a general equilibrium model of congressional voting in this paper we specify a model in which congressmen constituents and campaign contributors simultaneously decide on behavior constituents and contributors desire to influence the voting behavior of congressmen congressmen on the other hand want to be elected and vote accordingly we empirically test this model using roll call voting on eight bills dealing with economic regulation and find support for the model our results indicate that part of the voting behavior of congressmen may be explained by noneconomic factors we also find that unions and businesses as campaign contributors are sometimes influential unions are more often influential than is business ideological factors are also important in explaining voting

capture and ideology in the economic theory of politics the economic theory of regulation long ago put public interest theories of politics to rest these theories have correctly been viewed as normative wishings rather than explanations of real world phenomena they have been replaced by models of political behavior that are consistent with the rest of microeconomics anthony downs 1957 james buchanan and gordon tullock 1965 george stigler 1971 sam peltzman 1976 recently however debate has arisen over whether some version of a public interest theory of regulation will have to be readmitted to our thinking about actions and results in the political arena what is at issue is the empirical importance of the altruistic publicly interested goals of rational actors in determining legislative and regulatory outcomes james kau and paul rubin 1979 kalt 1981 peltzman 1982 this study assesses the nature and significance of publicly interested objectives in a particular instance of economic policymaking u s senate voting on coal strip mining regulations the existence of such objectives is of course no contradiction of the economic view of human behavior kenneth arrow 1972 gary becker 1974 and may well be rooted in genetic biological history becker 1976 jack hirshleifer 1978 generally however individuals altruistic publicly interested goals have been given little attention this reflects the judgment that such goals are so empirically unimportant as to allow the use of occam s razor in positive models or well founded apprehensions that these goals are unusually difficult to identify measure and analyze notwithstanding the latter problem we find that approaches which confine themselves to a view of political actors as narrowly egocentric maximizers explain and predict legislative outcomes poorly the tracking and dissecting of the determinants of voting on coal strip mining policy suggest that the economic theory of politics has been prematurely closed to a broader conception of political behavior

agricultural land relations in the developing world in this paper we draw on a number of methodological approaches which have been used to explain land relations tenancy sharecropping and interlinking distress sales dualistic land ownership distributions classes and land reform and their variations over space and time we indicate that the explanatory power of theories on land relations hinges on the complexity market imperfections and distortions admitted in the analysis

valuation of bankrupt firms this study compares the market value of firms that reorganize in bankruptcy with estimates of value based on management s published cash flow projections we estimate firm values using models that have been shown in other contexts to generate relatively precise estimates of value we find that these methods generally yield unbiased estimates of value but the dispersion of valuation errors is very widethe sample ratio of estimated value to market value varies from less than 20 to greater than 250 cross sectional analysis indicates that the variation in these errors is related to empirical proxies for claimholders incentives to overstate or understate the firm s value

optimal capital structure and bankruptcy choice dynamic bargaining versus liquidation abstract we model a firm s optimal capital structure decision in a framework in which it may later choose to enter either chapter 11 reorganization or chapter 7 liquidation creditors anticipate equityholders ex post reorganization incentives and price them into the ex ante credit spreads using a realistic dynamic bargaining model of reorganization we show that the off equilibrium threat of costly renegotiation can lead to lower leverage even with liquidation in equilibrium if reorganization is less efficient than liquidation the added option of reorganization can actually make equityholders worse off ex ante even when they liquidate on the equilibrium path

the law of 1 n revisited distributive politics legislature size and the costs of collective action the foundational model of distributive politics predicts a positive relationship between the number of legislative districts and the level of inefficiency of projects approved by the legislature weingast shepsle and johnsen s law of 1 n this relationship has been tested extensively in the empirical literature with mixed results this article presents a model wherein passing the omnibus legislation typical of distributive politics is a costly process the model predicts a nonlinear relationship between legislature size and spending as increasing the size of the legislature also increases the costs of collective action results from an empirical exercise based on u s state legislatures 1962 2014 are consistent with the proposed model showing a 1 n effect which diminishes at the margin as the legislature s size increases especially in the lower chamber

the effects of logrolling on congressional voting the theoretical public choice literature suggests that vote trading is an important determinant of congressional voting behavior yet empirical voting models do not allow for vote trading these models recognize that observed ideology may influence legislative behavior but do not correct for unobserved ideology this study devises new tests for logrolling and ideology the empirical model controls for logroll agreements and unobserved ideological interest via the correlation of unobserved variables the results reflect the presence of vote trading coalitions on some votes but not on others the results cast doubt on the importance of personal ideological interests of legislators copyright 1992 by american economic association

scale economies and rent seeking in legislative parties this paper examines equilibrium legislative party size based upon scale economies in producing political outcomes political production finding policies legislators desire and votetrading to pass them has strong scale economies up to but not far beyond a majority of the voters either one or two parties is efficient but a larger number is not a single party s optimal long run strategy is to benefit a dominant majority by avoiding the creation of an effective second party but short term rent seeking is in legislators and leaders interests which eventually causes a second effective party and a stable two party equilibrium estimates of party size for the u s congress suggest considerable short term rent seeking

lobbying and agricultural trade policy in the united states the authors study whether political campaign contributions influence agricultural protection in the united states in the manner suggested by the political economy model of grossman and helpman 1994 this is the first attempt to test this model using agricultural data the authors test the model using a detailed cross sectional data set of agricultural protection subsidies and political action committee pac contributions in the late 1990s the model is qualitatively affirmed by the data they make a novel attempt to solve a puzzle about the model s quantitative implications also found in recent studies this solution makes the simple model consistent with the complicated decisionmaking process in real world government the results imply the underpinnings of a political economy equilibrium that will be hard to dislodge

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

the equity performance of firms emerging from bankruptcy this study assesses the stock return performance of 131 firms emerging from chapter 11 using differing estimates of expected returns we consistently find evidence of large positive excess returns in 200 days of returns following emergence we also examine the reaction of our sample firms equity returns to their earnings announcements after emergence from chapter 11 the positive and significant reactions suggest that our results are driven by the market s expectational errors not mismeasurement of risk the results provide an interesting contrast but not a contradiction to previous work that has documented poor operating performance for firms emerging from chapter 11 with large corporate bankruptcies being commonplace during the late 1980s and early 1990s there has been a notable increase in the number of firms emerging from bankruptcy altman 1991 1993 when firms emerge from bankruptcy they often cancel the old stock and distribute an entirely new issue of common stock the stocks of firms emerging from a chapter 11 bankruptcy are often called orphan equities among practitioners and there have been reports in the popular press about spectacular returns in this market for example as sandler 1991 p cl states

congressional voting on term limits between 1990 and 1995 twenty three states unilaterally imposedterm limits on their own delegations tocongress in 1995 the house ofrepresentatives defeated a constitutionalamendment that would have limited the termsfor all of congress only weeks later thesupreme court struck down the individualstate laws in 1997 the house againbrought the issue to a vote which alsofailed this paper models congressionalvoting on term limits with a simple gamewithin an interest group theory withlegislators as imperfect agents ofconstituents the game foremost predictsthat members from term limited states wouldbe more likely to support term limits inthe first vote but no more likely on thesecond vote the empirical section employsprobit multinomial logit and orderedprobit maximum likelihood estimations toconfirm the stated hypotheses among otherresults in particular both the joint andconditional probability of a yea on thefirst vote and a subsequent nay on thesecond vote is higher for members fromstates that had unilaterally self imposedterm limits the results are robust tomodel specification estimator andalternative sampling implications areproposed in the concluding comments

how do mergers create value a comparison of taxes market power and efficiency improvements as explanations for synergies there is little evidence in the literature on the relative importance of the underlying sources of merger gains prior literature suggests that synergies could arise due to taxes market power or efficiency improvements based on value line forecasts we estimate the average synergy gains in a broad sample of 264 large mergers to be 10 03 of the combined equity value of the merging firms the detailed data in value line projections allow for the decomposition of these gains into underlying operating and financial synergies we estimate that tax savings contribute only 1 64 in additional value while operating synergies account for the remaining 8 38 operating synergies are higher in focused mergers while tax savings constitute a large fraction of the gains in diversifying mergers the operating synergies are generated primarily by cutbacks in investment expenditures rather than by increased operating profits overall the evidence suggests that mergers generate gains by improving resource allocation rather than by reducing tax payments or increasing the market power of the combined firm

party politics and the price of payola the literature contains two competing views of the role of political parties parties are treated either as associations of interest groups supported to the degree that they offer electoral support in the lawmaker s district or as expressions of the personal ideologies of the lawmakers in this paper parties are treated as bargaining agents for groups of lawmakers in their dealings with interest groups interest groups are depicted buying votes on proposals where those votes are cheapest parties are combinations of consistently low price vote suppliers the theory has empirical power that discriminates between it and the two competing models

the value of creditor control in corporate bonds this paper introduces a measure that captures the premium in bond prices that is due to the value of creditor control we estimate the premium as the difference in the bond price and an equivalent synthetic bond without control rights that is constructed using credit default swap cds contracts we find empirically that this premium increases as firm credit quality decreases and around important credit events such as defaults bankruptcies and covenant violations the increase is greatest for bonds most pivotal to changes in control changes in bond and cds liquidity do not appear to drive increases in the premium

logrolling in the u s congress i introduction a long standing question in political science is whether exchange occurs in legislatures as it is expected in any economy where the intensity of demand varies the issue was originally raised by buchanan and tullock 1962 and expanded by coleman 1966 and mueller 1967 the subsequent literature has produced numerous models of vote trading haefele 1971 riker and brams 1973 koford 1982a much of the work suggests that vote trading leads to chaotic results see for example riker and brams 1973 kramer 1977 and mckelvey 1976 currently vote trading s quantitative importance and optimality are unknown references to logrolling go back to the early literature in political science bentley 1907 refers to it and since then scholars such as mayhew 1966 and ferejohn 1974 have provided primarily anecdotal evidence for logrolling the economic analysis of logrolling has mostly been theoretical and little work has been done to assess the qualitative and quantitative importance of vote trading in legislatures however much might be learned from such analysis given the apparent puzzle that for most roll calls votes on parts of bills only a minority of districts stand to gain yet such proposals get passed until recently vote trading has not been identified empirically stratmann 1992 is the only paper that identifies vote trades statistically and it looks only at vote trades among agricultural interests however it would be interesting to know whether logrolling is prevalent in circumstances other than farm commodity programs we need to identify logrolling coalitions to assess how widespread logrolling agreements are we expect them to be common if the intensity of demand for legislation varies related to the issue of vote trading is the question of what factors determine congressional voting behavior major elements in a legislator s voting decision are constituency interests ideology party and perhaps vote trading one segment of the literature on congressional voting has focused on the role of political parties as an important force determining a legislator s voting decision some authors have argued that parties provide an organizational framework within which logrolling will happen see for example fiorina 1974 koford 1987 weingast and marshall 1988 johnson and stratmann 1992 alternatively lindsay and maloney 1988 suggest that party discipline forces a legislator to vote for or against a piece of legislation the latter view implies that on some issues party affiliation forces the legislator to vote against constituency interests 1 whether party affiliation is a signal to constituencies of one s overall propensity to vote on bills or a means to build coalitions or whether both elements are important is an unresolved question voting along party lines can be due to party loyalty or party pressure promoting the interests of one s constituency or logrolling within the party to answer questions about voting along party lines and about vote trading and coalitions within a quantitative framework one has to distinguish empirically between party loyalty and logrolling coalitions that are organized within a party empirical studies have typically included a party dummy variable in regression equations however if logrolling coalitions are organized within a party such a dummy variable will measure both potential party loyalty or potential party discipline and membership in a logrolling coalition this paper uses a different approach to separate the logrolling variable from the party loyalty variable and so distinguishes between voting for a proposal because of membership in a log rolling coalition organized by a party and because of potential party discipline this paper analyzes a broad range of votes where logrolling has been reported the analysis spans two congresses 1959 to 1962 and examines trades between interests favoring subsidies for city interests labor interests and farm interests

imperfect information and the meltzer richard hypothesis standard majority voting models predict that redistribution is positively linked to the mean to median income ratio but empirical evidence is mixed this paper shows that the different empirical reactions to rising mean to median income ratios can be rationalized in a simple romer roberts meltzer richard framework with imperfect information in such a model it is important to consider the source of rising mean to median ratios income growth of the poor can lead to less redistribution as more agents perceive themselves to be rich which tends to reduce the support for redistribution an empirical application reveals that the model can explain a substantial part of the first reagan tax cut

logrolling under fragmented authoritarianism theory and evidence from china this paper provides a rigorous theoretical and empirical analysis of the effect of logrolling between interest groups on social welfare in a non democratic political system in particular we focus on china where bureaucratic interest groups are separate vertical organizations reaching down from beijing to the provinces and cities the key question in this paper is what are the effects of the logrolling of parochial interest groups on state policies and social welfare in autocracies we address this question both theoretically and empirically the theory predicts a specific distortion in resource allocation because of logrolling while the empirical results confirm the theoretical prediction we find policy outcomes under logrolling are characterized by excessive spending on all the interest groups preferred goods and insufficient spending on public goods we test the existence of logrolling between the ministry of civil affairs and ministry of health in china our result shows logrolling between the two ministries lead to inefficiencies in social security and health care policies

ceo compensation in financially distressed firms an empirical analysis this paper studies senior management compensation policy in 77 publicly traded firms that filed for bankruptcy or privately restructured their debt during 1981 to 1987 almost one third of all ceos are replaced and those who keep their jobs often experience large salary and bonus reductions newly appointed ceos with ties to previous management are typically paid 35 less than the ceos they replace in contrast outside replacement ceos are typically paid 36 more than their predecessors and are often compensated with stock options on average ceo wealth is significantly related to shareholder wealth after firms renegotiate their debt contracts however managers compensation is sometimes explicitly tied to the value of creditors claims

political interaction in the senate estimating a political spatial weights matrix and an application to lobbying behavior many motivations exist that cause legislators to behave strategically when voting these include logrolling towing the party line or political favor trading however it has proven difficult in the existing literature to uncover the magnitude of the interaction among politicians this paper takes a spatial approach to the problem using a spatial autoregressive model to not only uncover the magnitude of interactions but also the direction of the interactions in contrast to most applications of spatial econometrics i allow the elements of the spatial weights matrix to be estimated as parameters the political spatial weights matrix is calculated for 96 senators in the 110th u s congress furthermore in a marginal effects simulation i calculate the overall effect on voting from flipping a senator s vote allowing flipped votes to have a cascading effect i apply these measures to study political fundraising mildly suggesting that political interest groups direct donations to senators with the most influence

centralized vote trading this paper presents a model of centralized vote trading in a legislature in this model legislators trade only with party leaders who set prices at which they will buy needed vote changes and sell promises to pass or defeat particular bills each legislator trades away votes on bills of little concern to him and of high concern to leaders and purchases promises from the leaders to pass or defeat particular bills of high concern to the legislator relative to the price the leguslator must pay

firm characteristics and analyst following abstract this paper examines the major determinants of the number of analysts following a firm a simple model of analyst following is proposed and several firm characteristics are suggested that are likely to influence the extent of a firm s analyst following by either affecting the aggregate demand for or supply of analyst services or both for the firm almost all of these characteristics are found to be strongly significant in affecting the extent of analyst following of firms and the empirical results generally accord well with economic intuition