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

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

two party competition with persistent policies abstract when campaigning for reelection incumbent parties promises to voters are constrained by their records in office while opposition parties can use their time away from power to develop new platforms in this paper i introduce incumbent policy persistence in a dynamic game of electoral competition between two policy motivated parties and characterise the long run outcomes of its markov perfect equilibria incumbents reduced policy flexibility leads to alternation in power and policy dynamics that converge to alternations at policies equally preferred by the median voter convergence of policies towards the median is a robust equilibrium outcome while convergence to the median is not while alternations far from the median are never limits of equilibrium dynamics alternations close to the median can be reached only if policy dynamics start exactly there i show that these results are robust to voters being forward looking and to limited policy commitment by parties

testing intertemporal budget constraints theory and applications to u s federal budget and current account deficits this paper extends previous tests of intertemporal budget balance and present value relationships by expanding the set of allowable deficit processes and by deriving a testable condition that is sufficient to ensure intertemporal budget balance as long as the expected discount rate is strictly positive using these tests the authors find that both the postwar federal budget deficit process and the process governing accumulation of u s assets by foreigners are consistent with intertemporal budget balance copyright 1991 by ohio state university press

depreciation rules and value invariance with extractive firms the application of samuelson s theorem on value invariance to the case of intertemporally optimizing firms is shown to require a judiciously chosen economic depreciation formula which depends on both current stock and current flow variables in order to prevent the firms from changing their actions in the face of the tax regime we illustrate by deriving depreciation rules which achieve non distortingness of actions and value invariance for resource extracting firms

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

neutral taxation under uncertainty abstract the analogs under uncertainty of two well known certainty results are derived first if there are timing differences between tax payments and accruals neutrality is preserved if the resulting tax credits or liabilities are carried forward at the risk free interest rate provided that tax credits and liabilities are sure to be redeemed eventually second the invariance of asset valuations with respect to the rate of income tax at a given pre tax interest rate proved by johansson and samuelson under certainty can be extended to cover the case of uncertainty given analogous ceteris paribus conditions

the effect of group size on public good provision in a repeated game setting abstract the ability to cooperate in the provision of a pubic good is analyzed in a repeated game holding the level of provision fixed with quasi linear utility we find that the critical value of the discount parameter converges to 0 in the limit thus cooperation is feasible in a large market next we allow the level cooperation to be adjusted optimally as the group size increases both for a specific form of quasi linear utility and for cobb douglas utility in each case we find that there are admissible values of the discount parameter such that cooperation may be maintained in the limit

predictability and power in legislative bargaining the rules and procedures of legislatures often provide legislators with information bearing on the identities of upcoming proposers for a broad class of legislative bargaining games we establish that markovian equilibria necessarily deliver all economic surplus to the first proposer whenever the information structure permits the legislators to rule out some minimum number of proposers one round in advance this result holds regardless of the recognition process and even if players vary in patience and risk aversion it raises the possibility that procedures adopted in the interest of transparency may contribute to the imbalance of political power

dynamic bargaining and stability with veto players this note examines the structure of stationary bargaining equilibria in the finite framework of anesi 2010 the main result establishes a tight connection between the set of equilibrium absorbing points and the von neumann morgestern solutions assuming that players are patient that the voting rule is oligarchical and that there is at least one veto player with positive recognition probability a set of alternatives corresponds to the absorbing points of an equilibrium if and only if it is a von neumann morgenstern solution we also apply our analysis of ergodic properties of equilibria to the persistent agenda setter environment of diermeier and fong 2012 we show that all equilibria are essentially pure and we extend their characterization of absorbing sets to allow an arbitrary voting rule and by removing the restriction to pure strategy equilibira

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

senate representation and coalition building in distributive politics p7 vhe senate s equal representation of states shapes coalition building in distributive politics the great variation in state population means that some states have far greater need for federal fttnds than others but all senators have equal voting weight as a result even though all senators votes are of equal value to the coalition builder they are not of equal prwice coalition builders can include benefits for small states at considerably less expense to program budgets than comparable benefits for more populous states building on formal models of coalition building two hypotheses are developed and tested first coalition builders will seek out less costly members to build supportive coalitions efficiently second the final outcomes of distributive policy will more closely reflect the preferences of small state senators than large state senators the hypotheses are tested by examining the 1991 and 1997 98 reauthorizations of federal surface transportation programs the findings support both hypotheses

international capital mobility what do national saving investment dynamics tell us abstract we interpret the relationship between national saving and investment in the long run as reflecting a solvency constraint and interpret the ease with which a country can run current account imbalances in the short run before it has to ultimately reverse the transaction at some future date to satisfy the solvency constraint as being positively related to the degree of international capital mobility we apply panel error correction techniques to data for 20 oecd countries from 1960 to 1999 we find that saving and investment display a long run cointegration relationship that is consistent with the interpretation that a long run solvency constraint is binding for each country over time however deviations from this long run equilibrium relation have become more persistent which suggests that capital mobility has increased

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

gradual reforms of capital income taxation this paper analyzes the intertemporal allocation effects of anticipated tax rate changes reconsidering the recommendations of the meade committee in a perfect foresight general equilibrium model of economic growth it is shown that the r base or consumption tax can be more distortionary than an income tax and that a revenue neutral integration of corporate and personal taxation will lower social welfare moreover it is argued that a dividend tax dominates the r base tax because it places its distortions on the financial rather than on the real side of the economy copyright 1989 by american economic association

saving investment dynamics and capital mobility in the us and japan abstract this paper points out that a high long run correlation between saving and investment is better interpreted as reflecting the operation of a country s intertemporal budget constraint rather than as an indicator of capital mobility inferences about capital mobility can instead be made from the divergent short run dynamic responses of saving and investment to shocks using post war quarterly data for the us and japan the paper assesses the characteristics of saving and investment behavior under different regulatory environments it finds mixed evidence of changes in the short run dynamics of saving and investment that suggest increased capital mobility in the 1980s

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

is the budget deficit too large yes specifically we find that recent spending and taxing policies of the government if continued violate the government s intertemporal budget constraint as a result government spending must be reduced and or tax revenues must be increased these conclusions are based on tests of whether government spending and revenue are cointegrated in addition to examining real spending and revenue we also normalize these variables by real gnp and population for a growing economy these normalized measures are perhaps more pertinent we also test and find support for the hypothesis that deficits have become a problem only in recent 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

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

explaining saving investment correlations national saving and investment rates are highly positively correlated in virtually all countries this is puzzling as it apparently implies a low degree of international capital mobility this paper shows that the observed positive correlation between national saving and investment rates arises naturally within a quantitatively restricted equilibrium model with perfect mobility of financial and physical capital the model is consistent with the fact that saving investment correlations are larger for larger countries but are still substantial for small countries further the model is consistent with the finding that current account deficits tend to be associated with investment booms copyright 1993 by american economic association

international capital mobility in the long run and the short run can we still learn from saving investment data the idea to learn about international capital mobility from saving and investment data remains appealing our approach is based on var methods and overcomes some of the problems associated with saving investment regressions when the data are non stationary we propose a new measure of long run capital mobility that can be easily calculated as a by product of the estimation procedure of a cointegrated var in an application to historical us and british data we find long run capital mobility to have been remarkably stable over the century whereas variations in the mobility of capital primarily seem to have affected short run capital flows

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

a theory of constitutional standards and civil liberty why would potentially intolerant majorities in a democracy protect the rights of unpopular groups this paper models the formation of legal standards that determine the extent of civil liberty in a society it is shown that tolerant legal standards emerge over time despite all individuals having intolerant preferences each period citizens choose activities that have social consequences a majority vote determines which of these activities are legally protected because of errors in interpreting the symbolic content of these activities voters from the majority will not impose excessively intolerant standards otherwise they may end up severely punishing members of their own group by mistake extending this framework to a dynamic model we examine markovian equilibria of the game when government improves with time in its ability to correctly interpret citizens activities these improvements allow an unchanging majority to impose increasingly intolerant standards over time it is shown that societies with high political turnover due to population changes are apt to choose tolerant legal standards societies with low turnover are more apt to choose more intolerant and unstable ones each group seeks to prevent auditing capabilities of government from improving too much over time in order to prevent future majorities from successfully enforcing more intolerant standards

durable coalitions and communication public versus private negotiations abstract we present a laboratory experiment to study the effect of communication on durable coalitions coalitions that support the same allocation from one period to the next we study a bargaining setting where the status quo policy is determined by the policy implemented in the previous period our main experimental treatment is the opportunity for subjects to negotiate with one another through unrestricted cheap talk communication before a proposal is made and comes to a vote we compare committees with no communication committees where communication is public and messages are observed by all committee members and committees where communication is private and any committee member can send a private message to any other committee member we find that the opportunity to communicate has a significant impact on outcomes and coalitions when communication is public there are more universal coalitions and fewer majoritarian coalitions with private communication there are more majoritarian coalitions and fewer universal coalitions with either type of communication coalitions occur more frequently and last longer than with no communication the volume and content of communication is correlated with coalition type these findings suggest a coordination role for communication that varies with the mode of communication

persistence of power repeated multilateral bargaining with endogenous agenda setting authority abstract we extend a simple repeated multilateral bargaining model to allow successful agenda setters to hold on to power as long as they maintain the support of a majority of other committee members theoretically and experimentally we compare this endogenous power environment with a standard random power environment in which agenda setters are appointed randomly each period although the theoretical analysis predicts that the two environments are outcome equivalent the experimental analysis shows substantial differences in behavior and outcomes across the games the endogenous power environment results in the formation of more stable coalitions less equitable budget allocations the persistence of power across periods and higher long run inequality than the random power environment we present evidence that the stationary equilibrium refinements traditionally used in the literature fail to predict behavior in either game

domestic saving and international capital movements in the long run and the short run the evidence and analysis in this paper support the earlier findings of feldstein and horioka 1980 that sustained increases in domestic savings rates induce approximately equal increases in domestic rates of investment new estimates for the post opec period 1974 79 imply that each extra dollar of domestic saving increases domestic investment by approximately 85 cents in a sample of 17 oecd countries an explicit analysis of the problems of identification and simultaneous equations bias suggests that the regression estimates are more relevant as a guide to the long run response of international capital flows than to their short run behavior coefficient estimates based on annual variations in savings and investment are subject to potentially severe simultaneous equations bias that is not present when annual observations are averaged over a decade or more and the regression is estimated with a cross country sample of these averages a portfolio model of international capital allocation that is presented in the paper indicates that the short run change in the rate of net foreign investment in response to a sustained increase in domestic saving is likely to be substantially greater than the ultimate steady state response this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

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

estimating saving investment correlations evidence for oecd countries based on an error correction model abstract saving investment correlations are important stylized facts in open economy macroeconomics and indicators of capital mobility they are best estimated by an error correction model ecm because an ecm is consistent with intertemporal general equilibrium models the ecm is a synthesis of previous approaches applying the ecm to the oecd countries we find that in general saving and investment are cointegrated the ecm is more powerful in detecting cointegration than the two step engle granger procedure estimates of the saving investment correlation are robust with respect to overdifferencing we find evidence of a large country effect and an increase in capital mobility within the oecd area

a model of farsighted voting i present a new method of interpreting voter preferences in settings where policy remains in effect until replaced by new legislation in such settings voters consider not only the utility they receive from a given policy today but also the utility they will receive from policies likely to replace that policy in the future the model can be used to characterize both long term preferences and distributions over policy outcomes in situations where policy is ongoing and voters are farsighted

size distortions of tests of the null hypothesis of stationarity evidence and implications for the ppp debate abstract tests of the null hypothesis of stationarity against the unit root alternative play an increasingly important role in empirical work in macroeconomics and in international finance we show that the use of conventional asymptotic critical values for stationarity tests may cause extreme size distortions if the model under the null hypothesis is highly persistent this fact calls into question the use of these tests in empirical work we illustrate the practical importance of this point for tests of long run purchasing power parity ppp under the recent float we show that the common practice of viewing tests of stationarity as complementary to tests of the unit root null will tend to result in contradictions and in spurious rejections of long run ppp while the size distortions may be overcome by the use of finite sample critical values the resulting tests tend to have low power under economically plausible assumptions about the half life of deviations from ppp thus the fact that stationarity is not rejected cannot be interpreted as convincing evidence in favor of mean reversion only in the rare case that stationarity is rejected do size corrected tests shed light on the question of long run ppp

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

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

collective action and the group size paradox according to the olson paradox larger groups may be less successful than smaller groups in furthering their interests we address the issue in a model with three distinctive features explicit intergroup interaction collective prizes with a varying mix of public and private characteristics and nonlinear lobbying costs the interplay of these features leads to new results when the cost of lobbying has the elasticity of a quadratic function or higher larger groups are more effective no matter how private the prize with smaller elasticities a threshold degree of publicness is enough to overturn the olson argument and this threshold tends to zero as the elasticity approaches the value for a quadratic function we also demonstrate that these results are true irrespective of whether we examine group sizes over the cross section in some given equilibrium or changes in the size of a given group over different equilibria

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

a functional coefficient model view of the feldstein horioka puzzle what does the saving investment si relation really measure and how should the si relation be measured these are two of the most discussed issues triggered by the so called feldstein horioka puzzle based on panel data we introduce a new variant of functional coefficient models that allows to separate long and short to medium run parameter dependence the new modeling framework is applied to uncover the determinants of the si relation macroeconomic state variables such as openness the age dependency ratio government current and consumption expenditures are found to affect the si relation significantly in the long run

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

bilateral bargaining with endogenous status quo abstract we consider a non cooperative bargaining game where in each round if a proposal is rejected with a probability the allocation implemented in the previous round is implemented as a status quo and the game proceeds to the next round and with the complementary probability no allocations are implemented and the negotiations break down we show that there exists a unique stationary subgame perfect equilibrium such that in any round a proposer offers a proposal such that the responder is indifferent between accepting and rejecting it and an agreement is achieved if the probability of breakdown is close to zero the sequence of equilibrium allocations evolves from the initial status quo to an allocation near the equilibrium allocation of the rubinstein bargaining game over time the effect of the initial status quo on the equilibrium allocations vanishes over time

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

dynamic aspects of effluent taxation under uncertainty abstract the optimal adjustment process for an effluent charge is derived when the firm s response to the charge is uncertain the optimal process is shown to exhibit the dual effects of caution and probing because of uncertainty society should be risk averse or cautious when setting the charge however because of the possibility of generating information for improved future control this caution is balanced by the incentive to probe for additional information finally if the uncertain parameters of the firm s response function are nonautonomous their change over time must be explicitly considered to avoid bias in estimation

the emerging u s current account deficit in the 1980s a cointegration analysis this paper seeks to understand the recent history of u s external imbalances by identifying the long run tendency of the u s current account balance and investigating its behavior the procedure that is adopted is to estimate cointegrating regressions between u s exports and imports of goods and services estimates from cointegrating regressions between several measures of u s exports and imports show that up to about the end of 1983 the u s current account tended toward zero since that time there has been an apparent structural shift resulting in a long run tendency for a deficit in excess of 100 billion per year copyright 1992 by mit press

political economy of redistribution it is often argued that additional constraints on redistribution such as granting veto power to more players in society better protects property from expropriation we use a model of multilateral bargaining to demonstrate that this intuition may be flawed increasing the number of veto players or raising the supermajority requirement for redistribution may reduce protection on the equilibrium path the reason is the existence of two distinct mechanisms of property protection one is formal constraints that allow individuals or groups to block any redistribution that is not in their favor the other occurs in equilibrium where players without such powers protect each other from redistribution players without formal veto power anticipate that the expropriation of other similar players will ultimately hurt them and thus combine their influence to prevent redistributions in a stable allocation the society exhibits a class structure with class members having equal wealth and strategically protecting each other from redistribution

capital income taxation depletion allowances and nonrenewable resource extraction abstract this paper analyses the distortionary effects of the corporate income tax on the output path of the resource sector and on the allocation of resources between the mining and non mining corporate sectors the cost of capital for a resource industry facing a corporate income tax is derived as well as the resulting effective tax rate on capital income the comparison of the effective tax rates of the mining and non mining sectors pays particular attention to the role played by the depletion allowance in assuring equal treatment

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

financial determinants of domestic investment in sub saharan africa evidence from panel data abstract this study investigates the effects of financial development on domestic investment in a sample of 30 sub saharan african countries it is based on a dynamic serial correlation investment model including various indicators of financial development controlling for country specific fixed effects and nonfinancial factors of investment the results indicate a positive relationship between domestic investment total investment and private investment and various indicators of financial development higher financial development leads to higher future levels of investment implying a potent long run effect of financial development on domestic investment the findings imply that financial development can stimulate economic growth through capital accumulation

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