testing for asymmetric information in insurance markets the first goal of this paper is to provide a simple and general test of the presence of asymmetric information in contractual relationships within a competitive context we also argue that insurance data are particularly well suited to such empirical investigations to illustrate this claim we use data on contracts and accidents to investigate the extent of asymmetric information in the french market for automobile insurance using various parametric and nonparametric methods we find no evidence for the presence of asymmetric information in this market

a solution concept for majority rule in dynamic settings we define and explore the notion of a dynamic condorcet winner dcw which extends the notion of a condorcet winner to dynamic settings we show that for every dcw every member of a large class of dynamic majoritarian games has an equivalent equilibrium and that other equilibria are not similarly portable across this class of games existence of dcws is guaranteed when members of the community are sufficiently patient we characterize sustainable and unsustainable outcomes study the effects of changes in the discount factor investigate efficiency properties and explore the potential for achieving renegotiation proof outcomes we apply this solution concept to a standard one dimensional choice problem wherein agents have single peaked preferences as well as to one involving the division of a fixed aggregate payoff

do people care about democracy an experiment exploring the value of voting rights in almost all democratic national elections an individual vote cannot change the election outcome the fact that many individuals nevertheless participate voluntarily in such elections suggests that people do care about democracy as such this experiment investigates the value of democratic voting rights by providing participants the chance to sell them more specifically an incentive compatible mechanism is used to elicit the willingness to accept value of the voting right in the election of the german bundestag on 16 october 1994 a postexperimental questionnaire makes it possible to assess the relative importance of answers to the frequently raised question why do people vote

taking versus taxing an analysis of conscription in a private information economy most countries currently man their militaries through conscription i e a draft conventional wisdom suggests that by lowering the budgetary cost of the military a draft reduces distortionary taxation especially when military needs are large we find that this intuition is misguided when income taxes are set optimally voluntary enlistments lead to less distortionary taxation than a draft because the tax base left behind by a volunteer army tends to be more productive than that after a draft for reasonable parameter values drafts are more distortionary and less socially desirable when military needs are large

the undesirability of randomized income taxation under decreasing risk aversion abstract for the standard specification of the utilitarian optimal income tax problem with hidden characteristics the paper shows that randomized tax schemes are undesirable if preferences exhibit a property of weakly decreasing risk aversion according to the multidimensional risk aversion concept of hellwig hellwig m f 2004 risk aversion in the small and the large with multidimensional outcomes max planck institute for research on collective goods bonn preprint 2004 6 http www mpp rdg mpg de pdf dat 2005 23online pdf this property of decreasing risk aversion also implies that the optimal income tax schedule is unique and depends continuously on the data of the problem

the long term impact of military service on health evidence from world war ii and korean war veterans during the world war ii and korean war era the u s military freely distributed cigarettes to overseas personnel and provided low cost tobacco products on domestic military bases in fact even today the military continues to sell subsidized tobacco products on its bases using a variety of instrumental variables approaches to deal with nonrandom selection into the military and into smoking we provide substantial evidence that cohorts with higher military participation rates subsequently suffered more premature mortality more importantly we show that a large fraction 35 to 79 percent of the excess veteran deaths due to heart disease and lung cancer are attributable to military induced smoking

using elasticities to derive optimal income tax rates this paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates a simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income distribution in the general non linear income tax problem this method using elasticities shows precisely how the different economic effects come into play and which are the key relevant parameters in the optimal income tax formulas of mirrlees the optimal non linear tax rate formulas are expressed in terms of elasticities and the shape of the income distribution these formulas are implemented numerically using empirical earning distributions and a range of realistic elasticity parameters

long term consequences of vietnam era conscription new estimates using social security data we use the draft lottery to construct instrumental variables iv estimates of the impact of vietnam era military service on veterans social security ssa earnings through 2007 we also use ssa data to construct iv estimates for employment as measured by an indicator for positive earnings and disability status as measured by an indicator for social security disability program application new findings for recent years show surprisingly rapid convergence in veteran and nonveteran earnings by the early 1990s there was no longer a substantial vietnam era conscription penalty the iv estimates also show no effect on employment or disability rates

endogenous federal grants and crowd out of state government spending theory and evidence from the federal highway aid program contrary to simple theoretical predictions existing evidence suggests that federal grants do not crowd out state government spending a legislative bargaining model with endogenous grants documents a positive correlation between grant receipts and preferences for public goods this correlation has likely biased existing work against measuring crowd out to correct for such endogeneity the model motivates instruments based on the political power of state congressional delegations exploiting this exogenous variation in grants the instrumental variables estimator reports crowd out that is statistically and economically significant this endogeneity may explain the flypaper effect a nonequivalence between grant receipts and private income jel d70 h40 h77

bargaining and value we present and analyze a model of noncooperative bargaining among n participants applied to situations describable as games in coalitional form this leads to a unified solution theory for such games that has as special cases the shapley value in the transferable utility tu case the nash bargaining solution in the pure bargaining case and the recently introduced maschler owen consistent value in the general nontransferable utility ntu case moreover we show that any variation in a certain class of our bargaining procedure which generates the shapley value in the tu setup must yield the consistent value in the general ntu setup

going to college to avoid the draft the unintended legacy of the vietnam war between 1965 and 1975 the enrollment rate of college age men in the united states rose and then fell abruptly many contemporary observers e g james davis and kenneth dolbeare 1968 attributed the surge in college attendance to draft avoidance behavior under a policy first introduced in the korean war the selective service issued college deferments to enrolled men that delayed their eligibility for conscription these deferments provided a strong incentive to remain in school for men who wanted to avoid the draft for example the college entry rate of young men rose from 54 percent in 1963 to 62 percent in 1968 the peak year of the draft moreover both the college entry rate and the number of inductions dropped sharply between 1968 and 1973 as the draft was being phased out although these parallel trends are suggestive they do not necessarily prove that draft avoidance raised the education of men who were at risk of service during the vietnam war such an inference requires an explicit specification of the counterfactual what would have happened to schooling outcomes in the absence of the draft in this paper we use trends in enrollment and completed schooling of men relative to those of women to measure the effects of draftavoidance behavior during the vietnam war our maintained hypothesis is that in the absence of gender specific factors such as the draft the relative schooling outcomes of men and women from the same cohort would follow a smooth trend in light of the sharp discontinuity in military induction rates between 1965 and 1970 we look for similar patterns in the relative enrollment rate of men and in the relative college graduation rate of men from cohorts that were at risk of induction during this period

quality quantity and spatial variation of price this paper develops and implements a method for estimating price elasticities of demand using cross sectional household survey data geographically clustered households report unit values which when corrected for quality effects and for measurement error indicate the underlying spatial variation in prices and can be matched to variation in demand patterns a simple model of quality choice is proposed while the correction for measurement error exploits the clustered design of such surveys data from a 1979 household survey from the ivory coast are used to estimate price elasticities for beef meat fish cereals and starches copyright 1988 by american economic association

demand for education and labor market outcomes lessons from the abolition of compulsory conscription in france before 1997 education was a way for young french men to avoid military service in the army after the abolition of compulsory conscription in 1997 this incentive to stay on in education disappeared we show that the decrease in the benefit of pursuing education for men was followed by a fall in their educational achievement relative to women and by a decrease in their relative entry wages these results suggest that high school dropout rates could be reduced by policies increasing the immediate benefits of pursuing education and that it would yield a substantial improvement in early labor market outcomes

optimal taxation in theory and practice the optimal design of a tax system is a topic that has long fascinated economic theorists and flummoxed economic policymakers this paper explores the interplay between tax theory and tax policy it identifies key lessons policymakers might take from the academic literature on how taxes ought to be designed and it discusses the extent to which these lessons are reflected in actual tax policy we begin with a brief overview of how economists think about optimal tax policy based largely on the foundational work of ramsey 1927 and mirrlees 1971 we then put forward eight general lessons suggested by optimal tax theory as it has developed in recent decades 1 optimal marginal tax rate schedules depend on the distribution of ability 2 the optimal marginal tax schedule could decline at high incomes 3 a flat tax with a universal lump sum transfer could be close to optimal 4 the optimal extent of redistribution rises with wage inequality 5 taxes should depend on personal characteristics as well as income 6 only final goods ought to be taxed and typically they ought to be taxed uniformly 7 capital income ought to be untaxed at least in expectation and 8 in stochastic dynamic economies optimal tax policy requires increased sophistication for each lesson we discuss its theoretical underpinnings and the extent to which it is consistent with actual tax policy to preview our conclusions we find that there has been considerable change in the theory and practice of taxation over the past several decades although the two paths have been far from parallel overall tax policy has moved in the y n gregory mankiw is professor of economics matthew weinzierl is assistant professor of business administration and danny yagan is a ph d candidate in economics all at harvard university cambridge massachusetts their e mail addresses are ngmankiw

parochial interests and the centralized provision of local public goods evidence from congressional voting on transportation projects abstract local public goods financed from a national tax base provide concentrated benefits to recipient jurisdictions but disperse costs creating incentives for legislators to increase own district spending but to restrain aggregate spending due to the associated tax costs while these common pool incentives underpin a variety of theoretical analyses which tend to predict inefficiencies in the allocation of public goods there is little direct evidence that individual legislators respond to such incentives to test for reactions to such incentives this paper analyzes 1998 congressional votes over transportation project funding the empirical results provide evidence that legislators respond to common pool incentives the probability of supporting the projects is increasing in own district spending and decreasing in the tax burden associated with aggregate spending having found that legislators do respond to such incentives i use the parameter estimates to calculate the efficient level of public goods which suggest over spending in aggregate especially in politically powerful districts and large associated deadweight loss

endogenous choice of amendment agendas types of voters and experimental evidence a stylized model of three parties choosing an amendment agenda and voting over three policy alternatives is analyzed the analysis yields a classification of five types of voters random sincere strategic risk averse and eus expected utility sophisticated proposed by enelow j polit 43 1062 1089 1981 laboratory experiments suggest that the choice of agendas can be partially explained by the sincere voting model 26 of voters and strategic voting model 47 of voters even when players preferences are common knowledge risk aversion may explain choices of up to 56 of the voters finally the eus voting model explains up to 73 of the observed voting behavior

profit supply and factor demand functions comment in lau and yotopoulos 1972 a new method of estimating production relations was developed building on lau and yotopoulos 1971 this method bringing together estimates of profit and factor demand functions was further developed in yotopoulos and lau to incorporate a test of rationality their method has since been applied by yotopoulos lau and lin sidhu sidhu and baanante 1979 1981 jamison and lau and junankar 1980a b 1982 because the assumption of rationality is so fundamental to economics and because few tests of this hypothesis exist the lau yotopoulos method is very important however these studies rest on advanced economic theory and sophisticated econometrics so it is easy to be intimidated by them sophisticated estimators however are not necessarily free from er

sophisticated sincerity voting over endogenous agendas the empirical findings on whether or not legislators vote strategically are mixed this is at least partly due to the fact that to establish any hypothesis on strategic voting legislators preferences need to be known and these are typically private data in this note it is shown that under complete information if decision making is by the amendment procedure and if the agenda is set endogenously then sophisticated strategic voting over the resulting agenda is observationally equivalent to sincere voting the voting strategies however are sophisticated this fact has direct implications for empirical work on sophisticated voting

lifetime earnings and the vietnam era draft lottery evidence from social security administrative records errata the randomly assigned risk of induction generated by the draft lottery is used to construct estimates of the effect of veteran status on civilian earnings these estimates are not biased by the fact that certain types of men are more likely than others to service in the military social security administrative records indicate that in the early 1980s long after their service in vietnam had ended the earnings of white veterans were approximately 15 percent less than the earnings of comparable nonveterans copyright 1990 by american economic association

the fiscal role of conscription in the u s world war ii effort an often overlooked role of conscription is as a method of lump sum taxation in times of war conscription of military personnel allows the fiscal authority to minimize wartime government expenditure and hence minimize tax distortions associated with war finance this paper presents a simple dynamic general equilibrium model to articulate this view and calibrates the model to the u s world war ii experience analysis of the calibrated model indicates that the welfare value of conscription as a fiscal policy tool is quantitatively large despite the fact that the american involvement lasted only four years conscription is worth approximately 2 of annual aggregate consumption in perpetuity

on the optimal income taxation some further numerical results abstract using numerical calculations we show in the optimal income tax model that a realistic value for the elasticity of substitution between consumption and leisure 0 5 leads to conclusions different from some of those drawn by mirrlees 1971 and atkinson 1973 the marginal tax rates are not so low and the shape of the tax schedule is for a great majority of the population substantially nonlinear a new feature in our calculations is that both results come out without going to maximin as done by atkinson 1973 we study in special cases the locality of the zero limit of the marginal tax rate at the upper end of the ability distribution and we achieve a very definite conclusion this result is really very local we also present an interesting approximation result concerning the relationship between the level of the government revenue and the marginal tax rate for individuals with high ability an important methodological remark analogous to sen s critique on the ethical measures of inequality is made on the interpretation of optimal income tax calculations

nonlinear pricing with random participation the canonical selection contracting programme takes the agent s participation decision as deterministic and finds the optimal contract typically satisfying this constraint for the worst type upon weakening this assumption of known reservation values by introducing independent randomness into the agents outside options we find that some of the received wisdom from mechanism design and nonlinear pricing is not robust and the richer model which allows for stochastic participation affords a more general empirical specification we develop a multidimensional methodology for addressing this class of problems providing two important applications to nonlinear pricing first with nonlinear pricing by a monopolist the familiar nodistortion at the top result persists but in tandem with the surprising conclusion that there is either no distortion at the bottom or bunching second in a simple model of product differentiated duopolists competing with nonlinear pricing we show that generally the duopoly outcome is qualitatively similar to the monopoly outcome however when marginal costs are symmetric and competition is sufficiently intense distortions disappear and the equilibrium outcome takes a remarkably simple form efficient quality allocations with cost plus fee pricing

participation constraints in adverse selection models abstract this paper characterizes the optimal contract offered by an uninformed principal to an informed agent when the latter s reservation utility depends on his type the informational rent is nonmonotonic so that interior types may have a vanishing rent or be excluded from trade the paper identifies conditions for the optimal contract to be separating to be nonstochastic and to induce full participation it also discusses the nature of the solution when bunching occurs the results are applied to nonlinear pricing under price cap regulation and bypass competition and to competition in nonlinear pricing journal of economic literature classification numbers d82 d42 d23 d78 l51 l15

strategic voting in agenda controlled committee experiments this paper reports results of committee voting experiments with a fixed agenda that specified a sequence of binary decisions in this particular context the agenda setter can control the ultimate committee decision if it is known whether voting behavior is myopic or strategic subjects initially voted in accordance with myopic voting rules strategic behavior was more prevalent with experience the use of the same induced preferences in successive meetings was more likely to induce strategic voting than the provision of public information concerning the numbers of voters of each preference type copyright 1989 by american economic association

the optimal income taxation of couples this paper analyzes the general nonlinear optimal income tax for couples a multidimensional screening problem each couple consists of a primary earner who always participates in the labor market but makes an hours of work choice and a secondary earner who chooses whether or not to work if second earner participation is a signal of the couple being better worse off we prove that optimal tax schemes display a positive tax subsidy on secondary earnings and that the tax subsidy on secondary earnings decreases with primary earnings and converges to zero asymptotically we present calibrated microsimulations for the united kingdom showing that decreasing tax rates on secondary earnings is quantitatively significant and consistent with actual income tax and transfer programs

a reexamination of the optimal nonlinear income tax abstract this paper investigates mirrlees model of optimal income taxation it provides a concrete example of utility and density functions for which the solution to the usual first order model is not implementable i e and example where the first order approach does not work adding second order conditions leads to an extended model and to implementable solutions if these conditions are binding one gets a kink in the optimal net income schedule and bunching of individuals occurs the properties of an optimal nonlinear income tax are reexamined within the extended model

quality measurement errors and profit function estimation abstract a producer demand profit function estimator is developed which uses the structure of clustered samples to estimate the importance of variations in factor quality and errors in measurement of the wage and to correct for biases caused by these factors

evaluating the labor market effects of compulsory military service we identify the causal effect of compulsory military service on conscripts subsequent labormarket outcomes by exploiting the regression discontinuity design of the military draft in germany during the 1950s unbiased estimates of the effect of military service on lifetime earnings wages and employment are obtained by comparing men born before july 1 1937 the white cohort who were exempted from compulsory military service to men who were born on or shortly after this threshold date and hence faced a positive probability of being drafted we find that the putative earnings advantage and wage premium of those who served in the armed forces vanish when selection effects are taken into account

legislative representation bargaining power and the distribution of federal funds evidence from the us congress this article investigates the relationship between representation in legislatures and the geographic distribution of federal funds in a legislative bargaining model we demonstrate that funds are concentrated in high representation areas and two channels underlie this result the proposal power channel reflects the role of representation in committee assignments and the vote cost channel reflects the role of representation in coalition formation in our empirical analysis we find that small states relative to large states receive more funding in the us senate relative to the house we also find empirical support for the two channels underlying this relationship throughout the history of federations and international organisations a key consti tutional design question involves how jurisdictions of different sizes are represented in legislative bodies and how their votes will ultimately be weighted large jurisdictions typically argue for delegation sizes or voting weights that are roughly proportional to population whereas small jurisdictions typically argue for an equal number of delegates or votes for each jurisdiction this conflict over representation is presumably driven at least in part by a belief that increased representation strengthens bargaining power in the battle over the geographic distribution of funds authorised by these legislative bodies in this article i analyse the relationship between legislative representation bar gaining power and the geographic distribution of federal funds from both a theoretical and empirical perspective in addition to investigating the existence of a relationship between representation and federal funds i also explore the underlying mechanisms that is i ask which political institutions such as agenda control provided to commit tees and the formation of coalitions under majority rule shape the bargaining power of jurisdictions in central legislatures and thus facilitate the relationship between repre sentation and the distribution of federal spending to provide a framework for analysing these issues i begin by developing a simple theoretical model of a central legislature that determines the crossjurisdiction distri bution of local public goods which are financed by a national tax base both delegation sizes and population are variable allowing me to consider a variety of institutional arrangements for jurisdictional representation legislators represent local interests and given the common pool problem associated with concentrated benefits and dis persed tax costs attempt to increase ownjurisdiction spending but to restrain spending elsewhere the model follows a recent literature on legislative bargaining in which a proposer must secure a majority of votes in order to pass legislation and due to the

social interactions in high school lessons from an earthquake after an earthquake hit southern italy in 1980 young men from certain towns were exempted from compulsory military service we show that the exemption raised high school graduation rates of boys by more than 2 percentage points we do this by comparing high school graduation rates of young exempt men and older nonexempt men from the least damaged areas and men of the same age groups from nearby towns that were not hit by the quake similar comparisons show that graduation rates of young women in the affected areas also increased since in italy women are not subject to the draft the findings suggest the presence of spillover effects jel i21 j13

redistributive taxation in the roy model we consider optimal redistribution in a model where individuals can self select into one of several possible sectors based on heterogeneity in a multidimensional skill vector we show that when the government does not observe the sectoral choice or underlying skills of its citizens the constrained pareto frontier can be implemented with a single non linear income tax we derive formulas for this optimal tax schedule if sectoral inputs are complements a many sector model with self selection leads to optimal income taxes that are less progressive than the corresponding taxes in a standard single sector model under natural conditions however they are more progressive than in a multi sector model without occupational choice or without overlapping wage distributions as in stiglitz 1982

competition among institutions abstract economic theory offers two different approaches to the analysis of group formation and the role of institutions general equilibrium approach explores the influence of the economic environment on formation of coalitions game theory explores the influence of institutional rules on equilibrium outcomes we introduce an integrative approach an institution s policy depends on its membership while its membership depends on the policies of all the institutions we present three distinct mathematical approaches to these models highlighting the algebraic nature of the question of existence of equilibrium our apparatus cover many economic and political environments including cases with multiple dimensions and multiple institutions journal of economic literature classification numbers c62 d50 d71 d72 h11 h40 r13 r53

crashing the party an experimental investigation of strategic voting in primary elections the effect of primary formats on voting behavior and candidatefortune has been the topic of recent political academic andlegal arguments we address these debates by examining voterbehavior and election outcomes across primary systems in thelaboratory while we find the rate of strategic voting isgenerally low the rate varies across primary formats and thepotential impact on election outcomes differs fromconventional perceptions results suggest that more openprimary systems generate more strategic voting but contraryto conventional wisdom more open systems do not necessarilylead to more moderate election winners

the health effects of military service evidence from the vietnam draft i introduction the impact of military service on long term health is reemerging as a vital policy question as the united states conducts major military operations in iraq and afghanistan health professionals have raised concerns that significant numbers of the veterans of these conflicts are experiencing psychological and physical health problems the department of veterans affairs estimates that anywhere from 12 to 20 of servicemen returning from iraq suffer from posttraumatic stress disorder which the medical literature suggests can have a long term adverse effect on an individual s health in the 2005 fiscal year the department of veterans affairs spent about 32 billion dollars on medical care for veterans a substantial liability for the american taxpayer thus understanding the long term health impacts of military service is important both for allocating treatment resources and for correctly estimating the cost of waging these two wars comparing the health of veterans with that of nonveterans may not give us credible estimates of the effect of military service people voluntarily enlisting in the military differ in their observable characteristics from those who do not these observable differences between veterans and nonveterans leave us concerned that cross sectional estimates of the long term health consequences of military service will be biased by systematic differences in the unobservable characteristics of the two groups for this reason we use the draft lottery implemented during the vietnam war as an instrument for military service the draft lottery required randomly selected men born between 1944 and 1952 to report for possible induction into the military we use confidential versions of the 19742004 national health interview surveys nhis 1 to examine the impact of military service on veterans health we focus on the 67 608 men who were born between 1950 and 1952 because as we document this is the cohort most affected by the vietnam draft lottery we begin with a cross sectional comparison of veterans and nonveterans which reveals that veterans are in systematically worse health than nonveterans and that these health disparities increase with age these estimates probably overstate the causal effect of military service because veterans differ systematically from nonveterans on dimensions such as education that are strongly associated with adverse health when we correct for this problem using draft status to instrument for military service we find that despite a very strong first stage relationship between draft eligibility and military service the 2 stage least squares 2sls estimates of the impact of military service on health are fairly imprecise for most of the outcomes we examine the confidence intervals from the 2sls regressions containing both zero and the point estimate from the cross sectional regression this paper makes two contributions to the literature first unlike the cross sectional literature on the impact of military service on health the instrumental variables approach used in this paper provides unbiased estimates second this paper documents that though the vietnam lottery very significantly increased military service it led to only a modest increase in combat exposure 2 in the following section we discuss the existing literature on veterans health and on the impact of the vietnam era draft in section iii we describe our primary data source the nhis in section iv we discuss the research methodology and some of the issues that complicate the use of draft eligibility as an instrument section v discusses our results and section vi concludes ii previous literature there is a significant literature documenting the disproportionate prevalence of health problems among military veterans hoge et al 2004 find that mental health problems are common in veterans who served in iraq and afghanistan

efficiency losses from tax distortions vs government control abstract given the strong theoretical presumption that state enterprises are less efficient than private enterprises why have countries often chosen state ownership this paper explores the hypothesis that high tax rates can distort the decisions of private enterprises by enough that state ownership becomes preferable on efficiency grounds the forecast is that state ownership should be seen primarily in settings with high explicit or implicit tax distortions to private behavior

when and how do voters try to manipulate experimental evidence from borda elections we study strategic voting in a laboratory experiment using a borda mechanism we find that manipulation rates are surprisingly low even for individuals who know that they possess superior information about the other agents preferences exploring possible explanations we find that manipulation rates rise significantly if individuals are not only informed about the other agents preferences but also about their actual votes this suggests that uncertainty plays a key role in understanding strategic behavior in elections by contrast distributional concerns e g in the form of inequality aversion are found to play a negligible role in our context

an experimental study of expressive voting in this paper we report results of an initial attempt to test the theory of expressive voting our experiment involves requiring subjects to vote between receiving a in cash or having b donated to charity on their behalf across subjects we vary the probability that their vote will decide which disbursement is made as the probability of being decisive is lowered the opportunity cost of giving expression to charitable sentiment decreases hence the likelihood of voting in accordance with such sentiment is expected to increase we find weak support for the hypothesis but the results do not replicate when we alter the parameter settings limitations of our design are discussed

the role of the military draft in optimal fiscal policy recent contributions to the theory of optimal taxation have simultaneously contributed to the theory of optimal public debt in particular barro 2 who effectively interprets the government s optimal taxation problem as a dynamic control problem demonstrates that optimal debt creation serves to smooth out the distortions associated with income taxes over time in his analysis the value of outstanding debt is determined uniquely by the theory of optimal taxation which roughly dictates constant tax rates over time

reexamination of the relative efficiency of the draft and the all volunteer army economists are in almost universal agreement that the all volunteer approach to recruiting military personnel is more efficient than the draft several related considerations form the basis for this agreement first the draft imposes a discriminatory tax on recruits equal to the difference between their market wages and the below market military wage plus a compensating differential for serving in the military second below market pricing of personnel under the draft leads to a military with too many recruits third the all volunteer approach attracts those recruits with the lowest opportunity costs and hence secures a given number of recruits at less cost these standard economic arguments for the all volunteer approach over the draft have been heavily influenced by hansen and weisbrod 7 and oi 10 the purpose of this paper is to argue that under certain conditions the above considerations fail to make a compelling case for the all volunteer approach over the draft the conventional economic case for the all volunteer approach fails to recognize that the relative difference between the cost of the all volunteer approach and the draft depends on the percentage of the eligible population recruited into the military and the dead weight loss associated with conventional taxation as the number of recruits increases relative to the eligible population the advantage of being able to discriminate between high and low opportunity cost recruits diminishes also the larger

do you not like pigou or do you not understand him tax aversion and revenue recycling in the lab tax aversion reduces the likelihood that price rationing can be a politically viable tool for environmental protection we examine the case of the classic pigouvian tax to control a negative externality and consider how recycling the revenues labeling of the tax and information about its purpose affects the support for taxation we test the support for taxation within a single price market experiment in which purchases by some buyers impose external costs on others observing behavior consistent with tax aversion we also find that recycling the revenues to more narrowly targeted groups seems to increase support for taxation in the absence of narrow revenue recycling labeling a pigouvian instrument as a tax may significantly lower the likelihood of voter support

estimating the value of proposal power this paper investigates the role of proposal power in the allocation of transportation projects across u s congressional districts in 1991 and 1998 the evidence supports the key qualitative prediction of legislative bargaining models members with proposal power those sitting on the transportation authorization committee secure more project spending for their districts than do other representatives support for the quantitative restrictions on the value of proposal power is more mixed i then empirically address several alternative models of legislative behavior including partisan models informational roles for committees models with appropriations committees and theories of committees as preference outliers

distributional consequences of political representation abstract we investigate both theoretically and empirically the effect of the geographic concentration of representatives on the geographic distribution of fiscal transfers our theoretical model predicts that more representatives residing in a geographic area leads to higher government funds to that area our empirical analysis uses the fact that in germany due to germany s electoral rules in state elections the number of representatives varies across electoral districts controlling for various socio economic demographic and political variables and using a variety of estimation methods we find that districts with a greater number of representatives receive more government funds

utilitarianism and horizontal equity the case for random taxation this paper establishes that far from being able to derive the principle of horizontal equity from utilitarianism the principle is actually in consistent with utilitarianism in a variety of circumstances we derive conditions under which a it is optimal to impose random tax schedules ex post randomization and b it is optimal to randomize the tax schedules imposed on a set of otherwise identical individuals ex ante randomization the implications for optimal tax theory are discussed more generally it is shown that there are a number of potentially important economic situations with which the principle of horizontal equity may be inconsistent not only with utilitarianism but even with pareto optimality this abstract was borrowed from another version of this item

spatial elections with endorsements and uninformed voters some laboratory experiments this paper presents a laboratory experiment designed to examine voting behavior within a spatial election framework when subjects are only endowed with endorsement information in the experiment subjects are assigned ideal points on a single issue dimension with the aid of an endorsement their task is to vote for the candidate whose position is closer to them the results show that under these conditions subjects are in fact playing a lottery where the odds of being correct is a function of spatial location the study points out that researchers should be aware of an information bias in models that use this particular information source

battle scars the puzzling decline in employment and rise in disability receipt among vietnam era veterans using current population survey and us army administrative data we document that between 2000 and 2010 the employment rate of vietnam era veterans fell markedly relative to non veterans of the same cohorts while simultaneously their enrollment increased steeply in the veterans disability compensation dc program which provides healthcare and transfer payments to veterans with service connected disabilities thirty percent of vietnam era army veterans enrolled in dc in 2006 received benefits for post traumatic stress disorder with median annual payments of 25 500 the declining employment and rising transfer payments to vietnam era veterans underscore the long term private and public costs of wartime service potentially stemming from both adverse health consequences and policies that have expanded benefits eligibility

primaries and candidate polarization behavioral theory and experimental evidence do primary elections cause candidates to take extreme polarized positions standard equilibrium analysis predicts full convergence to the median voter s position with complete information but behavioral game theory predicts divergence when players are policy motivated and have out of equilibrium beliefs theoretically i show that primary elections can cause greater extremism or moderation depending on the beliefs candidates and voters have about their opponents in a controlled incentivized experiment i find that candidates diverge substantially and that primaries have little effect on average positions voters employ a strategy that weeds out candidates who are either too moderate or too extreme which enhances ideological purity without increasing divergence the analysis highlights the importance of behavioral assumptions in understanding the effects of electoral institutions