nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2019‒06‒24
sixteen papers chosen by
Stan C. Weeber
McNeese State University

  1. Electoral Competition and Corruption: Theory and Evidence from India By Afridi, Farzana; Dhillon, Amrita; Solan, Eilon
  2. The impact of pre-electoral coalitions on mayoral election outcomes in Indonesia By Blane D. Lewis
  3. Voting Power and Survival: The Case of a Ruling Party By Jelnov, Artyom; Jelnov, Pavel
  4. Games on Multi-Layer Networks By Walsh, A. M.
  5. Mixed rules in multi-issue allocation situations By Bergantiños, Gustavo; Chamorro, José María; Lorenzo, Leticia; Lorenzo-Freire, Silvia
  6. The Real Estate Transfer Tax and Government Ideology: Evidence from the German States By Manuela Krause; Niklas Potrafke
  7. An experimental study on the effects of communication, credibility, and clustering in network games By Gary Charness; Francesco Feri; Miguel A. Meléndez-Jiménez; Matthias Sutter
  8. Introduction to Voting and the Blockchain: some open questions for economists By Dhillon, Amrita; Kotsialou, Grammateia; McBurney, Peter; Riley, Luke
  9. The impact of mayor-council coalitions on local government spending, service delivery, and corruption in Indonesia By Blane D. Lewis; Adrianus Hendrawan
  10. Did sanctions help Putin? By Peeva, Aleksandra
  11. Managing Employees 'Insides' to Remedy Agency Problems? A Model of Transformational Leadership By Donze, Jocelyn; Simard-Casanova, Olivier
  12. Did terrorism affect the Brexit vote? By Bove, Vincenzo; Efthyvoulou, Georgios; Pickard, Harry
  13. Bond Exchange Offers or Collective Action Clauses? By Hege, Ulrich; Mella-Barral, Pierre
  14. Social accountability and service delivery: Experimental evidence from Uganda By Fiala, Nathan; Premand, Patrick
  15. Competing Mechanisms and Folk Theorems: Two Examples By Attar, Andrea; Campioni, Eloisa; Mariotti, Thomas; Piaser, Gwenaël
  16. The Urban-Rural Gap in Health Care Infrastructure – Does Government Ideology Matter? By Niklas Potrafke; Felix Rösel

  1. By: Afridi, Farzana (Indian Statistical Institute, Delhi and IZA, Bonn); Dhillon, Amrita (Kings College London); Solan, Eilon (Tel Aviv University)
    Abstract: In developing countries with weak enforcement, there is implicitly a large reliance on re-election incentives to reduce corruption. In this paper we extend existing models of post-election accountability with pure moral hazard to incorporate heterogeneous voters. In contrast to this existing literature, we show that electoral discipline is a weak instrument for improving accountability in a majoritarian voting system. More specifically, our model predicts that not only does corruption increase with competition under some conditions, but that the only type of corruption that is responsive to electoral competition is one where voters lose private benefits from the corruption, while corruption in public goods is not responsive. Consistent with these hypotheses, novel panel data on village level audits of one of India’s largest rural public works program suggest a U-shaped relationship between electoral competition and corruption, and responsiveness of corruption only in the private benefits of the program to competition. Our findings highlight the importance of credible penalties and the need for policy interventions that reduce pilferage in the public component of welfare programs, which entail larger welfare losses to citizens.
    Keywords: Corruption, Electoral Competition, Audit, Accountability, Moral Hazard. JEL Classification: D72, D82, H75, O43, C72.
    Date: 2019
  2. By: Blane D. Lewis
    Abstract: The extent to which pre-electoral coalitions (PECs) influence executive elections in presidential systems has not been subject to rigorous empirical study. This paper uses regression discontinuity methods to identify the causal effect of PEC size on mayoral election outcomes in Indonesia. The study finds that mayoral candidates backed by PECs comprising political parties that control council seat shares exceeding first-round electoral vote thresholds are around 18-24 percentage points more likely to win those elections than their counterparts supported by smaller-sized PECs.
    Keywords: Pre-election coalitions, presidential systems, subnational elections
    JEL: C21 C31 D72
    Date: 2018
  3. By: Jelnov, Artyom (Ariel University); Jelnov, Pavel (Leibniz University of Hannover)
    Abstract: In this article, we empirically study the survival of the ruling party in parliamentary democracies using a hazard rate model. We define survival of a crisis as being successful in a critical vote in the parliament. We develop a general probabilistic model of political crises and test it empirically. We find that during crises, parties in the parliament are likely to vote independently of each other. Thus, we receive as an empirical result what the previous voting power literature assumed.
    Keywords: voting power, coalitions, cabinet duration, Shapley-Shubik index, Rae index
    JEL: D72
    Date: 2019–05
  4. By: Walsh, A. M.
    Abstract: A set of agents is connected by two distinct networks, with each network describing access to a different local public good. Agents choose which networks to invest in, and neighbouring agents' investments in the same good are strategic substitutes, as are an agent's two investment choices. There are always equilibria where any investing agent bears all local investment costs and others free-ride. When investment in one good reduces marginal benefit from investment in the other, agents free-riding in one good may invest more profitably in the other, and equilibrium payoffs are more evenly distributed. This need not reduce aggregate payoff.
    Keywords: Multi-layer networks, network games, public goods
    JEL: D85 C72 H41
    Date: 2019–06–19
  5. By: Bergantiños, Gustavo; Chamorro, José María; Lorenzo, Leticia; Lorenzo-Freire, Silvia
    Abstract: Multi-issue allocation situations study problems where we have to divide an estate among a group of agents. The claim of each agent is a vector specifying the amount claimed by each agent on each issue. We present a two-stage rule. First we divide the estate among the issues following the constrained equal awards rule. Second, the amount assigned to each issue is divided among the agents proportionally to their demands on this issue. We apply such rule to two real problems: the distribution of natural resources between countries and the distribution of budget for education and research between universities.
    Keywords: multi-issue allocation situations, proportional rule, constrained equal awards rule
    JEL: C71
    Date: 2019–01–25
  6. By: Manuela Krause; Niklas Potrafke
    Abstract: Since 2007 the German state governments have been allowed by a constitutional reform to set real estate transfer tax rates. We exploit this reform and investigate whether government ideology predicts the levels and increases in the real estate transfer tax rates. The results show that leftwing and center governments were more active in increasing the real estate transfer tax rates than rightwing governments. Many voters were disenchanted with the policies and platforms of the established German parties. Disenchantment notwithstanding, real estate transfer tax policies show that the established political parties are still prepared to offer polarized policies.
    Keywords: Real estate transfer tax, partisan politics, reform, government ideology, fiscal federalism
    JEL: D72 H20 H71 P16 R38
    Date: 2019
  7. By: Gary Charness; Francesco Feri; Miguel A. Meléndez-Jiménez; Matthias Sutter
    Abstract: The effectiveness of social interaction depends strongly on an ability to coordinate actions efficiently. In large networks, such coordination may be very difficult to achieve and may depend on the communication technology and the network structure. We examine how pre-play communication and clustering within networks affect coordination in a challenging experimental game on eight-person networks. Free-form chat is enormously effective in achieving the non-equilibrium efficient outcome in our game, but restricted communication (where subjects can only indicate their intended action) is almost entirely ineffective. We can rationalize this result with a novel model about the credibility of cheap-talk messages. This credibility is much larger with freeform message communication than with restricted communication. We are the first to model this credibility and show, both theoretically and experimentally, an interaction effect of network structure and communication technologies. We also provide a model of message diffusion, which indeed predicts that diffusion will be more rapid without clustering and is consistent with our data.
    Keywords: networks, clustering, communication, credibility, cheap talk, experiment
    JEL: C71 C91 D03 D85
    Date: 2019
  8. By: Dhillon, Amrita (King’s College London); Kotsialou, Grammateia (King’s College London); McBurney, Peter (King’s College London); Riley, Luke (King’s College London)
    Abstract: This work discusses the potential of a blockchain based infrastructure for a decentralised online voting platform. When compared to paper based voting, online voting can vastly increase the speed that votes can be counted, expand the overall accessibility of the election system and decrease the cost of turnout. Yet despite these advantages, online voting for political office is subject to fraud at various levels due to its centralised nature. In this paper, we describe a general architecture of a centralised online voting system and detail which areas of such a system are vulnerable to electoral fraud. We then proceed to introduce the key ideas underlying blockchain technology as a decentralised mechanism that can address these problems. We discuss the advantages and weaknesses of the blockchain technology, the protocols the technology uses and what criteria a good blockchain protocol should satisfy (depending on the voting application). We argue that the decentralisation inherent in the blockchain technology could increase the public’s trust in national elections, as well as eliminate voter impersonation and double voting. We conclude with a discussion regarding how economists and social scientists can collaborate with the blockchain community in a research agenda on the design of efficient blockchain protocols and new voting systems such as liquid democracy.
    Keywords: JEL Classification:
    Date: 2019
  9. By: Blane D. Lewis; Adrianus Hendrawan
    Abstract: This study examines the impact of majority coalitions on local government spending, service delivery, and corruption in Indonesia. The investigation finds that majority coalitions, i.e. those coalitions for which participating political parties control greater than half of council seats, cause a shift in local government spending towards health sector activities and induce improvements in citizen health service access—but only for a year or two, after which the positive effects disappear. The study shows that budget fraud starts to become problematic in the last two years of the coalition’s life. Majority coalition support for the local health spending and service agenda dissipates quickly as attention turns to corrupting the budget, via increased infrastructure outlays and associated rent-seeking. We hypothesize that budget fraud serves, in part, to finance subsequent rounds of local parliamentary and executive elections.
    Keywords: majority coalitions, local government spending and service delivery, corruption, regression discontinuity, Indonesia
    JEL: H72 H75 H76
    Date: 2018
  10. By: Peeva, Aleksandra
    Abstract: Do sanctions strengthen the targeted regime? I analyze the 2014 imposition of Western sanctions on Russia and its impact on voting. The US and the EU introduced targeted measures against Russian entities and individuals related to Putin's regime. Using polling station-level data I investigate whether Putin gained relatively more support among those local constituencies which were geographically close to a sanctioned firm. I find a significant effect of targeted sanction imposition on the vote share in presidential elections between 2012 and 2018. Putin gained 1.54 percentage points at those polling stations that had a sanctioned firm in immediate vicinity. Targeted sanctions imposition also affected voter turnout. The effect on voting can be explained as rally-around-the-flag in the face of sanctions, as long as voters did not endure economic losses through a decline in some sanctioned firms' economic performance.
    Keywords: sanctions,rally-around-the-flag,voting,Russia
    JEL: D72 P26
    Date: 2019
  11. By: Donze, Jocelyn; Simard-Casanova, Olivier
    Abstract: We consider a leader who can choose between a transactional or a transformational style of leadership to motivate a team of followers, in presence of moral hazard and free riding. Transformational leadership extends transactional leadership by allowing the leader to deliver a motivational message in addition to standard monetary incentives. When followers adhere to the leader's message, they get more motivated and exert more effort. We show that there is a complementary between monetary incentives and the motivational message. Furthermore followers are better off under transformational leadership. We also show that when the team size increases, transformational leadership - even if it comes at a fixed implementation cost - becomes less and less profitable for the leader compared to transactional leadership, at least when the size increase does not reinforce too much the social incentives to adhere to the leader's vision. When the size increase makes social incentives sufficiently stronger, transformational leadership regains interest and can even remedy the free-riding and moral hazard problems. Our results are in line with the empirical literature on leadership.
    Keywords: leadership, teams, agency problems, incentives, motivational message.
    JEL: D2 D8 D9 M5
    Date: 2018–06–13
  12. By: Bove, Vincenzo (University of Warwick); Efthyvoulou, Georgios (University of Sheffield); Pickard, Harry (University of Sheffield)
    Abstract: We contribute to the recent research on Brexit and public opinion formation by contending that the determinants of the referendum results should be evaluated against the background of wider public security concerns. Terrorism has long been regarded as a top concern by the British public, more than in any other European country. Terrorist attacks on UK soil raised voters’ awareness of security issues and their saliency in the context of an EU referendum. We find that locations affected by terrorist violence in their proximity exhibit an increase in the share of pro-Remain votes, particularly for more sensational attacks. Using individual-level data, we show that in the aftermath of terrorist attacks, citizens are more likely to reconsider the security risks involved in leaving the EU.
    Keywords: Brexit, Security, Terrorism, Voting, Referendum JEL Classification:
    Date: 2019
  13. By: Hege, Ulrich; Mella-Barral, Pierre
    Abstract: This paper examines two prominent approaches to design efficient mechanisms for debt renegotiation with dispersed bondholders: debt exchange offers that promise enhanced liquidation rights to a restricted number of tendering bondholders (favored under U.S. law), and collective action clauses that allow to alter core bond terms after a majority vote (favored under U.K. law). We use a dynamic contingent claims model with a debt overhang problem, where both hold-out and hold-in problems are present. We show that the former leads to a more efficient mitigation of the debt overhang problem than the latter. Dispersed debt is desirable, as exchange offers also achieve a larger and more efficient debt reduction relative to debt held by a single creditor.
    Keywords: Out-of-court Restructuring; Exchange Offer; Collective Action Clause; Exit Consent; Hold-out problem; Hold-in Problem; Trust Indenture Act.
    JEL: G12 G32 G33
    Date: 2019–06
  14. By: Fiala, Nathan; Premand, Patrick
    Abstract: Corruption and mismanagement of public resources can affect the quality of government services and undermine growth. Can citizens in poor communities be empowered to demand better-quality public investments? We look at whether providing social accountability training and information on project performance can lead to improvements in local development projects. The program we study is unique in its size and integration in a national program. We find that offering communities a combination of training and information on project quality leads to significant improvements in household welfare. However, providing either social accountability training or project quality information by itself has no welfare effect. These results are concentrated in areas that are reported by local officials as more corrupt or mismanaged, suggesting local agents have significant information about where corruption and mismanagement is worse. We show evidence that the impacts come in part from community members increasing their monitoring of local projects, making more complaints to local and central officials and increasing cooperation. We also find modest improvements in people’s trust in the central government. The results suggest that government-led, large-scale social accountability programs can strengthen communities’ ability to address corruption and mismanagement as well as improve services.
    Keywords: Agricultural and Food Policy, Public Economics
    Date: 2018–05
  15. By: Attar, Andrea; Campioni, Eloisa; Mariotti, Thomas; Piaser, Gwenaël
    Abstract: We study competing-mechanism games under exclusive competition: principals first simultaneously post mechanisms, after which agents simultaneously choose to participate and communicate with at most one principal. In this setting, which is common to competing-auction and competitive-search applications, we develop two complete-information examples that question the relevance of the folk theorems for competing-mechanism games documented in the literature. The first example shows that there can exist pure-strategy equilibria in which some principal obtains a payoff below her min-max payoff, computed over all principals' decisions. Thus folk-theoremlike results may have to involve a bound on principals' payoffs that depends on the spaces of messages available to the agents, and not only on the players' actions. The second example shows that even this nonintrinsic approach is misleading when agents' participation decisions are strategic: there can exist incentive-feasible allocations in which principals obtain payoffs above their min-max payoffs, computed over arbitrary spaces of mechanisms, but which cannot be supported in equilibrium.
    Keywords: Competing Mechanisms; Folk Theorems; Exclusive Competition.
    JEL: D82
    Date: 2019–06–04
  16. By: Niklas Potrafke; Felix Rösel
    Abstract: Spatial inequalities in publicly provided goods such as health care facilities have substantial socioeconomic effects. Little is known, however, as to why publicly provided goods diverge among urban and rural regions. We exploit narrow parliamentary majorities in German states between 1950 and 2014 in an RD framework to show that government ideology influences the urban-rural gap in public infrastructure. Leftwing governments relocate hospital beds from rural regions. We propose that leftwing governments do so to gratify their more urban constituencies. In turn, spatial inequalities in hospital infrastructure increase, which seems to influence general and infant mortality.
    Keywords: Publicly provided goods, spatial inequalities, political business cycles, partisan politics, government ideology, health care, hospitals
    JEL: D72 H42 I18
    Date: 2019

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