received in the literature.
    Keywords: Contagion; Coordination; Externalities; Strategic complementarities
    JEL: C72
    Date: 2014–02
  16. By: Debor, Sarah
    Abstract: This paper reflects the socio-economic power of renewable energy production cooperatives for a wider energy system transformation in Germany. Energy cooperatives have turned into important supporters of renewable and decentralised energy structures, due to their strong growth since the year 2006, their participation in local renewable energy projects and their democratic awareness. The cooperative form of coordinating regional energy projects applies to a decentralised energy system that is managed by many smaller firms - a system concept that is preferred by the majority of German citizens. However, there is not enough knowledge to understand to what extent this organisational form is able to unify a broad group of actors in promoting a renewable energy system (societal power) and to gather capital for elaborating renewable energy supply structures (economic power). The reflection is based on an empirical assessment of all energy cooperatives that were registered in Germany by 31st December 2013. Their growth dynamic and their business approaches are discussed. A special focus lies on renewable energy production cooperatives. The study presents the development of their members, their capital, their profit and loss, as well as their investment intensity over a timeframe of three years (2010-2012). The socio-economic potential of renewable energy production cooperatives for supporting a renewable energy system is discussed against the background of empirical results. -- Das Diskussionspapier reflektiert die sozio-ökonomische Macht erneuerbarer Energieproduktions-Genossenschaften für eine Energiewende in Deutschland. Energiegenossenschaften sind durch ihr starkes Wachstum seit dem Jahr 2006, ihre Beteiligung an lokalen Energieprojekten, sowie ihrem demokratischen Selbstverständnis zu wichtigen Unterstützern von erneuerbaren und dezentralen Energiestrukturen geworden. Die Koordinierung lokaler Energieprojekte durch Genossenschaften steht für ein dezentrales Energiesystem, das vor allem von vielen kleineren Unternehmen verwaltet wird - ein Systemkonzept, das von einer Mehrheit in Deutschland bevorzugt wird. Allerdings existieren nicht genug Kenntnisse über das Vermögen dieser Organisationsform, viele Akteure für die Förderung eines erneuerbaren Energiesystems zu vereinen (gesellschaftliche Macht), sowie Kapital für die Diffusion erneuerbarer Energieversorgungsstrukturen zu sammeln (wirtschaftliche Macht). Die Reflektion basiert auf einer empirischen Untersuchung aller Energiegenossenschaften, die in Deutschland bis zum 31. Dezember 2013 registriert wurden. Ihre Wachstumsdynamik und Geschäftsansätze werden vorgestellt. Der Schwerpunkt der Analyse liegt auf erneuerbaren Energieproduktions-Genossenschaften. Die Studie beschreibt die Entwicklung ihrer Mitglieder und des Kapitals, sowie ihre Investitionsintensität für einen Zeitraum von drei Jahren (2010-2012). Das sozio-ökonomische Potenzial von Energiegenossenschaften für die Unterstützung eines erneuerbaren Energiesystems wird vor dem Hintergrund der empirischen Ergebnisse diskutiert.
    Date: 2014

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