nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2014‒12‒19
ten papers chosen by
Stan C. Weeber, McNeese State University

  1. Federal Governments Should Subsidize State Expenditure that Voters do not Consider when Voting By Aronsson, Thomas; Granlund, David
  2. Who turned their back on the SPD? Electoral disaffection with the German Social Democratic Party and the Hartz reforms By Baptiste Françon
  3. Who Do Unions Target? Unionization over the Life-Cycle of U.S. Businesses By Dinlersoz, Emin; Greenwood, Jeremy; Hyatt, Henry R.
  4. Redistribution and the political support of free entry policy in the Schumpeterian model with heterogenous agents By Dmitry A. Veselov
  5. Homophily, Group Size, and the Diffusion of Political Information in Social Networks: Evidence from Twitter By Yosh Halberstam; Brian Knight
  6. Last minute policies and the incumbency advantage By Manzoni, Elena; Penczynski, Stefan
  7. Leaders as Role Models for the Voluntary Provision of Public Goods By Gächter, Simon; Renner, Elke
  8. The Productivity Consequences of Political Turnover: Firm-Level Evidence from Ukraine's Orange Revolution By Earle, John S.; Gehlbach, Scott
  9. A Theory of Minimalist Democracy By Chris Bidner; Patrick Francois; Francesco Trebbi
  10. Preferential versus Multilateral Trade Liberalization and the Role of Political Economy By Stoyanov, Andrey; Yildiz, Halis Murat

  1. By: Aronsson, Thomas (Department of Economics, Umeå School of Business and Economics); Granlund, David (Department of Economics, Umeå School of Business and Economics)
    Abstract: This short paper analyzes whether a federal transfer system can be designed to increase welfare, when state governments create political budget cycles to increase the likelihood of reelection. The results show how the federal government may announce a transfer scheme in advance for the post-election year that counteracts the welfare costs of political budget cycles.
    Keywords: Political economy; intergovernmental transfer; budget cycle
    JEL: D61 D72 H71
    Date: 2014–11–13
  2. By: Baptiste Françon (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: This paper proposes an empirical analysis of the declining support for the German Social Democratic Party (SPD) during Schröder government's second term of office, which was marked by major reforms in the fields of unemployment insurance and labour market policy (Hartz reforms). Drawing on a panel of West Germans, we provide evidence that this disaffection was strongly related to a worker's occupation and that it involved electoral backlash from core blue-collar constituencies of the SPD. In comparison, the impact of other socio-economic characteristics such as the labour market status or the income was less pronounced. We further show that discontent grew stronger among occupations where the risk of unemployment was more prevalent. This suggests that opposition to specific measures that weakened status-securing principles of the unemployment insurance substantially drove electoral disaffection with the SPD during this period.
    Keywords: Political economy; economics of voting; social policy preferences; unemployment insurance; social-democracy; Germany
    Date: 2013–03
  3. By: Dinlersoz, Emin (U.S. Census Bureau); Greenwood, Jeremy (University of Pennsylvania); Hyatt, Henry R. (U.S. Census Bureau)
    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 secure elections in larger and more productive establishments early in their life-cycles, and among the establishments that experience an election, unions are more likely to win in smaller and less productive ones. These predictions find support in union certification election data for 1977-2007 matched with data on establishment characteristics. Other empirical regularities pertaining to union organizing are also documented.
    Keywords: unionization, union organizing, union certification election, diffusion of unionization, Bayesian learning, productivity
    JEL: J5 J50 J51 L11 L23 L25 L6 D24 D21
    Date: 2014–08
  4. By: Dmitry A. Veselov (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, National Research University Higher School of Economics - Laboratory of Macroeconomic Analysis)
    Abstract: We consider the problem of finding sufficient conditions for political support of liberal, growth-enhancing policy in a quality-ladders model with heterogeneous agents differing in their endowment of wealth and skills. The policy set is two-dimensional: Agents vote for the level of redistribution as well as for the level of entry barriers preventing the creation of more efficient firms. We show that under the majority voting rule there are three possible stable political outcomes: full redistribution and low barriers to entry ("liberal" order), high redistribution and high barriers to entry ("corporatism"). We show that key variables determining the political outcome are the expected gain from technological adoption, the ratio of total profits to total wages, and the skewness of human capital distribution.
    Keywords: Barriers to entry; majority voting; quality-ladders model; wealth inequality; talent inequality; economic growth
    Date: 2013–05
  5. By: Yosh Halberstam; Brian Knight
    Abstract: In this paper, we investigate political communications in social networks characterized both by homophily–a tendency to associate with similar individuals–and group size. To generate testable hypotheses, we develop a simple theory of information diffusion in social networks with homophily and two groups: conservatives and liberals. The model predicts that, with homophily, members of the majority group have more network connections and are exposed to more information than the minority group. We also use the model to show that, with homophily and a tendency to produce like-minded information, groups are disproportionately exposed to like-minded information and the information reaches like-minded individuals more quickly than it reaches individuals of opposing ideologies. To test the hypotheses of our model, we analyze nearly 500,000 communications during the 2012 US elections in a social network of 2.2 million politically-engaged Twitter users. Consistent with the model, we find that members of the majority group in each state-level network have more connections and are exposed to more tweets than members of the minority group. Likewise, we find that groups are disproportionately exposed to like-minded information and that information reaches like-minded users more quickly than users of the opposing ideology.
    JEL: D7 D8
    Date: 2014–11
  6. By: Manzoni, Elena; Penczynski, Stefan
    Abstract: This paper models a purely informational mechanism behind the incumbency advantage. In a two-period electoral campaign with two policy issues, a specialized incumbent and an unspecialized, but possibly more competent challenger compete for election by voters who are heterogeneously informed about the state of the world. Due to the asymmetries in government responsibility between candidates, the incumbent's statement may convey information on the relevance of the issues to voters. In equilibrium, the incumbent sometimes strategically releases his statement early and thus signals the importance of his signature issue to the voters. We find that, since the incumbent's positioning on the issue reveals private information which the challenger can use in later statements, the incumbent's incentives to distort the campaign are decreasing in his quality, as previously documented by the empirical literature. The distortions arising in equilibrium are decreasing in the incumbent's effective ability; however, the distortions may be increasing in the incumbent's reputation of expertise on his signature issue.
    Keywords: Incumbency advantage , electoral competition , information revelation , agenda setting
    JEL: D72 D82 D60
    Date: 2014
  7. By: Gächter, Simon (University of Nottingham); Renner, Elke (University of Nottingham)
    Abstract: We investigate the link between leadership, beliefs and pro-social behavior. This link is interesting because field evidence suggests that people's behavior in domains like charitable giving, tax evasion, corporate culture and corruption is influenced by leaders (CEOs, politicians) and beliefs about others' behavior. Our framework is an experimental public goods game with a leader. We find that leaders strongly shape their followers' initial beliefs and contributions. In later rounds, followers put more weight on other followers' past behavior than on the leader's current action. This creates a path dependency the leader can hardly correct. We discuss the implications for understanding belief effects in naturally occurring situations.
    Keywords: leadership, beliefs, experiments, public goods, path dependency, public policy, management
    JEL: C72 C90 H41 Z13
    Date: 2014–10
  8. By: Earle, John S. (George Mason University); Gehlbach, Scott (University of Wisconsin-Madison)
    Abstract: We examine the impact of political turnover on economic performance in a setting of largely unanticipated political change and profoundly weak institutions: the 2004 Orange Revolution in Ukraine. Exploiting census-type panel data on over 7,000 manufacturing enterprises, we find that the productivity of firms in the regions most supportive of Viktor Yushchenko increased by more than 15 percentage points in the three years following his election, relative to that in the most anti-Yushchenko regions. We conclude that this effect is driven primarily by particularistic rather than general economic policies that disproportionately increased output among large enterprises, government suppliers, and private enterprises – three types of firms that had much to gain or lose from turnover at the national level. Our results demonstrate that political turnover in the context of weak institutions can have substantial distributional effects that are reflected in economic productivity.
    Keywords: political connections, firm behavior, voting, transition
    JEL: H32 D72 P26
    Date: 2014–09
  9. By: Chris Bidner; Patrick Francois; Francesco Trebbi
    Abstract: A majority of the world democracies are far from the benchmark of representative democracy. This paper presents a model of political transitions based on a minimalist conception of the democratic state, i.e. a form of government solely characterized by competitive elections. We show that the model can produce dynamics of transition into democracy without requiring any role for redistribution or representation of voters, but solely based on interactions among the ruling elites. This allows the model to match several relevant stylized facts concerning the organization of new and consolidating democracies, weakly institutionalized countries, and hybrid regimes.
    JEL: H11 P16 P48
    Date: 2014–10
  10. By: Stoyanov, Andrey; Yildiz, Halis Murat
    Abstract: In this paper we analyze the effect of the freedom to pursue preferential trade liberalization, permitted by Article XXIV of the GATT, on country's incentives to participate in multilateral negotiations and on the feasibility of the global free trade. We present a model in which countries choose whether to participate in preferential or multilateral trade agreements under political pressures from domestic special interest groups. We show that heterogeneity in political preferences across countries plays an important role for the relative merits of preferential and multilateral approaches to trade liberalization. On one hand, the opportunity to liberalize preferentially may be necessary to induce countries with strong political motivations to participate in multilateral free trade negotiations. On the other hand, when countries share similar political preferences, multilateral free trade that would have been politically supported otherwise becomes unattainable if countries can pursue preferential liberalization.
    Keywords: Free Trade Agreements, Multilateralism, Political Economy, Coalition-proof Nash Equilibrium
    JEL: C72 F12 F13
    Date: 2014–11–11

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