nep-cdm New Economics Papers
on Collective Decision-Making
Issue of 2021‒06‒21
twelve papers chosen by
Stan C. Weeber, McNeese State University

  1. The Power of the Federal Reserve Chair By Riboni, Alessandro; Ruge-Murcia, Francisco J.
  2. Equal division among the few: an experiment about a coalition formation game By Yukihiko Funaki; Emmanuel Sol; Marc Willinger
  3. Who is in for a Party and for What? Party Identities, Selection of Politicians and Policies By Cervellati, Matteo; Gulino, Giorgio; Roberti, Paolo
  4. Compromising on Compromise Rules By Salvador Barberà; Danilo Coelho
  5. The causal effect of political power on the provision of public education: Evidence from a weighted voting system By Lindgren Erik; Per Pettersson-Lidbom; Bjorn Tyrefors
  6. Electoral Competition with Costly Policy Changes: A Dynamic Perspective By Gersbach, Hans; Jackson, Matthew O.; Muller, Philippe; Tejada, Oriol
  7. Veto power and coalition formation in the commons: an experiment By Marc Willinger; Oussama Rhouma; Klarizze Puzon
  8. Corporate – Nonprofits Partnerships to Improve Social Innovation and Corporate Social Responsibility By Castagnola, Lauren; Yawson, Robert M.
  9. Political Connections, Allocation of Stimulus Spending, and the Jobs Multiplier By Joonkyu Choi; Veronika Penciakova; Felipe Saffie
  10. The Influence of Empirical and Normative Expectations on Cooperation By Felix Kölle; Simone Quercia
  11. Calamities, Common Interests, Shared Identity: What Shapes Altruism and Reciprocity? By Cevat Giray Aksoy; Antonio Cabrales; Mathias Dolls; Ruben Durante; Lisa Windsteiger
  12. Assessing Smart Specialisation: governance By Fabrizio Guzzo; Carlo Gianelle

  1. By: Riboni, Alessandro; Ruge-Murcia, Francisco J.
    Abstract: Transcripts from the meetings of the Federal Open Market Committee (FOMC) show that the policy proposed by its chair is always adopted with a majority of votes and limited dissent. An interpretation of this observation is that the power of the chair vis-a-vis the other members is so large that the policy selected by the committee is basically that preferred by the chair. Instead, this paper argues that the observation that the chair's proposal is always approved is an equilibrium outcome: the proposal passes because it is designed to pass and it does not necessarily correspond to the policy preferred by the chair. We construct a model of inclusive voting where the chair has agenda-setting powers to make the proposal that is initially put to a vote but is subject to an acceptance constraint that incorporates the preferences of the median and the probability of counter-proposals. The model is estimated by the method of maximum likelihood using real-time data from FOMC meetings. Results for the full sample and sub-samples for each chair between 1974 and 2008 show that the data prefer a version of our model where the chair is moderately inclusive over a dictator model. Thus, the workings of the FOMC appear to be stable over time and no chair, regardless of personality and recognized ability, can deviate far from the median view.
    Keywords: agenda-setting; collective decision-making; Consensus; FOMC; Inclusive-voting
    Date: 2020–06
  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: Cervellati, Matteo; Gulino, Giorgio; Roberti, Paolo
    Abstract: Using a quasi-natural experiment, we isolate the effect of increasing the political power of a given political party for the selection of cabinet members and the policies implemented by coalition governments. We exploit the randomization of party symbols in the ballot papers in all local elections taking place in Italy for over a decade. We document that the party whose symbol is randomly located next to the coalition candidate's name benefits from extra votes at the expense of the other parties in the same running coalition. ``Treating'' a party with a boost of votes shifts coalition policies towards this party's platform, but only for issues that feature prominently in its electoral manifesto. The documented effects are large in magnitude and also hold for smaller parties. Regarding possible mechanisms, we find that changes in the composition of elected majorities lead to the appointment of cabinet members with significantly different socio-demographic characteristics, a reflection of the treated party within the coalition. These results provide a first systematic evidence supporting the view that political ideologies are also instrumental in the selection of politicians with genuine preferences over salient issues and of their key role in mapping different positions of coalition partners into policies.
    Keywords: Quasi-natural Experiment Behavioral Political Economics Causal Estimates Selection of Politicians Coalition Governments
    Date: 2020–06
  4. By: Salvador Barberà; Danilo Coelho
    Abstract: We propose three mechanisms to reach compromise between two opposing par- ties. They are based on the use of Rules of k Names, whereby one of the parties proposes a shortlist and the other chooses from it. Methods of this class are used in practice to appoint Supreme Court justices and have been recently proposed for arbitration selection processes. Our mechanisms are flexible and allow the parties to participate in the endogenous determination of the role of proposer and the shortlist size. They involve few stages, weakly implement the Unanimity Compromise Set and are robust to the strategic inclusion of candidates.
    Keywords: The Unanimity Compromise Set, Compromise Rule of k Names, shortlisting contest, alternate shortlists, shortlisting, voting by alternating offers, and vetoes and fallback bargaining
    JEL: D02 D71 D72
    Date: 2021–06
  5. By: Lindgren Erik; Per Pettersson-Lidbom; Bjorn Tyrefors
    Abstract: In this paper, we estimate the causal effect of political power on the provision of public education. We use data from a historical nondemocratic society with a weighted voting system where eligible voters received votes in proportion to their taxable income and without any limit on the maximum of votes, i.e., the political system used in Swedish local governments during the period 1862-1909. We use a novel identification strategy where we combine two different identification strategies, i.e., a threshold regression analysis and a generalized event-study design, both of which exploit nonlinearities or discontinuities in the effect of political power between two opposing local elites: agricultural landowners and emerging industrialists. The results suggest that school spending is approximately 90-120% higher if the nonagrarian interest controls all of the votes compared to when landowners have more than a majority of votes. Moreover, we find no evidence that the concentration of landownership affected this relationship
    Date: 2021–06
  6. By: Gersbach, Hans; Jackson, Matthew O.; Muller, Philippe; Tejada, Oriol
    Abstract: We analyze dynamic electoral competition policy changes. The costs of changing a policy increase with the extent of the shift and generate an incumbency advantage. We characterize the dynamics of Markov equilibria in terms of history and party polarization, and analyze how policies are influenced by the amplitude and convexity of costs of change, as well as by the degree of party and voter farsightedness. Regardless of the initial policy, party choices converge in the long run to a stochastic alternation between two (regions of) policies, with transitions occurring when office-holders suffer a shock to their capacity or valence. Although costs of change have a moderating effect on policies, full convergence to the median voter position does not take place.
    Keywords: costs of change; democracy; dynamic elections; Markov perfect equilibrium; Political Polarization
    JEL: C72 C73 D72 D78
    Date: 2020–06
  7. By: 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); Oussama Rhouma (UJ - Université de Jendouba); Klarizze Puzon (UNU - United Nations University, Umeå University)
    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
    Date: 2021–05–17
  8. By: Castagnola, Lauren; Yawson, Robert M.
    Abstract: Corporations are under increasing pressure to serve social purposes beyond maximizing shareholder value. One of the best resources for businesses seeking to affect social change meaningfully is through working with, learning from, and partnering with nonprofits. Different approaches have been emerging for nonprofits to inform and support the interests of for-profit businesses in the area of corporate social responsibility (CSR). In particular, collective impact (CI) and its implications for corporate partners; increasing positive community engagement through progressive hiring practices instituted by non-profit organizations (NPOs); fostering innovation within an organizational setting through NPO collaboration; and exploring a hybrid model of non-profit/for-profit business, with an examination of the advantages and disadvantages thereof. In this paper, we review these unique approaches to show how for-profits can learn from nonprofits and vice versa when it comes to social innovation and corporate social responsibility
    Keywords: Corporate Social Responsibility, Social Innovation, Nonprofits, Collective Impact, Triple Bottom-Line
    JEL: L3 L31 L33 L38 M0 M1 M10 M14
    Date: 2021–03–27
  9. By: Joonkyu Choi; Veronika Penciakova; Felipe Saffie
    Abstract: Using American Recovery and Reinvestment Act (ARRA) data, we show that firms lever their political connections to win stimulus grants and that public expenditure channeled through politically connected firms hinders job creation. We build a unique database that links information on campaign contributions, state legislative elections, firm characteristics, and ARRA grant allocation. Using exogenous variation in political connections based on ex-post close elections held before ARRA, we causally show that politically connected firms are 38 percent more likely to secure a grant. Based on an instrumental variable approach, we also establish that a one standard deviation increase in the share of politically connected ARRA spending lowers the number of jobs created per $1 million spent by 7.1 jobs. Therefore, the impact of fiscal stimulus is not only determined by how much is spent, but also by how the expenditure is allocated across recipients.
    Keywords: campaign finance; state grants; public expenditure allocation; American Recovery and Reinvestment Act
    JEL: D22 D72 E62 H57 P16
    Date: 2021–05–13
  10. By: Felix Kölle (University of Cologne, Albertus Magnus Platz, 50923 Cologne, Germany); Simone Quercia (University of Verona ,via Cantarane 24, 37129 Verona, Italy)
    Abstract: In this paper, we investigate the joint influence of empirical and normative expectations on cooperative behavior. We conduct two experimental studies (n = 243) in which we separately elicit (i) behavior in a public goods game and (ii) social norms under the form of normative and empirical expectations. In a situation where individuals can decide conditionally on others' contributions, we find a strong norm of conditional cooperation whereby people find it socially appropriate to match others contribution and believe others to comply with such rule of behavior. In contrast, when there is strategic uncertainty regarding others' behavior, empirical and normative expectations diverge substantially. While individuals believe that contributing fully to the public good is the most appropriate action, they expect others to contribute only half of their resources. This renders normative expectations unpredictive for average behavior and underlines the importance of a close alignment of empirical and normative expectations for the influence of social norms on behavior.
    Keywords: Cooperation, social norms, expectations, public goods, experiment
    JEL: H41 D63 C92
    Date: 2021–06
  11. By: Cevat Giray Aksoy; Antonio Cabrales; Mathias Dolls; Ruben Durante; Lisa Windsteiger
    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
  12. By: Fabrizio Guzzo (European Commission - JRC); Carlo Gianelle (European Commission - JRC)
    Abstract: This reports provides some insights on the impact of Smart Specialisation on the governance of research and innovation policy systems across EU regions and countries. First, the analysis explores the governance arrangements underpinning Smart Specialisation strategies and the changes introduced by this policy concept. Second, it investigates to what extent (if any) and how Smart Specialisation has been promoting better coordination and collective action. The results show that Smart Specialisation has made the decision-making process and the governance of innovation policy more inclusive. One of the results of this policy experience is the reorganisation and/or establishment of coordination bodies, platforms, thematic working groups, clusters and the like. These organisations are reshaping and strengthening networks of engagement and modalities of cooperation between public and private actors, lowering transaction costs associated with collective action. There is evidence that Smart Specialisation has supported the production of a wide range of tangible and intangible collective goods, which are considered essential in promoting development processes. Finally, under the Smart Specialisation experience, inter-government coordination has received more attention that in the past and, as a result, new norms and arrangements have been experimented. However, despite these changes, and the general increase in pressure for coordination, the effectiveness of horizontal and vertical coordination is still weak. This depends on coordinating bodies and arrangements that are not properly functioning and the persistence of a silo approach in government, which is difficult to overcome. Clearly, this is an area where more efforts are needed in the future, along with the strengthening of the skills and resources to perform policy functions. In view of the new Cohesion Policy 2021-2027, the report provides two main recommendations. First, the Smart Specialisation approach should recognise more explicitly the need for upgrading the quality of governance and policy capacity. Where these elements are weak and/or incomplete they should be addressed with specific measures embedded into strategies and progress should be continuously monitored. Second, territories should discover what governance arrangements work best in their context, preferring the experimentation of new governance structures and processes and the increase of responsibilities and functions of management bodies and other relevant organisations as a result of capacity building processes, to the adoption of ideal models and best practices, which are often formally introduced without promoting real changes.
    Keywords: regional innovation policy, smart specialisation, governance, EU Cohesion policy
    JEL: O25 O30 R58
    Date: 2021–05

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