neighborhood information exchange and voter participation an experimental study we study the effect of social embeddedness on voter turnout by investigating the role of information about other voters decisions we do so in a participation game in which we distinguish between early and late voters each late voter is told about one early voter s turnout decision cases are distinguished where the voters are allies support the same group or adversaries with opposing preferences and where they are uncertain about each other s preferences our experimental results show that the social embeddedness matters this information increases aggregate turnout by approximately 50 the largest effect is observed for allies early voters strategically try to use their first mover position and late voters respond to this

labor supply at the extensive and intensive margins the eitc welfare and hours worked some previous studies have emphasized differences between labor supply responses on the extensive margin participation and intensive margin hours worked e g james j heckman 1993 jean kimmel and thomas j kniesner 1998 recent tax and welfare policy changes provide a potentially more convincing way of identifying these responses than is available in other nonexperimental data the earned income tax credit eitc changes during the 1990 1996 period sharply altered the budget sets of single mothers over a short period of time these changes in incentives are likely to be unrelated to differences across individuals in the desire to work and thus are likely to be exogenous to labor supply decisions this lack of exogeneity is harder to claim for wage differences across people which are the main alternative source of identifying variation in addition to preference heterogeneity wages are driven by supply and demand factors that one must account for to obtain valid estimates using wage variation the eitc unequivocally encourages single parents to work at least some hours during a year because it shifts out the budget set at all positive hours points this first prediction is clearly confirmed by the data in addition theory implies that the eitc will decrease hours worked among those already working because most recipients are on the plateau or phase out portions of the credit schedule for these recipients the eitc reduces or does not affect the after tax wage while at the same time discouraging work through the income effect of the credit payment however recent hours worked patterns for eitc eligible individuals do not appear to fit this second prediction hours and weeks worked by likely recipient groups have not fallen this paper analyzes this puzzling finding building on earlier work by nada eissa and jeffrey liebman 1996 and meyer and dan t rosenbaum 1999 this study shows that nearly all of the laborsupply adjustment of single mothers occurs at the extensive margin not the intensive margin this finding raises the issue of what model features are needed to explain both participation and hours but leaves the answer to be provided in future work this finding also suggests that the large literature simulating alternative policies for low wage workers such as the eitc may be misleading because nearly all work has used models that imply similar responses on participation and hours margins

a theory of voting equilibria a voting equilibrium arises when the voters in an electorate acting in accordance with both their preferences for the candidates and their perceptions of the relative chances of various pairs of candidates being in contention for victory generate an election result that justifies their perceptions voting equilibria always exist and the set of equilibria can vary substantially with the choice of voting system we compare equilibria under the plurality rule approval voting and the borda system we consider a candidate positioning game and find that the plurality rule imposes little restriction on the position of the winning candidate in three candidate races while approval voting leads to a winner positioned at the median of the voter distribution we contrast campaign activities intended to influence voter preferences with activities meant to influence only perceptions of candidate viability

information and incentives the agency information problem this paper considers the use of imperfect information for risk sharing and incentive purposes when perfect observation of actions and outcomes is impossible making complete contracting infeasible the incentive insurance problem is defined to consist of two parts the choice of an information system and the design of a sharing rule based on the information system a generalized agency model is formulated to analyse this problem the agency models of ross 1973a b wilson 1968 stiglitz 1974 mirrlees 1976 harris and raviv 1979 holmstrom 1979 a o appear as special cases of the generalized model the analysis focuses on the value of information in the agency information problem the set of information systems which are valuable i e improve risk sharing and incentives in a pareto sense is characterized a problem independent ranking of information systems for the agency information problem is then characterized under the assumption that the agent s preferences are additive in money and actions the ranking may be viewed as a generalization of blackwell s ranking of information systems for decision problems to this particular game when the agent s risk preferences depend on his choice of action on the other hand it is shown that the blackwell ranking may be invalid randomized incentive schemes are shown to be efficient when the incentive effect of risk is positive and sufficiently large relative to the absolute risk aversion of the partners

e ztax tax salience and tax rates this paper examines whether the salience of a tax system affects equilibrium tax rates i analyze how tolls change after toll facilities adopt electronic toll collection etc drivers are substantially less aware of tolls paid electronically i estimate that in steady state tolls are 20 to 40 percent higher than they would have been without etc consistent with a salience based explanation for this toll increase i find that under etc driving becomes less elastic with respect to the toll and toll setting becomes less sensitive to the electoral calendar alternative explanations appear unlikely to be able to explain the findings

reforming taxes and raising revenue part of the fiscal solution this paper reviews the fiscal outlook in the united states discusses why revenue increases are a critical aspect of any enduring fiscal solution and outlines constructive policies to reform the tax system and simultaneously raise revenues in particular this paper highlights the merits of curtailing income tax expenditures introducing a value added tax and imposing levies on consumption and production of non renewable energy copyright 2011 oxford university press

the illusory effects of saving incentives on saving the authors evaluate research on how tax based saving incentives iras and 401 k s affect saving previous research overstates the impact of the incentives on saving by failing to account for several issues households with saving incentives have stronger tastes for saving than others saving incentives have interacted with debt nonfinancial assets financial markets and pensions and saving incentives represent pretax balances whereas taxable accounts represent posttax balances accounting for these issues essentially eliminates the impact of saving incentives on saving the authors conclude that little if any of the contributions to existing saving incentives have raised saving

fuel taxes an important instrument for climate policy abstract this article shows that fuel taxes serve a very important role for the environment and that we risk a backlash of increased emissions if they are abolished fuel taxes have restrained growth in fuel demand and associated carbon emissions although fuel demand is large and growing our analysis shows that it would have been much higher in the absence of domestic fuel taxes people often assert that fuel demand is inelastic but there is strong research evidence showing the opposite the price elasticity is in fact quite high but only in the long run in the short run it may be quite inelastic which has important implications for policy makers had europe not followed a policy of high fuel taxation but had low us taxes then fuel demand would have been twice as large hypothetical transport demand in the whole oecd area is calculated for various tax scenarios and the results show that fuel taxes are the single most powerful climate policy instrument implemented to date yet this fact is not usually given due attention in the debate

signaling and election motivations in a voting model with common values and responsive candidates in this paper we focus on strategic voting behavior when both an election and a signaling motivation affect voters behavior we analyze a model of elections with two candidates competing on a one dimensional policy space voters are privately and imperfectly informed about a common shock affecting the electorate s preferences candidates are assumed to choose policy in response to information gleaned from election results and according to exogenous factors that may lead to polarization in candidates policy choices we analyze a subset of symmetric equilibria in which strategies are symmetric to candidates names and private signals css equilibria we show that signaling and election motivations pull voters to vote in different directions we provide conditions that show the relation between the amount of information aggregated in the election and the motivation that influences voting behavior the most finally we show that when candidates are responsive and polarized all css equilibria are inefficient in the limit

information aggregation through costly political action information about various policy alternatives is dispersed among the individual members of a society prior to a vote over the alternatives some people take costly political action to signal their private information to voters by informing voting decisions political action has potential to decrease the likelihood that voters cast mistaken votes perhaps surprisingly preelection communication may be counterproductive the dispersed information is partially aggregated by the vote and political action may contribute noise to the voting process in some cases the voting mechanism is more likely to implement the full information voting outcome in the absence of preelection political action copyright 1994 by american economic association

pivots versus signals in elections abstract we consider a two period model of elections in which voters have private information about their policy preferences a first period vote can have two types of consequences it may be pivotal in the first election and it provides a signal that affects candidates positions in the second election pivot events are exceedingly unlikely but when they occur the effect of a single vote is enormous in contrast vote totals always have some signaling effect but the effect of a single vote is small we investigate which effect pivot or signaling drives equilibrium voting behavior in large electorates

a theory of strategic voting in runoff elections abstract this paper analyzes the properties of runoff electoral systems when voters are strategic a model of three candidate runoff elections is presented and two new features are included the risk of upset victory in the second round is endogenous and many types of runoff systems are considered three main results emerge first runoff elections produce equilibria in which only two candidates receive a positive fraction of the votes second a sincere voting equilibrium does not always exist finally runoff systems with a threshold below 50 percent produce an ortega effect that may lead to the systematic victory of the condorcet loser jel c72 d72

how retirement saving programs increase saving this paper summarizes the authors work on the effect of ira and 401 k contributions on net personal saving they consider many different nonparametric approaches to controlling for heterogeneity in individual saving behavior and conclude that the weight of the available evidence suggests that contributions to both iras and 401 k s largely represent new saving the authors devote particular attention to reconciling their results with the findings in other studies that reach different conclusions sometimes using the same databases that the authors analyze methodological limitations that undermine the reliability of results in other studies explain many of these disparities

why vote for losers voting theory generally concludes that in first past the post elections all votes should go to effective candidates duverger s law and parties should adopt a similar platform median voter theorem however such predictions are not always met in practice we show why divergence and vote dispersion is a natural outcome when a parties are opportunistic b there is uncertainty on the position of the median voter and c elections are repeated voting for losers increases the informational content of elections and may induce mainstream parties to relocate towards extremists as a result to maximize their probability of being elected they do not adopt median

electoral competition and politician turnover abstract in this paper we analyze the selection by opportunistic parties of the candidates who run for election we consider a setting with incomplete but symmetric information about the candidates abilities in which electoral campaigns provide voters with additional information about candidates parties care only about selecting an appropriate candidate to win the election while voters elect the best candidate conditional on their information we first argue that in order to defeat an established very good candidate of its rival a party may favor a new candidate with highly uncertain ability rather than an established good candidate next we establish that the discrepancy between the objective of parties and the objective of the electorate leads to inefficient conservatism in the selection of candidates i e each party keeps its incumbents too often from the voters viewpoint

do political protests matter evidence from the tea party movement can protests cause political change or are they merely symptoms of underlying shifts in policy preferences this paper studies the effect of the tea party movement in the united states which rose to prominence through a series of rallies across the country on april 15 tax day 2009 to identify the causal effect of protests we use an instrumental variables approach that exploits variation in rainfall on the day of the coordinated rallies weather on tax day robustly predicts rally attendance and the subsequent local strength of the movement as measured by donations media coverage social networking activity and later events we show that larger rallies cause an increase in turnout in favor of the republicans in the 2010 congressional elections and increase the likelihood that incumbent democratic representatives retire incumbent policymaking is affected as well representatives respond to large protests in their district by voting more conservatively in congress finally the estimates imply significant multiplier effects for every protester republican votes increase by seven to fourteen votes together our results show that protests can build political movements that ultimately affect policy and they suggest that it is unlikely that these effects arise solely through the standard channel of private information revelation

information aggregation rationality and the condorcet jury theorem the condorcet jury theorem states that majorities are more likely than any single individual to select the better of two alternatives when there exists uncertainty about which of the two alternatives is in fact preferred most extant proofs of this theorem implicitly make the behavioral assumption that individuals vote sincerely in the collective decision making a seemingly innocuous assumption given that individuals are taken to possess a common preference for selecting the better alternative however in the model analyzed here we find that sincere behavior by all individuals is not rational even when individuals have such a common preference in particular sincere voting does not constitute a nash equilibrium a satisfactory rational choice foundation for the claim that majorities invariably do better than individuals therefore has yet to be derived

growth effects of flat rate taxes recent estimates of the potential growth effects of tax reform vary wildly ranging from zero to eight percentage points using an endogenous growth model we assess which model features and parameter values are important for determining the quantitative impact of tax reform we find that the critical parameters are factor shares depreciation rates the elasticity of intertemporal substitution and the elasticity of labor supply the elasticities of substitution in production on the other hand are relatively unimportant the quantitative estimates in several recent papers are compared with each other and with some of the evidence from u s experience we find that robert lucas s conclusion that tax reform would have little or no effect on the u s growth rate is theoretically robust and consistent with the evidence

economic effects of fundamental tax reform brookings institution the tax system profoundly affects countless aspects of private behavior it is a powerful policy influence on the distribution of income and it is the one aspect of government that almost every citizen cannot avoid with tax reform high on the political agenda this book brings together studies of leading tax economists and lawyers to assess the various reform proposals and examine the effects of tax reform in several distinct areas together these studies and comments on them present a balanced evaluation of professional opinion on the issues that will be critical in the tax reform debate the book addresses annual and lifetime distributional effects saving investment transitional problems simplification home ownership and housing prices charitable groups international taxation financial intermediaries and insurance labor supply and health insurance

divided majority and information aggregation theory and experiment this paper studies theoretically and experimentally the properties of plurality and approval voting when a majority gets divided by information imperfections the majority faces two challenges aggregating information to select the best majority candidate and coordinating to defeat the minority candidate under plurality the majority cannot achieve both goals at once under approval voting it can welfare is strictly higher because some voters approve of both majority alternatives in the laboratory we find i strong evidence of strategic voting and ii superiority of approval voting over plurality finally subject behavior suggests the need to study equilibria in asymmetric strategies

tax deductions tax credits and the homeownership rate of young urban adults in the united states the us president s advisory panel on federal tax reform has recommended changes to income tax concessions for homeowners consistent with the opinions of many economists the tax reform panel concl

information access and contributions a signaling model of lobbying interest groups pay monetary contributions to gain access and provide information to a policymaker if their interests are aligned with those of the policymaker s constituency they have costless access and report their private information truthfully if their interests conflict they are forced to pay a strictly positive contribution in order to enhance the credibility of their reports the policymaker bases her policy decision on the competing reports and the size of the contributions accompanying these reports the interest groups contribution decisions are plagued by a free rider problem i derive the implications of this problem for the size and pattern of contributions and for the degree of information aggregation

multicandidate elections aggregate uncertainty in the laboratory the rational voter model is often criticized on the grounds that two of its central predictions the paradox of voting and duverger s law are at odds with reality recent theoretical advances suggest that these empirically unsound predictions might be an artifact of an arguably unrealistic assumption the absence of aggregate uncertainty about the distribution of preferences in the electorate in this paper we propose direct empirical evidence of the effects of aggregate uncertainty in multicandidate elections adopting a theory based experimental approach we explore whether aggregate uncertainty indeed favors the emergence of non duverger s law equilibria in plurality elections our experimental results support the main theoretical predictions

the determination of performance standards and participation the purpose of this paper is to study the usefulness of performance standards it is often recommended that subordinates should participate in determining their own standards of performance the main reason being of a behavioral nature i shall demonstrate that there is also an economic rationale for this participation when the participation is used to convey information from a better informed subordinate to a lessinformed manager given that this information will be used for the subordinate s performance evaluation the subordinate has an obvious incentive to cheat in this reporting i construct an agency model which includes these reporting incentive problems and use it to study the effects of participation on the agency and the value of information systems to the agency throughout the analysis the agent will be kept at a constant level of utility so that the principal s utility becomes a measure of the agency s preferences thus reflecting pareto optimality the methodology in this paper is closely related to that of demski and feltham 1978 magee 1980 and baiman and demski 1980 magee 1980 in particular studied issues related to participation but he did not confine his study to pareto optimal contracts as will be the case in this paper in order to maintain a tractable problem many behavioral factors will be left outside the formal analysis despite the fact these have played a major role in the behavioral literature on participation cf argyris 1952 becker and green 1962 stedry 1960 and swieringa and moncur 1975

contracts without memory in multiperiod agency models abstract settings are considered in which optimal multiperiod contracts can have no memory i e where second period payments do not need to depend on first period outcomes if contracts have no memory a repeated agency game can be played myopically there are no gains to long term relationships conditions on preferences for a no memory contract are presented in an agency game with moral hazard on the act selection preference separability and domain additivity imply the existence of a no memory contract in a setting without moral hazard but with asymmetric information on the outcome domain additivity implies no memory

trust coordination and the industrial organization of political activism we study political activism by several interest groups with private signals when their ideological distance to the policymaker is small a low trust regime prevails agents frequently lobby even when it is unwarranted taking advantage of the cone rmation provided by others activism conversely the policymaker responds only to generalized pressure when ideological distance is large a high trust regime prevails lobbying behavior is disciplined by the potential contradiction from abstainers and the policymaker s response threshold is correspondingly lower within some intermediate range both equilibria coexist we then study the optimal organization of ine uence activities contrasting welfare levels when interest groups act independently and when they coordinate jel d72 d78 d82

a conversational war of attrition we explore costly deliberation by two differentially informed and possibly biased jurors a hawk lones and a dove moritz alternately insist on a verdict until one concedes debate assumes one of two genres depending on bias a juror say lones is intransigent if he wishes to prevail and reach a conviction for any type of moritz next to concede in contrast lones is ambivalent if he wants the strongest conceding types of moritz to push for acquittal both jurors are ambivalent with small bias or high delay costs as lones grows more hawkish he argues more forcefully for convictions mitigating wrongful acquittals if dovish moritz is intransigent then he softens strategic substitutes leading to more wrongful convictions ambivalent debate is new and yields a novel dynamic benefit of increased polarization for if moritz is ambivalent then he toughens strategic complements and so surprisingly a more hawkish lones leads to fewer wrongful acquittals and convictions so more polarized but balanced debate can improve communication unlike in static cheap talk we also show that patient and not too biased jurors vote against their posteriors near the end of the debate optimally playing devil s advocate we shed light on the adversarial legal system peremptory challenges and cloture rules

who votes more strategically strategic voting is an important explanation for aggregate political phenomena but we know little about how strategic voting varies across types of voters are richer voters more strategic than poorer voters does strategic behavior vary with age education gender or political leaning the answers may be important for assessing how well an electoral system represents different preferences in society we introduce a new approach to measuring and comparing strategic voting across voters that can be broadly applied given appropriate survey data in recent british elections we find that older voters vote more strategically than younger voters and that richer voters vote more strategically than poorer voters even as strategic behavior varies little across the education level the differences in strategic voting by age and income are smaller than observed differences in turnout by age and income but they tend to exacerbate these better known inequalities in political participation

land and power theory and evidence from chile many employment relationships concede rents to workers depending on the political institutions the presence of such rents allows employers to use the threat of withdrawing them to control their workers political behavior such as their votes in the absence of secret ballot we examine the effects of the introduction of the secret ballot in chile in 1958 on voting behavior before the reforms localities with more pervasive patron client relationships tended to exhibit a much stronger support for the right wing parties traditionally associ ated with the landed oligarchy after the reform however this difference across localities completely disappeared jel d72 n46 o13 o15 o17

elections with limited information a fulfilled expectations model using contemporaneous poll and endorsement data as information sources a one dimensional model of two candidate elections under asymmetric information is theoretically developed and experimentally tested candidates do not know voter utility functions and most voters are uninformed about candidate policy positions a fulfilled expectations equilibrium is defined using poll and endorsement data as information sources it is proved that with any positive fraction of informed voters any equilibrium extracts all available information all participants voters and candidates alike act as if they were fully informed for fixed candidate strategies a dynamic is given for convergence to voter equilibrium and this process is shown to imply a bandwagon effect

the informational role of supermajorities abstract we study a collective decision making environment where an agenda setter makes strategic proposals to privately informed voters who vote strategically we show that consistent with empirical evidence it can be optimal for the agenda setter to propose supermajorities due to an informational role that we unveil optimal supermajorities can be less costly than minimum winning coalitions even though more voters are awarded a positive share we also examine consequences in terms of quality of decision making we show that the introduction of a strategic agenda setter can lead to socially suboptimal decisions

proportional versus winner take all electoral vote allocations this paper considers how the welfare of voters is affected under an electoral college system when some state elects to award electoral votes in proportion to the number of votes received by each candidate rather than awarding all electoral votes to the winner of the state i show that a majority of voters in that state is made worse off as a result of the change i also give conditions under which voters in other states are made better or worse off as a result of the change

coordination focal points and voting in strategic situations a natural experiment this paper studies coordination in a multi stage elimination tournament with large monetary incentives and a diversified subject pool drawn from the adult british population in the tournament members of an ad hoc team earn money by answering general knowledge questions and then eliminate one contestant by plurality voting without prior communication we find that in the early rounds of the tournament contestants use a focal principle and coordinate on one of the multiple nash equilibria in pure strategies by eliminating the weakest member of the team however in the later rounds contestants switch to playing a mixed strategy nash equilibrium

public protests and policy making technological advances and the development of social media have made petitions public protests and other form of spontaneous activism increasingly common tools for individuals to influence decision makers to study these phenomena in this article i present a theory of petitions and public protests that explores their limits as mechanisms to aggregate information the key assumption is that valuable information is dispersed among citizens through petitions and protests citizens can signal their private information to the policy maker who can then choose to use it or not i first show that if citizens individual signals are not sufficiently precise information aggregation is impossible no matter how large is the population of informed citizens even if the conflict with the policy maker is small i then characterize the conditions on conflict and the signal structure that guarantee information aggregation when these conditions are satisfied i show that full information aggregation is possible as the population grows to infinity when they are not satisfied i show that information aggregation may still be possible if social media are available

protests and trust in the state evidence from african countries this paper provides empirical evidence that after protests citizens substantially revise their views on the current leader but also their trust in the country s institutions the empirical strategy exploits variation in the timing of an individual level survey and the proximity to social protests in 13 african countries first we find that trust in political leaders strongly and abruptly decreases after protests second trust in the country monitoring institutions plunges as well both effects are much stronger when protests are repressed by the government as no signs of distrust are recorded even a couple of days before the social conflicts protests can be interpreted as sudden signals sent on a leaders actions from which citizens extract information on their country fundamentals

inequality lobbying and resource allocation this paper describes how wealth inequality may distort public resource allocation a government seeks to allocate limited resources to productive sectors but sectoral productivity is privately known by agents with vested interests in those sectors they lobby the government for preferential treatment the government even if it honestly seeks to maximize economic efficiency may be confounded by the possibility that both high wealth and true economic desirability create loud lobbies broadly speaking both poorer economies and unequal economies display greater public misallocation the paper warns against the conventional wisdom that this is so because such governments are more corrupt jel d72 d78 d82 016 in this paper we propose a particular channel through which wealth inequality distorts the resource allocation process our analysis rests on four premises

abstention and signaling in large repeated elections abstract i consider a two period model of repeated elections in which politicians update their beliefs about the preferences of the voters after the first period election and set second period policies accordingly when voting is costless a positive fraction of voters abstains for any finite population but abstention vanishes in the limit of an arbitrarily large election i demonstrate that in large elections a single vote changes second period policies by an amount exponentially large compared to the probability of influencing the first period election if the probabilities with which voters vote for the two candidates differ using this i prove that the limiting voting behavior in the first election is independent of the first period policy choices of the candidates the incentive to vote to signal one s preferences thus dominates the incentive to vote to increase the chances of electing one s preferred candidate

pandering and electoral competition abstract we study an election with two perfectly informed candidates voters share common values over the policy outcome of the election but possess arbitrarily little information about which policy is best for them voters elect one of the candidates effectively choosing between the two policies proposed by the candidates we explore under which conditions candidates always propose the voters optimal policy the model is extended to include strategic voting policy motivated candidates imperfectly informed candidates and heterogeneous preferences

moral hazard economic meaning of the conditions justifying the first order approach abstract it is shown that the condition justifying the use of the agent s first order condition to describe his optimal action in a principal agent situation with pure moral hazard is related to but not the same as diminishing returns to effort examples are provided to illustrate the joint implications for the production function the nature of the underlying uncertainty and the disutility of effort

information aggregation in debate who should speak first abstract privately informed individuals speak openly in front of other members of a committee about the desirability of a public decision each individual wishes to appear well informed for any given order of speech committee members may herd by suppressing their true information with individuals of heterogeneous expertise optimizing over the order of speech can improve the extraction of information but not perfectly so it is not always optimal to use the common anti seniority rule whereby experts speak in order of increasing expertise a committee with more able experts may be afflicted by greater herding problems yielding a worse outcome

simulating fundamental tax reform in the united states this paper uses a new large scale dynamic life cycle simulation model to compare the welfare and macroeconomic effects of transitions to five fundamental alternatives to the u s federal income tax including a proportional consumption tax and a flat tax the model incorporates intragenerational heterogeneity and a detailed specification of alternative tax systems simulation results project significant long run increases in output for some reforms for other reforms namely those that seek to insulate the poor and initial older generations from adverse welfare changes long run output gains are modest

voting as communicating mandates multiple candidates and the signaling voter s curse abstract in this spatial model of common value elections votes convey citizens private opinions regarding which policies are socially optimal and the winning candidate utilizes this information in choosing policy in equilibrium large margins of victory convey mandates for candidates to make bold policy changes to communicate extreme policy views citizens support extreme parties that may be unlikely to win office to convey moderate views citizens deliberately abstain from voting thereby avoiding the signaling voter s curse of encouraging overextremism in large elections mandates can identify the optimal policy from an entire continuum thereby greatly strengthening condorcet s 1785 classic jury theorem behavioral patterns are consistent with otherwise puzzling empirical features of elections and can also apply to other political activities such as public protests or writing letters to elected officials

optimal allocation and backup of computer resources under asymmetric information and incentive incompatibility abstract this paper presents the optimal allocation and backup of computing resources in a multidivisional firm in the presence of asymmetric information and incentive incompatibility a game theoretic model is developed and transformed to a linear programming problem the solution to this linear programming problem enables the corporate headquarters to design a resource allocation scheme such that the revelation principle prevails and all divisions tell the truth to cope with the combinatorial explosion of complexity caused by the resource constraint a greedy type algorithm and an averaged version of the original linear programming problem are developed to provide the upper and lower bounds the greedy type algorithm generates exact solutions for a wide range of instances the lower bounds coincide with the exact solutions for the cases where the computer resource is either scarce or abundant the averaged version resource allocation model with slight modifications solves the optimal computer backup capacity problem it determines how much back up capacity the firm should purchase when the firm s computer breaks down

collective action with uncertain payoffs coordination public signals and punishment dilemmas how can one analyze collective action in protests or revolutions when individuals are uncertain about the relative payoffs of the status quo and revolution we model a calculus of protest of individuals who must either submit to the status quo or support revolt based only on personal information about their payoffs in deciding whether to revolt the citizen must infer both the benefit of successful revolution and the likely actions of other citizens we characterize conditions under which payoff uncertainty overturns conventional wisdom a when a citizen is too willing to revolt he reduces the incentives of others to revolt b less accurate information about the value of revolution can make revolt more likely c public signals from other citizens can reduce the likelihood of revolt d harsher punishment can increase the incidence of punishment and e the incidence of protest can be positively correlated with that of repression

voting as communicating this paper develops a model where voters trade off two different motives when deciding how to vote they care about current decision making they are strategic but they also care about communicating their views about their most preferred candidate so as to influence future elections by influencing other voters opinion and or party positioning in effect voters in this model are intermediate between strategic and sincere voters of conventional models in elections with more than 2 candidates this allows us to better investigate the relative efficiency of various electoral systems our main conclusion is that since voting is used as a communication device electoral systems should be designed to facilitate efficient communication e g by opting for 2 round systems rather than 1 round systems

informational limits to democratic public policy the jury theorem yardstick competition and ignorance condorcet s jury theorem provides a possible explanation for the success of democracies relative to other forms of government in its modern form the jury theorem predicts that majority decisions are well informed because they are based upon far more information than possessed by any single individual on the other hand it is evident that democratic politicians and policies are not always as good as the jury theorem implies they should be

comparing electoral systems a geometric analysis this paper constructs a game theoretic model of elections inalternative electoral systems with three or four candidates each electoral system specifies how the platforms of thecandidates and their scores give rise to an outcome whengeometrical analysis shows that two outcomes can competeagainst each other for victory a pivot probability isassociated to that pair each voter is rational and picks thecandidate that maximizes her expected utility which resultsfrom the balancing of her preferences and beliefs about thepivot probabilities candidate positioning is endogenous andthe result of a nash game the possible equilibria arecomputed for plurality and runoff majority systems

information cascades and revolutionary regime transitions we combine acemoglu and robinson s model of the economic origins of democracy with lohmann s model of political mass protest this allows us to analyse the economic causes of political regime change based on the microfoundations of revolution we are able to derive conditions under which democracy arises peacefully when it occurs only after a revolution and when oligarchy persists we model these possibilities in a world of asymmetric information where information cascades are possible and where these cascades may involve errors in the sense that they make everyone worse off

when the squeakiest wheel gets the most oil exploiting one s nuisance power abstract in this paper a lobby group or union may influence public policy because it is able via a costly signal such as a boycott or a strike to negatively impact the image of decision makers the competence of a government is measured by its ability to do a lot with only a little money voters receive through observing the level of public output only a noisy signal of government s quality so that the lobby groups which are better informed may transmit to them more precise information about it we show that when unions are unbiased i e have no hostility against or sympathy for the incumbent government strikes may occur only when the government is bad consequently a strike in this case acts as a clear though costly signal to the public of an incompetent government when some or all unions or lobby groups are biased against the incumbent government we show that the possibility of strikes may distort the budget allocation away from the efficient one bad governments have a tendency to favor their political enemies while good governments favor their political enemies only when they are not overly biased

lifetime incidence and the distributional burden of excise taxes this implies that low income households in one year have some chance of being higher income households in other years and significantly affects the estimated distributional burden of excise taxes this paper shows that household expenditures on gasoline alcohol and tobacco as a share of total consumption a proxy for lifetime income are much more equally distributed than expenditures as a share of annual income from a longer horizon perspective excise taxes on these goods are therefore much less regressive than standard analyses suggest this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

the primary effect preference votes and political promotions we analyze how electoral rules and outcomes shape the internal organization of political parties theoretically we make an analogy with primary elections to argue that parties use preference vote tallies to identify popular politicians and promote them to positions of power empirically we document this behavior among parties in sweden s semi open list system and in brazil s open list system to identify a causal impact of preference votes we exploit a regression discontinuity design around the threshold of winning the most preference votes on a party list in our main case sweden these narrow primary winners are at least 50 more likely to become local party leaders than their runners up across individual politicians the primary effect is present only for politicians who hold the first few positions on the list and when the preference vote winner and runner up have similar competence levels across party groups the primary effect is the strongest in unthreatened governing parties

the effects of pensions on household wealth a reevaluation of theory and evidence this paper examines the extent to which households offset pension wealth with reductions in other wealth systematic econometric biases imply that the estimated offsets in previous empirical studies are smaller than the true offset and may even have the wrong sign new empirical estimates that do not correct for the biases generate little offset between pensions and other wealth estimates that correct for the biases show substantially more offset a smaller impact of pensions on overall saving than in most previous studies the estimates also indicate that the effects of pensions on wealth vary significantly across households

polarization and inefficient policies of the economy in this case the costs of producing a public good the parties each propose a policy an election is held and the policy of the winning party is implemented voters and parties care about the level of the public good and costs two kinds of sequential equilibria exist revealing where voters learn the true costs and the implemented policy adjusts to costs and non revealing if parties preferences are polarized only non revealing equilibria fulfill a refinement criterion like the intuitive criterion if they are alike only revealing equilibria fulfill this criterion thus less political polarization improves information revelation in electoral democracies policy motivated parties are likely to be better informed about the functioning of the economy than are voters this paper presents a model where two parties but not voters are informed about the cost of producing a public good we study whether an electoral democracy leads to efficient production of the public good given this asymmetry of information in particular under which circumstances will the implemented policy the level of the public good reflect actual costs the main result is that the policy will reflect costs if and only if at least one of the parties has preferences which are sufficiently similar to the median voter s in this sense polarization leads to inefficiency the public good can be for instance infrastructure medicare or military services both a continuum of voters and the parties have preferences over the amount of the good that is provided by the government the preferences of the two parties are situated on each side of those of the median voter the costs of providing the good are not precisely known to the voters who only know the distribution of costs and that they will pay for these costs as taxpayers on the other hand the parties know the costs

on the theory of strategic voting many analyses of plurality rule elections predict the complete coor dination of strategic voting and hence support for only two candidates here i suggest that stable multi candidate support will arise in equilibrium a group of voters must partially coordinate behind one of two challenging candidates in order to dislodge a disliked incumbent in a departure from existing models the popular support for each challenger is uncertain this support must be inferred from the private observation of informative signals such as the social communication of pref erences throughout the electorate or the imperfect observation of opinion polls the uniquely stable voting equilibrium entails only limited strategic voting and hence incomplete coordination this is due to the surprising presence of negative feed back an increase in the degree of strategic voting by others reduces the incentives for an individual to vote strategically the incentive to vote strategically is lower in relatively marginal elections after controlling for the distance from contention of a trailing preferred challenger a calibration of the model applied to the uk general election of 1997 is consistent with the impact of strategic voting and the reported accuracy of voters understanding of the electoral situation it suggests that nearly 50 seats may have been lost by the conservative party due to strategic voting 1 plurality rule elections and strategic voting 1 1 strategic voting and duverger s law plurality rule elections where the winner is the candidate who receives the largest number of votes are vulnerable to strategic voting a voter might well switch away from her preferred candidate and toward a perceived leader in the hope of exerting a greater influence over the outcome of the election this phenomenon has long been the focus of both economic and political scientific study in an influential essay riker 1982b cited droop s 1871 eloquent exposition of the strategic voting problem 1 i oer my grateful thanks to the many friends colleagues seminar participants referees and editors who have oered insightful comments during the long gestation of this paper its antecedents and companion work special thanks go to steve fisher whose empirical analysis of strategic voting raised many of the questions that i seek to answer in this paper and to chris wallace this particular paper brings together much of the analysis previously circulated in the papers a new theory of strategic voting strategic voting under the qualified majority rule and idiosyncrasy information and the impact of strategic voting

resistance redistribution and investor friendliness abstract poor communities sometimes resist private investment and destroy economic surplus even if the government has the willingness and ability to redistribute we interpret such acts of resistance as demands for redistribution destruction contains credible information about how the affected group values surplus and such information is used by the government in implementing the optimal redistribution policy the extent of destruction is increasing in the extent of political marginalization of the affected group resistance not only destroys economic surplus it also mutes the investor s incentives to create surplus the government uses a tax subsidy on the investor to maximize weighted social surplus and we show that the possibility of destruction may force the government to be too soft in its negotiations with the investor we discuss several policy instruments that have the potential to improve welfare these include compensation floor for the affected group legal or financial protection for the investor and licensing fees for the investor

information aggregation in polls we study information transmission via polling a policymaker polls constitu ents who differ in their information and ideology to determine policy full rev elation is an equilibrium in a poll with a small sample but not with a large one in large polls full information aggregation can arise in an equilibrium where constituents endogenously sort themselves into centrists who respond truth fully and extremists who do not we find polling statistics that ignore strate gic behavior yield biased estimators and mischaracterize the polvs margin of error we construct estimators that account for strategic behavior finally we compare polls and elections jel c42 d83

polling games and information revelation in the downsian framework abstract we investigate the incentives faced by poll respondents when candidates use polling data to inform their selection of policy platforms focusing on models with a unidimensional policy space single peaked preferences and two office seeking candidates observing a summary statistic from polls that ask respondents their preferences we find that for most environments honest poll response cannot occur in a perfect bayesian equilibrium however simple partially revealing equilibria exist when the poll only asks respondents which party or candidate they prefer when the candidates learn the sample average or see all the data there are partially revealing equilibria that mimic those of the binary message game interpretation of polling data requires knowledge of the equilibrium played as the meanings of poll responses are endogenously determined the analysis suggests that naive use of polling data may be misleading

sequential voting in large elections with multiple candidates abstract i analyze strategic voting incentives in large elections with three candidates when voting takes place sequentially voters have perfect information about their private preferences but do not know the distribution from which other voters preferences are drawn if a candidate finishes last in an early voting round voters deduce that this candidate is likely to be less popular amongst the remaining voters and the remaining voters almost always have an incentive to stop voting for this candidate by contrast sincere voting equilibria can exist under either simultaneous voting or an early voting round of sequential voting without knife edge assumptions

automobile externalities and policies this paper discusses the nature and magnitude of externalities associated with automobile use including local and global pollution oil dependence traffic congestion and traffic accidents it then discusses current federal policies affecting these externalities including fuel taxes fuel economy and emissions standards and alternative fuel policies summarizing insofar as possible the welfare effects of those policies finally we discuss emerging pricing policies including congestion tolls and insurance reform and summarize the appropriate combination of policies to address automobile externalities

campaign advertising and voter welfare this paper investigates the role of campaign advertising and the opportunity of legal restrictions on it an electoral race is modeled as a signalling game with three classes of players many voters two candidates and one interest group the group has non verifiable insider information on the candidates quality and on the basis of this information offers a contribution to each candidate in exchange for a favorable policy position candidates spend the contributions they receive on non directly informative advertising this paper shows that 1 a separating equilibrium exists in which the group contributes to a candidate only if the insider information about that candidate is positive 2 although voters are fully rational a ban on campaign advertising can be welfare improving and 3 split contributions may arise in equilibrium and if they arise too often they are detrimental to voters

asymmetric information and the electoral momentum of public opinion polls this paper demonstrates that the existence of public opinion polls amplifies the effects of shifts in the distribution of the public s preferences over the issue space on the election s results voters evaluate candidates by their positions on the issue space and by a valence or general ability dimension some individual s the informed have more precise information about the relative abilities of candidates than others the uninformed since public opinion polls reflect the information of the informed high approval for a candidate at the polls signals to the uninformed that he is more likely to be abler however high approval may also reflect changes in the distribution of the public on the issue space as a result the uninformed partly confuse the two effects and public opinion polls tend to reinforce the effects of shifts in the public s ideological preferences on election results a shift to the right that shows up as more support for the right wing candidate at the polls is partly interpreted as a higher efficiency of this candidate as a result he wins with a higher margin than the margin he would have won with in the absence of polls or under perfect information

optimal incentives and asymmetric distribution of information abstract the problem of designing optimal incentive schemes arises if information is asymmetrically distributed among individuals the existence and the welfare properties of optimal incentive schemes are discussed for cases where the information asymmetry refers either to the quality of a product or to the behaviour of an individual

politics and public goods in developing countries evidence from the assassination of rajiv gandhi abstract this paper employs an instrumental variables strategy to identify the effect of party ideology on policy outcomes exogenous variation in party representation is generated by the assassination of the leader of the congress party which occurred midway through india s national elections in 1991 and dramatically increased the probability of congress victory for a subset of constituencies representation by the congress party leads to a substantial increase in the provision of public goods favored by the poor consistent with the party s expressed populist agenda among the salient changes are increases in the availability of drinking water and primary education and declines in agricultural and industrial electrification and telephone coverage i compare these effects to those obtained using a regression discontinuity design and find that the latter yields little effect of congress representation on public goods allocations

wealth constraints lobbying and the efficiency of public allocation abstract in esteban and ray 1999 inequality public allocation and development mimeo we formalize a model in which individuals lobby before the government in order to benefit from some productivity enhancing government action infrastructures direct subsidies permissions in short the government honestly tries to allocate these permissions to the agents that will make the best use of them as revealed by the intensity of their lobbying if the marginal cost of resources varies with wealth the amount of information transmitted through lobbying will depend on the degree of inequality in this paper we summarize the main approach and examine the special case of equal wealth we show that the nature of signaling equilibria is critically affected by per capita wealth

welfare the earned income tax credit and the labor supply of single mothers during 1984 1996 welfare and tax policy were changed to encourage work by single mothers the earned income tax credit was expanded welfare benets were cut welfare time limits were added and welfare cases were terminated medicaid for the working poor was expanded as were training programs and child care during this same time period there were unprecedented increases in the employment and hours of single mothers we show that a large share of the increase in work by single mothers can be attributed to the eitc and other tax changes with smaller shares for welfare benet cuts welfare waivers training programs and child care programs