a dynamic theory of collective goods programs a collective goods program such as an entitlement program distributes benefits and costs according to constituents characteristics this paper presents a dynamic theory of the legislative choice of collective goods programs based on a sequential model of proposal making and voting in a majority rule legislature where the status quo in a session is given by the program last enacted a stationary markov perfect equilibrium is characterized for a unidimensional collective goods program and yields a generalized median voter theorem comparative statics on preferences and legislative procedures and a characterization of the dynamics of such programs equilibrium programs can expand or contract over time but they ultimately converge to the median on the path to that point legislators may act strategically to address the durability problem that a future legislature can undo the actions of the present legislature by strategically positioning the status quo to limit the changes that future legislatures can make

time consistent public policy in this paper we study how a benevolent government that cannot commit to future policy should trade off the costs and benefits of public expenditure we characterize and solve for markov perfect equilibria of the dynamic game between successive governments the characterization consists of an inter temporal first order condition a generalized euler equation for the government and we use it both to gain insight into the nature of the equilibrium and as a basis for computations for a calibrated economy we find that when the only tax base available to the government is capital income an inelastic source of funds at any point in time the government still refrains from taxing at confiscatory rates we also find that when the only tax base is labour income the markov equilibrium features less public expenditure and lower tax rates than the ramsey equilibrium

fully absorbing dynamic compromise abstract i consider a repeated divide the dollar voting model with rejections leading to the implementation of the previous period s allocation see kalandrakis 14 i show that if proposals can be non exhaustive then equal division can be achieved as an absorbing steady state from any initial allocation given a large enough discount factor as a part of a markov perfect equilibrium this result is robust to changes in voting thresholds and persistence in proposal power outside of unanimity or total persistence

legislated protection and the world trade organization tariff bindings and administered protection are two characteristics of the world trade organization wto that are little understood tariff bindings place a ceiling on tariffs that is not always reached whereas administered protection provides all industries with some minimum import protection effectively creating a floor for protection how do these policies affect applied most favored nation mfn tariff rates that are enacted through the legislature i model tariffs determined by a dynamic legislative process and show that low applied mfn tariffs are less likely with tariff bindings and more likely with administered protection than under purely legislated protection

intergenerational redistribution with short lived governments we study the politics of intergenerational redistribution in an overlapping generations model with short lived governments the successive governments who care about the welfare of the currently living generations and possibly about campaign contributions are unable to pre commit the future course of redistributive taxation in a stationary politico economic equilibrium the intergenerational transfer in each period depends on the current value of the state variable and all expectations about future political outcomes are fulfilled we find that there exist multiple stationary equilibria in many political settings steady state welfare is often lower than it would be in the absence of redistributive politics

budget windows sunsets and fiscal control abstract in recent years the united states has evaluated policy changes using a multi year budget window a budget window that is too short permits the shifting of costs beyond the window s endpoint while a window that is too long includes years for which current legislation is essentially meaningless and allows the shifting of fiscal burdens to those whom budget rules are supposed to protect this paper characterizes the optimal budget window an appropriately designed budget window eliminates the incentive to use sunsets to avoid budget restrictions the analysis also has implications for how to account for long term term budget commitments

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

bargaining in standing committees with an endogenous default committee voting has mostly been investigated from the perspective of the standard baron ferejohn model of bargaining over the division of a pie in which bargaining ends as soon as the committee reaches an agreement in standing committees however existing agreements can be amended this article studies an extension of the baron ferejohn framework to a model with an evolving default that reflects this important feature of policymaking in standing committees in each of an infinite number of periods the ongoing default can be amended to a new policy which is in turn the default for the next period the model provides a number of quite different predictions i from a positive perspective the key distinction turns on whether the quota is less than unanimity in that case patient enough players waste substantial shares of the pie each period and the size principle fails in some pure strategy markov perfect equilibria in contrast the unique markov perfect equilibrium payoffs in a unanimity committee coincide with those in the corresponding baron ferejohn framework ii if players have heterogeneous discount factors then a large class of subgame perfect equilibria including all markov perfect equilibria are inefficient

dynamic legislative policy making abstract we prove existence of stationary markov perfect equilibria in an infinite horizon model of legislative policy making in which the policy outcome in one period determines the status quo for the next we allow for a multidimensional policy space and arbitrary smooth stage utilities and we assume preferences and the status quo are subject to arbitrarily small shocks we prove that equilibrium continuation values are differentiable and that proposal strategies are continuous almost everywhere we establish upper hemicontinuity of the equilibrium correspondence and we provide weak conditions under which each equilibrium of our model determines an aperiodic transition probability over policies we establish a convergence theorem giving conditions under which the invariant distributions generated by stationary equilibria must be close to the core in a canonical spatial model finally we extend the analysis to sequential move stochastic games and to a version of the model in which the proposer and voting rule are determined by play of a finite perfect information game

the power of the last word in legislative policy making we examine legislative policy making in institutions with two empirically relevant features agenda setting occurs in real time and the default policy evolves we demonstrate that these institutions select condorcet winners when they exist provided a sufficient number of individuals have opportunities to make proposals in policy spaces with either pork barrel or pure redistributional politics where a condorcet winner does not exist the last proposer is effectively a dictator or near dictator under relatively weak conditions

on the faustian dynamics of policy and political power this paper examines the faustian dynamics of policy and power we posit a general class of dy namic games in which current policies affect the future distribution of political power resulting in the following faustian trade off if the current ruler chooses his preferred policy he then sacrifices future political power yet if he wants to preserve his future power he must sacrifice his present policy objec tives the trade off comes from the fact that the current political ruler pivotal voter cannot uncouple the direct effect of his policy from its indirect effect on future power a policy endogenous pe equilibrium describes this endogenous transfer of power and the resulting evolution of policy and political power over time we show that the faustian trade off in a pe equilibrium is decomposed into two basic rationales the political preservation effect induces more tempered policy choices than if one s policy choice did not affect one s political fortunes however the reformation effect induces more aggressive policies in order to exploit the productivity gains from policies chosen by even more aggressive successors we distinguish between political systems that give rise to monotone faustian dynamics political power that progressively evolves towards more fiscally liberal types of leaders and cyclical faustian dynamics political power that oscillates between liberal and conservative types of leaders in each case we show that the faustian trade off moderates the choices of each type of leader

the provision of public goods under alternative electoral incentives politicians who care about the spoils of office may underprovide a public good because its benefits cannot be targeted to voters as easily as pork barrel spending we compare a winner take all system where all the spoils go to the winner to a proportional system where the spoils of office are split among candidates proportionally to their share of the vote in a winner take all system the public good is provided less often than in a proportional system when the public good is particularly desirable we then consider the electoral college system and show that it is particularly subject to this inefficiency

rethinking social insurance economics 1 social insurance programs have become the most important the most expensive and often the most controversial aspect of government domestic policy not only in the united states but also in many other countries including developing and industrialized nations in the united states these programs include social security retirement disability and survivor insurance unemployment insurance and medicare insurance for those age 65 and older together these programs accounted for 37 percent of federal government spending and more than 7 percent of gdp in 2003 these ratios have increased rapidly in the past and are projected to increase even faster in the future because of the more rapid aging of the population i will discuss how the major forms of social

inefficiency in legislative policymaking a dynamic analysis this paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining the policy space incorporates both productive and distributive public spending and distortionary taxation the productive spending is investing in a public good that benefits all citizens e g national defense and the distributive spending is district specific transfers e g pork barrel spending investment in the public good creates a dynamic linkage across policymaking periods the analysis explores the dynamics of legislative policy choices focusing on the efficiency of the steady state level of

impact of contract farming on income linking small farmers packers and supermarkets in china summary this study compares contract and non contract growers of apples and green onions in shandong province china in order to explore the constraints on participation and the impact of contract farming on income we find little evidence that firms prefer to work with larger farms though all farms in the area are quite small using a heckman selection correction model we find that contract farming raises income even after controlling for observable and unobservable household characteristics these results suggest that contract farming can help raise small farm income though questions remain regarding the number of farmers that can be brought into such schemes 2009 elsevier ltd all rights reserved

bureaucrats voters and public investment abstract this paper explores the provision of a durable public good in romer and rosenthal s agenda setter model it identifies a type of equilibrium called a romer rosenthal equilibrium in which in every period the bureaucrat proposes the maximum level of public investment the voter will support the paper establishes that such an equilibrium exists for a variety of public good benefit functions equilibrium public good levels converge or almost converge to a steady state these steady states can involve a unique public good level being provided each period or may exhibit a two period cycle steady state public good levels exceed the voter s optimal level more surprisingly steady state equilibrium reversion levels can exceed the voter s optimal steady state level meaning that reversion levels cannot be used to bound the optimal level reflecting the inability of the agents to commit to their future proposing and voting behavior equilibrium paths are pareto inefficient

nash bargained household decisions a rejoinder this note is a rejoinder to marjorie b mcelroy and mary jean horney s 1990 reply it discusses the scope of mcelroy and horney s previous results and the possibility of estimating a nash bargained model from independent observation of threat points copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

a positive theory of fiscal deficits and government debt this paper considers an economy in which policymakers with different preferences alternate in office as a result of elections government debt is used strategically by each policymaker to influence the choices of his successors if different policymakers disagree about the desired composition of government spending between two public goods the economy exhibits a deficits bias that is debt accumulation is higher than it would be with a social planner the equilibrium level of debt is larger the larger is the degree of polarization between alternating governments and the less likely it is that the current government will be re elected

an evaluation of the swedish system of active labour market programmes in the 1990s we investigate the presence of short and long term effects from joining a swedish labor market program vis a vis more intense job search in open unemployment overall the impact of the program system is found to have been mixed joining a program has increased employment rates among participants a result robust to a misclassification problem in the data on the other hand it has also allowed participants to remain significantly longer on unemployment benefits and more generally in the unemployment system this being particularly the case for those entitled individuals entering a program around the time of their unemployment benefits exhaustion

small farmers in high value chains binding or relaxing constraints to inclusive growth summary considerable empirical work relates participation in contract farming with farm profitability however causation is far from settled as few studies control for endogeneity of participation moreover the link between contract farming and equity is ambiguous as the association between contract farming and farmer endowments is mixed this case study of smallholders in the tobacco industry addresses these issues and seems to be the first such econometric application in the philippines based on a treatment effects regression contract farming increases profitability with participation biased toward smaller farm sizes supporting the positive role of contract farming toward inclusive growth in rural areas

dynamic pivotal politics we analyze a dynamic extension of a parsimonious model of lawmaking in which preferences evolve over time and today s policy becomes tomorrow s status quo unlike in existing models of pivotal politics policy makers voting behavior depends on the institutional environment and on their expectations about future economic and political shocks relative to sincere voting the equilibrium behavior exhibits a strategic polarization effect which increases with the degree of consensus required by the institution the volatility of the policy environment and the expected ideological polarization of the future policy makers the equilibrium behavior also exhibits a strategic policy bias which works against any exogenous policy bias embedded in the voting rule our analysis implies that the existing literature underestimates the inertial effect of checks and balances and overestimates the impact of institutional biases such as fiscally conservative budget procedures

a three player dynamic majoritarian bargaining game this file contains two sets of calculations first we report the calculations of demands and continuation values of proposition 1 second the mixing probabilities of proposition 1 are shown to be well defined

why a stubborn conservative would run a deficit policy with time inconsistent preferences a conservative government in favor of a low level of public consumption knows that it will be replaced by a government in favor of a larger level of public consumption we show that the resulting level of public consumption is in between the levels the two governments would choose if each were in power both in the present and in the future in particular we show that if the conservative government is more stubborn in a particular sense than the succeeding government the conservative government will borrow more than it would had it remained in power in the future

a dynamic theory of public spending taxation and debt this paper presents a dynamic political economy theory of public spending taxation and debt policy choices are made by a legislature consisting of representatives elected by geographically defined districts the legislature can raise revenues via a distortionary income tax and by borrowing these revenues can be used tofinance a national public good and district specific transfers interpreted as pork barrel spending the value of the public good is stochastic reflecting shocks such as wars or natural disasters in equilibrium policy making cycles between two distinct regimes business as usual in which legislators bargain over the allocation of pork and responsible policy making in which policies maximize the collective good transitions between the two regimes are brought about by shocks in the value of the public good in the long run equilibrium tax rates are too high and too volatile public good provision is too low and debt levels are too high in some environments a balanced budget requirement can improve citizen welfare

the dynamics of political compromise we characterize efficient self enforcing divisions of political or economic surplus between two parties that interact repeatedly the party in power can decide the allocation and the parties political strength changes according to a markov process we find that the share of the party currently in power depends not only on its current strength but also on whether it had previously been even stronger since it last came to power we find that the constitutional supermajority requirements that attempt to constrain the use of power can counterproductively create less compromise

power fluctuations and political economy we study constrained pareto e cient allocations in a dynamic production economy where the group that holds political power decides the allocation of resources for high discount factors the economy converges to a rst best allocation where labor supply decisions are not distorted for low discount factors distortions do not disappear and uctuate over time most importantly the set of sustainable rst best allocations is larger when there is less persistence in the identity of the party in power because this encourages political compromise this result contradicts the common presumption that there will be fewer distortions when there is a stable ruling group

cooperation and punishment under repeated majority voting in light of the extensive theoretical evidence suggesting absence of equilibrium in voting models tullock 1981 asks why so much stability our results suggest the following answer political agents engaged in long term relationships can sustain highly stable allocations if there are strongly held norms for punishment of defectors 1

trade standards and poverty evidence from senegal summary in the debate on trade and poverty it is argued that standards act as trade barriers and cause marginalization of the poor this paper quantifies income and poverty effects of high standards trade and integrates labor market effects by using company and household survey data from the vegetable export chain in senegal we find that exports grew sharply despite increasing standards contributing importantly to rural incomes and poverty reduction tightening standards induced a shift from smallholder contract farming to integrated estate production altering the mechanism through which poor households benefit through labor markets instead of product markets

majority rule bargaining and the under provision of public investment goods abstract despite evidence that modern democracies systematically shortchange public investment goods relatively little theoretical work exists to explain this phenomenon we build on baron and ferejohn s american political science review 83 4 1989 1181 1206 bargaining model to describe public investments in a setting of budgetary politics specifically we show that underinvestment inherently arises from distributive politics within a majoritarian institution the inability of current majorities to contract with future ones drives a wedge between spending on consumption today and investing for future consumption extensions to the model demonstrate that earmarking future returns to specific players and or detaching consumption from investment decisions yields more efficient levels of public investment

noncooperative foundations of stable sets in voting games abstract this short note studies the noncooperative foundations of von neumann morgenstern stable sets in voting games to do so we study stationary markov equilibria smes of a noncooperative legislative bargaining game based on underlying simple games the following result emerges from such an exercise every stable set of the underlying simple game is the limit set of pure strategy stage undominated smes of the bargaining game when voters are sufficiently farsighted

estimating the benefit incidence of an antipoverty program by propensity score matching this brief summarizes the results of a gender impact evaluation study entitled estimating the benefit incidence of an antipoverty program by propensity score matching conducted between 1997 and 1998 in argentina the study observed that the average direct gain to the participant is found to be about half the gross wage over half of the beneficiaries are in the poorest decile nationally and 80 percent are in the poorest quintile the propensity score matching psm estimator is reasonably robust to a number of changes in methodology participants are more likely to be poor than non participants participants are less well educated live in poorer neighborhoods and are more likely to be members of neighborhood associations and political parties average gains are similar between men and women but are higher for younger workers funding for the study derives from the world bank research committee

economic impact of direct marketing and contracts the case of safe vegetable chains in northern vietnam abstract the paper investigates the respective impacts on incomes of contractual arrangements direct sales and spot marketing for safe vegetable farmers in northern vietnam it is based on a survey of 137 peri urban vegetable farmers that was analyzed using different econometric methods to correct selection biases direct sales and contractual arrangements have a significant positive impact on income compared to spot marketing contracts have less impact on income compared to direct sales it is recommended that policies be formulated to stimulate direct dealings between farmers and consumers which enhance consumer confidence in terms of quality and translate into higher farmer income than anonymous exchanges or contracts

on dynamic compromise abstract most legislatures require the consent of only a simple majority to pass a proposal so why don t legislative outcomes favor only a bare majority we show that compromise can be achieved if legislators are neither too impatient nor too patient and initial allocations are not too unequal the compromise is only sustainable if starting from the unequal allocations there is a possibility of spiraling towards a complete absence of compromise we find that the range of discount factors for which the equilibrium exists increases as the number of legislators increases in this sense compromise is easier in larger legislatures

barriers to investment in polarized societies i present a tractable dynamic model of political economy where disagreements about the composition of public spending result in implementation of short sighted policies the relative price of investment to consumption is excessively large in equilibrium due to over taxation investment rates are too low which slows down growth along the transition in the long run this results in output consumption and welfare being inefficiently low the larger is the degree of polarization the greater is the inefficiency political stability mitigates the effects of polarization by making the incumbent internalize the dynamic inefficiencies introduced by the choice of growth retarding policies

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

institutional constraints and the inefficiency in public investments abstract this paper studies limits on executive authority by identifying a dynamic channel through which they interact with policy making the model features two agents one of which becomes the incumbent in each of the two periods and unilaterally decides on investment in a common interest public good targeted pork spending and the future executive constraint while a weak constraint permits an incumbent to enact his desired policies in case of re election the same applies to his opponent in the opposite scenario however this trade off changes with the level of the public good because the agents shared investment interest dominates their conflict over pork spending to a lesser extent as the efficiency gains from investing get exhausted in equilibrium more efficient states of the public good are associated with tighter executive constraints despite the fact that agents share the same preferences over public good consumption equilibrium public good provision is inefficient moreover this inefficiency worsens as the incumbent s re election chances deteriorate these findings shed light on why incumbents facing similar electoral environments make different institutional choices

democratic public good provision this paper analyzes an overlapping generation model of redistribution and public good provision under repeated voting expenditures are financed through age dependent taxation that distorts human capital investment taxes redistribute income both across skill groups and across generations we focus on politico economic markov equilibria and contrast these with the ramsey allocation under commitment the model features indeterminate equilibria with a key role of forward looking strategic voting due to the lack of commitment to future policies the tax burden may be on the wrong side of the dynamic laffer curve moreover restrictions on government policies can in some cases be welfare improving

a reform dilemma in polarized democracies abstract we study the feasibility and efficiency of policy reforms in democracies we develop a simple election model where i reforms are costly for voters and politicians and these costs increase with the extent of policy change and ii politicians differ in their ability to carry out reforms efficiently we identify a so called reform dilemma which manifests itself in two variants from a static perspective low reform ability politicians are elected when political parties are polarized who then impose high costs on citizens for each reform step this property of elections arises as low reform ability is a substitute for policy commitment from a dynamic perspective incumbents may choose socially undesirable policies to align the social need for reform with their own reform ability and are thus re elected regardless of their reform ability

legislative bargaining with reconsideration we present a dynamic model of legislative bargaining with an endogenously evolving default policy and a persistent agenda setter policy making proceeds until the agenda setter can no longer pass a new policy to replace an approved bill we prove existence and necessary conditions of pure strategy stationary equilibria for any finite policy space any number of players and any preference profile in equilibrium the value of proposal power is limited compared to the case that disallows reconsideration as voters are induced to protect each other s benefits to maintain their future bargaining positions the agenda setter in turn would prefer to limit his ability to reconsider the lack of commitment due to the possibility of reconsideration however enhances policy efficiency

mandatory versus discretionary spending the status quo eect do mandatory spending programs such as medicare improve eciency we analyze a model with two parties allocating a xed budget to a public good and private transfers each period over an innite horizon we compare two institutions that dier in whether public good spending is discretionary or mandatory we model mandatory spending as an endogenous status quo since it is enacted by law and remains in eect until changed mandatory programs result in higher public good spending furthermore they ex ante pareto dominate discretionary programs when parties are patient persistence of power is low and polarization is low

the costs and benefits of balanced budget rules lessons from a political economy model of fiscal policy this paper analyzes the impact of a balanced budget rule that requires that legislators do not run deficits in the political economy model of battaglini and coate 2008 the main finding is that the rule leads to a gradual reduction in the level of public debt legislators reduce debt in periods when the demand for public goods is relatively low they do so because the rule by restricting future fiscal policies raises the expected costs of carrying debt whether the rule increases citizen welfare depends on a comparison of the benefits of a lower debt burden with the costs of greater volatility in taxes and less responsive public good provision a quantitative version of the model is developed in which costs and benefits can be evaluated a welfare loss results if the debt level when the rule is imposed lies in the support of the long run distribution associated with the unconstrained equilibrium

dynamic collective choice with endogenous status quo we analyze a bargaining situation in which preferences evolve over time and the previous agreement becomes the next status quo the endogeneity of the status quo exacerbates the players conflict of interest players disagree more often than under exogenous status quo this leads to inefficiencies and status quo inertia under certain conditions the negotiations can come to a complete gridlock players never reach an agreement gridlock can occur between players with arbitrarily similar preferences provided they are sufficiently patient in legislative settings our model predicts polarization and explains why legislators may fail to react promptly to economic shocks

the impact of a food security program on household food consumption in northwestern ethiopia a matching estimator approach abstract with the financial support from various development partners ethiopia has designed and implemented several programs to improve household food security yet food insecurity is still a major challenge to several millions of people in the country and it is questionable whether the different food security programs implemented over the past years have been successful using a propensity score matching method to control for pre intervention differences this study examined the impact on household food calorie intake of an integrated food security program ifsp which had been implemented in northwestern ethiopia by two non governmental organizations as a case study the estimated results provide evidence that ifsp has a positive and statistically significant effect on food calorie intake in particular ifsp has raised physical food calorie intake by 30 among the beneficiary households however we also found that ifsp has differential impact depending on family size landownership and gender of head of household overall the paper provides evidence that supporting integrated food security programs is important to improve food security in rural areas

bargaining in legislatures over particularistic and collective goods we develop a bargaining model in which a legislature divides a budget among particularistic and collective goods by incorporating both private and public goods in a unified model we uncover nonmonotonic relationships between legislative preferences for collective spending and the amount of the budget actually allocated to collective goods put simply policy proposers can exploit coalition partners strong preferences for public goods to actually provide fewer public goods in equilibrium while directing more private goods to themselves these results explain why policy reforms to limit special interest spending often fail this unified model also sheds new light on when legislatures prefer open or closed amendment rules and when coalitions take different sizes and shapes

spending biased legislators discipline through disagreement this paper studies politicians who have a present bias for spending they want to increase current spending and procrastinate spending cuts we argue that legislators bias is more severe in economies with low institutional quality we show that disagreement in legislatures leads to policy persistence and that this attenuates the temptation to overspend depending on the environment legislators decisions to be fiscally responsible may either complement or substitute other legislator s decisions in economies with weak institutions politicians actions are strategic complements thus institutional changes that induce fiscal responsibility are desirable they generate a positive responsibility multiplier and reduce inefficient spending however in economies with better institutions the same institutional change would induce some legislators to free ride on others responsibility and may lead to more inefficient spending