nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2018‒08‒27
thirteen papers chosen by
Stan C. Weeber, McNeese State University

  1. A Mathematical Model for Optimal Decisions in a Representative Democracy By Malik Magdon-Ismail; Lirong Xia
  2. Immigrant Voters, Taxation and the Size of the Welfare State By Arnaud Chevalier; Benjamin Elsner; Andreas Lichter; Nico Pestel
  3. International Environmental Agreements - Stability with Transfers among Countries By Diamantoudi, Effrosyni; Sartzetakis, Eftichios; Strantza, Stefania
  4. How much influence does media on voting for political candidates in Kosovo? By Arbenita Sylejmani Nimani
  5. Voters sometimes provide the wrong incentives. The lesson of the Brazilian drought industry By Cavalcanti, Francisco
  6. How internal and external supervision impact the dynamics between boards and Top Management Teams and TMT reflexivity By Melanie de Waal; Floor Rink; Janka Stoker; Dennis Veltrop
  7. Fear, populism, and the geopolitical landscape: The “sleeper effect” of neurotic personality traits on regional voting behavior in the 2016 Brexit and Trump votes By Obschonka, Martin; Stuetzer, Michael; Rentfrow, Peter J.; Lee, Neil; Gosling, Samuel D.; Schmitt-Rodermund, Eva
  8. International Environmental Agreements - The Impact of Heterogeneity among Countries on Stability By Diamantoudi, Effrosyni; Sartzetakis, Eftichios; Strantza, Stefania
  9. Group Size and Political Representation Under Alternate Electoral Systems By Chaturvedi, Sugat; Das, Sabyasachi
  10. Differential Voting Right Shares in India - Legal and Valuation Perspective By Wadhwa, Manick; Wadhwa, Ankit
  11. Financial Asset Ownership and Political Partisanship: Liberty Bonds and Republican Electoral Success in the 1920s By Eric Hilt; Wendy M. Rahn
  12. Growth, Inequality, and Party Support: Valence and Positional Economic Voting By Ruth Dassonneville; Michael S. Lewis-Beck
  13. Political Cycles, Government Spending, and Efficiency of Indonesia' Local Governments By Chalil, Tengku Munawar

  1. By: Malik Magdon-Ismail; Lirong Xia
    Abstract: Direct democracy is a special case of an ensemble of classifiers, where every person (classifier) votes on every issue. This fails when the average voter competence (classifier accuracy) falls below 50%, which can happen in noisy settings where voters have only limited information, or when there are multiple topics and the average voter competence may not be high enough for some topics. Representative democracy, where voters choose representatives to vote, can be an elixir in both these situations. Representative democracy is a specific way to improve the ensemble of classifiers. We introduce a mathematical model for studying representative democracy, in particular understanding the parameters of a representative democracy that gives maximum decision making capability. Our main result states that under general and natural conditions, 1. Representative democracy can make the correct decisions simultaneously for multiple noisy issues. 2. When the cost of voting is fixed, the optimal representative democracy requires that representatives are elected from constant sized groups: the number of representatives should be linear in the number of voters. 3. When the cost and benefit of voting are both polynomial, the optimal group size is close to linear in the number of voters. This work sets the mathematical foundation for studying the quality-quantity tradeoff in a representative democracy-type ensemble (fewer highly qualified representatives versus more less qualified representatives).
    Date: 2018–07
  2. By: Arnaud Chevalier (Royal Holloway University of London and the Institute of Labor Economics); Benjamin Elsner (University College Dublin, IZA and CReAM); Andreas Lichter (IZA); Nico Pestel (IZA and ZEW Mannheim)
    Abstract: This paper studies the impact of immigration on public policy setting. As a natural experiment, we exploit the sudden arrival of eight million forced migrants in West Germany after World War II. These migrants were on average poorer than the West German population, but unlike most international migrants they had full voting rights and were eligible for social welfare. Using panel data for West German cities and applying difference-in-differences and an instrumental variables approach, we show that local governments responded to this migration shock with selective and persistent tax raises as well as shifts in spending. In response to the inflow, farm and business owners were taxed more while residential property and wage bill taxes were left unchanged. Moreover, high-inflow cities significantly raised welfare spending while reducing spending on infrastructure and housing. Election data suggest that these policy changes were partly driven by the political influence of the immigrants: in high-inflow regions, the major parties were more likely to nominate immigrants as candidates, and a pro-immigrant party received high vote shares. We further document that this episode of mass immigration had lasting effects on people’s preferences for redistribution. In areas with larger inflows in the 1940s, people have substantially higher demand for redistribution more than 50 years later.
    Date: 2018–08–06
  3. By: Diamantoudi, Effrosyni; Sartzetakis, Eftichios; Strantza, Stefania
    Abstract: The paper examines the stability of self-enforcing International Environmental Agreements (IEAs) among heterogeneous countries, allowing for transfers. We employ a two-stage, non-cooperative model of coalition formation. In the first stage each country decides whether or not to join the agreement, while in the second stage countries choose their emissions simultaneously. Coalition members agree also to share the gains from cooperation in the first stage. We use quadratic benefit and environmental damage functions and assume two types of countries differing in their sensitivity to the global pollutant. In examining the impact of transfers on the coalition size, we apply the notion of Potential Internal Stability (PIS). Results show that transfers can increase cooperation among heterogeneous countries. However, the increase in the coalition size, relative to the case without transfers, comes only from countries belonging to the type with the lower environmental damages, which are drawn into the coalition by the transfers offered. Furthermore, the level of cooperation increases with the degree of heterogeneity. However, the reduction in aggregate emissions achieved by the enlarged coalition is very small leading to dismal improvement in welfare, which confirms the "paradox of cooperation".
    Keywords: Environmental Economics and Policy
    Date: 2018–06–07
  4. By: Arbenita Sylejmani Nimani (Phd Candidate, Univesity of Tirana, Faculty of Social Science, Sociolgy)
    Abstract: The purpose of this paper is to identify how much media generally influences the voting process of political candidates during the election campaign. Also, this paper aims to see what other causes might exist that fewer women compete in politics, and why these women are not getting elected?This paper has utilizes used a combination of qualitative and quantitative methods. Qualitative method includes the analysis of the content of the newspaper?s front page, and the realization of 20 in depth interviews with journalists. While as a quantitative method a survey with questionnaires was used which were filled by 200 citizens of Pristina, Kosovo. In the last local elections held on October 22, 2017 in Kosovo, for 38 Kosovo municipalities, there were 196 men and 8 women candidates running for the local elections. But no woman managed to win the local elections. Even in the previous elections we had a woman who was voted as a mayor, but now we have none. It turns out that on the front page of newspapers men are mentioned much more than women during the election campaign. For example, the daily newspaper Koha Ditore, as the most widely read newspaper, during the election campaign; men politicians who run for mayor were quoted what they said 32 times in front page, while women who also run for mayor quoted only 2 times. Also, the other daily newspaper Zëri had cited men politicians what they promised during the election campaign 27 times while women only twice.
    Keywords: women, men, media, newspaper, election, campaign, voted.
    Date: 2018–06
  5. By: Cavalcanti, Francisco
    Abstract: Citizen assessment of government performance is a cornerstone of the successful functioning of democracy. However, accountability is a double-edged sword. When voters misunderstand the stakes and provide the wrong incentives to elected officials, political accountability leads to an implementation of suboptimal welfare policies. This paper reveals that an electorate can demand clientelism. I find evidence that after a drought, voters increase the vote share of local incumbent parties that are politically aligned with the central government to ensure the inflow of partisan government aid relief. Such behavior reinforces the central government’s incentives to bias policies in favor of politically aligned municipalities to influence elections. Consequently, the circle of distortion of aid relief allocation is perpetuated. The data cover the Brazilian democratic elections from 1998 to 2012. I use fixed effects models with panel data and a regression discontinuity design with heterogeneous treatment effects. The results resemble a long-run patronage equilibrium.
    Keywords: clientelism, voter, alignment, drought.
    JEL: D72 H84 N56 P16 Q54
    Date: 2018–03–07
  6. By: Melanie de Waal; Floor Rink; Janka Stoker; Dennis Veltrop
    Abstract: Reflexivity can prevent Top Management Teams (TMTs) from using decision biases that harm sound strategic decision making of TMTs. To ensure reflexivity, TMTs are supervised internally by supervisory boards, and externally by independent supervisory authorities, but there is theoretical debate on their respective impact. We propose that frequent internal supervision is associated with Board-TMT relationship conflict, but this relationship will be less strong when TMTs are supervised by boards with an open board composition (including newer members). When such conflict occurs it can harm TMT reflexivity, but we expect that this relationship will be less strong when external supervision increases. These hypotheses were supported in a multisource team-level data set collected in the field among TMTs (N = 111 TMT members) and their supervisory boards (N = 152 board members) of 56 insurance companies. This study advances empirical and practical knowledge on the distinct and interdependent impact of internal and external supervision on TMT reflexivity.
    Keywords: internal supervision; external supervision; relationship conflict; boardroom dynamics; reflexivity; board composition
    JEL: D74 G22 G38
    Date: 2018–08
  7. By: Obschonka, Martin; Stuetzer, Michael; Rentfrow, Peter J.; Lee, Neil; Gosling, Samuel D.; Schmitt-Rodermund, Eva
    Abstract: Two recent electoral results - Donald Trump’s election as US president and the UK’s Brexit vote - have re-ignited debate on the psychological factors underlying voting behavior. Both campaigns promoted themes of fear, lost pride, and loss aversion, which are relevant to the personality dimension of Neuroticism, a construct previously not associated with voting behavior. To that end, we investigate whether regional prevalence of neurotic personality traits (Neuroticism, Anxiety, Depression) predicted voting behavior in the US (N = 3,167,041) and the UK (N = 417,217), comparing these effects with previous models, which have emphasized the roles of Openness and Conscientiousness. Neurotic traits positively predicted share of Brexit and Trump votes and Trump gains from Romney. Many of these effects persisted in additional robustness tests controlling for regional industrial heritage, political attitude, and socio-economic features, particularly in the US. The “sleeper effect” of neurotic traits may profoundly impact the geopolitical landscape.
    Keywords: Voting; Neuroticism; Fear; Trump; Brexit; Election
    JEL: D72
    Date: 2018
  8. By: Diamantoudi, Effrosyni; Sartzetakis, Eftichios; Strantza, Stefania
    Abstract: The present paper examines the stability of self-enforcing International Environmental Agreements (IEAs) among heterogeneous countries in a twostage emission game. In the first stage each country decides whether or not to join the agreement, while in the second stage the quantity of emissions is chosen simultaneously by all countries. We use quadratic benefit and environmental damage functions and assume k types of countries that differ in their sensitivity to the global pollutant. We find that the introduction of heterogeneity does not yield larger stable coalitions. In particular, we show that, in the case of two types, when stable coalitions exist their size is very small, and, if the asymmetry is strong enough, they include only one type of countries. Moreover, heterogeneity can reduce the scope of cooperation relative to the homogeneous case. We demonstrated that introducing asymmetry into a stable, under symmetry, agreement can disturb stability.
    Keywords: Environmental Economics and Policy
    Date: 2018–07–10
  9. By: Chaturvedi, Sugat; Das, Sabyasachi
    Abstract: We examine the effect of group size of minorities on their representation in national government under majoritarian (MR) and proportional (PR) electoral systems. We first establish a robust empirical regularity using an ethnicity-country level panel data comprising 438 ethno-country minority groups across 102 democracies spanning the period 1946–2013. We show that a minority group’s population share has no relation with its absolute representation in the national executive under PR but has an inverted U-shaped relation under MR. The pattern is stable over time and robust to alternate specifications. The developmental outcomes for a group proxied using stable nightlight emissions in a group’s settlement area follow the same pattern. We reproduce the main results by two separate identification strategies—(i) instrumenting colony’s voting system by that of the primary colonial ruler and, (ii) comparing the same ethnicity across countries within a continent. We argue that existing theoretical framework with a two group set up is not able to explain this pattern. Our proposed model incorporates the spatial distribution of multiple minority groups in a probabilistic voting model and justifies these patterns as equilibrium behavior. The data further validate a critical assumption of the model and its additional comparative static results. Our work highlights that electoral systems can have important effects on power inequality across minorities, and consequently, their well-being.
    Keywords: Electoral systems, minorities, political representation, settlement patterns
    JEL: D72 D78 H11
    Date: 2018–07
  10. By: Wadhwa, Manick; Wadhwa, Ankit
    Abstract: In India, a company can only issue DVR, a.k.a. Differential Voting Rights, shares that offer fewer voting rights than ordinary shares of the same company. The holders of the equity shares with differential rights enjoy all other rights such as bonus shares, rights shares etc., which the holders of ordinary equity shares are entitled to Ideally, the movement in the two shares, i.e. ordinary share and DVR share, should mirror each other. However in India, on an average, only 63.83% of the returns of DVR shares is explained by returns of the ordinary shares. The legal environment is the key factor in explaining differences across countries and the voting premium is smaller in countries with better legal protection for minority and non-voting stockholders and larger for countries without such protection. Considering the strict corporate governance requirements for Companies to list dual-class shares in India and the various laws protecting the rights of DVR shareholders against hostility, it can be argued that the discount of 35-45% for DVR shares is a bit excessive.
    Keywords: dual class shares; dvr; india; legal; valuation; voting vs non-voting shares
    JEL: G1 G14 K22
    Date: 2018–07
  11. By: Eric Hilt; Wendy M. Rahn
    Abstract: We analyze the effects of ownership of liberty bonds, which were marketed to households during World War I, on election outcomes in the 1920s. In order to address the endogeneity of liberty bond subscriptions, we utilize the local severity of the fall 1918 influenza epidemic, which disrupted the largest liberty bond campaign, as an instrument. We find that counties with higher liberty bond ownership rates turned against the Democratic Party in the presidential elections of 1920 and 1924. This was a reaction to the depreciation of the bonds prior to the 1920 election (when the Democrats held the presidency), and the appreciation of the bonds in the early 1920s (under a Republican president), as the Fed raised and then subsequently lowered interest rates. Our results suggest the liberty bond campaigns had unintended political consequences and illustrate the potential for financial asset ownership to increase the sensitivity of ordinary households to economic policy decisions.
    JEL: N1 N2 N3 N4
    Date: 2018–06
  12. By: Ruth Dassonneville (Department of Poitical Science, University of Montréal); Michael S. Lewis-Beck (Department of political science, University of Iowa)
    Abstract: Economic growth helps governments get reelected. But does growth, as a valence issue, exhaust the possibilities for the economic vote? What about the impact of inequality, as as a positional economic issue? Can rising economic inequality make or break a government, independent of the country’s growth trajectory? We show, via an examination of 310 elections in established democracies, across time and space, that growth and inequality both matter for incumbent government support. Somewhat surprisingly, we find that both left-wing and right-wing incumbents are held accountable for changes in inequality. While these effects appear unaltered by structural factors such as federalism or the electoral system, their impact seems to depend, to some extent, on whether the country is going through economic hard times.
    Date: 2018–02
  13. By: Chalil, Tengku Munawar
    Abstract: The paper presents a test of the relationship between rational political cycles with the government spending behavior and its efficiency by using extensive data set of whole Indonesian municipalities/cities from 2008-2014. The results show that politicians/local leaders in Indonesia tend to maximize their preference during the election year but anticipate the election time through strategy to deceive voters.
    Keywords: election, political cycles, government expenditure
    JEL: D72 D78 H72 I31
    Date: 2018–07–18

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