nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2019‒03‒18
fourteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Senegal: Presidential elections 2019 - The shining example of democratic transition immersed in muddy power-politics By Kohnert, Dirk; Marfaing, Laurence
  2. Globalization and Protectionism: AMLO’s 2006 Presidential Run By Sebastian Bustos; Jose Ramon Morales Arilla
  3. Coalition Formation in Legislative Bargaining By Marco Battaglini
  4. How should the EU and other WTO members react to their WTO governance and WTO Appellate Body crises? By Ernst-Ulrich Petersmann
  5. Is there a selection bias in roll call votes? Evidence from the European Parliament By Hix, Simon; Noury, Abdul; Roland, Gerard
  6. Sharing Rules in Heterogeneous Partnerships: An Experiment By Hélia Marreiros
  7. A prospect-theory model of voter turnout By Oliver Herrmann; Richard Jong-A-Pin; Lambert Schoonbeek
  8. Nudging cooperation By Barron, Kai; Nurminen, Tuomas
  9. The Political Economy of Higher Education Finance: How Information and Design Affect Public Preferences for Tuition By Lergetporer, Philipp; Woessmann, Ludger
  10. Haggling on Values: Towards Consensus or Trouble By Victorien Barbet; Noé Guiraud; Vincent Laperrière; Juliette Rouchier
  11. Foreign in influence and domestic policy: A survey By Toke S. Aidt, Facundo Albornoz, Esther Hauk; Facundo Albornoz; Esther Hauk
  12. Designing organizations in volatile markets By Shuo Liu; Dimitri Migrow
  13. The foreign direct investment-institution nexus in oil-abundant countries By Federico Carril-Caccia; Juliette Milgram Baleix; Jordi Paniagua
  14. Uncertainty in cooperative interval games: How Hurwicz criterion compatibility leads to egalitarianism By Mallozzi, Lina; Vidal-Puga, Juan

  1. By: Kohnert, Dirk; Marfaing, Laurence
    Abstract: Whereas Senegal has long been sold as a showcase of democracy in Africa, including peaceful political alternance, things apparently changed fundamentally with the Senegalese presidentials of 2019 that brought new configurations. One of the major issues was political transhumance that has been elevated to the rank of religion in defiance of morality. It threatened political stability and peace. In response, social networks of predominantly young activists, created in 2011 in the aftermath of the Arab Spring focused on grass-roots advocacy with the electorate on good governance and democracy. They proposed a break with a political system that they consider as neo-colonialist. Moreover, Senegal’s justice is frequently accused to be biased, and the servility of the Constitutional Council which is in the first place an electoral court has often been denounced.
    Keywords: Senegal,presidential elections,governance,political change, political transhumance,social networks,West Africa,WAEMU, ECOWAS , civic agency
    JEL: D72 D74 F54 N17 N37 N97 O17 P16 Z13
    Date: 2019–03–12
  2. By: Sebastian Bustos (Center for International Development at Harvard University); Jose Ramon Morales Arilla (Center for International Development at Harvard University)
    Abstract: We study the effects of local tariff drops for Mexican exports to the US on the local electoral perfor- mance of Andrés Manuel López Obrador (AMLO) in Mexico’s 2006 presidential election. In an effort to appeal to his rural base, AMLO proposed to unilaterally retain tariff exemptions on imported corn and beans, which were scheduled to drop under NAFTA by the end of 2008. This elevated protectionism in the public agenda during the campaign. We find that local economic gains due to export tariff drops under NAFTA between 1994 and 2001 led to a drop in AMLO’s local vote share gains in 2006. These effects are contingent to the 2006 election, as similar effects on local vote for the left are not found in previous or later elections. Results are robust to controls for local grain growing and Chinese competition. We predict that AMLO would have been elected in 2006 had protectionism not been a salient electoral issue. Our findings suggest export access gains due to globalization undermine local political preferences over national protectionist platforms.
    Keywords: NAFTA, AMLO, Globalization, Protectionism
    JEL: F13 F55 D72
    Date: 2019–03
  3. By: Marco Battaglini (Cornell University and EIEF)
    Abstract: We propose a new model of legislative bargaining in which coalitions have different values, reflecting the fact that the policies they can pursue are constrained by the identity of the coalition members. In the model, a formateur picks a coalition and negotiates for the allocation of the surplus it is expected to generate. The formateur is free to change coalitions to seek better deals with other coalitions, but she may lose her status if bargaining breaks down, in which case a new formateur is chosen. We show that as the delay between offers goes to zero, the equilibrium allocation converges to a generalized version of a Nash Bargaining Solution in which — in contrast to the standard solution — the coalition is endogenous and determined by the relative coalitional values. A form of the hold-up problem specific to these bargaining games may lead to significant inefficiencies in the selection of the equilibrium coalition. We use the equilibrium characterization of the distortions to study the role of the head of state in avoiding (or containing) distortions. We also show that the model helps rationalizing well known empirical facts that are in conflict with the predictions of standard non-cooperative models of bargaining: the absence of significant (or even positive) premia in ministerial allocations for formateurs and their parties;the occurrence of supermajorities;and delays in reaching agreements.
    Date: 2019
  4. By: Ernst-Ulrich Petersmann
    Abstract: Since 2017, the United States (US) and other World Trade Organization (WTO) members violate their legal duties and democratic mandates given by national parliaments to maintain the WTO Appellate Body (AB) as legally prescribed in Article 17 of the WTO Dispute Understanding (DSU), i.e. as being ‘composed of seven persons’, with vacancies being ‘filled as they arise’. This contribution argues that none of the reasons offered by the US for its blocking of the (re)appointment of AB candidates - on grounds unrelated to the personal qualifications of the candidates - can legally justify its disruptions of the WTO legal and dispute settlement system. Also the European Union (EU) has offered no convincing justification of its failure to protect ‘strict observance of international law’ in it external relations, as required by Article 3 of the Lisbon Treaty on European Union (TEU) and by Article IX:1 WTO Agreement (‘where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting’). The 2018 ‘Concept Paper’ prepared by the EU Commission on ‘WTO modernization’ indicates no strategy for the obvious problem that the EU objective of ‘preserving and deepening the rules-based multilateral system’, including ‘more effective and transparent dispute settlement including the Appellate Body’, is inconsistent with the US strategies underlying US blocking of the AB jurisdiction by preventing the appointment of AB judges, a strategy which was previously applied by the US for blocking third-party adjudication under Chapter 20 of the North American Free Trade Agreement (NAFTA). Trade diplomats have no democratic mandate for disrupting the AB jurisdiction by illegally reducing the number of AB members to one single judge by December 2019 and, thereby, undermining the WTO legal and dispute settlement system. EU trade diplomats must exercise leadership for using the existing legal powers and duties of the WTO Ministerial Conference and General Council under Article IX:1 WTO – if necessary, based on ‘a majority of the votes cast’ - to initiate and complete the WTO selection procedures for filling AB vacancies and protect the AB as legally defined in Article 17 DSU. Article IX.2 could be used for authoritative interpretations ‘taken by a three-fourths majority of the Members’ confirming the collective duties of WTO members to fill AB vacancies in case of illegal blocking of AB nominations. WTO law foresees similar majority decisions for the appointment of the WTO Director-General; such majority decisions are necessary for preventing illegal de facto amendments of the WTO legal system, and do not set a precedent for future WTO majority voting on discretionary, political issues, which most WTO diplomats reject as a ‘nuclear option’. As suggested by European ordo-liberalism, citizens and democratic institutions must hold trade politicians democratically and legally more accountable for complying with their legislative mandates to implement and modernize, but not to destroy WTO law and dispute settlement.
    Keywords: Appellate Body, competition rules, governance crisis, ordo-liberalism, WTO
    Date: 2018–12
  5. By: Hix, Simon; Noury, Abdul; Roland, Gerard
    Abstract: We examine the magnitude and significance of selection bias in roll call votes. Prior to 2009, all recorded (roll call) votes in the European Parliament had to be requested explicitly by European Political Groups. Since 2009, a roll call vote has been mandatory on all final legislative votes. We exploit that change in the rules and compare differences between final legislative votes, amendment votes and non-legislative votes before and after 2009, using a difference-in-differences approach with extensive controls. Using data from the Sixth (2004–2009) to Seventh (2009–2014) European Parliaments, we fail to find any large differences in voting cohesion for the main political groups. We find even less significance when we control for changes in parliamentary membership between those two periods. The results suggest that selection biases in the European Parliament associated with strategic choices are negligible.
    Keywords: roll call votes; European Parliament; party disclosure; natural experiment; difference in difference estimation
    JEL: D72 D78 P16 P48
    Date: 2018–03–10
  6. By: Hélia Marreiros (Universidade Católica Portuguesa, Católica Porto Business School and CEGE)
    Abstract: We experimentally investigate the welfare implications of two distinct output sharing rules in partnerships with a heterogeneous composition. In particular the paper examines the tradeoff between the potential benefits of a simple equal output sharing rule and a distribution rule that maximizes total welfare, the second best sharing rule. This output sharing rule, which is recommended, is unequal in heterogeneous production groups. The experimental setup is based on a team production technology model, where Nash equilibrium contributions are located in the interior of the set of feasible contributions. The results confirm that second best output sharing rules give higher welfare than equal ones when the two are different. Then, there is a trade off to be considered, when deciding on the team composition (the equal sharing rule is second best optimal in homogeneous partnerships), and when deciding the sharing rule given the group composition. We also find that the experimentally created wealth with equal sharing is higher than the anticipated from pure rational behavior because less skilled collaborating partners contribute with more input than anticipated. This is interpreted as evidence that less productive partners perceive a sense of unfairness when receive a similar share of output than the more productive ones, and decide to correspond with higher input contribution.
    Keywords: PPartnerships; Team Production, Incentives; Efficiency; Equality; Experiment
    JEL: C92 D63 J33 M52
    Date: 2019–01
  7. By: Oliver Herrmann; Richard Jong-A-Pin; Lambert Schoonbeek
    Abstract: We incorporate prospect-theory preferences in a game-theoretic model to study voter turnout. We show that voter turnout is heavily affected by agents having subjective reference points with respect to the vote or abstain decision and their subjective probability weighting in the decision-making process. Using empirically based parameter values, we show that our model has lower prediction error than other game-theoretic models with standard expected-utility preferences. We also find that our model maintains desirable comparative statics effects and leads to higher turnout predictions in larger electorates.
    Keywords: voting behavior, Downsian paradox, prospect-theory preferences
    JEL: D72
    Date: 2019
  8. By: Barron, Kai; Nurminen, Tuomas
    Abstract: This paper experimentally studies two simple interventions aimed at increasing public goods provision in settings in which accurate feedback about contributions is not available. The first intervention aims to exploit lying aversion by requiring subjects to send a non-verifiable ex post announcement about their contribution. The second intervention aims to nudge participants to higher contribution levels by simply labeling contributions of 16 or above as being ‘good’. We find that the ex post announcement mechanism does not have a significant effect on the cooperation rate. However, the nudge leads to a striking increase in the cooperation rate. We provide suggestive evidence that the nudge we use provides subjects with a focal point, helping conditional cooperators to coordinate their contributions. Moreover, despite the lack of monetary incentives to lie, we find that a non-negligible group of subjects inflate their anonymous announcements.
    Keywords: cooperation,nudge,public good,experiment,lying,focal point
    JEL: C91 C72 H41 Z13
    Date: 2018
  9. By: Lergetporer, Philipp (ifo Institute at the University of Munich; CESifo); Woessmann, Ludger (: University of Munich and ifo Institute; CESifo, IZA, and CAGE)
    Abstract: Public preferences for charging tuition are important for determining higher education finance. To test whether public support for tuition depends on information and design, we devise several survey experiments in representative samples of the German electorate (N>19,500). The electorate is divided, with a slight plurality opposing tuition. Providing information on the university earnings premium raises support for tuition by 7 percentage points, turning the plurality in favor. The opposition-reducing effect persists two weeks after treatment. Information on fiscal costs and unequal access does not affect public preferences. Designing tuition as deferred income-contingent payments raises support by 16 percentage points, creating a strong majority favoring tuition. The same effect emerges when framed asloan payments. Support decreases with higher tuition levels and increases when targeted at non-EU students.
    Keywords: tuition, higher education, political economy, survey experiments, information, earnings premium, income-contingent loans, voting JEL Classification: I22, H52, D72, D83
    Date: 2019
  10. By: Victorien Barbet (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Noé Guiraud (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Vincent Laperrière (UMR ESPACE); Juliette Rouchier (LAMSADE - Paris-Dauphine University)
    Abstract: We present a model showing the evolution of an organization of agents who discuss democratically about good practices. This model feeds on a field study we did for a few years in France where we followed Non Profit Organizations, called AMAP (a french short food chain), and observed their construction through time at the regional and national level. Most of the hypothesis we make are here either based on the literature on opinion diffusion or on the results of our field study. By defining dynamics where agents influence each other, make collective decision at the group level, and decide to stay in or leave their respective groups, we analyse the effect of different parameters, like size of organizations, on the stability and representativeness of these organizations. The models proves to be robust and we believe is easy to adapt to other context than AMAP. Moreover the article highlights the tension that exists between stability and representativeness in democratic organizations, along with the negative effect of increasing the number of topics to discuss and the positive effect of having openminded members.
    Keywords: democracy, organizations, opinion dynamics, agent based modeling
    Date: 2019–03
  11. By: Toke S. Aidt, Facundo Albornoz, Esther Hauk; Facundo Albornoz; Esther Hauk
    Abstract: In an interconnected world, economic and political interests inevitably reach beyond national borders. Since policy choices generate external economic and political costs, foreign state and non-state actors have an interest in influencing policy actions in other sovereign countries to their advantage. Foreign influence is a strategic choice aimed at internalizing these externalities and takes many forms. We distinguish three broad types of intervention strategies, (i) voluntary agreement interventions between the intervening foreign power and the target country, (ii) policy interventions based on rewarding or sanctioning the target country to obtain a specific change in policy and (iii) institution interventions aimed at influencing the policy choice by changing the political institutions in the target country (with or without a civil war). We propose a unifying theoretical framework to understand when and which form of foreign influence is chosen and use it to organize and evaluate the new political economics literature on foreign influence along with work in cognate disciplines. Foreign intervention plays a more important role for a proper understanding of domestic policy choices, for institutional dynamics and for internal conflict than is commonly acknowledged in both empirical and theoretical research.
    Keywords: Foreign inuence, international agreements, institutions, aid, sanctions, conflict
    JEL: D7 D72 D74 F13 F23 F51 F53
    Date: 2019–03–14
  12. By: Shuo Liu; Dimitri Migrow
    Abstract: Multinational and multiproduct firms often experience uncertainty in the relative return of conducting activities in different markets due to, for example, exchange rate volatility or the changing prospects of different products. We study how a multi-divisional organization should optimally allocate decision-making authority to its managerial members when operating in such volatile markets. To be able to adapt its decisions to local conditions, the organization has to rely on self-interested division managers to collect and disseminate the relevant information. We show that if communication takes the form of verifiable disclosure, then centralized decision-making does not suffer from information asymmetry and it allows the headquarter of the organization to better cope with the inter-market uncertainty. However, a downside of centralization is that it can discourage information acquisition, and this negative effect is amplified by the need for coordinating the activities of different divisions. As a result, the optimality of decentralized decision-making can actually be driven by a large coordination motive.
    Keywords: Centralization, decentralization, volatile markets, coordinated adaptation, information acquisition, verifiable disclosure, costly exaggeration
    JEL: D82 M52
    Date: 2019–03
  13. By: Federico Carril-Caccia (Department of Economic Theory and History, University of Granada (Spain).); Juliette Milgram Baleix (Department of Economic Analysis and Political Economy, University of Seville (Spain).); Jordi Paniagua (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).)
    Abstract: The present work reassesses the link between natural resources, institutional quality and foreign direct investment (FDI). In particular, we focus on the impact of good governance and democracy on foreign direct investment in oil-abundant countries. To this end, we estimate the effect of host countries’ institutions on the extensive margin (number of bilateral greenfield investment projects), using a gravity equation for a dataset that covers 182 countries during 2003-2012. Our findings confirm that compliance to rule of law, lack of corruption, political stability and democracy could boost new FDI links through the extensive margin. Our results could not rule out the “oil curse”, meaning that oil producers attract fewer new greenfield projects than similar countries without oil. Unlike other studies, we show that the impact of institutions is not necessarily undermined by the presence of natural resources.
    Keywords: Democracy, FDI, gravity equation, institutions, oil
    JEL: C23 F21 F23 Q39
    Date: 2019–03
  14. By: Mallozzi, Lina; Vidal-Puga, Juan
    Abstract: We study cooperative interval games. These are cooperative games where the value of a coalition is given by a closed real interval specifying a lower bound and an upper bound of the possible outcome. For interval cooperative games, several (interval) solution concepts have been introduced in the literature. We assume that each player has a different attitude towards uncertainty by means of the so-called Hurwicz coefficients. These coefficients specify the degree of optimism that each player has, so that an interval becomes a specific payoff. We show that a classical cooperative game arises when applying the Hurwicz criterion to each interval game. On the other hand, the same Hurwicz criterion can be also applied to any interval solution of the interval cooperative game. Given this, we say that a solution concept is Hurwicz compatible if the two procedures provide the same final payoff allocation. When such compatibility is possible, we characterize the class of compatible solutions, which reduces to the egalitarian solution when symmetry is required. The Shapley value and the core solution cases are also discussed.
    Keywords: Cooperative interval games; Hurwicz criterion; Hurwicz compatibility
    JEL: C71
    Date: 2019–03–12

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