nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2015‒07‒11
eleven papers chosen by
Stan C. Weeber
McNeese State University

  1. On ignorant voters and busy politicians By Aytimur, R. Emre; Bruns, Christian
  2. Voter Reaction to Government Incompetence and Corruption Related to the 1999 Earthquakes in Turkey By Akarca, Ali T.; Tansel, Aysit
  3. May There Be Victory: Government Election Performance and the World's Largest Public-Works Program By Zimmermann, Laura V
  4. Adaptation Strategies of Multinational Corporations, State-Owned Enterprises, and Domestic Business Groups to Economic and Political Transitions: A Network Analysis of the Chilean Telecommunications Sector, 1958- 2005 By Marcelo Bucheli; Erica Salvaj
  5. Bargaining in Global Communication Networks By Marco Pelliccia
  6. Public Governance and Political Corruption: A Framework for Anticorruption Policy By Glória Texeira; Ary Ferreira da Cunha
  7. Lobbying over Exhaustible-Resource Extraction By Achim Voss; Mark Schopf
  8. The Political Economy of Early and College Education - Can Voting Bend the Great Gatsby Curve? By Christopher Rauh
  9. Us and Them: Experimental evidence on what creates efficiency in choices made by married couples. By Lopez Maria Claudia; Munro Alistair; Tarazona-Gomez Marcela
  10. A Model of Dynamic Conflict in Ethnocracies By Bakshi, Dripto; Dasgupta, Indraneel
  11. Enforcing Repayment: Social Sanctions versus Individual Incentives By Arup Daripa

  1. By: Aytimur, R. Emre; Bruns, Christian
    Abstract: We show that a large electorate of ignorant voters can succeed in establishing high levels of electoral accountability. In our model an incumbent politician is confronted with a large number of voters who receive very noisy signals about her performance. We find that the accountability problem can be solved well in the sense that the incumbent exerts effort as if she faced a social planner who receives a perfect signal about her performance. Our results thus shed light on another potential blessing of large electorates in addition to information aggregation as postulated by the jury theorem.
    Keywords: accountability,elections,information,jury theorem
    JEL: D72 D82 H41
    Date: 2015
  2. By: Akarca, Ali T. (University of Illinois at Chicago); Tansel, Aysit (Middle East Technical University)
    Abstract: Two major earthquakes which struck northwestern Turkey in 1999 exposed rampant corruption involving construction and zoning code violations. The government's relief efforts were tainted by corruption as well, and exhibited a great deal of incompetence. How voters responded to these in the next election held in 2002 is investigated. The fact that different group of parties were responsible for the construction of the shoddy buildings, and for the corruption and mismanagement related to relief, provided us with a unique opportunity to determine whether and how the electorate punished the culprits for each of these. Vote equations are estimated for the seven major political parties. These are fitted to cross-provincial data individually, using OLS, Robust Regression methods, and Seemingly Unrelated Regressions procedures. The same picture emerges from each of these methods. Not just those ruling at the time of the earthquakes, but also other parties which were in power when the substandard buildings, were built were held accountable by the electorate. Furthermore, the Turkish voters appear to have allocated the blame rationally, taking into consideration the division of labor in the central government, and the relative influences the parties had on local administrations. Reaction of the voters to government incompetence and corruption was one of the factors which resulted in the emergence of a new party system. In 2002, the AKP, established only a year before, captured almost all of the far-right Islamist, about half of the far-right nationalist, and more than half of the center-right votes in 2002.
    Keywords: natural disaster, corruption, disaster aid, governance, election, voter behavior, voter turnout, Turkey
    JEL: D72 D73 H84 Q54
    Date: 2015–06
  3. By: Zimmermann, Laura V (University of Georgia)
    Abstract: A number of developing country governments have introduced ambitious anti-poverty programs in recent years, but the dynamic effects of these initiatives on governments' election performance remain poorly understood. Especially in contexts with low program implementation quality, public support for government interventions may be high initially but decline over time as citizens observe the actual program benefits. This paper analyzes the election impacts of the largest public-works program in the world, the Indian NREGS. Using a regression-discontinuity framework, the results suggest that length of program exposure and implementation quality matter: voter support in low implementation quality areas declines with longer program access. This effect is muted in well-implemented areas, where voter turnout is higher and incumbents of any party affiliation also benefit. The government payoff from implementing a large anti-poverty program may therefore be short-lived unless implementation challenges are resolved.
    Keywords: NREGS, election outcomes, India, anti-poverty programs, voting behavior
    JEL: D72 H53 I38
    Date: 2015–06
  4. By: Marcelo Bucheli; Erica Salvaj (School of Business and Economics, Universidad del Desarrollo)
    Abstract: This paper compares the corporate network strategies between multinational corporations of two different origins (United States and Spain), business groups, and state-owned enterprises in the public utility sector of a developing country going through economic and political transitions. The transitions we consider are from an import substitution industrialization model to an open market economy and from a democratic regime to a dictatorial one and back to democracy. We analyze the Chilean telecommunications sector between 1958 and 2005 and find that during a democratic regime all firms sought to build more networks with each other, while incentives decrease under an authoritarian regime. In the protectionist era, US investors built links with Chile’s corporate elite, while in times of an open economy, Spanish investors built these links with the government. State-owned corporations did not attempt to build links with other actors at any time, and business groups sought to build most networks among members of the group. Our findings challenge two commonly held assumptions: first, that open economies decrease incentives for domestic actors to build links with each other and, second, that close political regimes increase incentives to build networks among economic actors.
    Date: 2014–09
  5. By: Marco Pelliccia (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We study a Rubinstein-Stahl two-player non-cooperative bargaining game played by n players connected in a communication network. We allow the players to communicate with any peer in the same component via the existing paths connecting the peers in a given communication network (global interaction). The unique stationary subgame perfect equilibrium profile characterizes the players’ expected payoff as function of their betweenness centrality score. Secondly, we study a dynamic link-formation game which allows the players to activate new linkages or sever existing ones in order to increase their bargaining power for a given marginal cost per link. We identify the conditions under which the pairwise stable network structures which arise belong to the family of the nested split graphs. These are graphs where the neighbourhood of each node is contained in the neighbourhoods of nodes with higher degrees.
    Keywords: Communication; Network; Noncooperative bargaining; Network formation.
    JEL: C72 C78 D85
    Date: 2015–05
  6. By: Glória Texeira (Faculty of Law, University of Porto, Centre for Legal and Economic Research); Ary Ferreira da Cunha (Faculty of Law, University of Porto, Centre for Legal and Economic Research, Observatory of Economy and Management of Fraud)
    Abstract: In this paper we propose a framework of policies against political corruption. Though we have frameworks explaining the causes of corruption – mainly based on agency theory – and though many authors have considered the role of good governance in fighting corruption or the effectiveness of different anticorruption policies, we see that these branches of literature have yet not entered in dialogue to construct a framework for curbing political corruption. The framework is based on the contributions of agency theory to the field of corruption over the past decades. After all, if discretion, information asymmetries and non-coincidence of interests are the elements of agency contributing to corruption they must also be the fundamentals targeted by anticorruption policies. Based on an extensive literature survey we gather a large array of good governance policies shown to be effective against political corruption and consider how they fit in the framework. This framework may help decision makers, policy advisors, and civil society stakeholders understand and visualize their options, contributing to the construction of more comprehensive strategies.
    Keywords: Anticorruption Policy; Public Governance; Political Corruption
    JEL: O29 K42
    Date: 2015–02
  7. By: Achim Voss (University of Muenster); Mark Schopf (University of Paderborn)
    Abstract: Republished as CIE Working Paper 2014-06
    Keywords: Environmental Policy, Exhaustible Resources, Political Economy, Lobbying, Nash Bargaining, Dynamic Programming
    JEL: D72 Q31 Q38 Q58
    Date: 2015–03
  8. By: Christopher Rauh (University of Cambridge)
    Abstract: High earnings inequality goes hand in hand with low intergenerational earnings mobility across developed countries. Public expenditure on education, which could mitigate this relationship, is negatively correlated with inequality across countries. In an overlapping generations model, which I calibrate to the US, early and college education policies are endogenized via probabilistic voting. I investigate two channels, a technological and a political explanation. First, considering differences across countries in tertiary education characteristics account for 65% of the differences in inequality. The higher college premium in the US translates into increased incentives to invest in early education due to dynamic complementarities, and also increases the gap between parents' ability to finance education. Second, I exploit cross-country variations in the bias in voter turnout towards the educated. Thereby, I replicate the negative relation between inequality and public education expenditure and account for nearly one-quarter of the differences in inequality and mobility. For the US, I find that compulsory voting could foster mobility, whereas the effect on pre-tax inequality is low.
    Date: 2015
  9. By: Lopez Maria Claudia (Department of Community Sustainability, Michigan State University, MI USA); Munro Alistair (GRIPS); Tarazona-Gomez Marcela (Oxford Policy Management, United Kingdom)
    Abstract: A recurring and puzzling pattern with experiments on intra-household behaviour is the common failure of couples to attain the cooperative solution. Using married couples from a low income area of Bogota, Colombia we conduct an experiment that raises the salience of the family vis-à-vis outsiders. In this experiment husbands and wives play a repeated voluntary contribution game. At the same time each participant plays an identical game with one stranger in the same session. When investments to the common pools are made from separate and non-fungible budgets, most subjects contribute more to the household pool than the stranger pool, but rarely contribute everything to the household even after repetition and opportunities for learning. Efficiency is not obtained. However, when subjects make contributions to the two games from a single budget many individuals converge rapidly on a strategy of investing everything in the household pool and contributing little to the pool with a stranger. Overall the amount invested in some pool rises. Our results are in line with games played with individuals in which in-group cooperation is higher when membership of the group is more salient. They suggest that strengthening family identity may raise intrahousehold cooperation, but at the expense of cooperation of interhousehold cooperation.
    Date: 2015–07
  10. By: Bakshi, Dripto (Indian Statistical Institute); Dasgupta, Indraneel (Indian Statistical Institute)
    Abstract: We model an infinitely repeated Tullock contest, over the sharing of some given resource, between two ethnic groups. The resource is allocated by a composite state institution according to relative ethnic control; hence the ethnic groups contest the extent of institutional ethnic bias. The contest yields the per-period relative influence over institutions, which partly spills over into the next period, by affecting relative conflict efficiency. Our model generates non-monotone evolution of both conflict and distribution. Results suggest that external interventions, when effective in reducing current conflict and protecting weaker groups, may end up sowing the seeds of greater future conflict.
    Keywords: ethnocracy, ethnic conflict, dynamic contest, rent-seeking, inter-temporal productivity carryover
    JEL: D72 D74 O10 O20
    Date: 2015–06
  11. By: Arup Daripa (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We study repayment incentives generated through social sanctions and under pure in- dividual liability. In our model agents are heterogeneous, with differing degrees of risk aversion. We consider a simple setting in which agents might strategically default from a loan program. We remove the usual assumption of exogenous social penalties, and consider the endogenous penalty of exclusion from an underlying social cooperation game, modeled here as social risk-sharing. For some types of agents social risk-sharing can be sustained by the threat of exclusion from this arrangement. These types have social capital and can be given a loan that bootstraps on the risk-sharing game by using the threat of exclusion from social risk-sharing to deter strategic default. We show that the use of such sanctions can only cover a fraction of types participating in social risk sharing. Further, coverage is decreasing in loan duration. We then show that an individual loan programaugmented by a compulsory illiquid savings plan (such schemes are used by the Grameen Bank) can deliver greater coverage, and can even cover types excluded from social risk-sharing (i.e. types for whom social penalties are not available at all). Further, the coverage of an individual loan program has the desirable property of increasing with loan size as well as loan duration. Finally, we show that social cooperation enhances the performance of individual loans. Thus fostering social cooperation is beneficial under individual liability loans even though it has limited usefulness as a penalty under social enforcement of repayment. The results offer an explanation for the Grameen Bank’s adoption of individual liability replacing group liability in its loan programs since 2002.
    Keywords: Strategic default, social cooperation, social penalties, individual liability, loan coverage, loan duration, loan size.
    JEL: O12
    Date: 2015–03

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