nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2015‒02‒05
eighteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Persuading voters By Ricardo Alonso; Odilon Câmara
  2. Moderating Political Extremism: Single Round vs Runoff Elections under Plurality Rule By Bordignon, Massimo; Nannicini, Tommaso; Tabellini, Guido
  3. Political competition and the limits of political compromise By Alexandre B. Cunha; Emanuel Ornelas
  4. Workplace voice and civic engagement: what theory and data tell us about unions and their relationship to the democratic process By Alex Bryson; Rafael Gomez; Tobias Kretschmer; Paul Willman
  5. Democratization and Barriers to Entry in a Two-Dimensional Voting Model. By Dmitry A. Veselov
  6. Does Female Suffrage Increase Public Support for Government Spending? Evidence from Swiss Ballots By Hofer, Katharina E.
  7. Returns to Office in National and Local Politics By Kotakorpi, Kaisa; Poutvaara, Panu; Terviö, Marko
  8. Cooperation in Diverse Teams: The Role of Temporary Group Membership By Grund, Christian; Harbring, Christine; Thommes, Kirsten
  9. Legislative Vetoes and Corruption: The Effect of Formal Checks on Governance By B. Heller, William; P. Kyriacou, Andreas; Roca-Sagalés, Oriol
  10. Bidding Rings: A Bargaining Approach By Chatterjee, Kalyan; Mitra, Manipushpak; Mukherjee, Conan
  11. From bilateral two-way to unilateral one-way flow link-formation By Valenciano Llovera, Federico; Olaizola Ortega, Norma
  12. The Indigenous Roots of Representative Democracy By Jeanet Bentzen; Jacob Gerner Hariri; James A. Robinson
  13. Endogenous Reputation Formation: Cooperation and Identity under the Shadow of the Future By Kamei, Kenju
  14. Optimal Patronage By Drugov, Mikhail
  15. Do Shareholder Coalitions Modify Dominant Owner's Control? The Impact On Dividend Policy By Felix J. Lopez-Iturriaga; Domingo Javier Santana-Martin
  16. Contracts and cooperation: UK Corporate Law and Corporate Governance before 1914: a Re-interpretation By James Foreman-Peck; Leslie Hannah
  17. Flirting with Default: Issues Raised by Debt Confrontations in the United States By Joseph E. Gagnon; Anna Gelpern; Tomas Hellebrandt; Adam S. Posen; Douglas A. Rediker; David J. Stockton; Kent Troutman; Angel Ubide
  18. Environmental Advocacy in the Obama Years By Nisbet, Matthew C

  1. By: Ricardo Alonso; Odilon Câmara
    Abstract: In a symmetric information voting model, an individual (information controller) can influence voters’ choices by designing the information content of a public signal. We characterize the controller’s optimal signal. With a non-unanimous voting rule, she exploits voters’ heterogeneity by designing a signal with realizations targeting di↵erent winning-coalitions. Consequently, under simple-majority voting rule, a majority of voters might be strictly worse o↵ due to the controller’s influence. We characterize voters’ preferences over electoral rules, and provide conditions for a majority of voters to prefer a supermajority (or unanimity) voting rule, in order to induce the controller to supply a more informative signal.
    Keywords: information control; persuasion; voting
    JEL: D72 D83
    Date: 2014–06–03
  2. By: Bordignon, Massimo; Nannicini, Tommaso; Tabellini, Guido
    Abstract: We compare single round vs runoff elections under plurality rule, allowing for partly endogenous party formation. Under runoff elections, the number of political candidates is larger, but the influence of extremist voters on equilibrium policy and hence policy volatility is smaller, because the bargaining power of the political extremes is reduced compared to single round elections. The predictions on the number of candidates and on policy volatility are confirmed by evidence from a regression discontinuity design in Italy, where cities above 15,000 inhabitants elect the mayor with a runoff system, while those below hold single round elections.
    Keywords: electoral rules; policy volatility; regression discontinuity design
    JEL: C14 D72 H72
    Date: 2014–12
  3. By: Alexandre B. Cunha; Emanuel Ornelas
    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 trade-off between restricting political competition and constraining the ability of governments to issue debt.
    Keywords: Political turnover; efficient policies; public debt
    JEL: E61 E62 H30 H63
    Date: 2014–03
  4. By: Alex Bryson; Rafael Gomez; Tobias Kretschmer; Paul Willman
    Abstract: We offer an explanation for the phenomenon of declining democratic engagement by assuming that what happens at work is the primary driver of what occurs outside of the workplace. If workers are exposed to the formalities of collective bargaining and union representation, they also perhaps increase their attachment to, and willingness to participate in, structures of democratic governance outside of the workplace as well. In order for this argument to hold, one first needs to test whether individual union members are more prone to vote and participate in civil society than non-members: Other research refers to this as the union voting premium. We find that the voice effect of unionism on democratic participation is significant and is larger for groups that are significantly under-represented when it comes to voting, namely those with fewer years of education, immigrants, and younger workers. We also discuss the legal implications of these findings.
    JEL: R14 J01
    Date: 2013–09
  5. By: Dmitry A. Veselov (National Research University Higher School of Economics)
    Abstract: We propose a simple quality-ladder model with heterogeneous agents differing in their skills and wealth endowment to explain the persistence of barriers to entry in new democracies. In the model agents vote for a rate of redistribution and for the level of barriers to entry, which protect the incumbent firms from competition with new entrants. We show that even if a society democratizes, under certain conditions this leads only to the rise of redistribution, rather than to the elimination of barriers to entry. We show that this argument is particularly relevant for countries with a low level of human capital and high inequality in incomes and in skills.
    Keywords: Barriers to entry, majority voting, quality-ladders model, income inequality, skills inequality, persistence of economic institutions.
    JEL: O33 P16
    Date: 2015–01
  6. By: Hofer, Katharina E.
    Abstract: In this paper, I challenge the notion that women prefer larger governments than men which is why extending the franchise to women has led to an increase in government spending in many industrialized countries. I estimate the average treatment effect of being female on support for government spending, by analyzing the voting outcomes of two similar Swiss referendum votes concerning the federal government's authorization to levy income, capital and turnover taxes. The first ballot took place shortly before the extension of suffrage to women in February 1971, and the other one directly thereafter. Based on municipal voting data, I relate the increase in the electorate to the difference in acceptance rates for the two propositions. Surprisingly, I find that approval for government spending is higher among the male population. Further, I conduct a mediation analysis based on post-ballot surveys after comparable votes in 1981, 1991, and 1993. The intrinsic direct effect of being female proves to be the driving force behind the negative gender gap. In contrast, socioeconomic mediators like employment status or education turn out to play a weaker role.
    Keywords: Female Suffrage; Gender Preference Gap; Voting; Direct Democracy; Mediation
    JEL: J16 H10 D72
    Date: 2015–01
  7. By: Kotakorpi, Kaisa; Poutvaara, Panu; Terviö, Marko
    Abstract: We apply a regression discontinuity design to estimate the returns to being elected to parliament or to a municipal council. We present a bootstrap approach for measuring electoral closeness in any electoral system, and apply it to the Finnish proportional open list system. Getting elected to parliament increases annual earnings initially by about €20,000. The time profile of the earnings effect suggests that the returns accrue mainly during the time in office, while the effect on subsequent earnings is small. Getting elected to a municipal council increases subsequent annual earnings by about €1,000.
    Keywords: political careers; regression discontinuity; returns to office
    JEL: D72 J45
    Date: 2014–12
  8. By: Grund, Christian (RWTH Aachen University); Harbring, Christine (RWTH Aachen University); Thommes, Kirsten (RWTH Aachen University)
    Abstract: In organizations, some team members are assigned to a team for a predefined short period of time, e.g., as they have a temporary contract, while others are permanent members of the same team. In a laboratory experiment we analyze the cooperation levels resulting from diverse teams, where some team members remain with a team and others are switching teams. Our results reveal that teams consisting partly of members with temporary membership display a lower productivity compared to teams of permanent team members only. First, temporary team members cooperate less than permanent team members. Second, individual effort decisions increase with the number of team mates who are of the same type. This second effect holds for both temps and permanents. We argue that social identity is affected by team composition and the individuals' role in a team.
    Keywords: cooperation, economic experiment, public good, team
    JEL: C9 M5
    Date: 2015–01
  9. By: B. Heller, William; P. Kyriacou, Andreas; Roca-Sagalés, Oriol
    Abstract: What keeps corruption in check? Politicians have incentives to both avoid and actively oppose corruption when voters can hold them accountable for it. But to punish malfeasance voters have to know about it, and corrupt actors don’t want such information to be easy to find. Moreover, we argue that the very people best positioned to observe and block corruption—legislators with influence in the policy-making process—also are well-positioned to benefit from corruption. We thus focus on political elites and explore the conditions affecting the corrupt exercise of influence in the policy-making process. To that end, we look at the role of institutional checks in the legislative process and conclude, contra conventional wisdom, that as the number of checks increase so also should corruption increase, all else equal. This conclusion follows from the argument that checks give the individuals who control them influence and, importantly, an incentive to collude with other veto players in order to channel public resources to private ends. As long as the benefits of collusion (e.g., among coalition partners or even copartisans) outweigh the costs, increasing the number and potency of checks only increases opportunities for corruption. We find, testing our claim against data from a sample of 97 countries, strong support for our hypothesized relationship between institutional checks and corruption.
    Keywords: Veto players, checks, corruption, governance, panel data
    JEL: D72 D73
    Date: 2014–12–12
  10. By: Chatterjee, Kalyan (Department of Economics, Pennsylvania State University); Mitra, Manipushpak (Economic Research Unit, Indian Statistical Institute, Kolkata, India); Mukherjee, Conan (Department of Economics, Lund University)
    Abstract: We address the issue of bidder ring formation in single and multi-unit Vickrey auctions. We address this issue in a bargaining game set up under the assumption that valuation of bidders is commonly known only amongst themselves. In the single unit case, we show that the equilibrium coalition structure can only be an order preserving r-ring, that includes the winner and the top (r-1) losers. In the multiple units case, we specify sufficient conditions for formation of an interesting class of equilibrium coalition structures, which we call single winner ring with free riding, where exactly one winner colludes with all the losers and generates maximum possible bidders' surplus, and, depending on the protocol, the remaining winners free ride either by staying alone or by colluding in pairs.
    Keywords: Bidding rings; Bargaining games; Coalition formation; Auctions
    JEL: C71 C72 C78 D44 L41
    Date: 2015–01–16
  11. By: Valenciano Llovera, Federico; Olaizola Ortega, Norma
    Keywords: network formation, unilateral link-formation, bilateral link-formation, stability, efficiency, dynamics
    JEL: A14 C72 D20 J00
    Date: 2014–11–26
  12. By: Jeanet Bentzen (Department of Economics, Copenhagen University.); Jacob Gerner Hariri (Department of Economics, Copenhagen University); James A. Robinson (Department of Government, Harvard University)
    Abstract: We document that rules for leadership succession in ethnic societies that antedate the modern state predict contemporary political regimes; leadership selection by election in indigenous societies is associated with contemporary representative democracy. The basic association, however, is conditioned on the relative strength of the indigenous groups within a country; stronger groups seem to have been able to shape national regime trajectories, weaker groups do not. This finding extends and qualifies a substantive qualitative literature, which has found in local democratic institutions of medieval Europe a positive impulse towards the development of representative democracy. It shows that contemporary regimes are shaped not only by colonial history and European in uence; indigenous history also matters. For practitioners, our findings suggest that external reformers' capacity for regimebuilding should not be exaggerated.
    Date: 2014–12–20
  13. By: Kamei, Kenju
    Abstract: People are interacting more with strangers thanks to recent technological advancement in online platforms. Online interactions can be characterized by infinitely-repeated games. Recent studies have shown that institutions that make people’s decisions open to others may enhance cooperation in these situations. But it is still unknown whether people can successfully cooperate with each other by choosing to show their identities and building good reputation when there is an option to hide them. We deal with this question using an experimental laboratory. Our experiment shows that a non-negligible fraction of people conceal their identities and people fail to cooperate with each other if hiding identities is free. However, almost all show their identities and successfully achieve cooperation with their partners if a small explicit cost is charged for act of hiding.
    Keywords: experiment, cooperation, reputation, prisoner dilemma game, internet, infinitely-repeated games
    JEL: C73 C92 D70 M21
    Date: 2015–01–27
  14. By: Drugov, Mikhail
    Abstract: We study the design of promotions in an organization where agents belong to groups that advance their cause. Examples and applications include political groups, ethnicities, agents motivated by the work in the public sector and corruption. In an overlapping generations model, juniors compete for promotions. Seniors have two kinds of discretion: direct discretion which allows an immediate advancement of their cause and promotion discretion ("patronage") which allows a biasing of the promotion decision in favour of the juniors from their group. We consider two possible goals of the principal, maximizing juniors' efforts and affecting the steady-state composition of the senior level towards the preferred group, and show that patronage may be strictly positive in both of them. We also apply the second setting to the case of corruption.
    Keywords: bureaucracy; contest; corruption; motivated agents; patronage; promotion
    JEL: D73 H41 J45 J70
    Date: 2015–01
  15. By: Felix J. Lopez-Iturriaga (National Research University Higher School); Domingo Javier Santana-Martin (Universidad de Las Palmas de Gran Canaria)
    Abstract: We examine the effect of shareholder coalitions on the corporate payout policy in Spain, a context characterized by the presence of dominant shareholders. Our results show that shareholder coalitions affect payout policy negatively (both for dividends and shares repurchases). This finding suggests that shareholder coalitions serve as an instrument for the dominant shareholder’s to extract private benefits. We also find that the relation between the voting rights involved in the coalition and the dominant owner?s voting rights is negatively related to dividends. This result means that the dominant owner uses the coalition as a mechanism to amplify his or her control over the firm and reduce the cost of expropriation. The results provide new evidence on the effects of corporate control mechanisms on shareholders wealth; this evidence is complementary to the US or UK centered research, where dominant ownership is not as prevalent and, thus, it is more difficult to capture these effects
    Keywords: shareholder coalitions; dividends; repurchases; dominant owner; ownership structure; payout
    JEL: G32 G34
    Date: 2014
  16. By: James Foreman-Peck (Cardiff University); Leslie Hannah (Cardiff University)
    Abstract: The consensus among legal and economic historians that British law provided little protection to corporate shareholders is based on formal provisions in the Companies Acts . In fact these Acts applied only to companies registered by the Board of Trade. Moreover both criminal and corporate law for statutory companies was codified in the Companies Clauses Consolidation Act of 1845. We show that, while the governance rules of private companies were largely unconstrained, for most of the Victorian period most capital in quoted companies (which were mainly statutory) scored highly on the "anti-director" rights index under mandatory rules. When registered companies came to dominate stock exchanges, nearer the end of the nineteenth century, they voluntarily adopted similar rules, which professionals serving the stock exchange and IPOs recognised had advantages for raising capital. The main exception was the omission of tiered voting rules (whose record in protecting minorities was at best debatable), in favour of one-share-one-vote. Unlike the prevailing consensus, our reinterpretation is consistent with evidence on the large size of the London Stock Exchange and extensive divorce of ownership from control in listed UK companies before 1914.
    Keywords: Corporate governance, anti-directors rights, voluntary regulation
    JEL: K22 L51
    Date: 2015–01
  17. By: Joseph E. Gagnon (Peterson Institute for International Economics); Anna Gelpern (Peterson Institute for International Economics); Tomas Hellebrandt (Peterson Institute for International Economics); Adam S. Posen (Peterson Institute for International Economics); Douglas A. Rediker (Peterson Institute for International Economics); David J. Stockton (Peterson Institute for International Economics); Kent Troutman (Peterson Institute for International Economics); Angel Ubide (Peterson Institute for International Economics)
    Abstract: The willful US fiscal crackup of 2012-13 will impose costs unless politicians' change their behavior and return to practicing good governance. In the past, the United States ran deficits, or put off some harder long-term choices, but basic budgetary processes worked. Everyone worldwide, whether a VA patient in Louisville or a US Treasury bondholder in London, could count on the US government making its payments. As a result, the US economy had lower interest rates and greater stability than anywhere else, and the dollar was everyone's envy and safe haven, which brought more investment into the United States. But the repeated failure of Congress to pass budget legislation, or to bring the debt ceiling into line with spending, and ultimately explicitly threatening default on US government debt, has made US fiscal politics no better than anyone else's—and in some ways a lot worse, damaging the US reputation for safety and stability. In fact, there is no other known example of a solvent democracy flirting with default through sheer political stubbornness. While many democracies with fragmented party systems spend themselves into crashes, the crashes only came when they had run out of credit, not as a self-inflicted wound. The essays in this volume make clear that the direct costs of the recent fiscal follies are already substantial. David J. Stockton argues, for example, that the fiscal uncertainty of 2013 took 1 percent off of US real GDP and increased unemployment by 0.5 percent. The continuing uncertainty about US fiscal decision-making, and the recurrent risk of a repeat, has dragged down American productive investment. Worse still, global markets have priced in a default risk on US treasuries, where there had been none. US taxpayers will consequently foot the bill for higher rates demanded by markets on newly issued US government debt from now on. The most overlooked and perhaps most lasting harmful effect of the fiscal follies will be the severely diminished ability of the United States to conclude international economic negotiations. People and their elected representatives can legitimately disagree with each other about the speed and seriousness needed to tackle US public debt problems. There is no room for disagreement, however, that a budget process that threatens recurrent deadlock and even possible default on US government debt is seriously harmful to American wellbeing and international standing.
    Date: 2014–02
  18. By: Nisbet, Matthew C
    Abstract: In the latter years of Barack Obama?s presidency, the effort to mobilize public opinion and grassroots activism on climate change has led to a broader shift in environmental politics, as environmental organizations and their allies devote ever greater resources to shaping the outcome of elections, framing debates in stark moral terms, and melding innovative Internet-based strategies with traditional face-to-face field organizing. Yet, on the road to meaningfully dealing with climate change, this new brand of pressure politics as practiced by, NextGenClimate, and their allies among national environmental groups is not without its potential trade-offs, flaws and weaknesses. Blocking the Keystone XL oil pipeline and divesting from fossil fuel companies make for potent symbolic goals, but may detract from more important goals such as the passage of newfederal rules limiting emissions from coal fired power plants, and promoting government investment in a broad range of cleaner, more efficient energy technologies. Evidence also suggests that the strategies that environmental groups and climate advocates have used to mobilize a progressive base of voters and donors, may in fact be only strengthening political polarization, turning off core constituencies, dividing moderate and liberal Democrats, and promoting broader public disgust with ?Washington? and government

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