nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2021‒05‒17
nineteen papers chosen by
Stan C. Weeber, McNeese State University

  1. Political Parties as Drivers of U.S. Polarization: 1927-2018 By Canen, Nathan; Kendall, Chad; Trebbi, Francesco
  2. On the (Ir)relevance of Firm Size for Bail-outs under Voter-Neutrality: The Case of Foreign Stakeholders By Schilling, Linda Marlene
  3. Understanding the Success of the Know-Nothing Party By Alsan, Marcella; Eriksson, Katherine; Niemesh, Gregory T.
  4. Salience and accountability: School infrastructure and last-minute electoral punishment By Nicolás Ajzenman; Ruben Durante
  5. An Experiment in Candidate Selection By Casey, Katherine; Kamara, Abou Bakarr; Meriggi, Niccolo
  6. Mobilization and the Strategy of Populism Theory and Evidence from the United States By Gennaro, Gloria; Lecce, Giampaolo; Morelli, Massimo
  7. Why Waste Your Vote? Informal Voting in Compulsory Elections in Australia By Eamon McGinn; Shiko Maruyama
  8. The Volunteer's Dilemma in Finite Populations By Konrad, Kai A.; Morath, Florian
  9. Unmasking Partisanship: Polarization Undermines Public Response to Collective Risk By Milosh, Maria; Painter, Marcus; Sonin, Konstantin; Van Dijcke, David; Wright, Austin L.
  10. Combining Social Choice and Matching Theory to Understand Institutional Stability By Ashutosh Thakur
  11. Informal Central Bank Communication By Vissing-Jørgensen, Annette
  12. Matching Politicians to Committees By Ashutosh Thakur
  13. Bargaining in the Family By Jean-Paul Chavas; Eleonora Matteazzi; Martina Menon; Federico Perali
  14. Do Pandemics Shape Elections? Retrospective voting in the 1918 Spanish Flu Pandemic in the United States By Abad, Leticia Arroyo; Maurer, Noel
  15. The Dynamics of Property Rights in Modern Autocracies By Dan Cao; Roger Lagunoff
  16. Are High-Quality Earnings Useful for Voting Shareholders? Evidence from the Top Executive Director Election in Japan By Iwata, Kiyonori
  17. The Political Economy of Coastal Development By Pierre Magontier; Albert Solé-Ollé; Elisabet Viladecans Marsal
  18. Women Legislators and Economic Performance By Baskaran, Thushyanthan; Bhalotra, Sonia; Min, Brian; Uppal, Yogesh
  19. The Local Approach to Causal Inference under Network Interference By Eric Auerbach; Max Tabord-Meehan

  1. By: Canen, Nathan; Kendall, Chad; Trebbi, Francesco
    Abstract: The current polarization of elites in the U.S., particularly in Congress, is frequently ascribed to the emergence of cohorts of ideologically extreme legislators replacing moderate ones. Politicians, however, do not operate as isolated agents, driven solely by their preferences. They act within organized parties, whose leaders exert control over the rank-and-file, directing support for and against policies. This paper shows that the omission of party discipline as a driver of political polarization is consequential for our understanding of this phenomenon. We present a multi-dimensional voting model and identification strategy designed to decouple the ideological preferences of lawmakers from the control exerted by their party leadership. Applying this structural framework to the U.S. Congress between 1927- 2018, we find that the influence of leaders over their rank-and-file has been a growing driver of polarization in voting, particularly since the 1970s. In 2018, party discipline accounts for around 65% of the polarization in roll call voting. Our findings qualify the interpretation of â?? and in two important cases subvert â?? a number of empirical claims in the literature that measures polarization with models that lack a formal role for parties.
    Keywords: discipline; Ideology; Parties; Political Polarization; Spatial voting
    JEL: D72 P48
    Date: 2020–12
  2. By: Schilling, Linda Marlene
    Abstract: A failing firm employs domestic and foreign stakeholders. The latter have no voting rights. A politician decides on the vote-share maximizing bailout. In a probabilistic voting model, I analyze whether foreign stakeholders impact bailouts. Stakeholder voters shade their vote to reward the politician, while non-stakeholder voters punish the politician for imposing bailout-financing taxes. If foreign stakeholders neither pay taxes nor receive bailouts (seasonal workers), only voters at the firm level matter. Firms with equally large stakeholder groups receive distinct bailouts in equilibrium, depending on their voter-concentration among stakeholders. If foreigners pay taxes and receive bailouts (greencard holders), they impact the electorate and thus bailouts through monetary transfers despite their lack of voting rights. Then adding foreigners can both increase or decrease bailouts. The measure of all firm stakeholders remains insufficient to determine bailouts. In either case, vote-share maximizing bailouts equal socially optimal bailouts only if all stakeholders are domestic.
    Keywords: Bailouts; Economic voting; labor migration; political economy; Probabilistic voting; socially optimal bailouts; Too-big-to-fail; vote-share maximization
    JEL: D72 G3 P16
    Date: 2020–12
  3. By: Alsan, Marcella; Eriksson, Katherine; Niemesh, Gregory T.
    Abstract: We study the contribution of economic conditions to the success of the first avowedly nativist political party in the United States. The Know-Nothing Party gained control of a number of state governments in the 1854-1856 elections running on a staunchly anti-Catholic and anti-Irish platform. Our analysis focuses on the case of Massachusetts, which had experienced a wave of Irish Famine immigration and was at the forefront of industrialization in the United States. Voters in towns with more exposure to Irish labor market crowdout and deskilling in manufacturing were more likely to vote for Know-Nothing candidates in state elections. These two forces played a decisive role in 1855, but not the other years of the Know Nothings' success. We find evidence of reduced wealth accumulation for native workers most exposed to labor market crowdout and deskilling, though this was tempered by occupational upgrading. The Know-Nothings lost power in 1857 to the abolitionist Republicans as the crisis over slavery came to a head, culminating in the Civil War.
    JEL: D72 J61 N00
    Date: 2020–12
  4. By: Nicolás Ajzenman (Sao Paulo School of Economics - FGV); Ruben Durante (Universitat Pompeu Fabra)
    Abstract: Can seemingly unimportant factors influence voting decisions by making certain issues salient? We study this question in the context of Argentina 2015 presidential elections by examining how the quality of the infrastructure of the school where citizens were assigned to vote influenced their voting choice. Exploiting the quasi-random assignment of voters to ballot stations located in different public schools in the city of Buenos Aires, we find that individuals assigned to schools with poorer infrastructure were significantly less likely to vote for Mauricio Macri, the incumbent mayor then running for president. The effect is larger in low-income areas - where fewer people can afford private substitutes to public education - and in places where more households have children in school age. The effect is unlikely to be driven by information scarcity, since information on public school infrastructure was readily available to parents before elections. Rather, direct exposure to poor school infrastructure at the time of voting is likely to make public education - and the poor performance of the incumbent - more salient.
    Keywords: Elections Salience Electoral Punishment Public Infrastructure Education
    JEL: D72 D83 I25 D90
    Date: 2021–04
  5. By: Casey, Katherine; Kamara, Abou Bakarr; Meriggi, Niccolo
    Abstract: Are ordinary citizens or political party leaders better positioned to select candidates? While the American primary system lets citizens choose, most democracies rely instead on party officials to appoint or nominate candidates. The consequences of these distinct design choices are unclear: while officials are often better informed about candidate qualifications, they may value traits-like party loyalty or willingness to pay for the nomination-at odds with identifying the best performer. We partnered with both major political parties in Sierra Leone to experimentally vary how much say voters have in selecting Parliamentary candidates. Estimates suggest that more democratic procedures increase the likelihood that parties select voters' most preferred candidates and favor candidates with stronger records of public goods provision.
    Keywords: Information provision; Political selection; primaries
    JEL: D72 H1 P16
    Date: 2021–01
  6. By: Gennaro, Gloria; Lecce, Giampaolo; Morelli, Massimo
    Abstract: We propose a theory of strategic adoption of populism in electoral campaigns, in which a populist campaign attracts disillusioned voters but demobilizes core partisans. Under these conditions, populism is more tempting for outsider candidates in districts with low political trust or high economic insecurity, and where the race is close. We test the theory on the 2016 presidential election and the 2018 and 2020 House elections. We apply automated text analysis to campaign speeches and websites, and construct a continuous index of populism in campaign documents. We provide supportive evidence in favour of the mobilisation effects of populism, and show that outsider candidates, in competitive races, resort to more populism in response to higher economic insecurity. Drawing connections between theories of electoral mobilization and populism, this paper shows that the interaction of economic and political conditions is key to understand where politicians are more likely to ride on popular discontent.
    Keywords: American Politics; Electoral Campaign; populism; Text Analysis
    Date: 2021–01
  7. By: Eamon McGinn (University of Technology Sydney); Shiko Maruyama (University of Technology Sydney)
    Abstract: In Australia, where voting is compulsory, around 5% of votes are informal, not counting toward the outcome. Between 2004–2016, 32% of electorates reported more informal votes than votes in the margin between the winner and runner-up. Using exogenous changes in electorate boundaries, we test two hypotheses from the literature. We find the pivotal voter theory unsupported, except that better-educated voters respond to the margin more strategically. However, we do find that more candidates cause more informal votes. This choice-overload effect is observed regardless of voters’ education, indicating the role of time and effort cost rather than just cognitive ability.
    Keywords: informal voting, voter participation, pivotal voter model, redistricting, choice overload, compulsory voting, difference in differences, Australia
    JEL: C21 D72 D73 D91 H11 P16
    Date: 2021–05–03
  8. By: Konrad, Kai A.; Morath, Florian
    Abstract: We study the long-run stochastic stability properties of volunteering strategies in finite populations. We allow for mixed strategies, characterized by the probability that a player may not volunteer. A pairwise comparison of evolutionary strategies shows that the strategy with a lower probability of volunteering is advantaged. However, in the long run there are also groups of volunteering types. Homomorphisms with the more volunteering types are more frequent if the groups have fewer members, and if the benefits from volunteering are larger. Such homomorphisms with volunteering cease to exist if the group becomes infinitely large. In contrast, the disadvantage of volunteering disappears if the ratio of individual benefits and costs of volunteering becomes infinitely large.
    Keywords: collective action; finite populations; Mixed strategies; stochastic stability; volunteering
    JEL: C73 D62 H41
    Date: 2020–12
  9. By: Milosh, Maria; Painter, Marcus; Sonin, Konstantin; Van Dijcke, David; Wright, Austin L.
    Abstract: Political polarization may undermine public policy response to collective risk, especially in periods of crisis, when political actors have incentives to manipulate public perceptions. We study these dynamics in the United States, focusing on how partisanship has influenced the use of face masks to stem the spread of COVID-19. Using a wealth of micro-level data, machine learning approaches, and a novel quasi-experimental design, we establish the following: (1) mask use is robustly correlated with partisanship; (2) the impact of partisanship on mask use is not offset by local policy interventions; (3) partisanship is the single most important predictor of local mask use, not COVID-19 severity or local policies; (4) president Trump's unexpected mask use at Walter Reed on July 11, 2020 and endorsement of masks on July 20, 2020 significantly increased social media engagement with and positive sentiment towards mask-related topics. These results unmask how partisanship undermines effective public responses to collective risk and how messaging by political agents can increase public engagement with policy measures.
    Keywords: COVID-19; partisanship; Polarization
    JEL: H12 I18
    Date: 2020–11
  10. By: Ashutosh Thakur (Stanford Graduate School of Business and University of Cologne)
    Abstract: In many organizations, members need to be assigned to certain positions, whether these are legislators to committees, executives to roles, or workers to teams. I show that these assignment problems lead to novel questions about institutional stability. Will the set of agents being assigned prefer or vote in favor of some alternative allocation over their current allocation thereby lobbying to reform the institution? I explore questions of institutional stability where the choice of the institution (i.e., the matching mechanism) is chosen and agreed upon by the very people who are assigned by the assignment procedure. I endogenize an institution's choice of assignment procedures by analyzing an important sub-case of social choice that I call a social allocation choice problem. I discuss a variety of voting rules (plurality, majority, and unanimity) and their institutional stability counterparts in matching theory (popular matching, majority stability, and pareto efficiency). The novel property of majority stability is introduced and its existence and robustness to correlated preferences and interdependent preferences are analyzed. Chains of envy are necessary to overcome the packing problem that arises in reallocating a majority to a new set of assignments under an alternative allocation. This makes majority stability, in sharp contrast to plurality rule, strikingly robust to correlated preferences.
    Keywords: institutional stability, matching, assignment, voting, correlated preferences
    JEL: D71
    Date: 2021–04
  11. By: Vissing-Jørgensen, Annette
    Abstract: Starting from a set of facts on the timing of stock returns relative to Federal Reserve decision-making, I argue that informal communication â?? including unattributed communication -- plays a central role in monetary policy communication. This contrasts with the standard communications framework in which communication should be public and on-the-record because it serves to ensure accountability and policy effectiveness. I lay out possible benefits of using unattributed communication as an institution, but these should be weighed against substantial costs: It runs counter to accountability to use unattributed communication, causes frustration among those trying to understand central bank intensions, and enables use of such communication by individual policymakers. Unattributed communication driven by policymaker disagreements is unambiguously welfare reducing, because it reduces policy flexibility and harms the central bank's credibility and decision-making process. I suggest that central banks resist unattributed communication via expensive newsletters and increase consensus-building efforts to reduce disagreement-driven unattributed communication.
    Keywords: communication; monetary policy; Stock market
    JEL: E5 G12
    Date: 2020–12
  12. By: Ashutosh Thakur (Stanford Graduate School of Business and University of Cologne)
    Abstract: I analyze the assignment mechanisms used by the political parties in the US Senate to match their members to legislative committees from a matching theory perspective: one-sided, many-to-many matching with existing tenants. Understanding the data-generating process through detailed analysis of committee assignment procedures is crucial, but under-appreciated in the literature. I find that Republicans and Democrats use two distinct matching mechanisms creating very different strategic incentives, and analyze the theoretical and empirical implications of these organizational procedures. First, foundational theories of committee assignments must be re-evaluated in light of the constraints and induced strategic considerations of the two mechanisms. Second, my findings inform how to parse data for well-grounded empirical analysis by exploiting marked differences in strategyproofness which these mechanisms induce, both across parties and across seniorities within party. Lastly, I derive testable predictions from matching theory and present suggestive empirical tests highlighting the strategic intricacies of the assignment process.
    Keywords: matching, legislative organization, committee, strategy proofness
    JEL: D72
    Date: 2021–05
  13. By: Jean-Paul Chavas; Eleonora Matteazzi; Martina Menon; Federico Perali
    Abstract: This paper has the ambition to describe how families bargain to reach an agreement recognizing that the negotiation process is costly. Costs may emerge as the result of cognitive and non-cognitive limitations, information asymmetries and efforts to acquire them, time constraints and uncertain decision environments bounding the rationality of individuals. Family members may therefore act as satisficers (Simon, 1979) accepting choices that may not be Pareto efficient, but that, more realistically, satisfy a sufficient level of satisfaction. By introducing the cost of negotiating, we span the whole negotiation space and reproduce in slow motion the progress of the bargaining efforts involving simple iterations reflecting the steps taken during real bargaining sessions. Our novel theory results show that family members can reach inefficient bargaining agreements on the contract curve at relatively low cost or may settle the dispute on an efficient point on the Pareto frontier. The empirical analysis of the bargaining household model shows that the large majority of the family agreements is inefficient, lending empirical support to Simon’s hypothesis that rational individuals can be sufficiently satisfied also at inefficient but less conflictual positions on the contract curve. We also investigate the factors affecting agreeableness, the difficulty in reaching an agreement, and how the cost of inefficiency varies across households and affects intrahousehold inequalities.
    Keywords: bargaining agreements, household efficiency, intrahousehold welfare, threat strategies.
    Date: 2021
  14. By: Abad, Leticia Arroyo; Maurer, Noel
    Abstract: In 2020, many observers were surprised that the Covid-19 outbreak did not appear to have swung the election. Early returns showed little indication that harder-hit areas swung away from the incumbent GOP. In 1918, however, the United States also held an election in the middle of a devastating pandemic. Using county-level epidemiological, electoral, and documentary evidence from 1918-20 we find that flu mortality had a statistically-significant negative effect on the Congressional or gubernatorial vote. The swing, while precise however, was relatively small and not enough to determine the results. We find no effect from flu mortality on turnout rates or on the 1920 presidential election. Our results hold using overall mortality in 1917 and distance to military camps as instruments for 1918 flu deaths. They also withstand tests of coefficient stability and alternative specifications. Considering that the 1918 flu was much more severe than the 2020 Covid pandemic, the historical evidence implies that surprised observers of the 2020 election should not have been so surprised.
    Keywords: Elections; Pandemics
    JEL: N0
    Date: 2021–01
  15. By: Dan Cao (Department of Economics, Georgetown University); Roger Lagunoff (Department of Economics, Georgetown University)
    Abstract: This paper studies a dynamic model of property ownership and appropriation in modern autocracies. An autocrat represents the interests of an elite ``in-group." It chooses whether and how much to appropriate from public assets and from private assets of an ``out-group" at each date. To maintain the appearance of the rule of law, the autocrat implements an ownership assignment only if it is accepted by the affected citizens. However, because its enforcement of property rights is tied to the duration of its commitment, the autocrat's enforcement is conditional and temporary. Consequently, the autocrat systematically appropriates property from the out-group and from public assets. Under some initial conditions, the autocrat initially implements popular land reform only reverse course later on. More generally, wealth shares of both public property and private property of the out-group decline monotonically after an initial adjustment period. The model rationalizes the connection between increasing wealth inequality and privatization in autocracies such as Russia and China. Simulations of these countries' wealth distributions to mid 21st century display widening gaps in wealth between elites and the rest of the populace. Finally, we show that the ruling group under anocracy, an autocratic system that admits civil society groups, will generally be better off than under a traditional autocracy. The dilemma is that the anocratic system might enable the growth of an opposition party that eventually displaces the ruling group. Classification-C73, D72, H13, H41, P5
    Keywords: Authoritarian legalism, autocracy, anocracy, property rights, appropriation constraint, takings, civil society groups, Samuelson condition
    Date: 2021–05–11
  16. By: Iwata, Kiyonori
    Abstract: This study provides evidence of how earnings quality affects the voting behavior of shareholders. The results of the empirical analyses show that the approval rate of management proposals for top executive director (TED) election is positively associated with earnings performance, but this relationship is weakened when the firm reports low-quality earnings.
    Keywords: Shareholder Voting, Earnings Quality, Director Election, Corporate Governance
    Date: 2021–05
  17. By: Pierre Magontier; Albert Solé-Ollé; Elisabet Viladecans Marsal
    Abstract: We study the role of political parties as facilitators of intergovernmental cooperation regarding the development of coastal land. Slowing down this development has benefits (e.g., preservation of environmental amenities) and costs (e.g., job losses), not only for residents in the political jurisdiction but also for non-residents. Local governments may not consider the welfare of non-residents and therefore may not choose the right amount of development. This paper investigates how political alignment between mayors of nearby municipalities enhances the incentives to cooperate and affect development in coastal areas. We rely on high-quality administrative data from the cadaster on the amount of built-up land along the Spanish coast. Using a close-elections regression discontinuity design, we find that municipalities with mayors belonging to the ideological bloc governing a majority of municipalities in the coastal area develop less land than other municipalities. The effect is larger for land close to the coastline and in places with a large share of environmentally valuable land. This suggests that negative externalities are dominant in this context and that political parties are a useful tool to internalize them.
    Keywords: local government, land use policy, regression discontinuity
    JEL: D72 H70 R52
    Date: 2021
  18. By: Baskaran, Thushyanthan (University of Siegen); Bhalotra, Sonia (University of Essex & University of Warwick); Min, Brian (University of Michigan, Ann Arbor); Uppal, Yogesh
    Abstract: There has been a phenomenal global increase in the proportion of women in politics in the last two decades, but there is no evidence of how this influences economic performance. We investigate this using data on competitive elections to India’s state assemblies, leveraging close elections to isolate causal effects. We find significantly higher growth in economic activity in constituencies that elect women and no evidence of negative spillovers to neighbouring male-led constituencies, consistent with net growth. Probing mechanisms, we find evidence consistent with women legislators being more efficacious, less corrupt and less vulnerable to political opportunism.
    Keywords: Political representation ; identity ; India ; gender ; women legislators ; economic growth ; luminosity ; corruption ; roads ; close elections ; electoral incentives JEL Classification: D72 ; D78 ; H44 ; H73
    Date: 2021
  19. By: Eric Auerbach; Max Tabord-Meehan
    Abstract: We propose a new unified framework for causal inference when outcomes depend on how agents are linked in a social or economic network. Such network interference describes a large literature on treatment spillovers, social interactions, social learning, information diffusion, social capital formation, and more. Our approach works by first characterizing how an agent is linked in the network using the configuration of other agents and connections nearby as measured by path distance. The impact of a policy or treatment assignment is then learned by pooling outcome data across similarly configured agents. In the paper, we propose a new nonparametric modeling approach and consider two applications to causal inference. The first application is to testing policy irrelevance/no treatment effects. The second application is to estimating policy effects/treatment response. We conclude by evaluating the finite-sample properties of our estimation and inference procedures via simulation.
    Date: 2021–05

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