nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2016‒09‒11
four papers chosen by
Stan C. Weeber, McNeese State University

  1. Inequality Aversion and Coalition Formation By David M. McEvoy; John K. Stranlund
  2. Less public investment due to an aging population: The constant decline in public investment over the last four decades can only partly be explained by high public debt By Jäger, Philipp
  3. The political economy of EU-funds in Poland: evidence for the period 2007-2013 By Monika Banaszewska; Ivo Bischoff
  4. Taxation of Couples: a Mirrleesian Approach for Non-Unitary Households By Lucas de Lima; Carlos da Costa

  1. By: David M. McEvoy; John K. Stranlund
    Abstract: We explore the formation of coalitions to provide a public good when some players are averse to payoff inequality between coalition members and non-members. A model is presented to demonstrate how inequality-averse preferences could cause players to deliberately block profitable but inequitable coalitions from forming, and how the likelihood of such blocks is affected by the magnitude of payoff inequality. We then empirically examine coalition formation rates using laboratory experiments. Our results show that profitable coalitions are less likely to form the bigger the gap in payoffs between members and freeriding non-members. The experimental design allows us to tease out potentially confounding effects between the level of inequality and the minimum number of players required to make the coalition profitable. As predicted, controlling for the size of the participation threshold, we find that coalition formation rates fall as the payoff gap between members and non-members is increased. Key Words: self-enforcing agreements; inequality aversion; coalitions; experiments; public goods
    Date: 2016
  2. By: Jäger, Philipp
    Abstract: Public investment, for instance in infrastructure, has been constantly decreasing for four decades. New research by RWI for 13 OECD-countries shows: this development significantly correlates with population aging. Senior citizens do not value future payoffs of infrastructure projects and other public investments as much as working-age-individuals since people's time preferences change with age. Because of their growing voting power, elderly voters exhibit an increasing influence on policy proposals of political parties. To counter these effects, politicians should consider demeny voting, where parents get additional votes for each child. Other options include user-pay-infrastructure or alternative funding sources like Public Private Partnerships.
    Date: 2016
  3. By: Monika Banaszewska (Poznan University of Economics and Business); Ivo Bischoff (University of Kassel)
    Abstract: We provide an empirical study analysing the distribution of EU funds among 2478 Polish municipalities in the period of the multiannual financial framework 2007–2013. We find EU funds to be concentrated in smaller municipalities and economically weak sub-regions. Expenditures of EU funds per capita do not decrease in the municipalities’ fiscal capacity. This indicates that co-funding restrictions imposed by the EU did not prevent fiscally weak municipalities from attracting EU funds. Our primary focus rests on the question whether regional governments use their prominent role in the allocation process for EU funds to support their own political self-interest. Difference-in-difference estimations show that the answer is affirmative: Municipalities aligned with the regional government spend more EU funds per capita than nonaligned municipalities. Furthermore, we find support for the swing-district hypothesis: EU funds per capita decrease in the vote-share differential between the two leading parties.
    Keywords: EU, Cohesion funds, Poland, local government, party alignment, swing districts, vertical grants
    JEL: D72 H77
    Date: 2016
  4. By: Lucas de Lima (Fundacao Getulio Vargas); Carlos da Costa (Fundação Getulio Vargas)
    Abstract: Can we still rely on the taxation and revelation principles to study optimal taxation if households do not behave as single agents as precribed by the unitary model? To address this question we take a collective view of households, for which choices are outcomes of Nash bargains. The mechanism plays the dual role of inducing the allocations given that spouses make joint decisions and determining through threat points the objective functions optimized by spouses. We show that the revelation principle applies, provided that one uses the appropriate defintion of a type. The same is not true for the taxation principle, which typically fails in this environment. Our findings should prove useful to other group decison problems such as group borrowing and cartel behavior for firms with economies of scope.
    Date: 2016

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