pareto improving campaign finance policy this paper argues that campaign finance policy in the form of contribution limits and matching public financing can be pareto improving even under very optimistic assumptions concerning the role of campaign advertising and the rationality of voters the optimistic assumptions are that candidates use campaign contributions to convey truthful information to voters about their qualifications for office and that voters update their beliefs rationally on the basis of the information they have seen the argument also assumes that campaign contributions are provided by interest groups and that candidates can offer to provide policy favors to attract higher contributions

candidate reputations and the incumbency effect abstract a major shortcoming of the classical median voter model is that its central prediction convergence of platforms to the median voter s ideal is seldom observed one reason is that the classical model neglects the importance of voter expectations as a determinant of votes here we associate voters expectations about candidates with past as well as current candidate pronouncements and assume that incumbents whose actions are consistent with their reputations are perceived as less risky than challengers in equilibrium candidates choose distinct platforms typically neither adopts the median voter s ideal point either candidate may win depending on how well the incumbent s reputation reflects current voter tastes and how relatively risky the electorate perceives the challenger to be

spatial equilibrium with entry this paper examines spatial equilibrium in political competition when established parties choose their platforms competitively while rationally anticipating entry of a vote maximizing third party the resulting equilibrium is substantially different from the hotelling median equilibrium established parties are spatially separated and third parties will generally lose the election this provides one theoretical explanation for the stability of two party systems namely that non cooperative behavior between established parties can effectively prevent third parties from winning

lag length selection and tests of granger causality between money and income one of the most widely accepred relationships in macroeconomics is the positive relationship between the rate of growth of the money supply and the rate of growth of income a diversity of opinion arises however with the attempt to identify a causal relationship between these variables while friedman and schwartz 1963 initiated the empirical investigation of money income causality sims 1972 made the most significant contribution to this literature with a practical application of the criterion developed by granger 1969 for identifying a causal relationship since the appearance of sims s approach and an alternative one advanced by sargent 1976 many researchers have applied these techniques to the investigation of the causal relationship between money and income l with two exceptions hsiao 1981 and mcmillin and fackler 1984 these researchers have arbitrarily chosen the lengths of their distributed lags the purpose of this paper is to test for granger causality between money and income this paper differs from previous work in that considerably more attention is focused on the effect of the lag specification on the test results in particular we investigate the extent to which rules of thumb arbitrary lag specifications and

rents and the cost and optimal design of commodity taxes this paper numerically investigates the significance of rents for both the welfare costs and the optimal design of commodity taxes using a general equilibrium model calibrated to 1986 canadian data in the data we use ricardian rents are concentrated in agriculture and utilities with market structure rents concentrated in manufacturing different types of rents have different implications for the welfare cost of taxes and hence also for appropriate tax design ricardian rents lower the cost of taxes rents supported by imperfect competition with no free entry raise the cost of taxes rents supported by regulation generate rent seeking costs and if taxed improve resource allocation model results show a markedly nonuniform optimal tax structure and a substantial influence of the treatment of rents on the pattern of optimal tax rates by commodity

credibility and policy convergence in a two party system with rational voters the traditional approach to modeling political parties behavior based upon the contribution of anthony downs 1957 assumes that the parties unique objective is to win elections thus they maximize their popularity the crucial implication of this assumption for a two party system is that if the two parties have the same information about voters preferences full convergence of policies results from electoral competition this is the crucial implication of the median voter theorem more generally it may be argued that different parties are motivated differently because they represent different constituencies parties may not care only about winning elections per se but also about the quality of the policies resulting from an election in this case the candidates of the two parties view winning an election not only as a goal per se but also as a means of implementing a better policy for their respective constituencies this paper shows that electoral competitions imply dynamic inconsistency if the voters are modeled as rational and forwardlooking agents and parties do not care exclusively about being elected but also about which policy to implement once elected the dynamic inconsistency arises as follows the parties have an incentive to announce convergent platforms to increase their chances of election however if the elected party is not committed to its electoral platform it has an incentive to follow its most preferred policy rather than the policy announced in its platform if voters are rational they account for this incentive thus in general in a one shot electoral game the only timeconsistent equilibrium is one in which no convergence is possible the two parties follow their most preferred policies and the voters rationally expect this outcome full convergence of parties platforms results only as a limiting case when the parties are completely indifferent with respect to the quality of the policies resulting from the election thus these results differ from the existing literature on ideologically motivated politicians for instance donald wittman 1977 1983 randall calvert 1985 which implicitly assumes the possibility of binding commitments to electoral platforms complete or partial policy convergence can be the outcome of political competition if the interaction between the parties and the voters is modeled as an infinitely repeated game in fact if the candidates have concave objective functions the welfare maximizing policy rule implies a complete convergence of parties policies however this cooperative and agreed upon policy may or may not be sustainable as a subgame perfect equilibrium depending on parameter values in particular it depends on the discount rates of the two parties the degree of polarization of their preferences and the relative popu graduate school of industrial administration carnegie mellon university pittsburgh pa 15213 and national bureau of economic research cambridge ma 02138 this paper is based upon a chapter of my unpublished doctoral dissertation at harvard university i am greatly indebted to jeffrey sachs for directing my attention toward these issues and for many conversations i also wish to thank andrew abel dilip abreu olivier blanchard ramon caminal andrew caplin alex cukierman morris fiorina benjamin friedman herschel grossman howard rosenthal and the referees for very useful comments the responsibilitv af anv n mtnkieis af calrirp nfnlv mine the result of policy convergence in a two party system is more general than the median voter theorem for discussions of convergence results not at the median see john ledyard 1984 peter coughlin 1984 coughlin and shmuel nitzan 1981 melvin hinich 1977 for earlier work on spatial competition see richard mckelvey 1975 hinich ledyard and peter ordeshook 1972 1973 and the references quoted therein the present paper focuses on the result of convergence rather than on the median voter theorem per se

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

are energy prices cyclical abstract conventional analysis implies that energy price declines from 1981 to 1983 were caused by the world recession the alternative view presented in this paper is that these declines arose largely in response to changes in us energy policy and were not due to the business cycle after developing the theoretical conditions for cyclical prices in various oil and energy markets we examine us macroeconomic data 1947 1980 to test these competing views we conclude that declining oil and energy prices are not a business cycle phenomenon indeed the evidence offers support for the reverse causation that energy prices cause business cycles

political quid pro quo agreements an experimental study we experimentally study the common wisdom that money buys political influence in the game one special interest i e a corporate firm has the opportunity to influence redistributive tax policies in her favor by transferring money to two competing candidates the success of the investment depends on whether or not the candidates are willing and able to collude on low tax policies that do not harm their relative chances in the elections in the experiment successful political influence never materializes when the firm and candidates interact just once by contrast it yields substantially lower redistribution in about 40 of societies with finitely repeated encounters however investments are not always profitable and profit sharing between the firm and candidates depends on prominent equity norms our experimental results shed new light on the complex process of buying political influence in everyday politics and help explain why only relatively few firms do actually attempt to influence policymaking

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

post bretton woods deviations from purchasing power parity in g7 exchange rates an empirical exploration abstract exchange rates have deviated substantially and idiosyncratically from purchasing power parity ppp since the breakdown of bretton woods in this paper a model incorporating both traditional ppp and financial market variables is constructed and tested on the us dollar s six g7 exchange rates during the floating rate era empirical tests show that the model s common set of variables with consistent signs can explain the divergent behavior of g7 exchange rates during 1973 2 90 2 idiosyncracies are reflected in different subsets of the model s variables entering significantly into each exchange rate s regression the existence of stable relationships is demonstrated by the equations co integration

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

equilibrium political budget cycles political business cycle theories generally rely on nominal rigidities and voter myopia this paper offers an equilibrium theory that preserves some basic insights from earlier models though with significant refinements the political budget cycle emphasized here is in fiscal policy rather than output and inflation it arises via a multidimensional signal process one can consider the welfare implications of proposals to mitigate the cycle and the effects of altering the electoral structure copyright 1990 by american economic association

lobbying and the measurement of conventional welfare cost it is widely accepted that the welfare cost of distortionary policy has two components the first component is the conventional welfare cost of lost economic surplus due to an inefficient allocation of resources the second component is the rent seeking cost associated with efforts to influence policy if the policy in question is an excise tax the partial equilibrium measure of conventional welfare cost is the harberger triangle of lost consumer and producer surpluses partial equilibrium rent seeking costs are measured by the amount spent to influence policy total welfare cost is the sum of the two measurements while how one determines and thus measures the equilibrium amount of rent seeking is the subject of much debate and modelling the measurement of conventional welfare cost is not controversial 1 furthermore conventional welfare costs are treated as independent of the manner in which rent seeking occurs for example consider the welfare cost of monopoly see tullock 1967 or posner 1975 the portion o f the total welfare cost due to underproduction is measured by the harberger triangle of lost surplus whatever the method by which monopoly rights are obtained the benefits of rent seeking accrue entirely to the holder of the monopoly right any rent seeking expenses are treated as fixed costs with no effect on the monopolist s output decision the form that rent seeking takes is irrelevant to the measurement of conventional welfare cost in other cases the form rent seeking takes is relevant consider a multi firm industry subjected to an excise tax if effective lobbying requires a collective lobbying effort and if a firm s share of the industry s rent seeking expenses vary with a firm s output rent seeking will affect the firm s and industry s marginal cost functions the impact of rent seeking on marginal cost if overlooked leads to mismeasurement of conventional welfare cost and thus the total welfare cost of the policy moreover the direction of measurement error

interest groups and the electoral control of politicians abstract we develop a model of interest group influence in the presence of repeated electoral competition in each period of the game an interest group attempts to buy an incumbent s policy choice and a voter chooses whether to replace the incumbent with an unknown challenger the voter faces a tension between retaining good politician types and rewarding past performance the model predicts that above average incumbents face little discipline but others are disciplined increasingly and re elected at a higher rate as the interest group becomes more extreme extensions of the model consider term limits long lived groups and multiple groups

fiscal restraints and voter welfare this paper explores the logic of fiscal restraints in a political agency model with both moral hazard and adverse selection the role of the political process is both to discipline incumbents who may act against the public interest and to sort in those politicians who are most likely act in voters interests we use the model to examine the optimality of inefficient taxation limits on the size of government increasing transparency and yardstick competition some conclusions are surprising for example we show that some forms of fiscal restraint can only be desirable when incumbents are sufficiently likely to be benevolent

competence and ideology we develop a dynamic repeated election model in which citizen candidates are distinguished by both their ideology and valence voters observe an incumbent s valence and policy choices but only know the challenger s party our model provides a rich set of novel results in contrast to existing predictions from static models we prove that dynamic considerations make higher valence incumbents more likely to compromise and win re election even though they compromise to more extreme policies consequently we find that the correlation between valence and extremist policies rises with office holder seniority this result may help explain previous empirical findings despite this result we establish that the whole electorate gains from improvements in the distribution of valences in contrast fixing average valence the greater dispersion in valence associated with a high valence political elite always benefits the median voter but can harm a majority of voters when voters are sufficiently risk averse we then consider interest groups igs or activists who search for candidates with better skills we derive a complete theoretical explanation for the intuitive conjectures that policies are more extreme when igs and activists have more extreme ideologies and that such extremism reduces the welfare of all voters

an institutional theory of divided government and party polarization this paper develops a simple model of institutionally driven party competition which may explain the persistence of divided government in the basic model two parties that are solely motivated to win elections compete for two offices the legislature and the executive parties offer positions in a single dimension to a single district sophisticated electorate that understands the institutionally defined relationship between electoral and policy outcomes when parties are risk averse competition for the two offices leads to a prisoner s dilemma the parties can jointly improve on the one shot nash equilibrium in which they adopt convergent positions several extensive form election games are shown to allow the parties to solve their prisoner s dilemma in a subgame perfect nash equilibrium in such an equilibrium parties adopt widely separated positions and divided government and splitticket voting occur with high probability unlike typical voting models in the basic model there is no tendency for electoral equilibrium to produce the expected median voter s ideal policy outcome these results are robust to a variety of extensions including significant sincere voting multiple policy dimensions and defections by incumbent candidates

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

price of oil and world inflation and recession new evidence shows that the commonly held assumption that the 1973 74 oil price increase directly affected us and world inflation and subsequent recession is consistent with the empirical data an extended lucas varro real income equation applied to the us united kingdom canada france germany italy japan and the netherlands gives mixed results partly because of price control and decontrol programs simulation experiments on the price control variable using us data finds strong effects further studies can be made when consistent international data is available for the 1979 80 period 18 references 4 figures 3 tables dck

campaign finance and voter welfare with entrenched incumbents two candidates compete for elective office each candidate has information she would like to reveal to the voters but this requires costly advertising the candidates can solicit contributions from interest groups to finance such advertising these contributions are secured by promises to perform favors for the contributors should the candidate win the election voters understand this and elect the candidate they like best taking into account their expectations about promises to special interests there is an incumbency advantage in fundraising which is sometimes so great that the incumbent faces no serious opposition at all introducing partial public financing through matching funds improves voter welfare in districts that have advertising under the decentralized system while it can reduce welfare in other districts the optimal policy must strike a balance between these two effects

optimal retention in agency problems this paper studies the interaction between a single long lived principal and a series of short lived agents in the presence of both moral hazard and adverse selection we assume that the principal can influence the agents behavior only through her choice of a retention rule this rule is further required to be sequentially rational i e no precommitment is allowed we provide general conditions under which equilibria exist where a the principal adopts a cut off rule under which agents are retained only when the reward they generate exceeds a critical bound and b agents separate according to type with better agents taking superior actions we show that in equilibrium a retained agent s productivity is necessarily declining over time but that retained agents are also more productive on average than untried agents due to selection effects finally we show that for each given type agents of that type are more productive in the presence of adverse selection than when there is pure moral hazard i e when that type is the sole type of agent in the model nonetheless adding uncertainty about agent types cannot benefit the principal except in uninteresting cases

two roles for elections disciplining the incumbent and selecting a competent candidate this paper presents a political economy model in which the voterswant to control moral hazard on the part of the incumbent andselect a competent candidate to be in office we focus on electionswhich take place repeatedly as the basic disciplinary and screeningmechanism it is shown that incomplete information of the votersabout the economic competence of the incumbent helps to overcomethe lame duck effect of a government with foreseeable end asecond finding is that economic performance strongly influences thereelection of the incumbent in particular in stationary perfectbayesian equilibrium if economic performance is bad theincumbent will not be reelected we also prove that having thepossibility of reelecting a government increases the welfare of thevoters to the no reelection benchmark

efficient rents 1 rent seeking behavior in the long run we have analyzed long run behavior in rent seeking under several conditions and behavioral hypotheses the question of interest is whether or not the long run expenditures will exactly equal the value of the rents our results depend on the type of competitive response which is assumed to exist in the long run and on the r value governing the probability of winning

in search of the just u s oil policy a review of arrow and kalt and more in december 1979 the carter administration and the congress were embroiled in debate about the administration s new energy policy to reduce u s imports of foreign oil president carter was invoking his statutory authority to remove gradually existing price control regulations on u s crude oil to lessen the perceived equity problems of decontrol the administration submitted to congress legislation that politically tied the gradual elimination of price controls to the levying of a windfall profits tax within this political environment the american enterprise institute released a pamphlet by kenneth arrow and joseph kalt december 1979 entitled petroleum price regulation should we decontrol p 47 given the political issues at that time the authors mysteriously addressed only the economic wisdom of either reversing the presidential intention of decontrolling the industry or pursuing immediate decontrol comparing the cases for immediate instead of gradual decontrol was not explicitly undertaken most ironic was the authors complete silence on what their economic analysis implied for the wisdom of levying the then contemplated and nowimplemented windfall profits tax

interest groups campaign contributions and probabilistic voting this essay develops a simple model to analyze the impact of campaign contributions on electoral policy decisions of candidates for office interest groups here are firms that select contributions under the assumption that candidates policies and opposing groups donations remain unaltered candidates however recognize that their policy choices affect contributions campaign contributions are used by candidates to affect policy oriented voters perceptions of candidates positions in this framework the introduction of campaign contributions may affect candidates electoral policies and if they do then they benefit surely exactly one of the two interest groups

the political economy of dynamic elections accountability commitment and responsiveness we survey the literature on dynamic elections in the traditional settings of spatial preferences and rent seeking under perfect and imperfect monitoring of politicians we define stationary electoral equilibrium which encompasses notions used by barro 1973 ferejohn 1986 banks and sundaram 1998 and others we show that repeated elections mitigate the commitment problems of politicians and voters and that a responsive democracy result holds under general conditions term limits however attenuate the responsiveness finding we also touch on related applied work and we point to areas for fruitful future research including the connection between dynamic models of politics and economics

behind the revolving door a new view of public utility regulation regulatory officials frequently work for firms they regulate after they leave office this revolving door has been the subject of much scrutiny owing to the natural suspicion of corruption in a time dependent supergame i take a strategic look behind the revolving door and find it can lead to improved performance of regulated industries when firm managers and regulators have finite and concurrent terms investment incentives are minimal staggered terms and revolving doors can result in improved performance of regulated firms when each side s actions at each date are contingent on past outcomes

economic policy economic performance and elections this paper explores the role of reelection pressures in determining economic policy by assuming that voters are uncertai n as to the efficacy of different policies a reelection process is derived that depends on both a politician s past policies and the level of economic activity during his time in office it is shown th at the less uncertain are voters as to which policy is best the more likely is a politician to manipulate policy for reelection purposes manipulation entails implementing the policy that is more likely to be well received rather than the one that maximizes income copyright 1993 by american economic association

electoral competition and special interest politics have fixed positions on some issues but vary their positions on others in order to attract votes and campaign contributions in this context we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving and how their contributions affect the equilibrium platforms we show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups the party that is expected to win a majority of seats caters more to the special interests

the social cost of rent seeking first estimates omists have been unanimous in their verdict that rent seeking is socially wasteful if rational from the practitioner s perspective 1 the entire literature on rent seeking that has developed over the past twenty years has focused on a describing the process of rent seeking b describing the theoretical consequences of rent seeking and c applying the theory to examination of political behavior and political outcomes to our knowledge there have been no attempts to empirically verify quantify the alleged social waste due to rentseeking the purpose of this paper is to report our first stab efforts in this regard we make no pretense of advancing the theory of rent seeking the investigation is an empirical search for a phillips curve type of relationship between incidence of rent seeking in the u s economy and the size growth of that economy our findings based on both time series and cross sectional analysis of the u s economy verify the existence of a social cost to rentseeking our crude estimate of the impact of rent seeking suggests that rentseeking as we measure it cost the economy an additional 22 6 percent of measured gnp in 1985

determinants of official opec crude prices the hypothesis of this paper is that crude oil like any other unfinished commodity is valued for the products derived from it the purpose is to offer an empirical explanation for changes in the crude price charged by the members of opec the model results show that the market clearing prices reported to prevail for petroleum products on the principal petroleum spot market at rotterdam are the primary determinants of changes in official crude prices a systematic relationship between offical and spot prices is argued to have prevailed since 1974 an appendix clarifies five types of data required for the model 13 references 4 tables

seniority in legislatures we construct a stochastic game model of a legislature with an endogenously determined seniority system we model the behavior of the legislators as well as their constituents in an infinitely repeated divide the dollar game each legislative session must make a decision on redistributional issues modeled as a divide the dollar game however each session begins with a vote in which the legislators decide by majority rule whether or not to impose on themselves a seniority system legislative decisions on the redistributional issues are made by the baron ferejohn rule an agenda setter is selected by a random recognition rule which in our model is a function of the seniority system selected the agenda setter makes a proposal on redistributional issues and the legislature then votes whether to accept or reject the agenda setters proposal if the legislature rejects the proposal another agenda setter is randomly selected and the process is repeated if the legislature accepts the proposal the legislative session ends and the voters in each legislative district vote whether to retain their legislator or throw it out of office the voters verdict determines the seniority structure of the next period legislature we find a stationary equilibrium to the game having the property that the legislature imposes on itself a non trivial seniority system and that legislators are always reelected

legislators and interest groups how unorganized interests get represented this paper derives a supply price for public policy using a constrained maximization model in the model three sets of agents each have preferences over outcomes organized interest groups offer campaign contributions to improve their own wealth voters offer votes to obtain outcomes closer to their most preferred outcomes and legislators seek both campaign contributions and votes to obtain reelection a given legislator s supply price for policy is shown to depend on the productivity of his effort as determined by committee assignments priority and ability and by the preferences of his unorganized constituency in the home district two extreme assumptions about the effectiveness of campaign spending in eliciting votes are used to illustrate the comparative statics properties of the model the prediction of the model is that interest groups will in general seek out legislators whose voters are indifferent to the policy the interest group seeks thus voters who do have preferences over policy are in effect represented even though they are not organized

campaign advertising and voter welfare this paper investigates the role of campaign advertising and the opportunity of legal restrictions on it an electoral race is modeled as a signalling game with three classes of players many voters two candidates and one interest group the group has non verifiable insider information on the candidates quality and on the basis of this information offers a contribution to each candidate in exchange for a favorable policy position candidates spend the contributions they receive on non directly informative advertising this paper shows that 1 a separating equilibrium exists in which the group contributes to a candidate only if the insider information about that candidate is positive 2 although voters are fully rational a ban on campaign advertising can be welfare improving and 3 split contributions may arise in equilibrium and if they arise too often they are detrimental to voters

the life cycle of regulatory agencies dynamic capture and transaction costs the dynamics of regulation is analysed in a model where regulatory capture comes from the repeated interaction between an interest group and a regulatory agency regulatory institutions offer a framework for this dynamic process they put constraints on the interest group s influence the dynamics of regulation and its long run outcome depend on the political principal s the regulator s and the regulated firm s time preferences and their information some foundations for the transaction costs of side contracting used in the standard literature on collusion are provided those transaction costs are linked to the precise nature of regulatory institutions

electoral competition with informed and uninformed voters i present a model of electoral competition in which candidates raise campaign contributions by choosing policies that benefit interest groups and then expend those contributions to influence voters who are uninformed about the policies informed voters however vote based on those policies so candidates face a trade off between choosing a policy to generate funds to attract the uninformed vote and choosing a policy to attract the informed vote electoral equilibria are characterized for two categories of policies particularistic and collective in the case of particularistic policies the equilibrium policies of the candidates are separated if the proportion of uninformed voters is sufficiently high and the degree of separation is an increasing function of that proportion the model is extended to include the public financing of elections and incumbency advantages for the case of collective policies the candidates locate at the median of the ideal points of the informed voters and contributions are zero

bailout for sale the vote to save wall street this paper provides a public choice analysis of the 2008 banking bailout in the united states the paper introduces heterogeneity of congressional districts into the common agency problem in special interest politics district heterogeneity implies district specific electoral constraints on legislators ability to collect rents from and cast dissonant votes in support of special interests an empirical analysis examines legislative voting on the initial bailout proposal using campaign contributions to legislators from special interest groups and the importance of financial services for employment within congressional districts as the main explanatory variables the empirical analysis corrects for possible endogeneity bias using valid instruments and considers several intuitive sub sample estimations as alternative methods for addressing the endogeneity issue the paper provides empirical evidence that campaign contributions from the financial services sector influenced legislative voting on the banking bailout