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on Collective Decision-Making |
| By: | Thushyanthan Baskaran (Department of Economics, University of Göttingen, Germany); Zohal Hessami (Department of Economics, University of Konstanz, Germany) |
| Abstract: | We study partisan favoritism in the allocation of intergovernmental transfers. Our dataset combines local council election data with fiscal data on grant allocations in the German state of Hesse. Our identification strategy is a regression discontinuity design that relies on a perturbation procedure to classify close elections. We find that left-wing state governments favored aligned municipalities while right-wing state governments favored unaligned ones. One plausible explanation for this difference in the behavior of left- and right-wing governments is that only few local councils had absolute right-wing majorities during the tenure of the right-wing state governments. Therefore, right-wing state governments had to use transfers to “buy off” unaligned municipalities, while left-wing state governments could use transfers to enhance their electoral prospects. |
| Keywords: | Intergovernmental transfers, political alignment, partisan behavior, state and local governments |
| JEL: | D72 H72 H77 |
| Date: | 2014–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:1417&r=cdm |
| By: | Antony Millner (London School of Economics and Political Science - LSE); Hélène Ollivier (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Leo Simon (University of California - Berkeley - Department of Agricultural and Resource Economics) |
| Abstract: | We consider a two period model in which an incumbent political party chooses the level of a current policy variable unilaterally, but faces competition from a political opponent in the future. Both parties care about voters' payoffs, but they have different beliefs about how policy choices will map into future economic outcomes. We show that when the incumbent party can endogenously influence whether learning occurs through its policy choices (policy experimentation), future political competition gives it a new incentive to distort its policies - it manipulates them so as to reduce uncertainty and disagreement in the future, thus avoiding the costs of competitive elections with an opponent very different from itself. The model thus demonstrates that all incumbents can find it optimal to 'over experiment', relative to a counterfactual in which they are sure to be in power in both periods. We thus identify an incentive for strategic policy manipulation that does not depend on self-serving behavior by political parties, but rather stems from their differing beliefs about the consequences of their actions. |
| Keywords: | Beliefs; Learning; Political Economy |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01022728&r=cdm |
| By: | Tetsuji Okazaki (Faculty of Economics, The University of Tokyo); Michiru Sawada (College of Economics, Nihon University) |
| Abstract: | This paper investigates the extent, determinants, and implications of the political connections of firms at the peak of democracy in prewar Japan, identifying a firm as politically connected if one of its directors was simultaneously a member of the House of Representatives. We analyze the data of publicly traded companies in the periods before and after the 1928 and 1930 general elections. It is found that almost 20 % of publicly traded companies had political connections through politician directors. Regressions analyses reveal that smaller or badly performing firms and firms in the electric utilities and railroad industries, where government licenses were important, were more likely to have political connections. Furthermore, we find that the stock returns of firms that had new political connections improved from the pre-election period to the post-election period. |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2014cf946&r=cdm |
| By: | Clément MATHONNAT; Pierre MANDON |
| Abstract: | The empirical literature on the political economy of finance emphasizes the importance of political institutions as crucial determinants of financial development and shows that democratic regimes are positively and robustly correlated with financial development. By using a three years periodic panel of 140 countries over 1984-2007, we show that democratic regimes appear to be significantly and positively correlated with financial development, but the opposition between democracies and dictatorships is not sufficient to account for differentials in financial development between countries. Indeed, our results highlight a significant and highly heterogeneous relationship between democratic regimes and financial development since the positive effect induced by democracies on financial development is explained by the presence of specific democratic political institutions, namely: parliamentary form of government and to a lesser extent federal state form. Thus, democracies seem to better foster financial development if its constitutional arrangement allows horizontal flexibility and vertical stability in the political decision-making process. |
| Keywords: | Financial Development, political institutions, positive constitutional economics, comparative politics. |
| JEL: | P48 H00 G28 D72 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:cdi:wpaper:1619&r=cdm |
| By: | François Facchini (Université Paris-Sud - Faculté Jean Monnet, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Mickaël Melki (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne) |
| Abstract: | We provide a test of the impact of voters' political ideology on economic growth and of the role of preferences for government size as a transmission channel. We focus on France from the beginning of its stable democratic experience in 1871. A move of voters' ideology to the right increases economic growth over total observation period. However, the growth effect of ideology is mediated by voters' preferences for government size only during the post-World War II period. For reverse causality concerns, we use the political ideology of other historical democracies as an instrument variable for France's ideology. |
| Keywords: | Political ideology; economic growth; public spending |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00917617&r=cdm |
| By: | Bernd Hayo (University of Marburg); Florian Neumeier (University of Marburg) |
| Abstract: | Employing data from a representative survey conducted in Germany, this paper examines public preferences for the size and composition of government expenditure. We focus on public attitudes toward taxes, public debt incurrence, and public spending in six different policy areas. Our findings suggest, first, that the current scope of government is supported by a majority of the German population. Second, we find that individual preferences for the composition of government spending differ along various dimensions. Specifically, personal economic well-being, economic literacy, confidence in politicians, political ideology, and time preference are significantly related to individual attitudes toward public spending, taxes, and debt. The magnitude of the effects is particularly large for time preference, economic knowledge, and party preference. Third, public preferences for public spending priorities are only marginally affected when considering a public budget constraint. |
| Keywords: | Public spending, public preferences, public debt, taxes, survey, Germany. |
| JEL: | E62 H11 H50 H63 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201457&r=cdm |
| By: | Sylvain Béal (CRESE, Université de Franche-Comté); Marc Deschamps (Université de Lorraine, BETA (CNRS 7522) and GREDEG (CNRS UMR 7321)); Philippe Solal (Université de Saint-Etienne, CNRS UMR 5824 GATE Lyon Saint-Etienne) |
| Abstract: | The axiom of Balanced collective contributions is introduced as a collective variant of the axiom of Balanced contributions proposed by Myerson (1980). It requires that the identical average impact of the withdrawal of any agent from a game on the remaining population. It turns out that Balanced collective contributions and the classical axiom of Efficiency characterize the equal allocation of non-separable costs, an allocation rule which is extensively used in cost allocation problems and in accounting. For instance, the equal allocation of non-separable costs coincides with the Nucleolus on the class of data sharing games within the European REACH legislation. While our result does not hold on data sharing games, we provide comparable characterizations of the equal allocation of non-separable costs and the Shapley value. |
| Keywords: | Balanced collective contributions, Balanced contributions, Equal allocation of non-separable costs, Shapley value, Data games. |
| JEL: | C71 D71 K32 L65 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:crb:wpaper:2014-02&r=cdm |
| By: | Kesternich, Martin; Lange, Andreas; Sturm, Bodo |
| Abstract: | We experimentally test different rule-based contribution mechanisms in a repeated 4-player public goods game with endowment heterogeneity and compare them to a VCM, distinguishing between a random- and an effort-based allocation of endowments. We find that endowment heterogeneities limit the efficiency gains from minimum contribution rules under random allocation. Under effort-based allocations, substantial efficiency gains relative to a VCM occur, though being largely driven by significant reductions of contributions in VCM. By apparently influencing the perception of fair burden sharing, the endowment allocation procedure crucially impacts voluntary contributions under VCM, while the rule-based mechanisms generate stable efficiency levels, even though endowment heterogeneity substantially limits the ability of rule-based mechanisms to achieve the potential efficiency gains. |
| Keywords: | public good,institutions,minimum contribution rules,cooperation,endowment heterogeneity |
| JEL: | C72 C92 H41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:14055&r=cdm |
| By: | Iván Arribas (ERI-CES, University of Valencia, Ivie); Amparo Urbano Salvador (ERI-CES, University of Valencia) |
| Abstract: | This paper analyzes the impact of local and global interactions on individuals' action choices. Players are located in a network and interact with each other with perfect knowledge of their neighborhood and probabilistic knowledge of the complete network topology. Each player chooses an action, from some finite set, which imposes an externality on their neighbors as well as an externality on the complete network. Players deal with two opposing forces: they obtain utility from sharing their choices with their neighbors (positive local externality) but suiter disutility from sharing the same choice with all members of the network (negative global externality). Economic and social phenomena exhibiting these features are: the adoption of cost-reducing innovations, clusters of firms, time schedule choices, the adoption of subcultures and fads, among others. We find the conditions for the existence of all symmetric Bayesian Nash equilibria and translate them to a characterization in terms of the main properties of the network topol- ogy. The balance between local satisfaction and global dissatisfaction partially explains the equilibrium outcome. The players who finally decide on the type of equilibria are those that are either highly connected (hubs) or poorly connected (peripherals) to the others. On the one hand, hubs try to coordinate their action choices and on the other, peripherals are only worried about congestion and play the least selected actions of the network. Some examples illustrate our main results. As a by-product we also show the failure of symmetric |
| Keywords: | Random Network, Externalities, Action Selection, Bayesian Nash equilibria. |
| JEL: | C72 D71 D85 H40 R41 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:dbe:wpaper:0814&r=cdm |
| By: | Keser, Claudia; Markstädter, Andreas; Schmidt, Martin; Schnitzler, Cornelius |
| Abstract: | We compare voluntary contributions to the financing of a public good in a symmetric setting to those in asymmetric settings, in which four players have different, randomly allocated endowments. We observe that a weak asymmetry in the endowment distribution leads to the same contribution level as symmetry. Players tend to contribute the same proportion of their respective endowment. In a strongly asymmetric setting, where one player has a higher endowment than the three other players together, we observe significantly lower group contributions than in the other settings. The super-rich player does not contribute significantly more than what the others contribute on average and thus a much lower proportion of the endowment. |
| Keywords: | experimental economics,linear public good,income heterogeneity |
| JEL: | C92 D63 H41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:217&r=cdm |
| By: | Michal Ksawery Popiel (Queen's University) |
| Abstract: | Social networks are an important component in understanding the decision to consume addictive substances. They capture the role of limited access, peer influence, and social acceptance and tolerance. However, despite the empirical evidence of their role, they have been absent from theoretical models. This paper proposes a mechanism through which agents can influence each other in their decision to consume an addictive good. An agent's decision is sensitive to her state of addiction as well as to the composition of her neighbourhood. The model is consistent with the empirical evidence that peer influence can work in both ways: influencing an individual to use and helping them to quit. The structure of the network has important implications on the outcome of agents' decisions as well as the effectiveness of policies aimed at limiting use of addictive substances through deterrence. I provide a network-based explanation of why usage rates can vary across otherwise similar agents and show how in some situations encouraging network ties can lead to lower use while in others it can have the opposite effect. Furthermore, I explore the effect of networks on diffusion of addiction and, using simulations, find that addiction spreads faster in an environment where there are few strong links than in one with many weak links. |
| Keywords: | addiction, dual-self, networks, random utility |
| JEL: | C70 D01 I18 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1332&r=cdm |
| By: | de Melo, Gioia; Piaggio, Matías |
| Abstract: | We provide experimental evidence on the effects of non-monetary punishment by peers among communities of Uruguayan fishers exploiting a common pool resource (CPR). We combined this treatment with an in-group (groups from a single community) / mixed group (groups composed of fishers from different communities) treatment. Our aim is to compare the effects of non-monetary sanctions in a context in which individuals exploiting a CPR belong to different communities relative to the case in which only individuals from the same community are allowed to exploit the resource. We find that mixed groups—unlike in-groups—reduce their exploitation of the resource in response to the threat of punishment. We do not find any differences in behavior between in-groups and mixed groups when the possibility of being punished is not available. The effectiveness of non-monetary punishment is reduced because cooperation was not perceived as the unique social norm. In such cases there is substantial antisocial punishment, which leads to increased extraction of the CPR by those who are unfairly punished. These findings indicate that effective peer punishment requires coordination to prevent antisocial targeting and to clarify the social signal conveyed by punishment. |
| Keywords: | non-monetary punishment, in-group bias, framed field experimen, social preferences, commmon pool resource, Community/Rural/Urban Development, Environmental Economics and Policy, Institutional and Behavioral Economics, D03, O12, C93, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea14:170571&r=cdm |
| By: | Andreas Karpf (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | This article investigates whether the formation of individual inflation expectations is biased towards a consensus and is thus subject to some kind of herding behavior. Basing on the traditional Carlson-Parkin approach to quantify qualitative survey expectations and its extension by Kaiser and Spitz (2002) in an ordered probit context, a method to gain individual level inflation expectations is proposed using a Markov chain Monte Carlo Hierarchical Bayesian estimation method. This method is applied to micro survey data about inflation expectations of households from the monthly French household survey "Enquête mensuelle de conjoncture auprès des ménages - ECAMME" (January 2004 to December 2012). Finally a non-parametric test for herding behavior (Bernardt et al., 2006) is conducted on the cohort-level expectation estimates, showing that the expectation formation is not subject to a bias towards the expectation consensus. In constrast, it exhibits a strong anti-herding tendency which is consistent with the findings of other studies (Rülke and Tillmann, 2011). |
| Keywords: | Herd behavior; inflation; rational expectations |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00848054&r=cdm |
| By: | David L. Dickinson (Appalachian State University, CA, USA); David Masclet (CREM UMR CNRS 6211, University of Rennes 1, France and CIRANO, Montréal, Canada) |
| Abstract: | Experimental studies have shown that sanctions effectively deter free riding within groups. However, the over-use of costly punishment may actually harm overall welfare. A main reason for over-punishment is that free-riders generate negative emotions that likely favor excessive punishments. In this paper we ask whether the venting of one’s emotions in different ways can reduce the level of excessive punishment in a standard VCM-with-punishment environment while preserving the norm enforcement properties of punishment. We find that venting emotions reduces (excessive) punishment, and under certain conditions the net effect is an increase in final payoffs (i.e., welfare) to the group. |
| Keywords: | sanctions, public good, experiment, venting emotions |
| JEL: | C92 H41 D63 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:201414&r=cdm |
| By: | Bali Swain, Ranjula (Department of Economics); Wallentin, Fan Yang (Department of Statistics) |
| Abstract: | We examine how the impact on women empowerment varies with respect to the location and type of group linkage of the respondent. Using household survey data from five states in India, we correct for selection bias to estimate a structural equation model. Our results reveal that in the southern states of India empowerment of women takes place through economic factors. For the other states, we find a significant correlation between women empowerment and autonomy in women’s decision-making and network, communication and political participation respectively. We do not however find any differential causal impact of different delivery methods (linkage models). |
| Keywords: | microfinance; women empowerment; structural equation model; self-help groups |
| JEL: | C31 G21 J16 |
| Date: | 2014–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uunewp:2014_007&r=cdm |