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The Democracy Effect: a weights-based identification strategy

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  • Pedro Dal Bo
  • Andrew Foster
  • Kenju Kamei

Abstract

"Dal BÛ, Foster and Putterman (2010) show experimentally that the effect of a policy may be greater when it is democratically selected than when it is exogenously imposed. In this paper we propose a new and simpler identification strategy to measure this democracy effect. We derive the distribution of the statistic of the democracy effect, and apply the new strategy to the data from Dal BÛ, Foster and Putterman (2010) and data from a new real-effort experiment in which subjectsí payoffs do not depend on the effort of others. The new identification strategy is based on calculating the average behavior under democracy by weighting the behavior of each type of voter by its prevalence in the whole population (and not conditional on the vote outcome). We show that use of these weights eliminates selection effects under certain conditions. Application of this method to the data in Dal BÛ, Foster and Putterman (2010) confirms the presence of the democracy effect in that experiment, but no such effect is found for the real-effort experiment."

Suggested Citation

  • Pedro Dal Bo & Andrew Foster & Kenju Kamei, 2019. "The Democracy Effect: a weights-based identification strategy," Working Papers 2019-4, Brown University, Department of Economics.
    • Handle: RePEc:bro:econwp:2019-4
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    Cited by:

    1. Kenju Kamei & Thomas Markussen, 2023. "Free Riding and Workplace Democracy—Heterogeneous Task Preferences and Sorting," Management Science, INFORMS, vol. 69(7), pages 3884-3904, July.
    2. Yang, Xiaojun & Nie, Zihan & Qiu, Jianying & Tu, Qin, 2020. "Institutional preferences, social preferences and cooperation: Evidence from a lab-in-the-field experiment in rural China," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 87(C).
    3. Jacquemet, Nicolas & Luchini, Stéphane & Malézieux, Antoine, 2021. "Does voting on tax fund destination imply a direct democracy effect?," International Review of Law and Economics, Elsevier, vol. 67(C).
    4. Kamei, Kenju & Tabero, Katy, 2023. "Free Riding, Democracy and Sacrifice in the Workplace: Evidence from a Real Effort Experiment," MPRA Paper 119269, University Library of Munich, Germany.
    5. Sausgruber, Rupert & Sonntag, Axel & Tyran, Jean-Robert, 2021. "Disincentives from redistribution: evidence on a dividend of democracy," European Economic Review, Elsevier, vol. 136(C).
    6. Stein, Caroline & Untertrifaller, Anna, 2020. "The effect of ethical responsibility on performance," MPRA Paper 99176, University Library of Munich, Germany.
    7. Kenju Kamei, 2019. "Cooperation and endogenous repetition in an infinitely repeated social dilemma," International Journal of Game Theory, Springer;Game Theory Society, vol. 48(3), pages 797-834, September.
    8. Arno Apffelstaedt & Jana Freundt, 2022. "Corrupted Votes and Rule Compliance," ECONtribute Discussion Papers Series 137, University of Bonn and University of Cologne, Germany.
    9. Jensen, Thomas & Markussen, Thomas, 2021. "Group size, signaling and the effect of democracy," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 258-273.
    10. KAMEI Kenju, 2022. "Self-regulatory Resources and Institutional Formation: A first experimental test," Discussion papers 22084, Research Institute of Economy, Trade and Industry (RIETI).
    11. Mollerstrom, Johanna & Sunstein, Cass R., 2020. "How special is democracy?," Economics Letters, Elsevier, vol. 190(C).
    12. Fanny E. Schories, 2022. "The Influence of Indirect Democracy and Leadership Choice on Cooperation," Experimental Economics, Springer;Economic Science Association, vol. 25(4), pages 1173-1201, September.
    13. Kamei, Kenju, 2019. "Cooperation and Endogenous Repetition in an Infinitely Repeated Social Dilemma: Experimental Evidence," MPRA Paper 92097, University Library of Munich, Germany.
    14. Thomas Markussen & Jean-Robert Tyran, 2023. "Is There a Dividend of Democracy? Experimental Evidence from Cooperation Games," CESifo Working Paper Series 10616, CESifo.

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    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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