nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2015‒09‒18
thirteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Crossing Party Lines: The Effects of Information on Redistributive Politics By Casey, Katherine
  2. Local Representation and Strategic Voting: Evidence from Electoral Boundary Reforms By Janne Tukiainen; Tuukka Saarimaa
  3. Incentive Contracts for Teams: Experimental Evidence By Landeo, Claudia; Spier, Kathryn
  4. Fiscal redistribution around elections when democracy is not “the only game in town” By Pantelis Kammas; Vassilis Sarantides
  5. Growth, Unemployment, and Fiscal Policy: A Political Economy Analysis By Tetsuo Ono
  6. Forms of Democracies and Financial Development By Clément MATHONNAT; Pierre MANDON
  7. Actual topics within Germanys housing policy By R. Sotelo
  8. Improving the purchase decision in real estate asset management by debiasing decision-makers By C. Lausberg; F. Piepke
  9. Preferential versus Multilateral Trade Liberalization and the Role of Political Economy By Andrey Stoyanov; Halis Murat Yildiz
  10. The Diffusion of Academic Achievements: Social Selection and Influence in Student Networks By Sofia Dokuka; Diliara Valeeva; Maria Yudkevich
  11. Housing Co-operatives and Digital Democracy - Basic Aspects and Empirical Evidence By M. Mändle; D. Hummel
  12. Between capture and discretion - The determinants of distressed bank treatment and expected government support By Ignatowski, Magdalena; Korte, Josef; Werger, Charlotte
  13. Political Parties in Canada: What Determines Their Entry, Exit and the Duration of Their Lives? By J. Stephen Ferris; Marcel-Cristian Voia

  1. By: Casey, Katherine (Stanford University)
    Abstract: Many lament that weak accountability and poor governance impede economic development in Africa. Politicians rely on ethnic allegiances that deliver the vote irrespective of performance, dampening electoral incentives. Giving voters information about candidate competence counters ethnic loyalty and strengthens accountability. I extend a canonical electoral model to show how information provision flows through voter behavior and ultimately impacts the distribution of political spending. I test the theory on data from Sierra Leone using decentralization and differential radio coverage to identify information's effects. Estimates suggest that information increases voting across ethnic-party lines and induces a more equitable allocation of campaign spending.
    JEL: D72 H41 O17
    Date: 2015–02
  2. By: Janne Tukiainen; Tuukka Saarimaa
    Abstract: We analyze whether voters value local political representation by exploiting municipal mergers, which increase the number of candidates available to voters and intensify political competition. In the Finnish open-list proportional representation system, voters rank the candidates within parties, and thus, concentrating votes to local candidates increases the extent of local representation. Using a difference-in-differences strategy, we find that the vote distributions become more concentrated in municipalities less likely to gain local representation after the mergers. Moreover, the effect is much larger in municipalities where the benefits of local representation to voters are large. The latter result disentangles voters? responses from the responses of other political actors. The results are important also for designing local government mergers, which are an important policy tool in many countries. They highlight that concerns over deteriorating local democracy due to mergers have merit, because voters have preferences for local representation. At the same time, the vote concentration patterns we find alleviate these concerns.
    Keywords: Electoral boundary reform, difference-in-differences, local representation, municipality mergers, strategic voting.
    JEL: C23 D72 C21 H73 H77
    Date: 2015–09–11
  3. By: Landeo, Claudia (University of Alberta, Department of Economics); Spier, Kathryn (Harvard Law School)
    Abstract: This paper reports the results of an experiment on incentive contracts for teams. The agents, whose efforts are complementary, are rewarded according to a sharing rule chosen by the principal. Depending on the sharing rule, the agents confront endogenous prisoner's dilemma or stag-hunt environments. Our main findings are as follows. First, we demonstrate that ongoing interaction among team members positively affects the principal's payoff . Greater team cooperation is successfully induced with less generous sharing rules in infinitely-repeated environments. Second, we provide evidence of the positive effects of communication on team cooperation in the absence of ongoing team interaction. Fostering communication among team members does not significantly affect the principal's payoff , suggesting that agents' communication is an imperfect substitute for ongoing team interaction. Third, we show that offering low sharing rules can back re. The agents are willing to engage in costly punishment (shirking) as retaliation for low offers from the principal. Our findings suggest that offering low sharing rules is perceived by the agents as unkind behavior and hence, triggers negative reciprocity.
    Keywords: Moral Hazard in Teams; Prisoners Dilemma; Stag-Hunt Games; Infinitely-Repeated Games; Communication; Reciprocity; Laboratory Experiments
    JEL: C72 C90 D86 K10 L23
    Date: 2015–08–25
  4. By: Pantelis Kammas (Department of Economics, University of Ioannina); Vassilis Sarantides (Department of Economics, University of Sheffield)
    Abstract: This paper examines whether policy intervention around elections affects income inequality and actual fiscal redistribution. We first develop a simplified theoretical framework which allows us to examine fiscal redistribution around elections when democracy is not “the only game in town” and there is a threat of revolution from some groups of agents. Subsequently, employing data for a panel of 65 developed and developing countries during the period of 1975-2010, we provide robust empirical evidence of electoral cycles on income inequality and actual fiscal redistribution in countries characterized as new democracies. Moreover, our analysis suggests that this effect is mainly driven by a political instability channel which induces incumbents to redistribute resources - through fiscal policy - towards the poorer segments of the society in order to convince them that “democracy works”. In contrast, inequality and actual fiscal redistribution are not affected by elections in countries characterized as established democracies.
    Keywords: elections, new democracy, redistribution, income inequality
    JEL: D63 D72 E62
    Date: 2015–09
  5. By: Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This study presents an overlapping-generations model featuring capital accumu- lation, collective wage-bargaining, and probabilistic voting over fiscal policy. We characterize a Markov-perfect political equilibrium of the voting game within and across generations and show the following results. First, greater bargaining power of unions lowers the growth rate of capital and creates a positive correlation between unemployment and public debt. Second, greater political power of the old lowers the growth rate and shifts government expenditure from the unemployed to the old. Third, when the government finances its spending by issuing public debt, an introduction of a balanced-budget requirement increases the growth rate but may benefit the old at the expense of the unemployed.
    Keywords: Economic Growth; Fiscal Policy; Government Debt; Unemployment; Voting
    JEL: E24 E62 H60
    Date: 2014–08
  6. By: Clément MATHONNAT; Pierre MANDON
    Abstract: The political economy of finance literature emphasizes the critical role of political institutions in promoting financial development. Related empirical findings highlight a robust positive effect of democratic regimes on financial development compared to dictatorships. However, no study focused so far on identifying the precise political institutions explaining the financial development enhancing effect of democracies. In this paper, we study the effects of disaggregated political institutions on financial development along three institutional dimensions, namely forms of government, electoral rules and state forms. Using a large panel of 140 countries over 1984-2007, we show that institutional details are of crucial importance, since the positive effect of democracies on financial development clearly depends on the precise institutional dimensions at work, namely: parliamentary governments and, to a lesser extent federal states. Thus, our study contributes to the institutional design debate, by showing that the simple promotion of democratic regimes might not be sufficient to foster financial development.
    JEL: P48 H00 G28 D72
    Date: 2015–09
  7. By: R. Sotelo
    Abstract: During the electoral campaign for the general elections held on 22nd September 2013 the lobby group representing the tenants proposed a rent regulation in the housing sector concerning also new contracts for existing housing beyond social housing. This proposal was immediately included into their political agenda by the social democrats (SPD) and very shortly afterwards also taken as a position by chancellor Merkel as leader of the Cristian Democratic Party (SPD), although many doubts were expressed within her own party. Only the liberal party opposed to any type of rent control, but did in the end not enter parliament. After elections a coalition between the Social Democrats and the Cristian Democratic Parties was established and the implementation of the rent control fixed. This paper analyses the political reasons for the behavior of Angela Merkel, looks at the expected results from this rent control concerning the allocation of flats, the proportion of home-ownership, the ongoing segregation within cities, and the future construction of new housing.
    Keywords: Germany; Housing Policy; Rent Regulation
    JEL: R3
    Date: 2015–07–01
  8. By: C. Lausberg; F. Piepke
    Abstract: The question how real estate investment decisions should be made and are actually made has been extensively discussed in the literature. However, some behavioral aspects such as the effect of the anchoring bias on the quality of purchase decisions or the effectiveness of debiasing strategies have been neglected so far. It can be assumed that these aspects greatly influence decision-making in real estateÑ-as has been convincingly shown for other areas. This paper examines whether the anchoring effect occurs in real estate asset management and if this bias can be minimized using debiasing-strategies. To answer our research question we set up an experiment in which we asked 152 real estate experts to form an opinion about the ceiling price for a property described in an investment memorandum. We found that the probands anchored their opinion to the given offering price. That was in line with our expectations and the previous literature. But we also found that a simple debiasing strategy, considering a worst-case scenario, significantly reduced the unwanted anchoring effect. The results show that there are promising ways to improve decision-making. More research is needed until our findings can be incorporated in decision processes and decision support systems.
    Keywords: Anchoring; Debiasing; Decision-making; Real Estate Asset Management
    JEL: R3
    Date: 2015–07–01
  9. By: Andrey Stoyanov (York University, Department of Economics, Faculty of Liberal Arts and Professional Studies); Halis Murat Yildiz (Ryerson University, Department of Economics)
    Abstract: In this paper we analyze the e¤ect 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 preferen-tial or multilateral trade agreements under political pressures from domestic special interest groups. We show that heterogeneity in political preferences across coun-tries plays an important role for the relative merits of preferential and multilateral approaches to trade liberalization. On one hand, the opportunity to liberalize pref-erentially 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: F12 F13 C72
    Date: 2015–09–10
  10. By: Sofia Dokuka (National Research University Higher School of Economics); Diliara Valeeva (National Research University Higher School of Economics); Maria Yudkevich (National Research University Higher School of Economics)
    Abstract: Peer group effects show the influence of student social environments on their individual achievements. Traditionally, a social environment is considered by researchers of peer effects as exogenously given. However, significant peers that affect performance are often those that are deliberately chosen. Students might choose their friends among peers with similar academic achievements. A dynamic analysis of student social networks and academic achievements is needed to disentangle social selection and social influence processes in network formation. Using data about the friendship and advice networks of first year undergraduate students, we show that friends tend to assimilate each others’ achievements and choose advisers with similar grades. We explain these results by social segregation based on student performance. The article contributes to the dynamic analysis of student social networks and the understanding of the nature of peer group effects in education
    Keywords: social networks, academic achievements, peer group effects, higher education
    JEL: D85 I21 I23
    Date: 2015
  11. By: M. Mändle; D. Hummel
    Abstract: Web 2.0 and social media revolutionized our communication and caused extensive social change. In wake of this digital revolution the inherent notion of democracy has changed. Increased demand for transparency, the readiness to engage in dialogue and the opportunity to participate have shown that social media increasingly impacts our democratic structures and decisions. Also housing co-operatives were affected by these developments due to their democratic structures and traditionally strong member relations. In this context social media offers a multitude of opportunities for digital participation. This paper shows the basic aspects of participation in digital democracy. It describes how housing co-operatives can use these tools and mechanisms. However, this paper also illustrates the risks that are connected to the use of digital participation. Besides the theoretical aspects, also the results of an empirical survey is presented. The survey determines the status quo of digital democracy within the housing co-operative sector in Baden-Wurttemberg, Germany. In addition the attitude of co-op managers regarding the risk and benefits of digital participation was surveyed. The results show clearly that, so far only a few housing co-operatives offer their members opportunities for digital participation. Furthermore, the majority of the co-op managers express a skeptical view towards this new form of media. However, at the same time co-op managers emphasize, that in future the significance of social media and digital participation will probably rise considerably.
    Keywords: Housing Co-Operatives; Social Media
    JEL: R3
    Date: 2015–07–01
  12. By: Ignatowski, Magdalena; Korte, Josef; Werger, Charlotte
    Abstract: In this paper, we analyze how sources of political influence relate to the actual regulatory treatment of distressed banks and to the expectation of bank support provided by the government. We assemble a unique dataset that links U.S. banks’ sources of influence (e.g., lobbying expenditures, proximity to the relevant legislative committee, prior affiliation with regulatory or government institutions) to bank financial data, actual bank supervisory actions, and market-inferred expected government support. Employing this novel data, we cast some light on how regulatory decision making is affected by these sources of influence. Our findings suggest that banks’ influence matters for the regulatory treatment of distressed banks, as well as for the expectation of support regardless of bank distress. Several conditions increase the effectiveness of sources of influence in actual regulatory treatment: Lobbying activities are more effective with increasing lobbying expenditures, deteriorating capital ratios, and with the aid of former politicians. JEL Classification: D72, G21, G28
    Keywords: bank regulation, bank sources of influence, lobbying, Prompt Corrective Action, regulatory discretion
    Date: 2015–08
  13. By: J. Stephen Ferris (Department of Economics, Carleton University); Marcel-Cristian Voia (Department of Economics, Carleton University)
    Abstract: In this paper we consider two margins of individual political party life in Canada since Confederation—the extensive margin governing existence (the entry and exit decisions together with party turnover or churning) and the intensive margin determining lifespan or survival length. The results confirm in a more formal way many of the individual hypotheses advanced in the political literature for entry and exit—the importance of voter heterogeneity, minority governments, world wars, number of competitors and, to a lesser degree, economic circumstance. What stands out most strongly in the data is the introduction of public funding for established political parties following 1974 and immigration flows. The intensive margin is analyzed using a number of hazard models before focusing on semi-parametric models. These best capture the form of the empirical hazard and in the discrete form allows for the detection of party type heterogeneity. The results suggest presence of two distinct political party types in and, more generally, mirror those found for the entry/exit decision. The public funding and immigration flows variables again stand out as being particularly significant.
    JEL: D72 C41 C24
    Date: 2015–09–11

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