when today s rewards are tomorrow s endowments the effects of inequality on social competition abstract in this paper we study the role of inequality in a model of repeated social competition where endowments the resources used in the competition and rewards the resources obtained as prizes are connected because the rewards of today s competition determine the endowments of tomorrow s competition we find that the harshness of social competition is maximal for an intermediate level of inequality and that increasing or decreasing inequality beyond that level monotonically mitigates social competition up to completely eliminating it at the extremes if social competition is wasteful utilitarian welfare is maximized in case of equality a greater uncertainty about the connection between today s rewards and tomorrow s endowments mitigates social competition finally there emerge concerns for others resources that are downward and not upward with the value of high social standing which changes non monotonically in the resources of those with lower standing

a model of educational investment social concerns and inequality we consider a model in which educational investments entail productivity gains signaling power and social status the latter depends on the agent s relative achievement in one of three dimensions innate skills level of schooling and income we study the three scenarios separately and characterize the conditions under which social concerns increase or decrease educational and income inequality inequality increases decreases if education lowers the stigma suffered by low skilled workers less more than it boosts the prestige enjoyed by high skilled workers we discuss the expected results of some policies in light of these findings

dying to win olympic gold medals and longevity abstract this paper compares mortality between gold and silver medalists in olympic track and field to study how achievement influences health contrary to conventional wisdom winners die over one year earlier than losers i find strong evidence of differences in earnings and occupational choices as a mechanism losers pursued higher paying occupations than winners according to individual census records i find no evidence consistent with selection or risk taking how people respond to success or failure in pivotal life events may produce long lasting consequences for health

tax evasion on a social network abstract we relate tax evasion behavior to a substantial literature on social comparison in judgements taxpayers engage in tax evasion as a means to boost their expected consumption relative to others in their social network the unique nash equilibrium of the model relates optimal evasion to a bonacich measure of network centrality more central taxpayers evade more given that tax authorities are now investing heavily in big data tools that aim to construct social networks we investigate the value of acquiring network information we do this using networks that allow for celebrity taxpayers whose consumption is seen widely and who are systematically of higher wealth we show that there are pronounced returns to the initial acquisition of network information especially in the presence of celebrity taxpayers

marriage and managers attitudes to risk marital status can both reflect and affect individual preferences we explore the impact of marriage on corporate chief executive officers ceos and find that firms run by single ceos exhibit higher stock return volatility pursue more aggressive investment policies and do not respond to changes in idiosyncratic risk these effects are weaker for older ceos our findings continue to hold when we use variation in divorce laws across states to instrument for ceo marital status which supports the hypothesis that marriage itself drives choices rather than it just reflecting innate heterogeneity in preferences we explore various potential explanations for why single ceos may be less risk averse data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 1926 this paper was accepted by wei jiang finance

incentive effects of the u s welfare system a review the author would like to acknowledge support for prior work on this topic from the u s department of health and human services and helpful comments from three anonymous referees rebecca blank howard chernick john fitzgerald irwin garfinkel peter gottschalk edward gramlich david greenberg judith gueron james heckman v joseph hotz robert hutchens michael keane frank levy larry mead michael murray robert plotnick anuradha rangarajan philip robins howard rolston jeffrey smith and daniel weinberg all opinions and errors are those of the author alone

election goals and the allocation of campaign resources this paper compares the equilibrium behavior and outcomes in a model of two party competition for legislative seats under two different assumptions about the parties goals 1 parties maximize the expected number of seats won and 2 parties maximize the probability of winning a majority of the seats the two goals may lead to qualitatively different behavior and studying the differences yields insights into the relationship between the goals and the role of assymetries between the parties

the social basis of interdependent preferences abstract most economists are sympathetic to the idea that concerns for relative position are an important aspect of many economic problems there has traditionally been a reluctance to include such concerns primarily because models that included them often allow such a broad range of behavior that there are few if any restrictions on equilibrium behavior and hence such models would have little or no predictive power in this paper we discuss how reduced form models may naturally give rise to utility functions that depend in part on relative standing there are several advantages of modelling concern for relative standing in reduced form utility functions even when there is no similar concern in the deep preferences it provides structure and constraints on the way that relative standing affects utility and further it can yield testable implications about the way that changes in the underlying environment affect the concern for relative standing we discuss the advantages and disadvantages of modelling social concerns in this way and provide examples that illustrate how concerns for relative standing can affect savings investment and labor choice decisions

infrastructures and productivity in the spanish regions mas m maudos j perez f and uriel e 1996 infrastructures and productivity in the spanish regions reg studies 30 641 649 the aim of this paper is to analyse the role of public capital the types of infrastructures in which it is invested and their territorial distribution in the gains in productivity of the private sector in the spanish regions in the period 1964 91 using panel data techniques to control for unobserved state specific characteristics the results obtained show how the infrastructures most directly linked to the productive process present a significant and positive effect on productivity they also show the importance of the network effect of the infrastructures of a productive nature as well as a decrease in the elasticity associated with such infrastructures as development progresses mas m maudos j perez f et uriel e 1996 les infrastructures et la productivite aux regions espagnoles reg studies 30 641 649 cet article cherche a analyser le role du capital public les

a theory of tolerance abstract we propose a theory of tolerance where endogenous lifestyles and exogenous traits are invested with symbolic value by people value systems chosen by parents for their children affect the esteem enjoyed by individuals in society intolerant individuals attach all symbolic value to a small number of attributes and are irrespectful of people with different ones tolerant people have diversified values and respect social alterity we study the formation of values attached to various types of attributes and identify circumstances under which tolerance spontaneously arises policy may affect the evolution of tolerance in distinctive ways and there may be efficiency as well as equity reasons to promote tolerance an empirical investigation of tolerance of homosexuality demonstrates that our theory helps to shed light on survey data of endorsed values

a biological basis for expected and non expected utility abstract a biological model is developed here to determine the fittest attitude to risk with a fixed environment the type maximizing expected offspring is selected this yields the expected utility theorem when translated into a criterion for evaluating gambles over commodities with a random environment however the type selected is strictly less averse to idiosyncratic risk than to risk which is correlated across all individuals the implied criterion for choice over gambles does not satisfy the expected utility theorem and may induce choice of a gamble which is first order stochastically dominated journal of economic literature classification number d81

decision making under uncertainty and the evolution of interdependent preferences abstract this paper finds support for the evolution of interdependent preferences under natural selection from a perhaps surprising source decision making under uncertainty individuals choose from sets of risky alternatives the lotteries may involve either idiosyncratic risk or aggregate uncertainty or both robson j econ theory 68 1996 397 424 gives the evaluation criterion for lotteries that maximizes reproductive value and shows that it does not satisfy the expected utility theorem cooper and kaplan j theoret biol 94 1982 135 151 have demonstrated that when lotteries are aggregate the optimal decision rule involves randomization this paper reexamines robson s evaluation criterion using it to solve for the optimal amount of randomization the solution is characterized and an interpretation is offered that links maximizing reproductive value to maximizing expected relative offspring it is shown that when agents preferences arise from their own offspring relative to the average within the population a game is constructed out of the choice of lotteries and that the unique nash equilibrium distribution of actions maximizes reproductive value journal of economic literature classification numbers c72 d71 d81

congestion function specification and the publicness of local public goods abstract this paper is about the measurement of congestion within the median voter demand framework the model of congestion traditionally used in the literature and four others are compared and tested in a median voter framework the results show that a more flexible functional form which imposes fewer a priori restrictions on the data does at least as good a job of explaining variations in local government expenditures furthermore it is shown that measured publicness of local public goods depends entirely on the a priori restrictions imposed on the congestion function

status seeking and material affluence evaluating the hirsch hypothesis abstract when individuals hold a preference for high relative consumption competition to achieve social status can lead to inefficiently high levels of production and consumption contributing to natural resource depletion and environmental degradation in the 1970s fred hirsch argued that an increasing portion of expenditure is allocated to status seeking as average income rises this paper critiques this hypothesis from two points of view first we note examples from the historical and anthropological literatures suggesting that status seeking is often important in societies with relatively low incomes second we consider a set of analytical models that focus on the economic consequences of status seeking when social status is defined in terms of the algebraic difference between an individual s consumption of a status good and the average consumption level in society hirsch s hypothesis holds true and growth in the level of productivity and output can lead to declines in human welfare if on the other hand status is linked to the ratio of individual and average consumption hirsch s hypothesis is valid only if social status and non status goods are poor substitutes the paper also considers two cases in which social status is defined in terms of the amount of time people devote to status oriented activities under this assumption productivity growth leaves time use unchanged though the value of time devoted to status signaling increases in proportion to total expenditure

the regional allocation of infrastructure investment the role of equity efficiency and political factors abstract this paper analyses the main determinants of the regional allocation of infrastructure investment the estimated investment equation is derived from a general specification of the government s objective function berhman and craig am econom rev 77 1987 315 which accounts both for the equity efficiency trade off and for deviations from this rule that arise because of political factors the reaction of investment to changes in the regional output provides information about the strength of the equity efficiency trade off the main political factor considered is a measurement of the electoral productivity of funds invested in each region the equation is estimated from panel data on investment and the capital stock of transportation infrastructure i e roads rails ports and airports for the spanish departments nuts3 during the period 1987 1996 we use a dynamic specification of the equation that allows for slow adjustment and which is estimated by gmm methods arellano and bond rev econom stud 58 1991 277 the results suggest that efficiency criteria play only a limited role in the geographical distribution of government infrastructure investment specific regional infrastructure needs and political factors both appear to be factors that do explain the regional allocation of infrastructure investment

on the vote purchasing behavior of incumbent governments a couple of months before the swedish election in 1998 the incumbent government distributed 2 3 billion sek to 42 out of 115 applying municipalities this was the first wave of a four year long grant program intended to support local investment programs aimed at an ecological sustainable development this temporary grant program differs from traditional intergovernmental grants in several aspects most importantly in the sovereign decision making power given to the incumbent central government in this paper we investigate whether there were any tactical motives behind the distribution of these grants we find support for the hypothesis that the incumbent government used the grant program under study in order to win votes in particular we find strong support for the lindbeck weibull dixit londregan model in which parties distribute transfers to regions where there are many swing voters this result is statistically as well as economically significant we do however not find any support for the model that predicts that the incumbent government transfer money to its own supporters

social status in economic theory social distinction or status is an important motivation of human behaviour this paper provides a selective survey of recent advances in the economic analysis of the origins and consequences of social status concerns first a selection of empirical research from a variety of scientific disciplines is discussed to underpin the further theoretical analysis i then consider the origins and determinants of tastes for status discuss the endogenous derivation of such preferences for relative standing and assess the different formalizations of these preferences subsequently the consequences of preferences for status are studied for a variety of problems and settings the last section discusses a number of implications of status concerns for normative economics and public policy

life cycle consumption under social interactions abstract in this paper we examine how social interactions affect consumption decisions at various levels of aggregation in a life cycle economy made up of peer groups for this purpose we consider two analytically solvable life cycle models one under certainty equivalent behavior and one under prudence and explicitly allow for three different forms of social interactions in peer groups namely conformism altruism and jealousy we show that whether social interactions have any effects on individuals optimal consumption decisions critically depends on intertemporal rather than static considerations this is true regardless of whether individuals preferences are time separable or exhibit habit formation and whether information within peer groups is homogeneous or disparate it implies that analyzing the effects of social interactions in static rather than intertemporal settings is likely to be misleading we also show that social interactions when coupled with either habit formation or prudence can significantly strengthen the effects of habit formation or prudence in the direction of resolving two well known puzzles in the literature on the permanent income hypothesis namely excess smoothness and excess sensitivity

does electoral accountability affect economic policy choices evidence from gubernatorial term limits this paper analyzes the behavior of u s governors from 1950 to 1986 to investigate a reputation building model of political behavior we argue that differences in the behavior of governors who face a binding term limit and those who are able to run again provides a source of variation in discount rates that can be used to test a political agency model we find evidence that taxes spending and other policy instruments respond to a binding term limit if a democrat is in office the result is a fiscal cycle in term limit states which lowers state income when the term limit binds

divided government fiscal institutions and budget deficits evidence from the states does partisan control of american state government have systematic effects on state spending and taxing levels does divided control affect the government s ability to make hard decisions do institutional rules like legal deficit carryover restrictions matter using a formal model of fiscal policy to guide empirical analysis of data covering the american states from 1968 to 1987 we conclude that 1 aggregate state budget totals are driven by different factors under democrats and republicans the net result being that democrats target spending and taxes to higher shares of state level personal income 2 divided government is less able to react to revenue shocks that lead to budget deficits particularly where different parties control each chamber of the legislature and 3 unified party governments with restricted ability to carry deficits into the next fiscal year outside the south have sharper reactions to negative revenue shocks than those without restrictions

social norms and random matching games abstract nash equilibrium has been tremendously useful in understanding economic problems in which strategic behavior is important the theoretical foundations of the solution concept often include the assumption that the game to be played is common knowledge an unrealistic assumption in games with many players we introduce the concept of norm equilibrium for random matching games a norm equilibrium is a nash equilibrium that relies on substantially less information than common knowledge of the game we use norm equilibria to provide a folk theorem for random matching games and to analyze increasing numbers of players in a random matching game journal of economic literature classification numbers c70 c72

inequality and growth in the presence of competition for status abstract we investigate a simple endogenous growth model where agents care about their social status as greater equality tends to provide greater incentives to differentiate oneself redistribution may increase wasteful competitive consumption and lead to lower growth

migration for degrading work as an escape from humiliation this paper develops a model of voluntary migration into degrading work the essence of the model is a tension between two bads that which arises from being relatively deprived at home and that which arises from engaging in humiliating work away from home balancing between these two bads can give rise to an explicit voluntary choice to engage in humiliating work the paper identifies conditions under which a migrant will choose to engage in degrading work rather than being forced into it to work abroad as a prostitute say rather than on a farm the paper delineates the possible equilibria and finds that greater relative deprivation will make it more likely that the equilibrium outcome will be engagement in prostitution it is shown that under well specified conditions every individual will work as a prostitute yet every individual would be better off working on a farm put differently when specific conditions are satisfied there is a possibility of a coordination failure if individuals believe that everyone else will choose to be a prostitute this belief will be self fulfilling in this case all the individuals choose to engage in prostitution which renders each of them worse off the paper discusses various policy implications it is shown that a policy intervention a crackdown on migrants engagement in prostitution if implemented strictly can increase everyone s welfare but when the policy is implemented loosely cracking down on prostitution will only reduce individuals welfare without reducing their engagement in prostitution

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

first in village or second in rome though individuals prefer high quality peers there are advantages to being high up in the pecking order within a group in this environment sorting of agents yields an overlapping interval structure in the type space segregation and mixing coexist in a stable equilibrium with transfers this equilibrium corresponds to a competitive equilibrium where agents bid for relative positions and entails less segregation than the efficient allocation more egalitarianism within organizations induces greater segregation across organizations but can improve the allocation efficiency since competition is most intense for intermediate talent effective personnel policies differ systematically between high quality and low quality organizations

public investment in infrastructure in a simple growth model abstract in this paper we examine the implications for capital accumulation when infrastructure enters as an external input into private production functions in our model infrastructure is nonexclusive but may exhibit varying degrees of nonrivalry revenues from uniform taxes on capital and labor income are used to finance public investment in infrastructure we show that the optimal tax rate is independent of the degree of nonrivalry when production exhibits constant returns to augmentable factors the equilibrium displays constant growth for most parameters the growth rate depends on the population size under decreasing returns the optimal trajectory exhibits monotonic convergence to a steady state level

radio s impact on public spending if informed voters receive favorable policies then the invention of a new mass medium may affect government policies since it affects who is informed and who is not these ideas are developed in a voting model the model forms the basis for an empirical investigation of a major new deal relief program implemented in the middle of the expansion period of radio the main empirical finding is that u s counties with many radio listeners received more relief funds more funds were allocated to poor counties with high unemployment but controlling for these and other variables the effects of radio are large and highly significant

striking at the roots of crime the impact of welfare spending on crime during the great depression abstractduring the great depression contemporaries worried that people hit by hard times would resort to crime president franklin roosevelt argued that the massive government relief efforts struck at the roots of crime by providing subsistence income to needy families after constructing a panel data set for 81 large american cities for the years 1930 40 we estimate the effect of relief spending by all levels of government on crime rates the analysis suggests that a 10 percent increase in relief spending during the 1930s reduced property crime by roughly 1 5 percent by limiting the amount of relief recipients free time work relief may have been more effective than direct relief in reducing crime more generally our results indicate that social insurance which tends to be understudied in economic analyses of crime should be more explicitly and more carefully incorporated into the analysis of temporal and spatial variations in criminal activity

response to aristocratic equilibria a major point of cole mailath and postlewaite 1992 is that the existence of nonmarket decisions leads naturally to multiple equilibria and consequently the possibility that ex ante identical societies might exhibit different patterns of economic growth it was further argued that the multiplicity was not driven by technical aspects of the model but arose naturally from the economic structure of the problem in that paper we focused on two particular types of equilibria wealth isstatus and aristocratic unfortunately the argument in that paper for the existence of aristocratic equilibria is incorrect as the comment by steven landsburg points out landsburg does provide a condition condition 1 there is a positive measure of males with zero wealth that guarantees the existence of aristocratic equilibria the purpose of this response is first to argue that the existence of aristocratic equilibria in environments not covered by condition 1 is important and second to demonstrate by example that aristocratic equilibria do exist in some such environments the reason that aristocratic equilibria exist in a narrower set of environments than wealth is status equilibria is easy to understand in wealth is status equilibria women always accept the offer made by the wealthiest suitor and the parents matching as opposed to saving behavior has no impact on the ability of a son to match with a highendowment woman loosely speaking wealth is status equilibria involve myopically optimal or markovian behavior behavior that depends on only the payoff relevant aspects of history other equilibria in contrast require some degree of intergenerational enforcement since in such equilibria some women will be accepting offers to match from men other than the wealthiest suitor such behavior can be optimal only if deviations from the prescriptions of the social norm result in future negative consequences e g a loss of

forced gifts the burden of being a friend abstract in many developing countries gift expenses escalate with income growth and account for a substantial share of household expenditure we develop a theoretical model to demonstrate how unequal income growth may trigger gift competition and drive up the financial burden associated with gift exchange we use unique census type panel data from rural china to test our model predictions and demonstrate that 1 the value of gifts responds to the average gift in the community 2 the escalation of gift giving may have adverse welfare implications especially for the poor and 3 escalating gift expenses crowd out expenditures on other consumption items

running to keep in the same place consumer choice as a game of status if individuals care about their status defined as their rank in the distribution of consumption of one positional good then the consumer s problem is strategic as her utility depends on the consumption choices of others in the symmetric nash equilibrium each individual spends an inefficiently high amount on the status good using techniques from auction theory we analyze the effects of exogenous changes in the distribution of income in a richer society almost all individuals spend more on conspicuous consumption and individual utility is lower at each income level in a more equal society the poor are worse off

dress to impress brands as status symbols abstract we analyzed the market for indivisible pure status goods firms produce and sell different brands of pure status goods to a population that is willing to signal individual abilities to potential matches in another population individual status is determined by the most expensive status good one has there is a stratified equilibrium with a finite number of brands under constant tax rates a monopoly sells different brands to social classes of equal measure while in contestable markets social classes have decreasing measures under optimal taxation contestable markets have progressive tax rates while a monopoly faces an adequate flat tax rate to all brands in contrast with extant literature subsidies may be socially optimal depending on the parameters in both market structures

the distribution of public services an exploration of local governmental preferences a local governmental welfare function is specified to explore two of its central characteristics the equity productivity trade off and differential weights across neighborhoods the constrained maximization model is estimated using service outcomes safety in the welfare function as opposed to publicly provided inputs police over neighborhoods the equity productivity trade off is found to be considerable and not all neighborhoods are weighted equally the results show that inequality aversion and unequal concern by local government over service outcomes must be addressed explicitly to understand the observed distribution of publicly provided inputs with important implications for standard analysis of local governmental behavior copyright 1987 by american economic association

economic and social class voting in a model of redistribution with social concerns we investigate how concerns about social status may affect individuals preferences for redistribution in our model agents are heterogeneous across two dimensions productivity and social class and an individual s social status is de ned as his relative standing in terms of a weighted average of these two components the weight on each component depends positively on its standard deviation redistribution thus simultaneously affects labor supply and the weights that determine social status as such taxation not only redistributes resources from the rich to the poor but also becomes a way of preserving or modifying social status thus individuals who have the same productivity but belong to different social classes support different tax rates we characterize the equilibrium of the political game as the solution of a system of non linear equations and identify the interclass coalition of voters who support the equilibrium tax rate

status and incentives this article introduces status as reflecting an agent s claim to recognition in her work this is a scarce resource increasing an agent s status requires that another agent s status be decreased higher status agents are more willing to exert effort in exchange for money better paid agents would exert higher effort in exchange for improved status the results are consistent with actual management practices i egalitarianism is desirable in a static context ii in a long term work relationship juniors compensation is delayed and iii past performance is rewarded by pay increases along with improved status within the organization s hierarchy

the distribution of wealth and the efficiency of institutions the distribution of wealth and the efficiency of institutions this paper explores the effect on economic efficiency of the distribution of wealth and systems for enforcing property rights we construct a two person two period economy in which each person can consume plant transfer or steal corn we find circumstances in which redistribution of wealth is pareto optimal and in which increasing sanctions against theft to their maximum level is not these results suggest that it is not only important to consider distribution in the design of property institutions but also that redistribution itself may serve to increase the efficiency of systems of property rights i introduction a fundamental insight of economics is that property rights may foster creation of wealth nevertheless property rights which can be freely violated serve no function so that to be meaningful they must be enforceable effective enforcement requires the existence of enforcement systems to monitor violations impose sanctions and provide for restitution of stolen property an effective enforcement system produces obvious desirable effects by deterring theft and providing for restitution it assures that individuals will appropriate the fruits of their labors and hence enforcement serves to increase efficiency it is a standard observation in the literature on crime and punishment that the possibility of crime may lead potential victims to alter their behavior in efficiency reducing ways the possibility of street crime may for example empty the streets neher 1978 conversely the establishment of an effective enforcement system can return people to the streets both by deterring theft or reducing the probability that it will occur and by providing for restitution in the event theft occurs and the thief is apprehended we refer to these efficiency enhancing effects of enforcement as deterrence and restitution effects however the benefits of operating an enforcement system must be weighed against its costs such a system may be resource using and may yield undesirable as well as desirable effects thus maintaining a criminal justice system entails direct costs resources to operate a police force courts and prisons and indirect costs in that potential criminals may modify their behavior to adjust to the prospect of sanctions in efficiency reducing ways see becker 1968 usher 1986 a criminal may for instance dissipate resources in the face of expected sanctions or otherwise deploy them in an inefficient fashion to escape appropriation hence the tendency of criminals to exhibit apparently high discount rates observed by wilson and herrnstein 1985 may reflect the prospect of sanction rather than indicate a strong preference for immediate gratification as they suggest likewise the reduced risk of appropriation may explain the willingness of criminals to pay large transactions costs to maintain secrecy in swiss bank accounts we refer to these efficiency reducing effects of enforcement systems as sanction effects cheung 1970 and others have observed that the costs of enforcing property rights may depend on their distribution 1 ehrlich s 1973 finding that there is a positive relation between the level of crime and the degree of income inequality is supportive of this view beyond this it has frequently been suggested that redistribution may increase respect for property rights along with monitoring and sanctions the notion that giving people more to lose can render them more law abiding is central to liberal theories of rehabilitation it is also embedded in efficiency wage models where high wages are shown to be economical to the extent they increase the efficacy of sanctions and extend an employer s basis for control see for example eaton and white 1983 yellen 1984 any wealth transfers to individuals must of course come from other individuals

attitudes and allocations status cognitive dissonance and the manipulation of attitudes abstract economic studies of social status have typically focused on individuals engaging in relative comparisons based on certain characteristics e g consumption wealth without considering why these characteristics are deemed status worthy in this paper individuals choose a status earning characteristic in order to reduce mental discomfort dissonance as a result those individuals with the highest marginal utility from income are often the first to misconstrue or abandon these incentives in favor of alternate forms of seeking status the model provides an explanation for endogenous class formation and highlights the role of redistributive taxation in manipulating individuals attitudes towards status

election goals and income redistribution recent evidence from albania this paper examines the impact of political competition on block grants from federal to sub federal levels of government we model the extent and direction of income redistribution as determined proximately by the political agendas of central decision makers and at a deeper level by the institutions within which they nd themselves operating we contrast two political objective functions that yield di erent empirical predictions of the ways in which politics should a ect scal policy lessons learned here may prove important in understanding limits on the types of redistribution possible via block grants given the institutional framework in both developing and developed countries 2001 elsevier science b v all rights reserved jel classixcation h1 h7 o1

roads to prosperity assessing the link between public capital and productivity does the positive correlation between infrastructure and productivity reflect causation if so in which direction the author finds that when growth in roads the largest component of infrastructure changes productivity growth changes disproportionately in u s industries with more vehicles that vehicle intensive industries benefit more from road building suggests that roads are productive at the margin however road investments do not appear unusually productive intuitively the interstate system was highly productive but a second one would not be road building thus explains much of the productivity slowdown through a one time unrepeatable productivity boost in the 1950s and 1960s

telecommunications infrastructure and economic development a simultaneous approach in diesem beitrag wird untersucht welchen einflus die telekommunikations infrastruktur auf die wirtschaftliche entwicklung ausubt diese wichtige frage hat im zusammenhang mit der diskussion um informationsautobahnen aktualitat erlangt in der vorliegenden studie wird der einflus der telekommunikations infrastruktur fur 21 oecdlander fur die vergangenen 20 jahre analysiert es wird ein strukturgleichungsmodell geschatzt in dem investitionen in die telekommunikations infrastruktur als endogene variable erfast werden und in einem mikromodell angebot und nachfrage nach telekommunikations investitionen spezifiziert werden das mikromodell wird dann zusammen mit der makro wachstumsgleichung geschatzt als ergebnis stellen die autoren dann eine positive kausalbeziehung zwischen telekommunikations investitionen und wirtschaftlicher entwicklung fest wenn eine kritische masse an telekommunikations infrastruktur existiert

criminals response to changing crime lucre how do criminals respond to changes in the benefit from committing a successful crime this question is relevant for understanding the effectiveness of crime fighting policies that reduce demand for illegal goods disrupt black markets and otherwise eliminate cheaper avenues to illicit gain however the literature has not sufficiently addressed this question partly because finding a reliable measure of crime lucre is difficult using proprietary data on cargo theft i match historical prices of various goods with their thefts and estimate the price elasticity of theft to be 1 225 over a cumulative 7 month horizon jel k42

contests for ranks experimental evidence we use experiments to analyze multiple dimensions of the relationship between rank incentives and individual performance in our experiment i rank is defined as subjects relative position in their group based on their performance in a real effort task and ii subjects earnings are independent of their performance we find that any rank incentive improves mean performance than no rank incentive and this result is independent of the group size in the large group the mean performance increases strictly in all except at the highest rank incentive but in the small group the mean performance increases weakly in rank incentives finally the mean performance is significantly higher in the large than in the small group because of a higher prestige effect in additional treatments in which we do not reveal the identity of the statusprize winners we find that average performance is identical to that in the baseline treatment without any status prizes the last result signifies the important role that public revelation plays to enhance the strength of status the results are important for managerial practices

public investment congestion and private capital accumulation this paper analyses the impact of public investment on the dynamics of private capital formation in an intertemporal optimising market clearing framework the key feature characterising the analysis is that the public good is treated as a durable capital good subject to congestion we show how in the presence of congestion the effect of government investment on private capital formation involves a tradeoff between the degree of substitution between private and public capital in production and the degree of congestion both lump sum and distortionary tax financing are considered with this tradeoff being tightened in the latter case

social network structure and status competition in status competition studies the utility of heterogeneous individuals typically depends on an economy wide average indicator of status in our model emulative and jealous agents are embedded in an exogenous network where agent specific reference group is determined by the direct link emanating from the agent similarly to ghiglino and goyal 2010 but in a somewhat different framework we show that individual consumption is proportional to the agent s outbound katz bonacich network centrality measure and equilibrium is generally inefficient more important the negative externality associated with each agent depends on her inbound centrality measure the conspicuousness index a tax based on this index combined with a uniform lump sum transfer attains efficiency

social norms savings behavior and growth we argue that many goods and decisions are not allocated or made through markets we interpret an agent s status as a ranking device that determines how well he or she fares in the nonmarket sector the existence of a nonmarket sector can endogenously generate a concern for relative position in for example the income distribution so that higher income implies higher status moreover it can naturally yield multiple equilibria it is thus possible to explain differences in growth rates across countries without recourse to differences in underlying preferences technologies or endowments different social organizations lead to different reduced form preferences which lead to different growth rates

ideology tactics and efficiency in redistributive politics we model the electoral politics of redistribution when voters and parties care about inequality in addition to their private concerns for consumption and votes respectively ideological concerns about income redistribution lead each party to adopt a general proportional income tax adjusted to appeal to the ideological leanings of high clout groups with disproportionately many swing voters which the parties also ply with pork barrel projects our results relate to director s law which says that redistributive politics favors middle classes at the expense of both rich and poor

urban safety in vancouver allocation and production of a congestible public good this paper is a simultaneous exploration of the within city production of safety with the endogenous allocation of public inputs police three issues are central one is an examination of the local government allocation function second is that safety is specified as a congestible public service consistent with club theory finally the model is estimated using a survey measure of crime these innovations are due to a unique data set containing observations by neighborhoods in the city of vancouver the results are crucial for illustrating crime deterrence as well as the local public good nature of safety

the effect of welfare programs on criminal behavior a theoretical and empirical analysis a simple economic model of criminal behavior shows that welfare payments will reduce the time allocated to illegal activities under risk aversion and other reasonable assumptions this theoretical prediction is confirmed by the empirical findings using a set of cross sectional u s state data for 1987 it is found that cash or in kind welfare programs have a negative and often significant effect on property crime more general programs such as public housing seem to have a larger effect than those aimed primarily at women afdc medicaid and school lunch programs apparently have little effect on property crime

competing for talents abstract two organizations compete for high quality agents from a fixed population of heterogeneous qualities by designing how to distribute their resources among members according to their quality ranking the peer effect induces both organizations to spend the bulk of their resources on higher ranks in an attempt to attract top talents that benefit the rest of their membership equilibrium is asymmetric with the organization with a lower average quality offering steeper increases in resources per rank high quality agents are present in both organizations while low quality agents receive no resources from either organization and are segregated by quality into the two organizations a stronger peer effect increases the competition for high quality agents resulting in both organizations concentrating their resources on fewer ranks with steeper increases in resources per rank and yields a greater equilibrium difference in average quality between the two organizations

intergovernmental grants as a tactical instrument empirical evidence from swedish municipalities are grants to swedish municipalities tactical in this essay i derive testable implications from a theoretical voting model and test these on a panel of 255 swedish municipalities 1981 1995 in order to decide which regions that are politically powerful both election results and survey data from the swedish election studies are used the results although somewhat ambiguous support the hypothesis that intergovernmental grants are used in order to win votes

infrastructure and education as instruments of regional policy evidence from spain regional policy and spain infrastructure and education as instruments of regional policy evidence from spain governments have often tried to influence the regional distribution of economic activity through supply side measures such as investment in training and infrastructure using evidence from spain we examine whether such policies can have an impact and whether they have done so in the past our results indicate that disparities in the stocks of human and public capital account for a third of observed regional inequality about evenly split between the two factors hence public investment can in principle be used to reduce regional disparity its actual impact however will depend both on its overall volume and on the extent to which its regional allocation does indeed vary with regional need in spain investment in infrastructure has made only a small contribution to regional convergence primarily because it has not in practice been allocated to redistribute across regions to any great extent in contrast efrd transfers have clearly been allocated among regions with redistribution in mind the impact of the fund has been significant but it has been limited by the relatively small size of the programme angel de la fuente and xavier vives

no one likes to be second choice a decision maker is interested in appointing one individual from a group of candidates to a public position with an exogenous wage he must decide in what order to approach them candidates who are more valuable to the decision maker are less likely to be available the candidates preferences have a social component each candidate finds the position more attractive if he is highly ranked by the decision maker relative to the other candidates however the decision maker s preferences are his private information as a result candidates infer the decision maker s evaluation of them based on the number of candidates who have previously turned him down the main result is that when the number of candidates is suficiently large all of the candidates reject the decision maker s offers including those whom he most values moreover the decision maker s payoff is not monotonic in the number of candidates

accountability and decentralisation in government an incomplete contracts model this paper approaches the question of the appropriate level of decentralisation of power in government as a problem in the allocation of control rights under incomplete contracts the model of the paper compares allocations of power to local central and regional government as alternative means of motivating governments to act in the interests of citizens centralisation allows benefits from policy coordination but has costs in terms of diminished accountability which can be precisely defined as the reduced probability that the welfare of a given region can determine the re election of the government the model is extended to allow for conflicts of interest within regions and externalities between central and local governments in a federation it is also applied to determining levels of fiscal transfer between localities and to circumstances where governments may act as leviathans appropriating resources for their own use

income inequality and pecuniary crimes abstract this paper verifies the relationship between income inequality and pecuniary crimes the elasticity of pecuniary crimes relative to inequality is 1 46 corroborating previous literature other factors important to decrease criminality are expanding job opportunities and a more efficient legal system

heterogeneity social esteem and feasibility of collective action abstract in the presence of individual heterogeneity a major problem with egalitarian partnership such as complete income pooling is that individuals of comparatively high ability are induced to exit the arrangement this is nevertheless ignoring the possible impact of social esteem considerations based on a comparison of members performances in this paper drawing inspiration from pooling experiences in a japanese fishery we show that the exit problem can be surmounted if sensitivity to social esteem is neither too strong nor too weak if it is too strong the lower ability agents will exit out of social shame whereas if it is too weak the higher ability agents will not consider it worthwhile to transfer income to their partners when the arrangement is sustainable the lower ability people strive towards limiting the income gap

the origin of utility sexual selection and conspicuous consumption abstract this paper proposes an explanation for the universal human desire for increasing consumption and the associated propensity to trade survival opportunity off conspicuous consumption i argue that this desire was moulded in evolutionary times by a mechanism known to biologists as sexual selection whereby an observable trait conspicuous consumption in this case is used by members of one sex to signal their unobservable characteristics valuable to members of the opposite sex it then shows that the standard economics problem of utility maximisation is formally equivalent to the standard biology problem of the maximisation of individual fitness the ability to pass genes to future generations and thus establishes a rigorous theoretical foundation for including conspicuous consumption in the utility function

should the wealthy be able to buy justice this paper shows that allowing wealthy individuals to influence the outcome of their trials through the purchase of legal services can be consistent with the optimal penalty literature using this analysis the author reviews some of the advantages and disadvantages of varying the length of jail terms versus varying the probability of conviction finally implications for the bail prosecutorial and plea bargaining systems are examined copyright 1987 by university of chicago press

positional spending and status seeking in rural china focusing on a remote area in rural china we use a panel census of households in 26 villages to show that socially observable spending has risen sharply in recent years we demonstrate that such spending by households is highly sensitive to social spending by other villagers this suggests that social spending is either positional in nature i e motivated by status concerns or subject to herding behavior we also document systematic relations between social spending and changes in higher order terms of the income distribution we find that the implications of status seeking for spending are not unidimensional they vary across income groups and expenditure categories in particular and consistent with theories of rank based status seeking we find that the poor increase spending on funerals and gifts as competition for status intensifies in addition poor families of grooms expend more for wedding ceremonies as local income competition increases while the families of brides do not the welfare implications of spending in order to keep up with the joneses are potentially large particularly for poor households

a testable model of consumption with externalities abstract this paper presents a nonparametric model of interdependent preferences where an individual s consumption may act as an externality on the preferences of other consumers we assume that individual price consumption data is observed for all consumers it is known that the general consumption model with externalities imposes few restrictions on the observed data where the consistency requirement is nash rationalizability we motivate potential games as an important sub class of games where the family of concave potential games is refutable and imposes stronger restrictions on observed data we use this framework to extend the analysis of brown and matzkin d brown r matzkin testable restrictions on the equilibrium manifold econometrica 64 1996 1249 1262 on refutable pure exchange economies to pure exchange economies with externalities finally we discuss an application of this model to inter household consumption data

instrumental cardinal concerns for social status in two sided matching with non transferable utility in this paper we apply the instrumental approach to social preferences in order to distinguish among various shapes of preferences for social status in particular we consider the shape of reduced preferences that emerge in the equilibrium of a twosided matching model with non transferable utility cole et al 1992 1995 show that under full observability of potential mates attributes instrumental concerns for social status are ordinal i e only one s own rank in the distribution of attributes matters we show that when we depart from full observability instrumental concerns for social status become cardinal i e also other features of the distribution of attributes matter we also show that the actual shape of cardinal concerns depends on how individuals can deal with the informational asymmetry alternatively leading to upward concerns i e making comparisons with higher rank people downward concerns i e making comparisons with lower rank people or bidirectional concerns i e being both upward and downward

social organization in an endogenous growth model we develop an endogenous growth model in which individuals form matches in order to consume goods that are not explicitly traded the matching process endogenously generates a concern for relative wealth and is thereby beneficial for capital accumulation and economic growth we then study how social segmentation in the matching process affects economic growth under strong segmentation social competition over mates occurs inside homogeneous groups this homogeneity increases the severity of the rat race of wealth accumulation and fosters economic growth

do we punish high income criminals too heavily many critics believe that since high income criminals can afford to purchase better legal services they are less severely punished than poor criminals who commit equivalent crimes others are concerned that the penalties imposed on criminals are too small this paper shows that ignoring the effect conviction has on later earnings dramatically underestimates the total monetary penalty paid by those convicted and that the penalty structure is extremely progressive where evidence on the probability of conviction is available it shows that the highest income criminals face the highest expected penalties

public infrastructure and regional economic development a simultaneous equations approach an analysis of how central bank exchange market intervention can affect both the level of exchange rates and the risk premium in asset returns showing how the risk premium is related to the conditional variances of intervention and other exogenous processes

why do people care about social status abstract this paper shows that complementary interaction can induce people to care about social status because it serves as a signal of non observable abilities there is a unique separating equilibrium in which everyone cares about social status in this equilibrium a person s social status perfectly reveals his abilities and everyone matches with a person of like ability the analysis shows that people s instrumental concern for social status has important welfare and policy implications indeed peoples efforts to keep up with the joneses may be welfare enhancing

community cohesion and assimilation equilibria abstract we study the assimilation behavior of a group of migrants who live in a city populated by native inhabitants we conceptualize the group as a community and the city as a social space assimilation increases the productivity of migrants and consequently their earnings however assimilation also brings the migrants closer in social space to the richer native inhabitants this proximity subjects the migrants to relative deprivation we consider a community of migrants whose members are at an equilibrium level of assimilation that was chosen as a result of the maximization of a utility function that has as its arguments income the cost of assimilation effort and a measure of relative deprivation we ask how vulnerable this assimilation equilibrium is to the appearance of a mutant a member of the community who is exogenously endowed with a superior capacity to assimilate if the mutant were to act on his enhanced ability his earnings would be higher than those of his fellow migrants which will expose them to greater relative deprivation we find that the stability of the pre mutation assimilation equilibrium depends on the cohesion of the migrants community expressed as an ability to effectively sanction and discourage the mutant from deviating the equilibrium level of assimilation of a tightly knit community is stable in the sense of not being vulnerable to the appearance of a member becoming better able to assimilate however if the community is loose knit the appearance of a mutant will destabilize the pre mutation assimilation equilibrium and will result in a higher equilibrium level of assimilation

individual well being in a dynamic perspective this paper explores the determinants of individual well being as measured by self reported levels of satisfaction with income making full use of the panel data nature of the german socio economic panel we provide empirical evidence for well being depending on absolute and on relative levels of income in a dynamic framework this finding holds after controlling for other influential factors in a multivariate setting the main novelty of the paper is the consideration of dynamic aspects individual s own history as well as the relative income performance with respect to the others living in the society under analysis do play a major role in the assessment of well being