nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2018‒10‒22
thirteen papers chosen by
Stan C. Weeber
McNeese State University

  1. Policy Experimentation, Redistribution and Voting Rules By Renee Bowen; Vincent Anesi
  2. Inequality and Extremist Voting: Evidence from Germany By Dorn, Florian; Fuest, Clemens; Immel, Lea; Neumeier, Florian
  3. Better Regulation: Holding Martin Selmayr Accountable By Alemanno, Alberto
  4. Climate Resilience Pathways of Rural Households. Evidence from Ethiopia By Solomon Asfaw; Giuseppe Maggio; Alessandro Palma
  5. Evolutionary Models of Preference Formation By Alger, Ingela; Weibull, Jörgen W.
  6. Renewal of water-related infrastructure and user\'s contribution: a few benchmarks By Epiphane Assouan; Tina Rambonilaza; Bénédicte Rulleau
  7. Dissolution Power, Confidence Votes, and Policymaking in Parliamentary Democracies By Becher, Michael
  8. The Role of Ownership and Governance Mechanism in Sukuk Financing by Malaysian Firms: An Application of A Double Selection Model By Ashraf, Dawood; Rizwan, Muhammad Suhail; Azmat, Saad
  9. Who Uses Commercial Lobbying Firms By Eric Richert; Brittany Feor; Blair Long
  10. Analysis of Individual Renewable Energy Support: An Enhanced Model By Vladimir Udalov
  11. Attribution biases in Leadership: Is it effort or luck ? By Nisvan Erkal; Lata Gangadharan; Boon Han Koh
  12. The impact of international immigration and cultural diversity on economic performance, public attitudes and political outcomes in European regions By Chasapopoulos, Panagiotis
  13. Talking Behind Your Back: Asymmetric Communication in a Three-person Dilemma By Klaus Abbink; Lu Dong; Lingbo Hugang

  1. By: Renee Bowen; Vincent Anesi
    Abstract: We study optimal policy experimentation by a committee. We consider a dynamic bargaining game in which committee members choose either a risky reform or a safe alternative each period. When no redistribution is allowed the unique equilibrium outcome is generically inefficient. When redistribution is allowed (even small amounts), there always exists an equilibrium that supports optimal experimentation for any voting rule without veto players. With veto players, however, optimal policy experimentation is possible only with a sufficient amount of redistribution. We conclude that veto rights are more of an obstacle to optimal policy experimentation than constraints on redistribution.
    JEL: C73 C78 D61 D78 H61
    Date: 2018–09
  2. By: Dorn, Florian; Fuest, Clemens; Immel, Lea; Neumeier, Florian
    Abstract: This paper studies the impact of economic inequality on political polarization. Using a unique dataset covering different measures of regional income inequality as well as federal and state election outcomes at the county level in Germany, we investigate whether inequality influences the share of votes for right-wing and left-wing extremist parties using instrumental variable estimation. Our results suggest that an increase in income inequality has a sizeable influence on the support for extremist parties. The poorer a county is compared to the national average, the higher is the share of votes both nationalist and leftist parties receive. Our findings thus indicate that the rise in economic inequality may be a threat to political stability.
    Keywords: Inequality,political polarization,extremist voting,Germany
    JEL: C26 D31 D63 D72 R1 C26 D31 D63 D72 R1
    Date: 2018
  3. By: Alemanno, Alberto (HEC Paris - Tax & Law)
    Abstract: This time was supposed 'to be different', at least this was the motto of the 2014 European Parliament elections campaign. With less than a year before the next European elections, the time is ripe to examine how different this EU political cycle has actually been. Emboldened by the Spitzenkandidaten process – which established for the first time a link between the outcome of the EU elections and the presidency of the EU Commission –, the Juncker Commission emerged as the most political yet. To shrug off the label of technocratic institution – historically insulated from citizens’ preferences –, the new Commission asked EU citizens to judge its operation by its ability ‘to deliver solutions to the big issues that cannot be addressed by the Member States alone’. While the Better Regulation Agenda might have improved the Commission’s public accountability – with both citizens and stakeholders being better informed about and engaged with EU policy-making –, without however increasing its responsiveness to public preferences. This is the case at the input, throughput and output stage. Rather, the techno-political approach to policymaking – which characterizes the Juncker’s Better Regulation – might have paradoxically led to a compression of participatory democracy and somehow chilled stakeholder engagement. At a time of unprecedented contestation of the EU project – a trend which is combined by a record-demand for new forms of political representation –, it appears paradoxical that the EU – an early promoter of participation – is missing out the chance to seize the momentum to diversify and redesign its participatory structures being busy delivering on its electoral promises no one will ever judge.At the very same time the Juncker Commission has been striving to develop its own, autonomous democratic credentials, its choice to embrace a set of well-defined institutional mechanisms that reward expert judgment over political adjudication appears at odds with its newly-acquired political nature.
    Keywords: Better Regulation Agenda; Juncker Commission
    JEL: K33
    Date: 2018–09–11
  4. By: Solomon Asfaw (Green Climate Fund (GCF), South Korea); Giuseppe Maggio (University of Sussex); Alessandro Palma (CEIS - University of Rome Tor Vergata, Roma, Italy; IEFE - Bocconi University, Milan, Italy)
    Abstract: This paper explores the resilience capacity of rural Ethiopian households after the drought shock occurred in 2011. The work develops an original empirical framework able to capture the policy and socio-economic determinants of households’ resilience capacity by making parametric statistical assumption on the resilience distribution. To this end, the analysis employs a two-wave representative panel dataset aligned with detailed weather records while controlling for a large set of household- and community-level characteristics. The analysis shows that the majority of these factors affects significantly resilience capacity only in the group of households affected by the drought shock, suggesting that the observed effect relates to the adaptive capacity enabled by these factors, rather than a simple welfare effect. Three policy indications emerge from the findings of the empirical model. First, government support programmes, such as the PSNP, appear to sustain households’ resilience by helping them to reach the level of pre-shock total consumption, but have no impact on the food-consumption resilience. Secondly, the “selling out assets strategy” affects positively on households’ resilience, but only in terms of food consumption. Finally, the presence of informal institutions, such as social networks providing financial support, sharply increases households’ resilience by helping them to reach pre-shock levels of food and total consumption. Policies incentivizing the formation of these networks, through the participation of households to agricultural cooperative, agricultural associations, or community projects, may also help farmers in recovering their wealth level after a weather shock.
    Keywords: resilience, adaptation, livelihood strategy, food security, climate change, Ethiopia, drought.
    JEL: Q12 Q18 I32 C13
    Date: 2018–10
  5. By: Alger, Ingela; Weibull, Jörgen W.
    Abstract: The literature on the evolution of preferences of individuals in strategic interactions is vast and diverse. We organize the discussion around the following question: Supposing that material outcomes drive evolutionary success, under what circumstances does evolution promote Homo oeconomicus, defined as material self-interest, and when does it instead lead to other preferences? The literature suggests that Homo oeconomicus is favored by evolution only when individuals' preferences are their private information and the population is large and well-mixed so that individuals with rare mutant preferences almost never get to interact with each other. If rare mutants instead interact more often (say, due to local dispersion), evolution instead favors a certain generalization of Homo oeconomicus including a Kantian concern. If individuals interact under complete information about preferences, evolution destabilizes Homo oeconomicus in virtually all games.
    JEL: C73 D01 D03
    Date: 2018–09
  6. By: Epiphane Assouan; Tina Rambonilaza; Bénédicte Rulleau
    Abstract: This paper studies the contribution required from the users of collective drinking water networks to finance asset management of infrastructures. We characterize the first-best optimum and we compare it to the social optimum in the presence of preferences heterogeneity, in order to take into account the uses of alternative techniques for certain household needs. These alternatives uses generate negative externalities for the good functioning of the water networks. The first-best optimum thus requires a transfer from the exclusive users of the collective network to the users of the alternatives. Furthermore, Nash equilibrium reveals that the existence of this transfer requires other motivations than the only usage values. Finally, the case of water infrastructure asset management emphasizes how an essential part of inequality that can be associated with it can be attributed to preferences heterogeneity.
    Keywords: water services ; willigness to pay ; pur public good ; game theory
    JEL: C72 H41 H54 Q25
    Date: 2018
  7. By: Becher, Michael
    Abstract: There is striking variation across parliamentary democracies in the power of prime ministers to employ two prominent procedures to resolve legislative conflict: the vote of confidence and the dissolution of parliament. While previous contributions in comparative politics have investigated each of these two fundamental institutions in isolation, I develop a simple unified model to unbundle how this richer variety of institutional configurations shapes political bargaining over policy. The analysis clarifies that the effects of the confidence vote and dissolution power interact. As a consequence, there can be a non-monotonic effect of increasing prime ministers’ formal power on their ability to shape the policy compromise. Counterintuitively, introducing dissolution power makes the prime minister worse off under some conditions. These results suggest new directions for empirical research on the consequences of parliamentary institutions for legislative politics and policy. They also lay analytical foundations for explaining institutional variation and reforms.
    JEL: D72
    Date: 2018–05
  8. By: Ashraf, Dawood (The Islamic Research and Teaching Institute (IRTI)); Rizwan, Muhammad Suhail (NUST Business School, National University of Sciences and Technology, Islamabad, Pakistan); Azmat, Saad (Lahore University of Management Sciences Lahore, Pakistan)
    Abstract: After controlling for the double selection bias in a sequential three-equation model of the decisions to issuance, to choose a Sukuk structure, and the volume of Sukuk engagements, we find robust evidence suggesting that ownership structure and governance mechanisms play a significant role in controlling agency costs through issuance of Sukuk. In line with monitoring hypothesis, we find that higher government ownership positively influences the decisions to participate, issue a debt-like Sukuk and volume thereof. Similarly, in line with complementarity hypothesis, the empirical evidence suggests that firms with higher board of directors’ independence are more likely to participate in issuing Sukuk with higher volumes. We also find that ethnicity, in the form of a higher proportion of Malay/Muslim members on the board of directors, does not influence the initial decision on whether or not to issue Sukuk. However, once the decision to issue Sukuk is made, firms with higher institutional ownership or a higher proportion of Malay/Muslim board members are more likely to issue equity-like Sukuk
    Keywords: ukuk Financing; Ownership Structure; Governance Mechanisms; Double Selection Models
    JEL: F40 G21 G29
    Date: 2018–05–14
  9. By: Eric Richert (Queen's University); Brittany Feor (Queen's University); Blair Long (Queen's University)
    Abstract: This paper explains the type of interest groups that use commercial lobbyists and the types of groups that lobby directly or are excluded from access to politicians. The main results provide evidence that commercial lobbying and donations by these firms to politicians can improve policy outcomes by increasing the number of groups that the politician can trust. Special interest groups come up with policy proposals that may be good or bad for society. They also get a benefit of having their idea implemented regardless of its overall social benefit so cannot be trusted to present their policy only when it is good for society. We show that repeated interaction with a policy maker can incentivize truthful communication. Therefore, interest groups working on highly salient issues or who work on issues with mostly high social benefits, can lobby alone, while interest groups who work on less salient issues or are less reputable need to use a commercial lobbyist to be trusted by the politician. Finally, firms of the lowest quality or salience are excluded from influencing the policy maker.
    Keywords: Commercial Lobbying, Political Access, Strategic Communication, Repeated Contracts
    JEL: D72 D83 H11 P16
    Date: 2018–10
  10. By: Vladimir Udalov (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: This paper investigates an intergenerational conflict arising from renewable energy support. Using a politico-economic overlapping generations (OLG) model, it can be shown that older individuals unambiguously lose from renewable energy support and therefore vote to keep it at a minimum level. In contrast, younger individuals face ambiguous effects arising from renewable energy support. In the short run, they also lose from a negative consumption effect. In the long run, however, younger individuals benefit from a positive environmental effect. Renewable energy support also generates both positive and negative effects on consumption. The voting outcome is determined through a political process, whereby political parties converge to platforms that maximize the aggregate welfare of the electorate. Zusammenfassung: Dieses Papier untersucht einen Generationenkonflikt, der aufgrund der Förderung erneuerbarer Energien entsteht. Unter Verwendung eines einfachen polit-ökonomischen Modells sich überlappender Generationen kann gezeigt werden, dass die älteren Individuen durch die Förderung erneuerbarer Energien eindeutig schlechter gestellt werden und deshalb für ein minimales Niveau der Förderung stimmen. Im Gegensatz dazu sind die jungen Individuen mit einem nicht eindeutigen Effekt konfrontiert. In der kurzen Frist werden sie durch die Förderung erneuerbarer Energien genauso wie die älteren Individuen schlechter gestellt werden. Allerdings profitieren sie in der langen Frist von einem positiven Umwelteffekt und stehen unter bestimmten Bedingungen auch einem positiven Konsumeffekt gegenüber. Aus diesem Grund wählen sie ein höheres Niveau der Förderung. Das Abstimmungsergebnis wird im Rahmen eines politischen Prozesses bestimmt, wobei die politischen Parteien zu einer Plattform konvergieren, die aggregierte Wohlfahrt der Wählerschaft maximiert.
    Keywords: overlapping generations, generational conflict, environmental policy, renewable energy, voting
    JEL: Q54 Q29 D60 D90 H23 D72
    Date: 2018–06
  11. By: Nisvan Erkal (Department of Economics, The University of Melbourne); Lata Gangadharan (Department of Economics, Monash University); Boon Han Koh (Department of Economics, The University of Melbourne)
    Abstract: Leaders often make decisions under risk and uncertainty. Using a controlled laboratory experiment motivated by a simple theoretical framework, we investigate group members' biases in the attribution of their leaders' outcomes in an environment where only outcomes are observable. We find that group members' expectations about the leader's type are shaped by the leadership appointment mechanism. Moreover, upon observing the outcomes of their leaders' decisions, members attribute good outcomes more to luck and place too little weight on their prior beliefs in their updating behavior. Importantly, we find that the biases tend to be driven by those subjects who choose low effort as leaders.
    Keywords: Leadership; Decision-making under risk; Beliefs about others' actions;
    JEL: C92 D91 D81
    Date: 2018–08
  12. By: Chasapopoulos, Panagiotis (Tilburg University, School of Economics and Management)
    Abstract: The dissertation consists of three empirical studies in the field of International Immigration. The first chapter examines whether the effect of cultural diversity on economic performance of European regions is influenced by the level of generalized social trust and individuals’ trust in public institutions. The second chapter investigates how the origin and the skill level of immigrants in European regions affect natives’ attitudes toward them. The last chapter examines the impact of international immigration on electoral support for the radical right in Dutch municipalities.
    Date: 2018
  13. By: Klaus Abbink (Department of Economics, Monash University); Lu Dong (Nanjing Audit University); Lingbo Hugang (Nanjing Audit University)
    Abstract: Communication has been regarded as one of the most effective devices in promoting team cooperation. But asymmetric communication sometimes breeds collusion and is detrimental to team efficiency. Here, we present experimental evidence showing that excluding one member from team communication hurts team cooperation: the communicating partners collude in profit allocation against the excluded team member, and the latter reacts by refraining from exerting effort. We further show that allowing the partners to reach out to the excluded member helps to restore cooperation and fairness in profit allocation. But it does not stop the partners from talking behind the other member. They sometimes game the system by tricking the excluded member to contribute but then grabbing all profits for themselves.
    Keywords: communication, fairness, collusion, allocation, team cooperation, laboratory experiment
    Date: 2018–11

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