intrinsic motivation in public service theory and evidence from state supreme courts abstractthis paper provides a theoretical and empirical analysis of the intrinsic preferences of state appellate court judges we construct a panel data set using published decisions from all state supreme courts from 1947 to 1994 we estimate the effects of changes in judges employment conditions on a number of measures of judicial performance the results are consistent with the hypothesis that judges are intrinsically motivated to provide high quality decisions and that at the margin they prefer quality over quantity when judges face less time pressure whether from the introduction of an intermediate appellate court the weakening of electoral demands or an increased salary they write more well researched opinions that are cited more often by other judges these effects are strongest when judges have more discretion to select their portfolios of cases

a model of delegated project choice we present a model in which a principal delegates the choice of project to an agent with different preferences the principal determines the set of projects from which the agent may choose the principal can verify the characteristics of the project chosen by the agent but does not know which other projects are available to the agent two frameworks are considered i a static setting in which the collection of available projects is exogenous to the agent but uncertain and ii a dynamic setting in which the agent searches for projects

out of step out of office electoral accountability and house members voting does a typical house member need to worry about the electoral ramifications of his roll call decisions we investigate the relationship between incumbents electoral performance and roll call support for their party controlling for district ideology challenger quality and campaign spending among other factors through a series of tests of the 1956 1996 elections the tests produce three key findings indicating that members are indeed accountable for their legislative voting first in each election an incumbent receives a lower vote share the more he supports his party second this effect is comparable in size to that of other widely recognized electoral determinants third a member s probability of retaining office decreases as he offers increased support for his party and this relationship holds for not only marginal but also safe members

transparency in parliamentary voting how does transparency affect voting behavior to answer this question we exploit a switch from a show of hands to electronic voting in the upper house of the swiss parliament the change which took place halfway through the 2011 2015 legislative period also brought about the online publication of individual voting records using the lower house as a control group we compare individual voting decisions in a set of identical votes in both chambers this unique framework makes it possible to estimate the causal effect of increased transparency on legislators choices since the reform members of the upper house are less likely to deviate from the majority decision of their party legislators representing the same canton are also less likely to cast an aligned vote suggesting that voters lose influence over their representatives in parliament

contracting in the shadow of the law economic models of contract typically assume that courts enforce obligations based on verifiable events corresponding to the legal rule of specific performance as a matter of law this is not the case this leaves open the question of optimal contract design given the available remedies used by the courts this article shows that american standard form construction contracts can be viewed as an efficient mechanism for implementing building projects given existing legal rules it is shown that a central feature of these contracts is the inclusion of governance covenants that shape the scope of authority and regulate the ex post bargaining power of parties our model also implies that the legal remedies of mistake impossibility and the doctrine limiting damages for unforeseen events developed in the case of hadley v baxendale are efficient solutions to the problem of implementing complex exchange

time preference and international lending and borrowing in an overlapping generations model two economies represented by diamond type overlapping generations models and differing only in their pure rates of time preference are joined together capital formation balance of payments behavior and welfare are compared under autarky and openness with a positive natural rate of growth the low time preference country runs a current account surplus in the steady state but not necessarily outside it if preexisting capital is not shiftable between countries integration in the world economy makes the high time preference country worse off in the short run the ranking of stationary utility levels under autarky and openness is ambiguous

rational irrationality and the microfoundations of political failure models of inefficient political failure have been criticized forimplicitly assuming the irrationality of voters wittman 1989 1995 1999 coate and morris 1995 building on caplan s 1999a 1999b model of rational irrationality the current papermaintains that the assumption of voter irrationality is boththeoretically and empirically plausible it then examinesmicrofoundational criticisms of four classes of political failuremodels rent seeking pork barrel politics bureaucracy andeconomic reform in each of the four cases incorporating simpleforms of privately costless irrationality makes it possibleto clearly derive the models standard conclusions moreover itfollows that efforts to mitigate political failures will besocially suboptimal as most of the literature implicitlyassumes it is a mistake to discount the empirical evidence forthese models on theoretical grounds

is voter competence good for voters information rationality and democratic performance a long research tradition in behavioral political science evaluates the performance of democracy by examining voter competence this literature got its start arguing that voters lack of information undermines a defense of democracy rooted in electoral accountability a more recent literature deepens the debate with some authors claiming that voters eectively use cues to substitute for information about candidates and policies and other authors claiming that voters are insuciently rational to do so we argue that regardless of its conclusions about voter competence this literature s singleminded focus on voter behavior is misguided we use a sequence of formal models to show that traditional intuitions are incomplete because they ignore the eect that changes in voter behavior have on the equilibrium behavior of politicians when this strategic interaction is taken into account increases in voter information or voter rationality sometimes make democratic performance better and sometimes makes democratic performance worse one simply cannot assess the implications of voter characteristics for democratic performance without also studying how those characteristics aect the

a model of public opinion management abstract policymakers often motivate their decisions using information collected by government agencies while more information can help hold the government to account it may also give policymakers an incentive to meddle with the work of bureaucrats this paper develops a model of biased information gathering to examine how different disclosure rules and the degree of independence of government agencies affect citizen welfare disclosure rules and agency independence interact in subtle ways we find that secrecy is never optimal and yet insulating the agency from political pressure so that its information is always unbiased may also not be socially optimal a biased information gathering process can benefit the government by helping it to shape public opinion but it can also benefit the public by curbing the government s tendency to implement its ex ante favored policy thus mitigating the agency conflict between policymakers and the public

delegation and incentives this article analyzes the relation between authority and incentives it extends the standard principal agent model by a project selection stage in which the principal can either delegate the choice of project to the agent or keep the authority the agent s subsequent choice of effort depends both on monetary incentives and the selected project we find that the consideration of effort incentives makes the principal less likely to delegate the authority over projects to the agent in fact if the agent is protected by limited liability delegation is never optimal

can markets stimulate rights on the alienability of legal claims the alienability of legal claims holds the promise of increasing access to justice and fostering development of law i develop a principal agent framework where litigation funders provide expertise in reducing uncertainty in agents disutility of production the model leads to the counterintuitive prediction that litigation funders prefer cases with novel issues and social surplus is positively correlated with legal uncertainty consistent with the model court backlog court expenditures and a slowing in average time to completion are associated with third party funding cases with third party funding receive more citations and are reversed less often than comparable cases without such arrangements

explaining the vote constituency constraints on sophisticated voting it is well documented that legislators voting decisions are affected by the need to justify these decisions to home constituents however exactly how this need influences legislative decision making is as yet unclear in this paper a model of legislative vote and explanation is developed to explore the issue all agents in the model are presumed to be purely policy outcome oriented so legislators seek reelection to pursue policy outcomes the district and the legislator have different information regarding the legislator s preferences however and it is this feature that drives the analysis the principal finding is that the need to explain votes improves the district s payoffs relative to the case of no explanation this occurs in two ways depending on the penalties for legislators being discovered not to have told the truth when justifying their legislative behavior to constituents when the penalty is low legislators whose preferences exactly reflect those of the majority of their constituents vote sincerely more often than otherwise to signal their preferences to the district and when the penalty is sufficiently severe such legislators vote sophisticatedly all the time and are capable of fully justifying any decision to constituents after the fact

signaling through obstruction obstruction is a time honored tradition in legislative politics in many cases obstruction can be foreseen to be ultimately unsuccessful and in some of these cases purely costly even to the obstructor in this article i construct a model of obstruction in which the individual obstruction of a fait accompli policy proposal is potentially informative precisely and ironically because it is inefficient the theory based on the legislators reelection motivations offers comparative static predictions about the frequency and length of obstruction as a function of the individual characteristics of the legislator and his or her electoral setting including the legislator s value for reelection the appeal of the legislator s challenger the legislator s individual specific seniority competence and or valence and the visibility of the legislator s obstruction efforts to the voter finally the theory illustrates the potential for transparency of legislators individual actions to be strictly welfare reducing even in the absence of pandering

decision making in committees transparency reputation and voting rules in this paper i analyze the effect of the transparency of the decision making process in committees on the decisions that are eventually taken i focus on committees whose members are motivated by career concerns so that each member tries to enhance his own reputation when the decision making process is secretive the individual votes of the committee members are not exposed to the public but only the final decision thus individuals are evaluated according to the group s decision i find that in such a case group members are induced to comply with preexisting biases for example if the voting rule demands a supermajority to accept a reform individuals vote more often against reforms and exacerbate the conservatism of the voting rule when the decision making process becomes transparent and individual votes are observed this effect disappears and such committees are then more likely to accept reforms i also find that coupled with the right voting rule a secretive procedure may induce better decisions than a transparent one

contracts with endogenous information abstract i study covert information acquisition and reporting in a principal agent problem allowing for general technologies of information acquisition when posteriors satisfy two dimensional versions of the standard first order stochastic dominance and concavity convexity of the distribution function conditions a first order approach is justified under the same conditions informativeness and riskiness of reports are equivalent high powered contracts that make the agent s informational rents more risky are used to increase incentives for information acquisition insensitive contracts are used to reduce incentives for information gathering the value of information to the agent is always positive the value of information to the principal is ambiguous

the long run consequences of living in a poor neighborhood author s oreopoulos philip abstract many social scientists presume that the quality of the neigborhood to which children are exposed affects a variety of long run social outcomes i examine the effect on the long run labor market outcomes of adults who were assigned when young to substantially different public housing projects in toronto administrative data are matched to public housing addresses to track children from the program for over 15 years the main finding is that neighborhood quality plays little role in determining a youth s adult earnings education attainment or welfare participation but does affect exposure to crime while living in contrasting housing projects cannot explain large variances in labor market outcomes family differences as measured by sibling outcome correlations account for up to 30 percent of the total variance in the data

does local school control raise student outcomes evidence on the roles of school autonomy and parental participation abstract school autonomy and parental participation have been frequently proposed as ways of making schools more productive less clear is how governments can foster decentralized decision making by local schools this article shows that across eight latin american countries most of the variation in local control over school decisions exists within and not between countries that implies that the exercise of local authority to manage schools is largely a local choice only modestly influenced by constitutional stipulations regarding jurisdiction over school personnel curriculum and facilities as a consequence estimated impacts of local school autonomy parental participation or school supplies on student performance must account for the endogeneity of local efforts to manage schools empirical tests confirm that local managerial effort by the principal and parents and the adequacy of school supplies are strongly influenced by parental human capital and the size and remoteness of the community and th

political accountability and sequential policymaking abstract we develop a model of political accountability with sequential policymaking when a bureaucrat s actions are transparent his overseer faces a political time inconsistency problem she is tempted to revise her retention rule in the middle of the policymaking process as a result the bureaucrat s equilibrium behavior overemphasizes later tasks if the overseer knows the technology by which policies translate into outcomes then she can eliminate these distortions using task specific budget caps however if the overseer is uncertain about this technology such budget caps introduce ex post inefficiency when uncertainty is sufficiently large and consequential the overseer prefers an institutional environment with a fungible budget and no transparency such an environment allows the overseer to exploit the bureaucrat s expertise though at the cost of weaker overall incentives

opinions as incentives we study costs and benefits of differences of opinion between an adviser and a decision maker even when they share the same underlying preferences over decisions a difference of opinion about payoff relevant information leads to strategic information acquisition and transmission a decision maker faces a fundamental trade off a greater difference of opinion increases an adviser s incentives to acquire information but exacerbates the strategic disclosure of any information that is acquired nevertheless when choosing from a rich pool of opinion types it is optimal for a decision maker to select an adviser with some difference of opinion centralization of authority is essential to harness these incentive gains since delegation to the adviser can discourage effort

decentralization of governance and development all around the world in matters of governance decentralization is the rage even apart from the widely debated issues of subsidiarity and devolution in the european union and states rights in the united states decentralization has been at the center stage of policy experiments in the last two decades in a large number of developing and transition economies in latin america africa and asia the world bank for example has embraced it as one of the major governance reforms on its agenda for example world bank 2000 burki perry and dillinger 1999 take also the examples of the two largest countries of the world china and india decentralization has been regarded as the major institutional framework for the phenomenal industrial growth in the last two decades in china taking place largely in the nonstate nonprivate sector india ushered in a landmark constitutional reform in favor of decentralization around the same time it launched a major program of economic reform in the early 1990s on account of its many failures the centralized state everywhere has lost a great deal of legitimacy and decentralization is widely believed to promise a range of benee ts it is often suggested as a way of reducing the role of the state in general by fragmenting central authority and introducing more intergovernmental competition and checks and balances it is viewed as a way to make government more responsive and efe cient technological changes have also made it somewhat easier than before to provide public services like electricity and water supply relatively efe ciently in smaller market areas and the lower levels of government have now a greater ability to handle certain tasks in a world of rampant ethnic cone icts and separatist movements decentralization is also regarded as a way of diffusing social and political tensions and ensuring local cultural and political autonomy these potential benee ts of decentralization have attracted a very diverse range

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

using state child labor laws to identify the effect of school year work on high school achievement this article uses variation in the labor supply of twelfth grade students created by interstate variations in child labor laws to estimate the effect of school year work on twelfth grade math achievement the instrumental variable estimates in this article indicate that an exogenous decrease in school year hours worked of 10 hours per week would result in a 0 2 standard deviation increase in math scores comparisons to ordinary least squares estimates suggest that failure to account for the endogeneity of the labor supply decisions of high school students will result in underestimates of the negative impact of school year work on academic achievement

the evolution of common law we present a model of lawmaking by appellate courts in which judges influenced by policy preferences can distinguish precedents at some cost we find a cost and a benefit of diversity of judicial views policy motivated judges distort the law away from efficiency but diversity of judicial views also fosters legal evolution and increases the law s precision we call our central finding the cardozo theorem even when judges are motivated by personal agendas legal evolution is on average beneficial because it washes out judicial biases and renders the law more precise our paper provides a theoretical foundation for the evolutionary adaptability of common law

delegation to a possibly ignorant agent in a delegation problem an uninformed principal delegates decision making powers to a biased and possibly ignorant agent the principal cannot use monetary payments but can restrict the set of the agent s choices i show that in the general case the principal may offer a disconnected set of choices in a setting with arbitrary bias the uncertainty principle holds the principal benefits as the likelihood that the agent is informed increases when the bias is constant i show that the ally principle holds the principal benefits as the bias becomes smaller finally when the likelihood of the agent being informed is determined by the agent s effort then for small biases the principal benefits from limiting the agent s choice when the agent is sufficiently biased the principal gives more choice to the agent so as to to improve incentives for information acquisition

short run and long run welfare implications of free trade the author considers a two factor capital and labor two good consumption and investment goods one country overlapping generations model for the case in which the closed economy follows an efficient path the author proves that if trade lowers raises the relative price of the capital intensive good the current old people who only own capital lose gain from the opening of the economy while all subsequent generations whose only endowment is labor benefit lose from it it is also shown that the country gains from trade in the sense that the generations made better off by trade can compensate those that lose from the opening of the economy

learning while setting precedents a decision maker dm must address a series of problems over time each period a random case arises and the dm must make a yes or no decision which we call a ruling she is uncertain about the correct ruling until she conducts a costly investigation a ruling establishes a precedent which may be costly to violate in the future we compare the dm s incentive to acquire information the evolution of standards and the social welfare under two institutions nonbinding precedent and binding precedent under nonbinding precedent the dm is not required to follow previous rulings but under binding precedent she must follow previous rulings where applicable we find that compared to nonbinding precedent the incentive for information acquisition is stronger under binding precedent in earlier periods when few precedents exist but as more precedents are established over time the incentive for information acquisition becomes weaker under binding precedent even though erroneous rulings may be perpetuated under binding precedent social welfare can be higher because of the more intensive investigation conducted early on

a theory of delegated search for the best alternative searching for the best worker a reliable supply alternative or the most profitable investment is frequently delegated to an agent this article develops a theory of delegated search we show that the principal s ability to delegate depends on the agent s luck her initial resources and the contract that governs her search with moral hazard the optimal contract is characterized by performance deadlines with bonuses for early completion if performance cannot be specified the optimal search is implemented by an option to buy contract for the principal if performance is partially specified the optimal contract is a standard pay for performance arrangement

how much discretion for risk regulators we analyze the regulation of firms that undertake socially risky activities but can reduce the probability of an accident inflicted on third parties by carrying out non verifiable effort congress delegates regulation to an agency although these two bodies may have different preferences toward the industry the optimal level of discretion left to the agency results from the following trade off the agency can tailor discretionary policies to its expert knowledge about potential harm but it implements policies that are too pro industry the agency should be given full discretion when the firm is solvent partial discretion is preferred otherwise we then investigate how this trade off changes as the political and economic landscapes are modified

school decentralization helping the good get better but leaving the poor behind abstract the decentralization of public services is a major feature of institutional innovation the main argument in support of decentralization is that it brings decisions closer to the people thereby alleviating information asymmetries and improving accountability however decentralization can also degrade service provision in poor communities that lack the ability to voice and defend their preferences in this paper we analyze the average and distributional effects of school decentralization on educational quality in argentina we find that decentralization had an overall positive impact on student test scores the decentralization gains however did not reach the poor thus although bringing decisions closer to the people may help the good get better the already disadvantaged may not receive these benefits

optimal forecasting incentives an agent of unknown expertise is requested to forecast the mean of an uncertain outcome the agent can refine forecasts at a constant marginal cost per unit precision but neither cost nor precision can be verified by the planner the problem is to induce both truthful revelation and an appropriate degree of learning so as to minimize the expected sum of direct planning losses and agent payments optimal contracts are derived with and without self screening of expertise and with and without competition between agents self screening tends to be much less valuable than competition

government transparency and policymaking we argue that making lawmakers more accountable to the public by making it easier to identify their policy choices can have negative consequences specifically we analyze a model of political agency with a single lawmaker and a representative voter in our model the lawmaker has better information than the voter about the appropriateness of alternative policy courses in addition the voter is uncertain about the incumbent s policy preferences specifically the voter is worried the incumbent is an ideologue our model suggests that when lawmakers expect their policy choices to be widely publicized for those lawmakers sufficiently concerned about reelection the desire to select policies that lead the public to believe they are unbiased will trump the incentive to select those policies that are best for their constituents hence lawmakers who would do the right thing behind close doors may no longer do so when policy is determined in the open

the political economy of government responsiveness theory and evidence from india the determinants of government responsiveness to its citizens is a key issue in political economy here we develop a model based on the solution of political agency problems having a more informed an politically active electorate strengthens incentives for governments to be responsive this suggests that there is a role both for democratic institutions and the mass media in ensuring that the preferences of citizens are reflected in policy the ideas behind the model are tested on panel data from india we show that public food distribution and calamity relief expenditure are greater controlling for shocks where governments face greater electoral accountability and where newspaper circulation is highest

the role of dispute settlement procedures in international trade agreements although disputes are typically treated as synonymous with concerns about enforcement in economic models of trade agreements in reality most wto disputes seem to concern the interpretation of vague provisions or instances where the agreement is silent and some have suggested that the wto s dispute settlement body dsb could usefully grant exceptions to rigid contractual obligations these activist dsb roles could help complete an incomplete contract but how activist should the dsb be should dsb rulings set precedent we address these questions by characterizing the optimal choice of contract form and dsb mandate under various contracting conditions jel codes d02 d78 d86 f13 k12 k33

a political theory of populism when voters fear that politicians may have a right wing bias or that they may be in uenced or corrupted by the rich elite signals of true left wing conviction are valuable as a consequence even a moderate politician seeking reelection chooses populist policies i e policies to the left of the median voter as a way of signaling that he is not from the right truly right wing politicians respond by choosing more moderate or even left of center policies this populist bias of policy is greater when the value of remaining in o ce is higher for the politician when there is greater polarization between the policy preferences of the median voter and right wing politicians when politicians are indeed more likely to have a hidden right wing agenda when there is an intermediate amount of noise in the information that voters receive when politicians are more forward looking and when there is greater uncertainty about the type of the incumbent we show that similar results apply when some politicians can be corrupted or in uenced through other non electoral means by the rich elite we also show that soft term limits may exacerbate rather than reduce the populist bias of policies

does compulsory school attendance affect schooling and earnings we establish that season of birth is related to educational attainment because of school start age policy and compulsory school attendance laws individuals born in the beginning of the year start school at an older age and can therefore drop out after completing less schooling than individuals born near the end of the year roughly 25 percent of potential dropouts remain in school because of compulsory schooling laws we estimate the impact of compulsory schooling on earnings by using quarter of birth as an instrument for education the instrumental variables estimate of the return to education is close to the ordinary least squares estimate suggesting that there is little bias in conventional estimates every developed country in the world has a compulsory schooling requirement yet little is known about the effect these laws have on educational attainment and earnings 1 this paper exploits an unusual natural experiment to estimate the impact of compulsory schooling laws in the united states the experiment stems from the fact that children born in different months of the year start school at different ages while compulsory schooling laws generally require students to remain in school until their sixteenth or seventeenth birthday in effect the interaction of school entry requirements and compulsory schooling laws compel students born

multi tier targeting of social assistance the role of intergovernmental transfers albania provides a small amount of social assistance to nearly 20 percent of its population through a system that allows some community discretion in determining distribution this study investigates how well this social assistance program is targeted to the poor relative to other safety net programs in low income countries social assistance in albania is fairly well targeted nevertheless the system is hampered by the absence of a clear objective criterion to determine the size of the grants from the central government to communes as well as limited information that could be used to implement this criterion substantial gains in targeting could be achieved if the central government better allocated transfers to local governments even holding local targeting at base levels

managerial incentives and capital management the paper shows how career concerns rather than effort aversion can induce a natural incongruity in risk preferences between managers and superiors a model based on learning about managerial talent is developed to study second best contractual remedies we show that the optimal wage contract is an option of the value of the manager s human capital for insurance reasons and that consequently rationing of capital is often required to counterbalance the manager s resulting incentive to overinvest rationing is strictly superior to price decentralization offering one reason for the prevalence of centralized capital budgeting procedures

a theory of yes men this paper illustrates an incentive for workers to conform to the opinion of their supervisors when firms use subjective performance evaluation this desire to conform arises endogenously from the firm s need to induce the worker to exert effort the author shows that firms may optimally eschew the use of incentive contracts to retain workers incentives for honesty the author illustrates that the incentive to conform implies inefficiencies even when workers are risk neutral and is likely to lead to more centralized decision making than in the absence of the desire to conform copyright 1993 by american economic association

systematically biased beliefs about economics robust evidence of judgemental anomalies from the survey of americans and economists on the economy differences between the general public s positive economic views and economists resemble other judgemental anomalies laypeople and experts systematically disagree i analyse this puzzle using data from the survey of americans and economists on the economy the paper first tests and decisively rejects the hypothesis that the differences solely reflect economists self serving bias then it examines whether economists political ideology and party loyalties explain the disagreement if anything this slightly increases their magnitude the effect of economic training clearly falls but remains large after adding education to the set of control variables apparent biases robustness suggests that the anomaly is real

legal realism for economists abstract economists have made great progress in understanding the incentives and behavior of actors who operate outside of traditional economic markets including voters legislators and bureaucrats the incentives and behavior of judges however remain largely opaque do judges act as neutral third party enforcers of substantive decisions made by others are judges ordinary policymakers who advance whatever outcomes they favor without any special consideration for law as such emerging recent scholarship has started to explore more nuanced conceptions of how law facts and judicial preferences may interact to influence judicial decisions this work develops a perspective on judging that can usefully be understood as the modern manifestation of american legal realism a jurisprudential movement of lawyers judges and law professors that flourished in the early twentieth century the purpose of this essay is to introduce in simplified form the realist account of judicial decision making to contras

why has regional income convergence in the u s declined the past thirty years have seen a dramatic decrease in the rate of income convergence across states and in population flows to wealthy places these changes coincide with 1 an increase in housing prices in productive areas 2 a divergence in the skill specific real returns to living in productive places 3 a redirection of low skilled migration and 4 diminished human capital convergence due to migration we develop a model where falling housing supply elasticity and endogenous labor mobility generates these patterns using a new panel measure of housing supply regulations we demonstrate the importance of this channel income convergence continues in less regulated places while it has stopped in more regulated places

decentralized targeting of an antipoverty program abstract developing country governments often delegate authority over the targeting of antipoverty programs to community organizations while retaining control over how much goes to each community we offer a theoretical characterization of the information structure in such programs and the interconnected behavior of the various players our model motivates an econometric specification for explaining distributional outcomes results for bangladesh s food for education ffe program indicate that within village targeting improved with program size lower land inequality less remoteness fewer shocks and less private redistribution there is no sign that the center took account of village attributes conducive to reaching the poor

the economics of clear advice and extreme options i study a principal agent model in which the agent collects information and then chooses a verifiable action i show that the principal can find it desirable to constrain the agent s action set even though there is no disagreement about the ranking of actions ex post the elimination or penalization of intermediate actions which are optimal when information is poor improves incentives for information collection i characterize optimal action sets when the agent is infinitely risk averse with respect to income shocks and optimal incentive schemes when the agent is risk neutral copyright 2005 wiley blackwell

local capture evidence from a central government transfer program in uganda according to official statistics 20 percent of uganda s total public expenditure was spent on education in the mid 1990s most of it on primary education one of the large public programs was a capitation grant to cover schools nonwage expenditures using panel data from a unique survey of primary schools we assess the extent to which the grant actually reached the intended end user schools the survey data reveal that during 1991 1995 the schools on average received only 13 percent of the grants most schools received nothing the bulk of the school grant was captured by local officials and politicians the data also reveal considerable variation in grants received across schools suggesting that rather than being passive recipients of flows from the government schools use their bargaining power to secure greater shares of funding we find that schools in better off communities managed to claim a higher share of their entitlements as a result actual education spending in contrast to budget allocations is regressive similar surveys in other african countries confirm that uganda is not a special case

long term educational consequences of secondary school vouchers evidence from administrative records in colombia colombia s paces program provided over 125 000 poor children with vouchers that covered the cost of private secondary school the vouchers were renewable annually conditional on adequate academic progress since many vouchers were assigned by lottery program effects can reliably be assessed by comparing lottery winners and losers estimates using administrative records suggest the paces program increases secondary school completion rates by 15 to 20 percent correcting for the greater percentage of lottery winners taking college admissions tests the program increased test scores by two tenths of a standard deviation in the distribution of potential test scores jel i21 j12 i28

delegated information acquisition with moral hazard abstract we analyze a principal agent problem with moral hazard where a principal searches for an opportunity of uncertain return and hires an agent to evaluate available options the agent s effort affects the informativeness of a signal about an option s return based on the information provided by the agent the principal decides whether to exercise the option at hand we derive properties of the optimal contract in both static and dynamic versions of the problem we show that there are intermediate values of the prior probability that the option is of high quality at which positive effort cannot be sustained we also show that if the prior is below a threshold then the agent is rewarded for delivering bad news about the option s quality we derive distortions relative to the first best on the implemented effort level and optimal stopping decision for some parameter values it is optimal for the principal to commit to an ex post suboptimal stochastic decision to exercise an option

sources of inefficiency in a representative democracy a dynamic analysis this paper studies the efficiency of policy choice in representative democracies it extends the citizen candidate model of democratic policy making to a dynamic environment equilibrium policy choices are shown to be efficient in the sense that in each period conditional on future policies being selected through the democratic process there exists no alternative current policy choices which can raise the expected utilities of all citizens however policies that would be declared efficient by standard economic criteria are not necessarily adopted in political equilibrium the paper argues that these divergencies are legitimately viewed as politicalfailures

using the law to change the custom the custom often acts as a powerful hindrance to equity increasing changes in this paper we present a simple model of legal dualism in which a progressive legal reform can under certain conditions shift the conflicting custom in the direction intended by the legislator formal law then acts as an outside anchor that exerts a magnet effect on the custom we also characterize the conditions under which a moderate reform performs better than a radical one in improving the welfare of the disadvantaged sections of the population we illustrate our insights using examples on inheritance marriage and divorce in sub saharan africa and india

a dynamic specific factors model of international trade in a dynamic economy land and capital serve not only as factors of production but as assets which individuals use to transfer income from working periods to retirement changes in the terms of trade and in the endowments of fixed factors do not necessarily have the same effects on factor prices and on the composition of output as they do in a static framework changes in these variables affect both total savings and the amount of savings that is diverted toward investment in capital results derived from the traditional specific factors model are more likely to emerge when the sector using land as a factor of production has a higher labor share than the sector using capital in this case the land using sector dominates factor markets more than asset markets once the roles for land and capital as assets are recognized the possibility of natural resource booms that reduce steady state welfare arises at the same time an increase in population can raise steady state welfare

a test of racial bias in capital sentencing this paper proposes a test of racial bias in capital sentencing based upon patterns of judicial errors in lower courts we model the behavior of the trial court as minimizing a weighted sum of the probability of sentencing an innocent and that of letting a guilty defendant free we de ne racial bias as a situation where the relative weight on the two types of errors is a function of defendant and or victim race the key prediction of the model is that if the court is unbiased ex post the error rate should be independent of the combination of defendant and victim race we test this prediction using an original dataset that contains the the race of the defendant and of the victim s for all capital appeals that became nal between 1973 and 1995 we nd robust evidence of bias against minority defendants who killed white victims in direct appeal and habeas corpus the probability of error in these cases is 3 and 9 percentage points higher respectively than for minority defendants who killed minority victims

ignorance in agency problems we extend the standard agency model of adverse selection to incorporate the possibility that the agent may be ignorant i e know no more about a critical parameter than does the principal ignorance introduces a discontinuity pooling and particularly severe output distortions into the optimal incentive contract journal of economic literature classification numbers c79 d82

a theory of conservatism a free rider problem arises when a group choice between two alternatives has to be made on the basis of privately collected evidence leading to insufficient effort in gathering evidence and an ex ante welfare loss for the group to alleviate the free rider problem the group can commit to a conservative rule whereby the decision is made against the alternative favored by the group s preference or prior when evidence supports it but is not preponderant optimal conservatism increases private incentives to gather evidence and improves the quality of the group decision my result explains why sometimes groups appear overly cautious toward favored alternatives

ideologues or pragmatists we study a model of electoral control where the politician is a policy expert but the voter is not first we focus on the case of an ideologue namely a politician who always wants the same policy implemented regardless of the state we show that the voter s lack of policy expertise comes at no cost to him but may come at an electoral cost to the politician next we turn to the case of a pragmatist namely a politician whose preferences are state contingent we show that the voter s lack of policy expertise does come at a cost to him as a consequence the voter may fare better with an ideologue than with a pragmatist this can occur even if the pragmatist s preferences are arbitrarily close to and perfectly correlated with the voter s

endogenous cases and the evolution of the common law i develop a dynamic model of judge made law in which the ideal legal rule is unknown but can be learned in contrast to existing articles the flow of cases heard by the court is affected by the court s prior decisions the model highlights the significance of this feedback in explaining when and why the court will write broader or narrower opinions and the long run properties of common law in equilibrium the law settles endogenously because the incentives to make legally controversial choices disappear as the law evolves settled law exhibits residual uncertainty and ambiguity and potentially implements inefficient outcomes

optimal delegation via a strategic intermediary abstract this paper studies the optimal design of delegation rule in a three tier principal intermediary agent hierarchy in this hierarchy monetary transfer is not feasible delegation is made sequentially and all players are strategic we characterize the optimal delegation mechanism it is shown that the single interval delegation a la holmstrom is optimal only when the intermediary is moderately biased otherwise as responses to the distortion caused by a biased intermediary the optimal delegation set may involve a hole thus multi interval delegation set would arise when subordinates have opposing biases this result sheds some light on policy threshold effects slight changes in the underlying state cause a jump in the policy responses

legal efficiency and consistency abstract we analyze the efficiency and consistency of court decisions under common and civil law as a leading example we study the enforcement of property rights judges are of two types some are conservative and follow the precedent or the statute while others maximize social welfare when courts intervene ex post after the relevant economic choices have been made welfare maximizing courts face a commitment problem such an ex post bias has implications on the relative consistency and efficiency of each legal system surprisingly we find that court decisions are more consistent under common law than under civil law the welfare comparison between the two systems is instead ambiguous however in changing economic environments common law is more likely to dominate civil law because of its greater adaptability

democratic accountability and retrospective voting a laboratory experiment understanding the incentives of politicians requires understanding the nature of voting behavior i conduct a laboratory experiment to investigate whether voters focus on the problem of electoral selection or if they instead focus on electoral sanctioning if voters are forward looking but uncertain about politicians unobservable characteristics then it is rational to focus on selection but doing so undermines democratic accountability because selection renders sanctioning an empty threat in contrast to rational choice predictions the experimental results indicate a strong behavioral tendency to use a retrospective voting rule additional experiments support the interpretation that retrospective voting is a simple heuristic that voters use to cope with a cognitively difficult inference and decision problem and in addition suggest that voters have a preference for accountability the results pose a challenge for theories of electoral selection and voter learning and suggest new interpretations of empirical studies of economic and retrospective voting

vouchers for private schooling in colombia evidence from a randomized natural experiment colombia used lotteries to distribute vouchers which partially covered the cost of private secondary school for students who maintained satisfactory academic progress three years after the lotteries winners were about 10 percentage points more likely to have finished 8th grade primarily because they were less likely to repeat grades and scored 0 2 standard deviations higher on achievement tests there is some evidence that winners worked less than losers and were less likely to marry or cohabit as teenagers benefits to participants likely exceeded the 24 per winner additional cost to the government of supplying vouchers instead of public school places

too much information information provision and search costs a seller often needs to determine the amount of product information to provide to consumers we model costly consumer information search in the presence of limited information we derive the consumer s optimal stopping rule for the search process we find that in general there is an intermediate amount of information that maximizes the likelihood of purchase if too much information is provided some of it is not as useful for the purchase decision the average informativeness per search occasion is too low and consumers end up choosing not to purchase the product if too little information is provided consumers may end up not having sufficient information to decide to purchase the product the optimal amount of information increases with the consumer s ex ante valuation of the product because with greater ex ante valuation by the consumer the firm wants to offer sufficient information for the consumer to be less likely to run out of information to check one can also show that there is an intermedi

full extraction of the surplus in bayesian and dominant strategy auctions we consider auctions for a single indivisible object in the case where the bidders have information about each other which is not available to the seller we show that the seller can use this information to his own benefit and we completely characterize the environ ments in which a well chosen auction gives him the same expected payoff as that obtainable were he able to sell the object with full information about each bidder s willingness to pay we provide this characterization for auctions in which the bidders have dominant strate gies and for those where the relevant equilibrium concept is bayesian nash in both set ups the existence of these auctions hinges on the possibility of constructing lotteries with the correct properties we consider the situation in which an agent the seller possesses one indivisible unit of a good to which he attaches no value but the good has value to a number of potential buyers and its transfer to one of them would increase social welfare in particular the transfer to the buyer with the highest valuation maximizes social welfare in this paper we completely characterize environments in which the seller can design an auction that will enable him to capture for himself the full increase in social welfare induced by the transfer of the good to the bidder with the highest willingness to pay if the seller had full information about the reservation prices of potential buyers his optimal selling strategy would be very simple he would announce a price equal or very close to the highest reservation value the optimal strategy for the bidder with the highest evaluation would be to accept the offer note that we are treating a situation in which the seller can commit himself to a price as a result of the exchange the utility of the seller increases by the full amount of the increase in social welfare and he has been able to fully extract the surplus in many circumstances however a seller has only imperfect knowledge of the buyers willingnesses to pay in this case he must find some mechanism or auction which will enable him to maximize his benefit from the sale of the object the auction literature starts with this observation and shows how the seller can by an astute choice of auction extract the largest possible fraction of the surplus in general the literature has shown that this proportion is strictly less than one in some circumstances the bidders will have information about each other which is not available to the seller for instance in auctions for petroleum drilling rights bidders know the results of geological tests which they have

the wrong kind of transparency in a model of career concerns for experts when is a principal hurt from observing more information about her agent this paper introduces a distinction between information on the consequence of the agent s action and information directly on the agent s action when the latter kind of information is available the agent faces an incentive to disregard useful private signals and act according to how an able agent is expected to act a priori this conformist behavior hurts the principal in two ways the decision made by the agent is less likely to be the right one discipline and ex post it is more difficult to evaluate the agent s ability sorting the paper identifies a necessary and sufficient condition on the agent signal structure under which the principal bene ts from committing not to observe the agent s action the paper also shows the existence of strategic complementarities between information on action and information on consequence the results on the distinction between action and consequence are then used to interpret existing disclosure policies in delegated portfolio management in particular they are consistent with hitherto puzzling evidence that mutual funds systematically overperform pension funds

pessimistic information gathering an agent gathers information on productivity shocks and accordingly produces on behalf of a principal information gathering is imperfect and whether it succeeds or not depends on the agent s effort contracting frictions come from the fact that the agent is pessimistic on the issue of information gathering and there are both moral hazard in information gathering private information on productivity shocks and moral hazard on operating effort an optimal menu of linear contracts mixes high powered productivity dependent screening options following good news with a fixed low powered option otherwise

hierarchical accountability in government abstract this paper studies a setting where a relatively uninformed voter holds a policymaker accountable through an informed intermediary in equilibrium the voter uses the intermediary to insulate the policymaker from pandering incentives when the voter s policy expertise is low or the policymaker s congruence is high the voter can thus enjoy the benefits of bureaucratic expertise without forfeiting electoral responsiveness we examine the model s predictions using u s city level data and find that hierarchically accountable managers reduce popular city employment and adjust it more flexibly than electorally accountable mayors the estimated incentive effects are smaller in cities with high voter expertise and larger during election years and are robust to instrumentation by precipitation shocks that influenced early 20th century manager government adoptions for reasons obsolete today

are biased media bad for democracy this paper assesses the normative and positive claims regarding the consequences of biased media using a political agency framework with a strategic voter polarized politicians and news providers my model predicts that voters are always better informed with unbiased than biased outlets even when the latter have opposite ideological preferences however biased media may improve voter welfare contrary to several scholars fear partisan news providers are not always bad for democracy my theoretical findings also have important implications for empirical analyses of the electoral consequences of changes in the media environment left wing and right wing biased outlets have heterogeneous effects on electoral outcomes which need to be properly accounted for existing empirical studies are unlikely to measure the consequences of biased media as researchers never observe and can rarely approximate the adequate counterfactual elections with unbiased news outlets

when do elections encourage ideological rigidity elected officials are commonly accused of being ideologically rigid or failing to alter their positions in response to relevant policy information we examine this phenomenon with a theory in which politicians have private information about their ideological leanings and expected policy consequences the theory shows that in many circumstances the informational differences create a context in which elections induce ideological rigidity correspondingly elections often fail to provide incentives for information based moderation in which both left and right leaning politicians become more likely to use policy information these seemingly perverse incentives occur because politicians wish to signal that they share voters leanings indeed the motivation to signal preference similarity can induce rigidity even when voters want politicians to be responsive to new information we show that such incentives for rigidity are greater when voters have less information about policy and politicians preferences and discuss possible tests of these predictions

optimal limited authority for principal abstract this article studies a principal agent problem where the only commitment for the uninformed principal is to restrict the set of decisions she makes following a report by the informed agent we show that an ex ante optimal equilibrium for the principal corresponds to a finite partition of the state space and each retained decision is ex post suboptimal for the principal biased toward the agent s preference generally an optimal equilibrium does not maximize the number of decisions the principal can credibly retain compared to no commitment limited authority improves the quality of communication from the agent as a result it can give the principal a higher expected payoff than delegating the decision to the agent

learning in equilibrium models of arbitration this paper analyzes strategic communication in equilibrium models of conventional and final offer interest arbitration both models emphasize the role of learning by the arbitrator from the parties offers about the state of the employment relationship which is known to the parties but not to the arbitrator in both models the arbitrators equilibrium behavior is identical to the reduced form decision rule typically assumed in the empirical literature the paper thereby provides a structural interpretation for the existing empirical work the paper also represents progress towards a complete theory of arbitration because it satisfies three conditions that will be required of any such theory first the models predictions match the existing empirical evidence second the models describe equilibrium behavior and third the models are built on a common set of assumptions about preferences information and commitment the paper therefore not only provides an equilibrium foundation for the intuition that the arbitrator might learn from the parties offers but also uses the idea of learning to develop a unified analytical treatment of the two major forms of interest arbitration this abstract was borrowed from another version of this item