power illusion in coalitional bargaining an experimental analysis abstract one feature of legislative bargaining in naturally occurring settings is that the distribution of seats or voting weights often does not accurately reflect bargaining power game theoretic predictions about payoffs and coalition formation are insensitive to nominal differences in vote distributions and instead only depend on pivotality we conduct an experimental test of the classical baron ferejohn model with five player groups holding real power constant we compare treatments with differences in nominal power we find that initial effects of nominal differences become small or disappear with experience our results also point to the complexity of the environment as having a negative impact on the speed at which this transition takes place finally and of particular importance as a methodological observation giving subjects a pause accelerates learning

cyclical effects of government s employment and goods purchases distinguishing between the goods purchase and employee compensation components of government spending is important shocks to government goods purchases and shocks to government employment have the opposite effects on private output private employment and private investment moreover with this distinction in place quantitative analysis reveals that government spending is no longer a significant driving source of the u s business cycle on the contrary the components of government spending are procyclical in the u s data primarily because of their positive responses to the output fluctuations generated by technology shocks copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

tax base variability and procyclical fiscal policy in developing countries abstract based on a sample of 56 countries we show that fiscal policy in the g7 countries appears to be acyclical while fiscal policy in developing countries is procyclical i e fiscal policy is expansionary in good times and contractionary in bad times to explain this puzzle we develop an optimal fiscal policy model in which running budget surpluses is costly because they create pressures to increase public spending given this distortion a government that faces large fluctuations in the tax base as is the case for developing countries will find it optimal to run a procyclical fiscal policy

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

the power of the proposal maker in a model of endogenous agenda formation in a distributive setting this study examines a voting procedure for which agenda formation is endogenous it is found not surprisingly that agenda formation is another avenue for strategic manipulation of the voting process and provides the member to first take the floor an asymmetric advantage what is surprising is the degree of this advantage we find that the initial proposal maker earns a share of the fixed resource exceeding 1 for an majority rule and this is regardless of the number of members the voting rule is found to be an effective instrument in at least partially offsetting the power of the proposal maker while maintaining the stability of the voting process

are european business cycles close enough to be just one abstract we propose a comprehensive methodology to characterize the business cycle comovements across european economies and some industrialized countries without imposing any given model but trying to leave the data speak we develop a novel method to show that there is no evidence of a european economy that acts as an attractor to the other economies of the area we show that the establishment of the monetary union has not significantly increased the level of comovements across euro area economies finally we are able to explain an important proportion of the distances across their business cycles using macrovariables related to the structure of the economy to the directions of trade and to the size of the public sector

elections coalitions and legislative outcomes predictions of electoral behavior in a multiparty setting should be a function of the voters beliefs about how parties will perform following an election similarly party behavior in a legislature should be a function of electoral promises and rewards we develop a multistage game theoretic model of three party competition under proportional representation the final policy outcome of the game is generated by a noncooperative bargaining game between the parties in the elected legislature this game is essentially defined by the vote shares each party receives in the general election and the parties electoral policy positions at the electoral stage parties and voters are strategic in that they take account of the legislative implications of any electoral outcome we solve for equilibrium electoral positions by the parties and final policy outcomes

electoral cycles and the earnings of federal bureaucrats this paper analyzes the relationship between the timing of federal elections and the pay raises received by civilian employees of the federal government the theoretical framework discusses how electoral wage cycles are generated as a result of optimizing behavior on the part of voters bureaucrats and the government the empirical analysis uses a time series of wage rates for the twenty eight largest federal agencies over the period 1961 1978 the study indicates that pay hikes during the presidential election year are significantly greater about 2 to 3 percent higher than bureaucratic pay raises in other years

government turnover in parliamentary democracies in this paper we consider a dynamic model of government formation and termination in parliamentary democracies that accounts for the following phenomena 1 cabinet terminations due to replacement or early election 2 cabinet reshuf es 3 minority and surplus governments 4 the relative instability of minority governments

stable governments and the allocation of policy portfolios different members of coalition governments typically have responsibility for different aspects or dimensions of policy such responsibilities are allocated as portfolios to government members given a distribution of such portfolios final government policy is derived as the accumulation of individual members decisions in regard to their respective responsibilities we develop a portfolio allocation model of government formation and policy decision in multiparty legislatures in particular we focus on stable portfolio allocations where a stable allocation is one that yields a policy that no legislative coalition is willing or able to overturn several notions of stability are considered and related to the usual concept of the core among the results are that although stable allocations are not guaranteed such allocations can exist with minority governments and that final policy outcomes associated with stable governments need not be centrist

fiscal policy and monetary integration in europe fiscal policy economists policy makers and the media often argue that the maastricht treaty and the stability and growth pact make it difficult for governments of emu countries to stabilize their economies with appropriate fiscal policy and to provide adequate public investment our empirical analysis offers little support to this view discretionary budget deficits have actually become more counter cyclical in emu countries after the maastricht treaty as well as in the other eu and non eu industrialized countries we study and while public investment has declined recently in emu countries a similar tendency is apparent in other countries and started well before the maastricht treaty was signed jordi gali and roberto perotti

the cyclicality of consumption wages and employment of the public sector in the euro area this study empirically examines the business cycle behaviour of public consumption and its main components the public wage bill including its breakdown into compensation per employee and public employment and intermediate consumption in the euro area aggregate euro area countries and a group of selected non euro area organization for economic co operation and development oecd countries denmark sweden the uk japan and the us it looks across a large number of variables and methods using annual data from 1960 to 2005 it finds robust evidence supporting that public consumption wages and employment co move with the business cycle in a pro cyclical manner with 1 2 year lags notably for the euro area aggregate and euro area countries the findings reflect mainly the correlation between cyclical developments but also point to an important role of pro cyclical discretionary fiscal policies

non cooperative bargaining in natural monopolies abstract the joint production of a single output from a single input by a group of potential users of a technology is usually analyzed in the literature using a cooperative approach we provide an analysis for such economies by means of non cooperative bargaining two bargaining models are analyzed one based on demands the other on proposals we show that the convexity of the production function implies that subgame perfect equilibrium outcomes of these bargaining games are coalition stable i e core outcomes in the case of the proposal model the equilibrium outcomes yield even a full characterization of the core journal of economic literature classification numbers c72 d21 d42

the analytics of svars a unified framework to measure fiscal multipliers ticities implied by the identification schemes generate a large dispersion in the estimates of tax and spending multipliers second i estimate fiscal multipliers consistent with prior distributions of the elasticities computed by a variety of empirical strategies and by employing a simple dynamic stochastic general equilibrium model i document three findings for the u s for the period 1947 2010 first the impact tax multiplier is close to 0 second the impact spending multiplier ranges between 0 35 and 1 third there is a large uncertainty in the estimates of fiscal multipliers at longer horizons yet the probability that the spending multiplier is larger than the tax multiplier is above 0 65 for up to three years after policy interventions

the voracity effect abstract we analyze an economy that lacks a strong legal political institutional infrastructure and is populated by multiple powerful groups powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock in equilibrium this leads to slow economic growth and a voracity effect by which a shock such as a terms of trade windfall perversely generates a more than proportionate increase in fiscal redistribution and reduces growth we also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks jel f43 o10 o23 o40

why is fiscal policy often procyclical many countries especially developing ones follow procyclical fiscal policies namely spending goes up taxes go down in booms and spending goes down taxes go up in recessions we provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less than benevolent government to appropriate rents voters have incentives similar to the starving the leviathan classic argument and demand more public goods or fewer taxes to prevent governments from appropriating rents when the economy is doing well we test this argument against more traditional explanations based purely on borrowing constraints with a reasonable amount of success

robust stylized facts on comovement for the spanish economy the suggestion of obtaining stylized facts on comovement on the basis of prewhitened time series proposed in andre et al 2002 is further developed first some examples are shown on the robustness of the method second the relevance of such a proposal is tested by revisiting some of the existing stylized facts on comovement for the spanish economy in dolado et al 1993

legislative bargaining under weighted voting organizations often distribute resources through weighted voting we analyze this setting using a non cooperative bargaining game based on the baron ferejohn 1989 model unlike analyses derived from cooperative game theory we find that each voter s expected payoff is proportional to her voting weight an exception occurs when many high weight voters exist as low weight voters may expect disproportionately high payoffs due to proposal power the model also predicts that ex post the coalition formateur the party chosen to form a coalition will receive a disproportionately high payoff using data from coalition governments from 1946 to 2001 we find strong evidence ofsuch formateur effects

village and larger economies the theory and measurement of the townsend thai project i have spent close to 20 years cataloging transactions between households in thai villages along with a research team just this past summer we documented a number of ways in which even relatively poor villages have money markets not dissimilar in some ways from new york financial markets with borrowing and repayment passing along links in credit chains in another project we have been looking at month by month school attendance grade level completion and graduation for children in these villages following them from birth to graduation the townsend thai project is a theory based data collection endeavor measuring and mapping village and larger economies into general equilibrium frameworks this paper reviews a number of findings implications applications and lessons learned and considers next steps

inflation risk premia in the term structure of interest rates this paper estimates the size and dynamics of inflation risk premia in the euro area based on a joint model of macroeconomic and term structure dynamics information from both nominal and index linked yields is used in the empirical analysis our results indicate that the inflation risk premium on euro area 10 year nominal yields was approximately equal to 20 basis points on average over the 1999 2007 period the inflation premium has also been subject to moderate but statistically significant fluctuations for the post 2003 period in which reliable index linked bond prices are available our results suggest that increases in the raw break even inflation rate above 2 the upper bound of the european central bank s definition for price stability have mostly reflected variations in the inflation risk premium while long term inflation expectations have remained well anchored

public or private sector wage leadership an international perspective whether a government acts as a wage leader placing pressure on private sector wages more open to competition or whether it plays a passive role and merely follows wage negotiations in the private sector there are important implications for macroeconomic development particularly in small open economies and or countries that are members of a monetary union such as those of the european monetary union with the notable exception of the case of sweden opinion on this issue is still divided in this paper we look at public and private sector wage interactions from an international perspective 18 oecd countries we focus on the causal two way relationship between public and private wage setting confirming that the private sector on the whole appears to have a stronger influence on the public sector rather than vice versa however we also find evidence of feedback effects from public wage setting which affect private sector wages in a number of countries when the private sector takes the lead on wages there are few feedback effects from the public sector while public wage leadership is typically accompanied by private sector feedback effects

the cyclical behaviour of fiscal policy evidence from the oecd this paper addresses the topic of cyclicality in scal policy in particular we show that the level of cyclicality varies across spending categories and across oecd countries in line with leading theories of scal cyclicality we show that countries with volatile output and dispersed political power are the most likely to run procyclical scal policies wage government consumption is highlighted as the most important channel by which these variables affect scal cyclicality

demand competition and policy compromise in legislative bargaining i propose a new majoritarian bargaining model in which more than one implicit proposal can be on the table at the same time institutional differences from system to system affect the order of play the equilibrium majorities and the policy outcome the ex post distribution of payoffs within a winning coalition is however invariant to fundamental institutional differences and it is always proportional to the distribution of relative ex ante bargaining power the bargaining process is modeled as a sequential demand game in which players are called to propose a policy and to specify their desired share of the private benefits related to being in office the order of play is endogenous and the distribution of payoffs within an equilibrium majority usually does not depend on who is the proposal maker the role of the head of state and the advantages to center parties are also studied

fiscal policy in general equilibrium this paper studies four classic fiscal policy experiments within a quantitatively restricted neoclassical model the authors main findings are as follows 1 permanent changes in government purchases can lead to short run and long run output multipliers that exceed one 2 permanent changes in government purchases induce larger effects than temporary changes 3 the financing decision is quantitatively more important than the resource cost of changes in government purchases and 4 public investment has dramatic effects on private output and investment these findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy copyright 1993 by american economic association

the comovement between output and prices abstract in this paper i analyze the comovement of us prices and output in the postwar period i use a new set of statistics to characterize the comovement between variables the statistics capture important information about the dynamics in the system the estimation procedure does not require assumptions about the order of integration or the types of assumptions needed for var decompositions i find that the comovement between output and prices is positive in the short run and negative in the long run i show that a model in which demand shocks dominate in the short run and supply shocks dominate in the long run can explain these empirical results while sticky price models with only demand shocks cannot

real wages and the business cycle the objectives of this review are threefold 1 to characterize the empirical literature on the cyclical behavior of real wages 2 to identify the sources of the differences in results across studies and 3 to enumerate key factors that determine the cyclicality of real wages given a host of measurement and methodological issues drawing firm conclusions is difficult but several generalizations can be made the estimated cyclicality of real wages depends crucially on the time period of analysis and the choice of whether to examine the production or the consumption wage composition effects play an important but complicated role as well

computing white stylized facts on comovement abstract stylized facts concerning the comovements between two economic variables as measured by the cross correlation function of the two filtered variables reflect a mixture of both the existing cross correlation between the variables and the autocorrelation structure of each of them the autocorrelation structure in turn crucially depends on the filtering procedure we propose an alternative method of obtaining stylized facts based on the cross correlation function of the prewhitened time series which only depends on the purely stochastic components of the series and the cross effects between them the relevance of such an approach is tested by revisiting some of the facts reported by kydland and prescott federal reserve bank of minneapolis quarterly review 1990 3

are there election cycles in wage agreements an analysis of german public employees in this article the possibility of nordhaus political wage cyclesin the west german public services during 1961 1965 is investigated since wage negotiations are centralized one might expect a systematicallyhigher wage increase shortly before a federal election a regression ofwage increases from 30 consecutive public sector pay contracts is run onan election variable and several additional explanatory variables thenull of no election influence is rejected for worker wage increases theestimated increase in wages due to an imminent election is predicted to bein the range of 2 5 to 3 percentage points