nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2018‒12‒24
seventeen papers chosen by
Stan C. Weeber, McNeese State University

  1. Special Interest Groups versus Voters and the Political Economics of Attention By Balles, Patrick; Matter, Ulrich; Stutzer, Alois
  2. Globalization and Electoral Outcomes: Evidence from Italy By Mauro Caselli; Andrea Fracasso; Silvio Traverso
  3. Equitable Voting Rules By Bartholdi, Laurent; Hann-Caruthers, Wade; Josyula, Maya; Tamuz, Omer; Yariv, Leeat
  4. Political Awareness, Microtargeting of Voters, and Negative Electoral Campaigning By Burkhard Schipper; Hee Yeul Woo
  5. Anti-social Behavior in Groups By Želinský, Tomáš; Bauer, Michal; Cahlíková, Jana; Celik-Katreniak, Dagmara; Chytilova, Julie; Cingl, Lubomír
  6. Bayesian Forecasting of Electoral Outcomes with new Parties' Competition By José García-Montalvo; Omiros Papaspiliopoulos; Timothée Stumpf-Fétizon
  7. Who is NOT Voting for Brexit Anymore? By Eleonora Alabrese; Thiemo Fetzer
  8. Long-lasting social capital and its impact on economic development: the legacy of the commons By Daniel Montolio; Ana Tur-Prats
  9. Killing social leaders for territorial control: the unintended consequences of peace By Mounu Prem; Andrés Rivera; Darío Romero; Juan F. Vargas
  10. Biased Policy Professionals By DERCON, Stefan; BANURI, Sheheryar; GAURI, Varun
  11. The Geography of Repression and Support for Democracy: Evidence from the Pinochet Dictatorship By María Angelica Bautista; Felipe González; Luis R. Martínez; Pablo Muñoz; Mounu Prem
  12. Is Nepotism Inevitable Under Search and Matching Friction? By Mazumder, Debojyoti; Biswas, Rajit
  13. The Benchmark Inclusion Subsidy By Kashyap, Anil K; Kovrijnykh, Natalia; Li, Jian; Pavlova, Anna
  14. Regional Resources and Democratic Secessionism By Kai Gehring; Stephan A. Schneider
  15. The Costs and Benefits of Shareholder Democracy By Gantchev, Nickolay; Giannetti, Mariassunta
  16. Strikes, Employee Workplace Representation, Unionism, and Industrial Relations Quality in European Establishments By John T. Addison; Paulino Teixeira
  17. “Trust in times of economic crisis in Spain: Paradoxes for social capital theory” By Catalina Bolancé; Jordi Caïs; Diego Torrente

  1. By: Balles, Patrick (University of Basel); Matter, Ulrich (University of Basel); Stutzer, Alois (University of Basel)
    Abstract: Asymmetric information between voters and legislative representatives poses a major challenge to the functioning of representative democracy. We examine whether representatives are more likely to serve long-term campaign donors instead of constituents during times of low media attention to politics. Combining data on campaign finance donations made by individuals and special interest groups with information on their preferences for particular bills, we construct novel measures of electoral and organized interests pressure that representatives face with regard to specific legislative votes. In our analysis based on 490 roll calls between 2005 and 2014 in the US House of Representatives, we find strong evidence that representatives are more likely to vote with special interests and against constituency interests when the two are in conflict. Importantly, the latter effect is significantly larger when there is less attention on politics. Thereby, we draw on exogenous newsworthy shock events that crowd out news on the legislative process, but are themselves not related to it. The opportunistic behavior seems not to be mediated by short-term scheduling of sensitive votes right after distracting events.
    Keywords: attention, campaign finance, interest groups, legislative voting, mass media, media attention, roll call voting, US House of Representatives
    JEL: D72 L82 L86
    Date: 2018–11
  2. By: Mauro Caselli; Andrea Fracasso; Silvio Traverso
    Abstract: We study whether and to what extent the electoral dynamics in Italy over the 1994-2008 period can be explained by the development of economic factors associ- ated with globalization. To measure the level of exposure to globalization for local labor markets, our main unit of analysis, we use the intensity of import compe- tition from China and the presence of immigrants. Looking at parties’ political positions and employing an estimation strategy that accounts for endogeneity and time-invariant unobserved e↵ects across local labor markets, we find that both immigration intensity and exposure to import competition from China have con- tributed positively to the electoral outcomes of far-right parties, whereas only the former has produced a positive e↵ect on the votes of right-wing and traditional- ist/authoritarian/nationalist parties. On the other hand, neither of them has had an e↵ect on far-left parties. Moreover, electoral turnout has responded negatively to an increased presence of migrants. While the above e↵ects seem to work through the mediation of labor markets, the results suggest that other mechanisms at the level of local communities are also at play.
    Keywords: voting, electoral outcomes, trade, import competition, immigration, local labor markets
    JEL: D72 F14
    Date: 2018
  3. By: Bartholdi, Laurent; Hann-Caruthers, Wade; Josyula, Maya; Tamuz, Omer; Yariv, Leeat
    Abstract: A celebrated result in social choice is May's Theorem (May, 1952), providing the foundation for majority rule. May's crucial assumption of symmetry, often thought of as a procedural equity requirement, is violated by many choice procedures that grant voters identical roles. We show that a modification of May's symmetry assumption allows for a far richer set of rules that still treat voters equally, but have minimal winning coalitions comprising a vanishing fraction of the population. We conclude that procedural fairness can coexist with the empowerment of a small minority of individuals. Methodologically, we introduce techniques from discrete mathematics and illustrate their usefulness for the analysis of social choice questions.
    Keywords: equity; Finite Groups; May's Theorem; Social Choice; Voting rules
    JEL: C60 D71 D72
    Date: 2018–11
  4. By: Burkhard Schipper; Hee Yeul Woo (Department of Economics, University of California Davis)
    Abstract: We study the informational effectiveness of electoral campaigns. Voters may not think about all political issues and have incomplete information with regard to political positions of candidates. Nevertheless, we show that if candidates are allowed to microtarget voters with messages then election outcomes are as if voters have full awareness of political issues and complete information about candidate's political positions. Political competition is paramount for overcoming the voter's limited awareness of political issues but unnecessary for overcoming just uncertainty about candidates' political positions. Our positive results break down if microtargeting is not allowed or voters lack political reasoning abilities. Yet, in such cases, negative campaigning comes to rescue.
    Keywords: Electoral competition, campaign advertising, multidimensional policy space, microtargeting, dog-whistle politics, negative campaigning, persuasion games, unawareness
    JEL: C72 D72 D82 P16
    Date: 2017–05–01
  5. By: Želinský, Tomáš; Bauer, Michal; Cahlíková, Jana; Celik-Katreniak, Dagmara; Chytilova, Julie; Cingl, Lubomír
    Abstract: This paper provides strong evidence supporting the long-standing speculation that decision-making in groups has a dark side, by magnifying the prevalence of anti-social behavior towards outsiders. A large-scale experiment implemented in Slovakia and Uganda (N=2,309) reveals that deciding in a group with randomly assigned peers increases the prevalence of anti-social behavior that reduces everyone's but which improves the relative position of own group. The effects are driven by the influence of a group context on individual behavior, rather than by group deliberation. The observed patterns are strikingly similar on both continents.
    JEL: C92 C93 D01 D64 D74 D91
    Date: 2018–11
  6. By: José García-Montalvo; Omiros Papaspiliopoulos; Timothée Stumpf-Fétizon
    Abstract: We propose a new methodology for predicting electoral results that combines a fundamental model and national polls within an evidence synthesis framework. Although novel, the methodology builds upon basic statistical structures, largely modern analysis of variance type models, and it is carried out in open-source software. The methodology is largely motivated by the specific challenges of forecasting elections with the participation of new political parties, which is becoming increasingly common in the post-2008 European panorama. Our methodology is also particularly useful for the allocation of parliamentary seats, since the vast majority of available opinion polls predict at the national level whereas seats are allocated at local level. We illustrate the advantages of our approach relative to recent competing approaches using the 2015 Spanish Congressional Election. In general, the predictions of our model outperform the alternative specifications, including hybrid models that combine fundamental and polls' models. Our forecasts are, in relative terms, particularly accurate to predict the seats obtained by each political party.
    Keywords: multilevel model, Bayesian machine learning, inverse regression, evidence synthesis, elections
    JEL: C11 C53 C63 D72
    Date: 2018–12
  7. By: Eleonora Alabrese; Thiemo Fetzer
    Abstract: Using estimates of support for Leave across UK local authority areas constructed from a comprehensive 20,000 strong survey, we show that both the level and the geographic variation capturing differential degrees of support for Leave have changed significantly since the 2016 EU referendum. A lot of area characteristics, many of which were previously associated with higher levels of support for Leave, are now significant correlates capturing a swing towards Remain. They include, for example, the degree to which local authorities receive transfers from the EU or the extent to which their economies rely on trade with the EU, along with past electoral support for UKIP (and the BNP) and exposure to immigration from Eastern Europe. Lastly, exposure to austerity since 2010 is among the strongest individual correlates weakening the support for Leave. The evidence is consistent with the argument that the small margin of victory of Leave in 2016 was, to a significant extent, carried by protest voters, who used the EU referendum to voice their discontent with domestic social and economic developments, particularly, austerity. Lastly, we present some evidence suggesting that the UK public, even in Leave supporting areas, would be much more willing to make compromises on free movement and aspects of single market membership compared to what appears to be the UK governments negotiation objective.
    Keywords: Brexit, protest voting, globalization, European Union
    JEL: D72 F50 H30 H50
    Date: 2018
  8. By: Daniel Montolio (Universitat de Barcelona & Institut d'Economia de Barcelona (IEB)); Ana Tur-Prats (University of California, Merced)
    Abstract: This paper analyzes the historical determinants and long-term persistence of social capital, as well as its effect on economic development, by looking at the legacy of the commons in a Spanish region. In medieval times, common goods were granted to townships and were managed collectively by local citizens. This enabled the establishment of institutions for collective action and self-government. Common goods persisted until the second half of the nineteenth century. We argue that the experience of cooperation among villagers, repeated over the centuries, increased the social capital in each local community. In 1845, a law forced small villages to merge with others, a fact which generated exogenous variation in the number of mergers (i.e., cooperative networks) that each modern municipality was required to have. We exploit this change in an IV and RD setting and find that current municipalities formed by a greater number of old townships have a denser network of associations. We also find that higher social capital is associated with more economic development.
    Keywords: Collective Action, Self-Government, Long-Term Persistence, Common Goods
    JEL: N90 P48 Z10 H49
    Date: 2018
  9. By: Mounu Prem; Andrés Rivera; Darío Romero; Juan F. Vargas
    Abstract: Incomplete peace agreements may inadvertently increase insecurity if they trigger violent territorial contestation. We study the unintended consequences of the Colombian peace process and find that the permanent ceasefire declared by the FARC insurgency during peace negotiations with the government triggered a surge in the targeting of local community leaders. Leaders were killed by armed groups excluded from the peace process to thwart collective action and civilian mobilization, thus consolidating their dominance in formerly FARC-controlled areas. These results are exacerbated in places with judicial inefficiency and where peasants dispossessed during the conflict have started administrative process to reclaim their land.
    Keywords: Social leaders, Peace process, Armed conflict, Territorial control
    JEL: D72 D74
    Date: 2018–12–13
  10. By: DERCON, Stefan; BANURI, Sheheryar; GAURI, Varun
    Abstract: Although the decisions of policy professionals are often more consequential than those of individuals in their private capacity, there is a dearth of studies on the biases of policy professionals: those who prepare and implement policy on behalf of elected politicians. Experiments conducted on a novel subject pool of development policy professionals (public servants of the World Bank and the Department for International Development in the UK) show that policy professionals are indeed subject to decision making traps, including the effects of framing outcomes as losses or gains, and most strikingly, confirmation bias driven by ideological predisposition, despite having an explicit mission to promote evidence-informed and impartial decision making. These findings should worry policy professionals and their principals in governments and large organizations, as well as citizens themselves. A further experiment, in which policy professionals engage in discussion, shows that deliberation may be able to mitigate the effects of some of these biases.
    Keywords: Biases, deision making, policy professionals, framing, confirmation bias, behavioural economics
    JEL: C90 H83 Z18
    Date: 2018–12
  11. By: María Angelica Bautista; Felipe González; Luis R. Martínez; Pablo Muñoz; Mounu Prem
    Abstract: We show that exposure to repression under dictatorship increases support for democracy and contributes to regime change when a democratic window of opportunity arises. Studying the military dictatorship of Augusto Pinochet in Chile, we exploit the fact that the predetermined location of military bases predicts local levels of civilian victimization, but is unrelated to historical political preferences. Using two-stage least squares, we show that increased exposure to repression during the dictatorship led to higher voter registration and higher opposition to Pinochet’s continuation in power in the 1988 plebiscite that triggered the democratic transition. Complementary survey data confirms that individuals with greater exposure to repression during the military regime continue to have stronger preferences for democracy. However, exposure to repression does not affect election outcomes after democratization.
    Keywords: Chile; Human rights; Repression; Dictatorship; Democratization; Elections; Derechos humanos; Represión; Dictadura; Democratización; Elecciones
    JEL: D72 N46
    Date: 2018–12
  12. By: Mazumder, Debojyoti; Biswas, Rajit
    Abstract: The present article develops a search and matching framework to model political nepotism in the job market. The model argues that labor market friction generates incentives for the political leaders to provide nepotism under a democratic set up. Both the leaders optimally choose nepotism when the labor market friction is higher. It is shown that even for a relatively lesser labor market friction at least one leader would always choose nepotism. The results of the basic model remain robust in an extension where followers can pay a price and choose their allegiance, to any one of the political parties.
    Keywords: search and matching, nepotism, political regime change
    JEL: D72 J64 J71
    Date: 2018–11–02
  13. By: Kashyap, Anil K; Kovrijnykh, Natalia; Li, Jian; Pavlova, Anna
    Abstract: We study the impact of evaluating the performance of asset managers relative to a benchmark portfolio on firms' investment, merger and IPO decisions. We introduce asset managers into an otherwise standard asset pricing model and show that firms that are part of the benchmark are effectively subsidized by the asset managers. This "benchmark inclusion subsidy" arises because asset managers have incentives to hold some of the equity of firms in the benchmark regardless of the risk characteristics of these firms. Contrary to what is usually taught in corporate finance, we show that the value of an investment project is not governed solely by its own cash-flow risk. Instead, because of the benchmark inclusion subsidy, a firm inside the benchmark would accept some projects that an identical one outside the benchmark would decline. The two types of firms' incentives to undertake mergers or spinoffs also differ and the presence of the subsidy can alter a decision to take a firm public. We show that the higher the cash-flow risk of an investment, the larger the benchmark inclusion subsidy; the subsidy is zero for safe projects. Benchmarking also leads fundamental firm-level cash-flow correlations to rise. We review a host of empirical evidence that is consistent with the implications of the model.
    Keywords: asset management; Benchmark; Index; investment; mergers; Project Valuation
    JEL: G11 G12 G23 G32 G34
    Date: 2018–12
  14. By: Kai Gehring; Stephan A. Schneider
    Abstract: Although regional resources have been shown to influence secessionist conflicts in developing countries, their effect in established democracies has largely been neglected. We integrate regional resource value and inter-regional transfers in a model on the optimal size of nations, and show that regional wealth correlates positively with secessionist party success in a large panel of regions. To establish causality, our difference-in-differences and triple-differences designs exploit that Scotland and Wales both feature separatist parties, but only an independent Scotland would profit from oil discoveries off its coast. We document an economically and statistically significant positive effect of regional resources and rule out plausible alternative explanations.
    Keywords: fiscal federalism, inter-regional transfers, redistribution, secession, separatism, size of nations, resources, economic voting
    JEL: D70 H77 N90
    Date: 2018
  15. By: Gantchev, Nickolay; Giannetti, Mariassunta
    Abstract: We show that while low-cost shareholder activism via shareholder-sponsored proposals is occasionally value-enhancing, many proposals are submitted by the same few individual investors and other sponsors without organizational capabilities to analyze a large number of firms. These proposals if approved and subsequently implemented appear to destroy shareholder value. We show that firms whose shareholders are more likely to collect information before voting benefit from low-cost shareholder activism because these investors weed out low-quality proposals. We conclude that an informed shareholder base is crucial for firms to take advantage of low-cost shareholder activism.
    Keywords: corporate governance; Shareholder activism; Shareholder proposals; shareholder voting
    JEL: D72 G3
    Date: 2018–12
  16. By: John T. Addison; Paulino Teixeira
    Abstract: Using cross-country data, this paper investigates the relationship between workplace representation and strikes. Works councils are associated with reduced strike activity. However, where union members make up a majority of works councillors, such union-dominated councils experience greater strike activity than do their counterparts with minority union membership, and also more strikes than establishments with union workplace representation where union members are in a minority. Dissonance between the parties as to the state of industrial relations is associated with elevated strike activity. Finally, union density at the workplace, if not the presence of collective bargaining, is directly associated with strike incidence.
    Keywords: works councils, employee representation, union density, level of collective bargaining, industrial relations quality/dissonance, strike incidence, strike duration, strike frequency, strike intensity
    JEL: J51 J52 J53 J83
    Date: 2018
  17. By: Catalina Bolancé (Department of Econometrics, Riskcenter-IREA, University of Barcelona, Avinguda Diagonal 690, 08034 Barcelona, Spain.); Jordi Caïs (Departament de Sociologia i Anàlisi de les Organitzacions); Diego Torrente (Department of Sociology, Faculty of Economics and Business Diagonal Avenue 696 08034 Barcelona.)
    Abstract: The theory of social capital suggests that trust in other individuals (social trust) and trust in institutions are closely related phenomena. People who trust more in other individuals also trust more in institutions, and vice versa. Some scholars argue that trust generates a climate of social cooperation and a sense of collaboration, which in turn promotes interest and participation in institutions. Despite the fact that both social trust and trust in institutions tend to decline when socioeconomic conditions worsen, the theory of social capital rarely takes economic variables into account. The economic crisis in Spain resulted in a paradox: a notable decline in trust in institutions, together with a surprising increase – rather than the expected decrease – in social trust. In this article we analyse the impact of a number of variables on social trust and trust in institutions before and during the economic crisis in Spain. The results confirm that economic factors had greater explanatory power for both types of trust during times of economic crisis, due mainly to increased inequality. However, the classic variables of the theory of social capital, such as how people view democracy or the extent of civic participation, continued to be significant. The data analysed here also highlight the possibility that the two types of trust did not track in a mutually supportive manner due to the emergence of the Movimiento 15M (“15M Movement”), which gave rise to the appearance of new political parties such as Podemos (“We Can”), on the extreme left of the electoral scale.
    Keywords: Social trust, trust in institutions, economic crisis, political movements, social capital, Spain. JEL classification:H12, I31, D73
    Date: 2018–12

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