nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2015‒10‒04
fourteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Electoral Uncertainty, Income Inequality and the Middle Class By Mitra, Anirban; Mitra, Shabana
  2. Political Incentives and State Subsidy Allocation: Evidence from Hungarian Municipalities By Balázs Murakozy; Almos Telegdy
  3. A Fine Rule From a Brutish World? An Experiment on Endogenous Punishment Institution and Trust By H. Sun; M. Bigoni
  4. Mobile Politicians: Opportunistic Career Moves and Moral Hazard By Duha T. Altindag; Naci Mocan
  5. Mandated Political Representation and Redistribution By Mitra, Anirban
  6. How Lobbying Affects Representation: Results for Majority-Elected Politicians By David Stadelmann; Marco Portmann; Reiner Eichenberger
  7. The political economy of public transport pricing and supply decisions By DE BORGER, Bruno; PROOST, Stef
  8. Incentives and Information as Driving Forces of Default Effects By Altmann, Steffen; Falk, Armin; Grunewald, Andreas
  9. Preferential versus Multilateral Trade Liberalization and the Role of Political Economy By Halis Murat Yildiz; Andrey Stoyanov
  10. Efficiency of Flexible Budgetary Institutions By Ying Chen; Jan Zapal; Hulya Eraslan; Renee Bowen
  11. Electoral Competition with Rationally Inattentive Voters By Filip Matejka; Guido Tabellini
  12. Collective identity formation in hybrid organizations. By Romain Boulongne; Eva Boxenbaum
  13. Delegation and Communication By Arve, Malin; Honryo, Takakazu
  14. Oral democracy and women?s oratory competency in Indian village assemblies : a qualitative analysis By Sanyal,Paromita; Rao,Vijayendra; Prabhakar,Umang

  1. By: Mitra, Anirban; Mitra, Shabana
    Abstract: We investigate how increased electoral competition — by influencing the equilibrium policies of competing parties — affects the income distribution in society. Our model is embedded in a standard probabilistic voting setup where parties compete at two stages: (i) they allocate resources across various districts and (ii) then, for each district, they divide the resources among the different constituent groups. We show that an increase in electoral competition in a district results in a tendency towards equalization of incomes therein. We check for these relationships using data from the Indian national elections which are combined with household-level consumption expenditure data rounds from NSSO (1987-88 and 2004-05) to yield a panel of Indian districts. We find that districts which have experienced tight elections exhibit lower inequality and polarization which indicates a larger "middle class".
    Keywords: Income distribution, polarization, political economy, targeting.
    JEL: D72 D78 O20
    Date: 2015–04
  2. By: Balázs Murakozy (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences); Almos Telegdy (National Bank of Hungary and Central European University)
    Abstract: Using application-level data on successful and rejected applications for the European Union’s Structural and Cohesion Funds between 2004 and 2012 in Hungary, we study which grant types are susceptible to political manipulation and how politicians achieve this goal. Using township fixed-effect estimators to attenuate the simultaneity bias between municipality characteristics and political affiliation, we find that townships with a mayor endorsed by the governing parties obtain 10 percent higher grant value per capita. This effect varies widely by grant attributes: it is of 16-19 percent when the applicant is a public entity or the project’s purpose is construction so it is visible to voters and thus may bring about electoral benefits. For private applications and non-construction grants, where electoral gains are likely to be limited, the estimated effect is zero. Decomposing the township alignment effect into grant application effects (application intensity and the average value of grant) and grant decision effects (grant success rate and proportion of grant value received) reveals that both margins play a role in the political manipulation of grant distribution. When analyzing the effect of grants on votes, we show that voters indeed reward construction and public projects.
    Keywords: Redistributive politics; Political alignment; European Structural Funds, Hungary
    JEL: D72 D78 H77
    Date: 2015–06
  3. By: H. Sun; M. Bigoni
    Abstract: By means of a laboratory experiment, we study the impact of the endogenous adoption of a collective punishment mechanism within a one-shot binary trust game. The experiment comprises three games. In the first one, the only equilibrium strategy is not to trust, and not to reciprocate. In the second we exogenously introduce a sanctioning rule that imposes on untrustworthy second-movers a penalty proportional to the number of those who reciprocate trust. This generates a second equilibrium where everybody trusts and reciprocates. In the third game, the collective punishment mechanism is adopted through majority-voting. In line with the theory, we find that the exogenous introduction of the punishment mechanism significantly increases trustworthiness, and to a lesser extent also trust. However, in the third game the majority of subjects vote against it: subjects seem to be unable to endogenously adopt an institution which, when exogenously imposed, proves to be efficiency enhancing.
    JEL: C72 C92 D72
    Date: 2015–09
  4. By: Duha T. Altindag (Auburn University); Naci Mocan (Louisiana State University, NBER and IZA)
    Abstract: We exploit the randomness generated by a seat allocation mechanism utilized in Parliamentary elections that determines those politicians who get elected from a given district by a small margin, and those who lose. Using detailed information on personal attributes of more than 2,000 elected Members of the Parliament (MPs) and the votes received by each political party in every district and each of the five consecutive Parliamentary elections in Turkey between 1991 and 2011, we show that elected MPs are more likely to switch parties after an election if they faced electoral uncertainty and experienced a narrowly-won victory. The tendency to switch parties goes up as it becomes more lucrative to hold the post of MP. The impact of election uncertainty on party-switching is greater for younger MPs, and for those who are less educated. The propensity to switch due to uncertainty is higher if the MP is a member of the governing party, but only if the seat is valuable (if the majority of the party in the Parliament is slim). Politicians switch parties after an election to improve their ex-ante re-election probability in the following election. Although switching parties during a legislative session (between elections) for personal career concerns creates moral hazard, we find that party-switching MPs are more likely to get elected in the next election. These results point to forward-looking opportunistic behavior of politicians regarding their strategy to win future elections, and they indicate that politicians switch parties primarily for career concerns and for financial benefits that are associated with longer tenure in the Parliament. The results also signify that competition between political parties continues after the election, in the form of gaining seats in the Parliament post- election by transferring elected representatives of competing parties. This constitutes another dimension of the political agency problem.
    Date: 2015–09
  5. By: Mitra, Anirban
    Abstract: Mandated political representation for minorities involves earmarking certain electoral districts where only minority–group candidates are permitted to contest. Such quotas have been implemented in India for certain social groups and for women, although gender quotas in the legislature are popular in several other countries. This paper builds a political–economy model to analyze the effect of such affirmative action on redistribution in equilibrium. Our model predicts that, in situations where the minority–group is economically disadvantaged and where voters favor candidates from their own group, such a quota actually reduces transfers to poorer groups. Moreover, redistribution in reserved districts leads to a rise in within–(minority) group inequality.
    Keywords: Affirmative action, income distribution, political economy
    JEL: D72 D78 O20
    Date: 2015–07
  6. By: David Stadelmann; Marco Portmann; Reiner Eichenberger
    Abstract: Combining referendum results with parliamentary votes of proportionally-elected politicians of the Swiss Lower House of Parliament, Giger and Klüver (American Journal of Political Science, forthcoming) find that sectional and cause interest groups affect the quality of political representation. We extend their analysis to a new dataset of majority-elected politicians of the Upper House. Our results show that sectional and cause groups do not affect defection of politicians from their constituents. This suggests that the electoral system moderates the influence of interest groups on political representation.
    Keywords: Interest groups; representation; referenda; MP defection; electoral systems
    Date: 2015–09
  7. By: DE BORGER, Bruno; PROOST, Stef
    Abstract: This paper studies the political economy of public transport pricing and quality decisions in a hypothetical two-region federation. In each region there are two types of people: people not owning a car using only public transport, and car owners that demand both public transport and car trips. Each group may be a majority in the region and may also travel in the other region. Under regional decision-making, the political process may result in very low public transport fares, even if car owners are a large majority of the population. Cost recovery always improves with the share of outside users. Second, imposing a zero deficit constraint on regional public transport operators implements the second-best welfare optimum. Third, decentralized decision making leads to higher fares and better cost recovery. Our findings are consistent with very large public transport subsidies in Europe, and with the tendency towards decentralization of public transport policy-making.
    Keywords: Public transport pricing, Tax competition, Federalism
    JEL: H23 D62 R41 R48
    Date: 2015–05
  8. By: Altmann, Steffen; Falk, Armin; Grunewald, Andreas
    Abstract: The behavioral relevance of non-binding defaults is well established. While most research has focused on decision makers’ responses to a given default, we argue that this individual decision making perspective is incomplete. Instead, a comprehensive understanding of default effects requires to take account of the strategic interaction between default setters and decision makers. We analyze theoretically and empirically which defaults emerge in such interactions, and under which conditions defaults are behaviorally most relevant. Our analysis demonstrates that the alignment of interests between default setters and decision makers, as well as their relative level of information are key drivers of default effects. In particular, default effects are more pronounced if the interests of the default setter and decision makers are more closely aligned. Moreover, decision makers are more likely to follow default options the less they are privately informed about the relevant decision environment.
    Keywords: Default Options; Behavioral Economics; Strategic Communication; Laboratory Experiment
    JEL: D03 D18 D83 C92
    Date: 2015–09–17
  9. By: Halis Murat Yildiz (Department of Economics, Ryerson University, Toronto, Canada); Andrey Stoyanov (Department of Economics, York University, Toronto, Canada)
    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 feasibility of 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 in determining 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: F12 F13 C72
    Date: 2015–09
  10. By: Ying Chen (Johns Hopkins University); Jan Zapal (CERGE-EI & IAE-CSIC and Barcelona GSE); Hulya Eraslan (Rice University); Renee Bowen (Stanford GSB)
    Abstract: Which budgetary institutions result in efficient provision of public goods? We analyze a model with two parties bargaining over the allocation to a public good each period. Parties place different values on the public good, and these values may change over time. We focus on budgetary institutions that determine the rules governing feasible allocations to mandatory and discretionary spending programs. Mandatory spending is enacted by law and remains in effect until changed, and thus induces an endogenous status quo, whereas discretionary spending is a periodic appropriation that is not allocated if no new agreement is reached. We show that discretionary only and mandatory only institutions typically lead to dynamic inefficiency and that mandatory only institutions can even lead to static inefficiency. By introducing flexibility, either through a combination of mandatory and discretionary programs, or through a state-contingent mandatory program, we obtain static and dynamic efficiency.
    Date: 2015
  11. By: Filip Matejka; Guido Tabellini
    Abstract: This paper studies how voters optimally allocate costly attention in a model of probabilistic voting. The equilibrium solves a modified social planning problem that reflects voters’ choice of attention. Voters are more attentive when their stakes are higher, when their cost of information is lower and prior uncertainty is higher. We explore the implications of this in a variety of applications. In equilibrium, extremist voters are more influential and public goods are under-provided. The analysis also yields predictions about the equilibrium pattern of information, and about policy divergence by two opportunistic candidates. Endogenous attention can lead to multiple equilibria, explaining how poor voters in developing countries can be politically empowered by welfare programs .
    Date: 2015
  12. By: Romain Boulongne (GROUPE HEC); Eva Boxenbaum (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris, Copenhagen Business School - Copenhagen Business School)
    Abstract: The present article examines the process of collective identity formation in the context of hybrid organizing. Empirically, we investigate hybrid organizing in a collaborative structure at the interface of two heterogeneous organizations in the domain of new renewable energies. We draw on the literature on knowledge sharing across organizational boundaries, particularly the notions of transfer, translation and transformation, to examine in real time how knowledge sharing in a hybrid setting contributes (or not) to the emergence of a new collective identity at the interface of two heterogeneous organizations. Our findings point to two factors that limit knowledge sharing and hence to new collective identity formation in a hybrid space: 1) ambiguous or multiple organizational roles and 2) strong identities of the collaborating organizations. These findings contribute to illuminating the initial formation of a new collective identity in hybrid organizing, and hence how new hybrid organizational forms may emerge non-intentionally.
    Keywords: hybrid organizing, collective identity, renewable energy
    Date: 2015–07–01
  13. By: Arve, Malin; Honryo, Takakazu
    Abstract: This paper analyzes delegation and joint decision making in an environment with private information and partially aligned preferences. We compare the benefits of these two decision making procedures as well as the interaction between them. We give a condition under which delegation is preferred to ex post joint decision making and we show how the interaction between delegation and ex post joint decision making always crowds out delegation. Finally, we analyze how the availability of the principal at the communication stage affects our results.
    JEL: D23 D82 L23
    Date: 2015–09–22
  14. By: Sanyal,Paromita; Rao,Vijayendra; Prabhakar,Umang
    Abstract: In democracies, innovative political institutions have opened up scope for direct public participation often in the form of talk: citizens talking to the state and mutual talk among citizens on matters concerning community development. A prominent example is the Indian gram sabha, or village assembly, which occurs in a highly stratified context. This paper undertakes a talk-centered analysis of the gram sabha with a focus on examining the oral participation of women in general and women affiliated with microcredit self-help groups who have access to an associational life. The qualitative analysis of 255 gram sabha transcripts from four South Indian states finds that women associated with microcredit self-help groups employ a wider variety of narrative styles and utilize a more multilayered structure to convey their messages compared with all women taken together. Thus, the difference is not so much in the numerical instances of talking or in the types of issues raised, but rather in the quality of participation. The paper makes an important theoretical contribution by proposing the concept of oral democracy as an alternative to deliberative democracy, and urges an analytical focus on the oral or oratory competency of subordinated groups as they participate in these important institutions.
    Keywords: Parliamentary Government,Access to Finance,National Governance,Governance Indicators,Primary Education
    Date: 2015–09–21

This nep-cdm issue is ©2015 by Stan C. Weeber. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.