nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2021‒06‒14
twenty papers chosen by
Stan C. Weeber, McNeese State University

  1. Political activism when voters have a limited attention span By Barankay, Iwan
  2. Equal division among the few: an experiment about a coalition formation game By Yukihiko Funaki; Emmanuel Sol; Marc Willinger
  3. The impact of income inequality on public environmental expenditure with green consumerism By Lesly Cassin; Paolo Melindi-Ghidi; Fabien Prieur
  4. Veto power and coalition formation in the commons: an experiment By Willinger, Marc; Rhouma, Oussama; Puzon, Klarizze Anne
  5. Electoral Systems and Inequalities in Government Interventions By Micael Castanheira De Moura; Laurent Bouton; Garance Génicot
  6. Elections, Political Connections and Cash Holdings: Evidence from Local Assemblies By David Adeabah; Charles Andoh; Simplice A. Asongu; Isaac Akomea-Frimpong
  7. A social-choice perspective on authoritarianism and political polarization By Salvatore Barbaro
  8. Naturally occurring enhancements to competition for talent in teams​ By Abhijit Ramalingam; Brock V. Stoddard; James M. Walker
  9. Eat Widely, Vote Wisely? Lessons from a Campaign Against Vote Buying in Uganda By Blattman, Christopher; Larreguy, Horacio; Marx, Benjamin; Reid, Otis
  10. Voting by Simultaneous Vetoes By Margarita Kirneva; Matias Nunez
  11. Social Democracy and the Decline of Strikes By Molinder, Jakob; Karlsson, Tobias; Enflo, Kerstin
  12. Voting right rotation, behavior of committee members and financial market reactions: Evidence from the U.S. Federal Open Market Committee By Michael Ehrmann; Robin Tietz; Bauke Visser
  13. Pendular Voting By Volker Britz; Hans Gersbach
  14. Stepping-up innovation in manufacturing firms: Knowledge combinations in an Italian local production system By Plechero, Monica; Grillitsch, Markus
  15. Semi-flexible Majority Rules for Public Good Provision By Gersbach, Hans; Tejada, Oriol
  16. Calamities, Common Interests, Shared Identity: What Shapes Altruism and Reciprocity? By Aksoy, Cevat Giray; Cabrales, Antonio; Dolls, Mathias; Durante, Ruben; Windsteiger, Lisa
  17. Profit Sharing as a Bargaining Weapon Against Unions By Vladimir Pecheu
  18. Corruption and Extremism By Attila Gaspar; Tommaso Giommoni; Massimo Morelli; Antonio Nicolò
  19. Deliberative Institutions and Optimality By Jérôme Mathis; Marcello Puca; Simone M. Sepe
  20. Does reducing inequality increase cooperation?​ By Abhijit Ramalingam; Brock V. Stoddard

  1. By: Barankay, Iwan
    Abstract: We discuss the relationship between two forms of political activism and openness. We focus on direct democratic institutions and measure political activism by the number of direct democratic ballots and voter participation in those ballots. Openness is measured by the signature requirement that has to be met in order to qualify for a ballot. We show that in models where the status quo policy that elicits the political activity is invariant to changes in openness, more openness leads to more political activism results. However, looking at the empirical evidence on the frequency of ballots in Swiss Cantons, we find no relationship between openness and the number of ballots. This can be explained by allowing voters to have a limited attention span or that the status quo policy adapts to the more acute threat. We also find empirical evidence that more openness increases voter participation, which is due to the information externalities of signature collections.
    Keywords: direct democracy; limited attention; Political openness
    JEL: D72 D91
    Date: 2020–07
  2. By: Yukihiko Funaki (Waseda University); Emmanuel Sol (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marc Willinger (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We study experimentally a three player sequential and symmetric coalition formation game with empty core. In each round a randomly chosen proposer must choose between a two players coalition or a three players coalition and decide about the payoff division among the coalition members. Players who receive a proposition can accept or reject it. In case of acceptance the game ends. If it is rejected, a new proposer is randomly selected. The game was played repeatedly, with randomly rematched groups. We observe that over 86% of the realized coalitions are two-players coalitions. Three players coalitions are often observed in early rounds but are frequently rejected. Equal splits are the most frequently observed divisions among coalition members, and their frequency increases sharply over time. We propose an extension of von Neumann and Morgenstern (1944)'s notion of stable set to account for our results.
    Date: 2021–05–17
  3. By: Lesly Cassin (Univ Paris I); Paolo Melindi-Ghidi (Univ Paris Nanterre, EconomiX); Fabien Prieur (Univ Montpellier CEE-M)
    Abstract: This article analyzes the impact of income inequality on environmental policy in the presence of green consumers. We first develop a model with two main ingredients: citizens, with different income capacities, have access to two commodities whose consumption differs in terms of price and environmental impact, and they vote on the environmental policy. In this setting, there exists a unique political equilibrium in which the population is split into two groups, that differ in the type of good, conventional vs. green, they consume. The analysis shows that a change in the level of inequality induces variations in both the size and composition of these two groups of citizens. This in turn determines whether or not more inequality stimulates the public policy. We then conduct an empirical investigation on a panel of European countries over the period 1996-2019. We find the existence of an inverted J-shape relationship between inequality and public environmental spending. This outcome can be explained by the combination of a composition effect, affecting the green group, and a substitution effect between private green consumption and public environmental spending.
    Keywords: income inequality, green consumption, environmental policy, probabilistic voting, political equilibrium
    JEL: Q58 H23 D31 D72
    Date: 2021–05
  4. By: Willinger, Marc (CEE-M, Univ Montpellier, CNRS, INRAE, SupAgro, Montpellier, France); Rhouma, Oussama (Université de Jendouba); Puzon, Klarizze Anne (CERE - the Center for Environmental and Resource Economics)
    Abstract: We propose a five-player common-pool resource (CPR) game with endogenous coalition formation. We show that the level of extraction from the CPR depends on the size of each coalition that is formed and on the final coalition structure. These predictions are tested in a laboratory experiment. We consider two treatments: dictator vs. veto. In the dictator treatment, at each stage of the coalition formation game, a randomly chosen player imposes the coalition size and selected members cannot refuse to become a member. In the veto treatment, players have the right to refuse joining the current coalition if they want to and make counter-proposals. We observe that the formation of the grand coalition is more frequent in the dictator treatment. However, with the repetition of the coalition formation game, the grand coalition becomes more frequent under both treatment, and past experience of a grand coalition increases the likelihood that the current coalition structure is the grand coalition. Finally, the possibility to form coalitions is beneficial at reducing CPR extractions, compared to the singleton structure, in both treatments
    Keywords: coalition formation; laboratory experiment; veto power; common pool resource
    JEL: C71 C92 H41 Q01
    Date: 2021–06–02
  5. By: Micael Castanheira De Moura; Laurent Bouton; Garance Génicot
    Abstract: This paper studies the political determinants of inequalities in government interventions under majoritarian (MAJ) and proportional representation (PR) systems. We propose a probabilistic voting model of electoral competition with highly targetable government interventions and heterogeneous localities. We uncover a novel relative electoral sensitivity effect that affects government interventions only under MAJ systems. This effect tends to reduce inequality in government interventions under MAJ systems when districts are composed of sufficiently homogeneous localities. This effect goes against the conventional wisdom that MAJ systems are necessarily more conducive to inequality than PR systems. We illustrate the empirical relevance of our results with numerical simulations on possible reforms of the U.S. Electoral College.
    Keywords: Distributive Politics, Electoral Systems, Electoral College, PublicGood, Inequality
    JEL: D70 H00
    Date: 2021–05–01
  6. By: David Adeabah (University of Ghana, Legon, Ghana); Charles Andoh (University of Ghana, Legon, Ghana); Simplice A. Asongu (Yaoundé, Cameroon); Isaac Akomea-Frimpong (Western Sydney University, Australia)
    Abstract: We examine the relationship between elections, political connections, and cash holdings in Ghanaian local assemblies. Using a panel dataset of 179local assemblies over a period 2012 to 2017, a panel regression and the generalized method of moments estimation techniques was employed for the analysis. We find that local assemblies hold less cash during election years, which suggests that election may be one of the potential factors to mitigate agency conflict in weak governance environment. Further, we demonstrate that local assemblies that have political connections hold less cash; however, political uncertainty makes these entities conducive to agency problems than their non-connected peers because they hold more cash. Additional analysis indicates that one year prior to elections, managerial conservatism kicks-in and leads managers to hold more cash in local assemblies that have political connections, which continues and becomes more pronounced in election years. Our results have implications for regulations on the cash management practices of local assemblies.
    Keywords: agency problem; cash holdings; generalized method of moments;panel regression; political connections
    Date: 2021–01
  7. By: Salvatore Barbaro (Johannes Gutenberg University Mainz)
    Abstract: Facing a spreading of polarization and authoritarianism, research from various disciplines attempted to explore the sources of this threatening development in many societies. Socio-economic factors, as well as the diffusion of social media, were identified as explaining factors. We emphasize another source for the success of polarizing politicians: The collective-decision rules. We show that several frequently used voting schemes greatly support polarizing candidates’ success while other voting rules that are often scientifically proposed but rarely in use are much more appropriate to avoid polarizing candidates’ success. The simple-majority rule and the Borda count are more suitable for preventing society from a polarizing candidate’s landslide. By comparing the two last-mentioned voting rules, we find that the Borda count has some advantage over the simple-majority rule.
    JEL: D71
    Date: 2021–05–25
  8. By: Abhijit Ramalingam (Appalachian State University); Brock V. Stoddard (Appalachian State University); James M. Walker (Indiana University)
    Abstract: In a laboratory setting, we study team production of group-level public goods, where two teams compete for the resources of a common-member who can benefit from and provide effort in both teams. Intrinsically, the common-member faces divided loyalties. We examine such competition in settings in which the common-member has productive abilities equal to that of the other team members and in which he/she has greater relative potential. In the homogeneous setting, we find evidence that competition increases when the common-member must choose team membership across decision rounds, instead of sharing membership within a round. In the heterogeneous setting, we find the largest increase in team effort when the common-member has sufficient resources to match that of team members in both teams. When the common-member’s productivity increases, so his/her capabilities are equivalent to the setting where resources increase, team performance is not equally increased. Further treatments explore possible explanations for these latter findings.
    Keywords: public goods; experiment; divided loyalties; competition; group choice; heterogeneity
    JEL: C72 C91 C92 H41
    Date: 2021–05–21
  9. By: Blattman, Christopher; Larreguy, Horacio; Marx, Benjamin; Reid, Otis
    Abstract: We estimate the effects of one of the largest anti-vote-buying campaigns ever studied---half a million voters exposed across 1427 villages---in Uganda's 2016 elections. Working with civil society organizations, we designed the study to estimate how voters and candidates responded to their campaign in treatment and spillover villages, and how impacts varied with treatment intensity. Despite its heavy footprint, the intervention did not reduce offers of gifts in exchange for votes. However, it had sizable effects in the polling booth. Votes swung from well-funded incumbents (who buy most votes) towards their poorly-financed challengers. Qualitative and quantitative evidence suggests the swing arose from tactical responses by candidates as well as changes in village norms. Specifically, while the campaign struggled to instill norms of refusing gifts, it convinced some voters to abandon reciprocity---to accept gifts but vote for their preferred candidate. This leveling of the electoral playing field led challengers to buy votes in markets where they had previously been deterred from entering.
    Keywords: Africa; Elections; field experiment; voting behavior
    JEL: C93 D72 O55
    Date: 2020–06
  10. By: Margarita Kirneva (CREST, CNRS, Ecole Polytechnique); Matias Nunez (CREST, CNRS, Ecole Polytechnique)
    Abstract: We design voting mechanisms in which every Nash equilibrium is coalition proof, preventing the well known coordination failures of usual voting systems. In each of these simultaneous mechanisms, each voter has the right to select a list of alternatives to veto, and the winner is selected randomly from the nonvetoed alternatives. For each specification of the veto rights, we show that each of these mechanisms implements a veto by random priority rule introduced by Moulin[1981]. We then discuss necessary conditions for arbitrary mechanisms to satisfy implementation in both Nash and coalition proof and show that the existence of veto rights in the mechanism is unavoidableto achieve this demanding implementation notion.
    Keywords: Implementation, Voting, Vetoes, Coalition Formation, Efficiency.
    JEL: D71 D72
    Date: 2021–06–03
  11. By: Molinder, Jakob (Department of Economic History, Lund University); Karlsson, Tobias (Department of Economic History, Lund University); Enflo, Kerstin (Department of Economic History, Lund University)
    Abstract: This paper tests if a strong labor movement leads to fewer industrial conflicts. The focus is on Sweden between the first general election in 1919 and the famous Saltsjöbaden Agreement in 1938, a formative period when the country transitioned from fierce labor conflicts to a state of industrial peace. Using panel data techniques to analyze more than 2,000 strikes in 103 Swedish towns, we find that a shift of municipal political majority towards the Social Democrats led to a significant decline in local strike activity, but only in towns where union presence was strong. The strike-reducing mechanism is related to corporatist explanations rather than increased social spending in municipal budgets.
    Keywords: power resource theory; industrial conflicts; strikes; labor markets; local politics
    JEL: H53 J51 N34 N44
    Date: 2021–05–21
  12. By: Michael Ehrmann (European Central Bank); Robin Tietz (Cass Business School); Bauke Visser (Erasmus University Rotterdam)
    Abstract: Whether Federal Reserve Bank presidents have the right to vote on the U.S. monetary policy committee depends on a mechanical, yearly rotation scheme. Rotation is without exclusion: also nonvoting presidents attend and participate in the meetings of the committee. Does voting status change behavior? We find that the data go against the hypothesis that without the voting right, presidents use their public speeches and their meeting interventions to compensate for the loss of formal influence; rather, they support the hypothesis that the voting right makes presidents more involved. We also find that speeches move financial markets less in years that presidents vote. We argue that these discounts are consistent with their communication behavior.
    Keywords: voting right rotation, monetary policy committee, central bank communication, FOMC, financial market response
    JEL: E58 D71 D72
    Date: 2021–06–05
  13. By: Volker Britz (CER–ETH – Center of Economic Research at ETH Zurich, Switzerland); Hans Gersbach (CER–ETH – Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: We introduce a democratic procedure with voting-based proposals called ”Pendular Voting”. It works as follows: An agenda-setter chooses a proposal meant to replace a given status quo. In the first stage, a random sample of the population votes on the proposal. The result is made public, which may reveal information about the distribution of preferences in the electorate. Depending on the outcome, a third option (next to the proposal and the status quo) is added: This option is either closer to or more distant from the status quo than the original proposal. Then, in a second stage the entire electorate expresses pairwise social preferences over the status quo, the initial proposal, and the third option. We investigate the manipulability and exploitation of this voting procedure and its welfare effects. We show that manipulation is limited or absent and that exploitation can be avoided. Regardless of whether the agenda-setter is altruistic or selfish, Pendular Voting leads to welfare gains in expectation.
    Keywords: Democracy, Manipulation, Information Sharing, Referendum
    JEL: C72 D70 D72
    Date: 2021–05
  14. By: Plechero, Monica (Ca’ Foscari University of Venice); Grillitsch, Markus (CIRCLE, Lund University)
    Abstract: Industry 4.0 requires from manufacturing firms to become more innovative in order to remain relevant and competitive. To step-up firm innovation, several studies in Innovation and Economic Geography foreground that firms need to combine knowledge in novel ways either within local industrial structures or over distance. The contribution of this paper is to investigate in-depth how manufacturing firms with traditional roots combine new generative knowledge in and beyond a local production system (LPS), what enables them to access and integrate such knowledge from external sources, and how this relates to the firms’ innovation performance, with a focus on radical and varied forms of innovation. The contribution of this paper lies also in a mixed-methods research approach, which combines a population-based survey of mechatronics firms in an Italian LPS, with in-depth interviews. This allows for a qualitative interpretation of the causes of the identified distributions and correlations. The main finding of the paper is that firms generating radical innovations and varied forms of innovation combine unrelated types of knowledge in-house and through external sources. The pattern is that the traditional manufacturing knowledge of mechatronics firms still prevails but that firms increasingly complement this with new knowledge, in particular science-based analytical knowledge. Firms that have acquired complementary knowledge in-house are able to access new knowledge nationally or internationally. Even though firms source knowledge relatively frequently within the local production system, the firms who access new knowledge nationally and internationally stand out in terms of their innovation performance.
    Keywords: Industry 4.0; knowledge bases; local productive system; innovation; manufacturing firms
    JEL: O33 R11
    Date: 2021–06–02
  15. By: Gersbach, Hans; Tejada, Oriol
    Abstract: We introduce semi-flexible majority rules for public good provision with private valuations. Such rules take the form of a two-stage, multiple-round voting mechanism where the output of the first stage is the default alternative for the second stage and the voting thresholds (a) vary with the proposal on the table and (b) require a qualified majority for final approval in the second stage. We show that the (detail-free) mechanism elicits the information about the valuations and uses it to implement the utilitarian optimal public-good level if valuations can be only high or low. This level is chosen after all potential socially optimal policies have been considered for voting. We explore ways to reduce the number of voting rounds and develop a compound mechanism when there are many types of citizens to approximate the optimal public-good level.
    Keywords: Voting - Utilitarianism - Implementation - Procedural democracy
    JEL: C72 D70
    Date: 2020–07
  16. By: Aksoy, Cevat Giray (European Bank for Reconstruction and Development); Cabrales, Antonio (University College London); Dolls, Mathias (Ifo Institute for Economic Research); Durante, Ruben (CEPR); Windsteiger, Lisa (Max Planck Institute for Tax Law and Public Finance)
    Abstract: We conduct a large-scale survey experiment in nine European countries to study how priming a major crisis (COVID-19), common economic interests, and a shared identity influences altruism, reciprocity and trust of EU citizens. We find that priming the COVID-19 pandemic increases altruism and reciprocity towards compatriots, citizens of other EU countries, and non-EU citizens. Priming common European values also boosts altruism and reciprocity but only towards compatriots and fellow Europeans. Priming common economic interests has no tangible impact on behaviour. Trust in others is not affected by any treatment. Our results are consistent with the parochial altruism hypothesis, which asserts that because altruism arises out of inter-group conflict, humans show a tendency to favor members of their own groups.
    Keywords: COVID-19, Europe, altruism, reciprocity, survey experiment
    JEL: D72 H51 H53 H55 O52 P52
    Date: 2021–06
  17. By: Vladimir Pecheu (Aix Marseille Univ, CNRS, AMSE, Marseille, France)
    Abstract: There is no consensus among economists about the reasons why firms resort to profit sharing compensation, especially in larger firms. This paper presents evidence for France showing that firms with unions are more likely to resort to profit sharing than those without and, moreover, that strike incidence decreases with its usage. Inspired by these stylized facts, I develop a model to study the effects of profit sharing on union behavior that introduces two novel mechanisms. First, by making employee compensation depend on output, profit sharing makes unions internalize the cost of their strikes so that they are less inclined to organize collective actions. This in turn damages the credibility of their strike threats. Second, over time unions lose reputation, which further reduces their bargaining power. Lastly, I test the model using exogenous dates of elections of union representatives that give incentives for unions to organize collective actions in a competition for voters. I show that employers anticipate the effect of elections by increasing the usage of profit sharing. Its payment leads to a reduction in strike length the same year, and to a drop in wage growth by about 13 percent the year after. The effect is concentrated on lower occupations for whom wage growth is almost halved and driven by a reduction in the bargaining power of unions.
    Keywords: profit sharing, unions, bargaining, strikes, reputation, labor income inequality
    JEL: M52 J51 J52 C78
    Date: 2021–06
  18. By: Attila Gaspar; Tommaso Giommoni; Massimo Morelli; Antonio Nicolò
    Abstract: This paper shows that corruption generates extremism, but almost exclusively on the opposition side. When the majority has greater ability to use corruption to obtain her favorite policy outcome from the minority, then the minority group has an incentive to select a more extreme representative because it is more unlikely that such a type will accept a bribe. On the majority side, on the other hand, the perception of more likely use of the corruption tool does not create any distortion in the choice of political representatives. We provide strong causal evidence for these novel predictions using two different types of corruption signals, in Indonesia and Brazil.
    Keywords: Corruption, Extremism, Delegation, elections
    JEL: D72 D73
    Date: 2021
  19. By: Jérôme Mathis (Université Paris-Dauphine, PSL Research University, and LEDa.); Marcello Puca (Università di Bergamo, CSEF and Webster University Geneva); Simone M. Sepe (University of Arizona, Toulouse School of Economics, and ECGI)
    Abstract: We derive necessary and sufficient conditions to achieve efficiency in common interest deliberative games. Our model explicitly characterizes a large class of deliberative institutions where privately informed agents strategically deliberate before taking a decision. Under the model's information structure, the transmission of information may require interpretation from agents with specific knowledge. The dynamics of interpretation are suggestive of a variety of frictions in information transmission. Private information is aggregated, and efficient decisions are taken at equilibrium, if and only if deliberative institutions enable the agents to extend deliberation (consensual extension) and freely interact with one another (freedom of reach). When, instead, these conditions do not hold, deliberation is incomplete and “anything goes”: no general conclusion can be drawn as efficiency depends on the details of the deliberative extended-form game. We substantiate some of the implications of this indeterminacy result through detailed examples.
    Keywords: Dynamic group communication, Collective choice, Strategic deliberation.
    JEL: D71 D82 D83
    Date: 2021–05–28
  20. By: Abhijit Ramalingam (Appalachian State University); Brock V. Stoddard (Appalachian State University)
    Abstract: Inequality reduces the ability of communities to work together. The theory of reciprocity suggests reducing inequality allows groups to increase cooperation. We experimentally test if, after experiencing inequality, unconditional income transfers to the poor increase contributions to public goods. Both pure redistribution to eliminate inequality and additional resources directed to the poor without reducing resources of the rich fail to raise cooperation beyond levels observed in groups that were always equal. The rich do not respond to additional resources available to the group, and continue keeping most of their resources for private consumption. After receiving additional resources, the poor mimic the contribution behaviour of the rich. This shift of the majority of additional resources towards private consumption renders transfers ineffective in raising cooperation.
    Keywords: reciprocity; inequality reduction; income transfers; cooperation; public goods; experiment
    JEL: C91 C92 D31 D63 H41
    Date: 2021–05–21

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