self rewards and personal motivation self administered rewards are ubiquitous they serve as incentives for personal accomplishments and are widely recommended to increase personal motivation we show that in a model with time inconsistent and reference dependent preferences self rewards can be a credible and effective tool to overcome self control problems we also discuss the different types of self rewards the individual can use such as vice goods and virtue goods and analyze which types of goods the individual prefers

transition to fully funded pension schemes a non orthodox criticism summary the paper examines the dominant views on the adoption of mandatory fully funded pension schemes ff as a partial or complete substitute for the unfunded payg three obstacles to the ff reform are envisaged to begin with the reform may fail to boost workers marginal propensity to save since workers may contract their voluntary saving to compensate the larger mandatory saving to ff schemes secondly if payg s payroll contributions are reduced and diverted to a ff scheme the larger private saving supply will be balanced by a lower government saving if the government is committed to honour the current pension payments thirdly keynes saving paradox reinforced by the capital theory critique initiated by sraffa suggests that the effect of the rise in the marginal propensity to save is not an increase in capital accumulation but rather a fall of income and employment

how aid targets votes the impact of electoral incentives on foreign aid distribution despite allegations that foreign aid promotes corruption and patronage little is known about how recipient governments electoral incentives influence aid spending this article proposes a distributional politics model of aid spending in which governments use their informational advantages over donors in order to allocate a disproportionate share of aid to electorally strategic supporters allowing governments to translate aid into votes to evaluate this argument the author codes data on the spatial distribution of multilateral donor projects in kenya from 1992 to 2010 and shows that kenyan governments have consistently influenced the aid allocation process in favor of copartisan and coethnic voters a bias that holds for each of kenya s last three regimes he confirms that aid distribution increases incumbent vote share this evidence suggests that electoral motivations play a significant role in aid allocation and that distributional politics may help explain the gap between donor intentions and outcomes

do corrupt governments receive less foreign aid critics of foreign aid programs argue that these funds often support corrupt governments and inefficient bureaucracies supporters argue that foreign aid can be used to reward good governments this paper documents that there is no evidence that less corrupt governments receive more foreign aid on the contrary according to some measures of corruption more corrupt governments receive more aid also we could not find any evidence that an increase in foreign aid reduces corruption in summary the answer to the question posed in the title is no

financial illiteracy and pension contributions a field experiment on compound interest in china i conduct a field experiment to study the relationship between peoples misunderstanding of compound interest and their pension contributions in rural china i find that explaining the concept of compound interest to subjects increased pension contributions by roughly 40 the treatment effect is larger for those who underestimate compound interest than for those who overestimate compound interest moreover financial education enables households to partially correct their misunderstanding of compound interest i structurally estimate the level of misunderstanding of compound interest and conduct a counterfactual welfare analysis lifetime utility increases by about 10 if subjects misunderstanding of compound interest is eliminated authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

competing for endorsements endorsements are a simple language for communication between interest group leaders and group members the members who share policy concerns may not perfectly understand where their interests lie on certain issues if their leaders cannot fully explain the issues they can convey some information by endorsing a candidate or party when interest groups endorse legislative contenders the candidates may compete for backing policies may favor special interests at the expense of the general public the authors examine the conditions under which parties compete for endorsements the extent to which policy outcomes are skewed and the normative properties of the political equilibria

the hyperbolic consumption model calibration simulation and empirical evaluation ur preferences for the long run tend to conflict with our short run behavior when planning for the long run we intend to meet our deadlines exercise regularly and eat healthfully but in the short run we have little interest in revising manuscripts jogging on the stairmaster and skipping the chocolate souffleala mode delay of gratification is a nice long term goal but instant gratification is disconcertingly tempting this gap between long run intentions and short run actions is apparent across a wide range of behaviors including saving choices a 1997 survey found that 76 percent of respondents believe they should be saving more for retirement looking only at respondents who believed they were at an age where you should be seriously saving already the survey found that 55 percent reported being behind in their savings and only 6 percent reported being ahead farkas and johnson 1997 the report on the survey concluded t he gaps between people s atti tudes intentions and behavior are troubling and threaten increased insecurity and dissatisfaction for people when they retire americans are simply not doing what logic and their own reasoning suggests they should be doing a 1993 luntz webber merrill lynch survey found similar answers when baby boomers were asked what percentage of your annual household income do you think you should save for retirement and what percentage of your annual

job search and hyperbolic discounting structural estimation and policy evaluation this paper estimates the structural parameters of a job search model with hyperbolic discounting and endogenous search effort it estimates quantitatively the degree of hyperbolic discounting and assesses its implications for the impact of various policy interventions aimed at reducing unemployment the model is estimated using data on unemployment spells and accepted wages from the national longitudinal survey of youth nlsy the likelihood function explicitly incorporates all the restrictions implied by the optimal dynamic programming solution to the model both observed and unobserved heterogeneity are accounted for the results point to a substantial degree of hyperbolic discounting especially for low and medium wage workers the structural estimates are also used to evaluate alternative policy interventions for the unemployed estimates based on a model with exponential discounting may lead to biased inference on the economic impact of policies jel c6 c73 d90 j64 j68

possession and discounting behavior abstract subjects chose when they could first use financial rewards between choices 2 months apart we manipulated the early reward date and whether participants took immediate possession quasi hyperbolic discounting is rejected in favor of hyperbolic discounting without but not with possession

the punishment trap integration referendums as popularity contests it is widely believed that voters care little about foreign policy transforming referendums on international agreements into tests of a government s popularity the authors analyze this notion and present two level games characterized by asymmetric information the article demonstrates that the linking of domestic issues to an international treaty does not convert referendums into pure plebiscites however the two level decision creates a severe dilemma for the electorate uncertainty regarding whether the possible utility of the treaty offsets the value of domestic policies influences the decisions of voters the median voter risks punishing a popular government or failing to express discontent with an unpopular administration our games explore the conditions under which competing elites try to manipulate the uncertainty of constituents about the outcome of international negotiations empirical illustrations are presented in the form of case studies and survey analyses of the ballots in denmark franc

a theory of political transitions we develop a theory of political transitions inspired by the experiences of western europe and latin america nondemocratic societies are controlled by a rich elite the initially disenfranchised poor can contest power by threatening revolution especially when the opportunity cost is low for example during recessions the threat of revolution may force the elite to democratize democracy may not consolidate because it is redistributive and so gives the elite an incentive to mount a coup highly unequal societies are less likely to consolidate democracy and may end up oscillating between regimes and suffer substantial fiscal volatility

tax incidence when individuals are time inconsistent the case of cigarette excise taxes abstract one of the most cogent criticisms of excise taxes is their regressivity with lower income groups spending a much larger share of their income on goods such as cigarettes than do higher income groups we argue that traditional quantity based measures of incidence are only appropriate under a very restrictive time consistent model of consumption of sin goods a model that is much more consistent with existing evidence on smoking decisions is a time inconsistent formulation where excise taxes on cigarettes serve a self control function that is valued by smokers who would like to quit but cannot this self control function benefits lower income groups more since they have a significantly higher price sensitivity of smoking calibrations show that as a result cigarette taxes are much less regressive than previously assumed and are even progressive for a wide variety of parameter values

does competition in privatized social services work the chilean experience summary this paper examines the premises under which the privatization of chilean social services of 1981 was carried out reformers expected that i competition between providers would ensure a more efficient supply of services and ii shifting decisions to households would guarantee a better satisfaction of household needs although some of the benefits of competition are lost through rent dissipation especially in the providers search for the more profitable customers we conclude that the reform has benefited society by providing competition to public providers and reducing the risk of political capture the major lesson however is that the full benefits from privatization cum competition are slow to arrive and require able regulators moreover the benefits of privatization may depend to a large extent on implementation fine tuning

impact of pension privatization on foreign direct investment summary we explore the causal effect of market oriented pension reform on net foreign direct investment fdi inflows in latin america and among the transitional economies of eastern europe and central asia both of which have experienced waves of pension privatization and fdi over the last two decades with our balanced panel of 42 countries over the 1991 2006 period we implement fixed effects models controlling for the decision to enact full or partial privatization of the public pension system and several other covariates whose choice is informed by the rich empirical literature on fdi our econometric results indicate that pension privatization triggers a significant increase in net fdi inflows and that the effect does not wane over time we estimate that full privatization increases fdi as a percentage of gdp by about 57 ceteris paribus

the scope of imf conditionality international organizations are governed by two parallel sets of rules formal rules which embody consensual procedures and informal rules which allow exceptional access for powerful countries a new data set drawn from the imf s records of conditionality provides an opportunity to study the bargaining process within an important international organization and answer questions about the institution s autonomy i find evidence of u s influence which operates to constrain condition ality but only in important countries that are vulnerable enough to be willing to draw on their influence with the united states in ordinary countries under ordinary circumstances broad authority is delegated to the imf which adjusts conditionality to accommodate local circumstances and domestic political opposition the imf has refrained from exploiting the vulnerability of particular countries to maximize the scope of conditionality international organizations have become increasingly important actors in inter national politics they have proliferated have expanded in membership have acquired new legal enforcement powers and have extended their reach into the details of domestic political economy in their member states af ew including the international monetary fund imf or simply the fund command significant resources and wield considerable authority some critics have argued that these international organizations are sufficiently autonomous to create a democratic def icit at the international level as they pursue a vision of undemocratic liberal ism 1 other critics have argued that international organizations are nothing more than instruments in the hands of powerful states 2 these critiques of course cannot simultaneously be true and both run into difficulties the puzzle that the rogue agency view cannot explain is why the principals have chosen to delegate so much authority in principal agent terms this view posits that both screening and monitoring have failed the principals are unable to select agents with preferences similar to their own and are unable

tax incidence in differentiated product oligopoly abstract we analyze the incidence of ad valorem and unit excise taxes in an oligopolistic industry with differentiated products and price setting bertrand firms both taxes may be passed on to consumers by more than 100 percent and an increase in the tax rate can increase short run firm profits and hence the long run number of firms we provide summary conditions for these effects to arise the conditions depend on demand curvatures and are written in elasticity form surprisingly the analysis largely corroborates cournot results with homogeneous demand

delegation and the regulation of risk political principals typically use low cost fire alarm signals transmitted by the media interest groups and disaffected constituents to monitor the activities of regulatory agencies we argue that regulatory decision making is biased and inconsistent if the instruments of political oversight are simple and the information flows to the principal are coarse relative to the complexity of the regulatory environment

a panel data analysis of the fungibility of foreign aid the donor community has been increasingly concerned that development assistance intended for crucial social and economic sectors might be used directly or indirectly to fund unproductive military and other expenditures the link between foreign aid and public spending is not straightforward because some aid may be fungible this article empirically examines the impact of foreign aid on the recipient s public expenditures using cross country samples of annual observations for 1971 90 for the base sample of 14 developing countries it finds that aid is not fungible at the aggregate level and there is no associated tax relief increasing the number of countries however makes aid fungible moreover results based on the main sample indicate that aid is fungible in three out of five sectors examined developing country governments receiving earmarked concessionary loans for agriculture education and energy reduce their own resources going to these sectors and use them elsewhere only loans to the transport and communication sector are fully spent on the purposes intended by donors because most aid appears to be fungible the rate of return on a specific donor funded project tells little about the impact of that assistance a better approach may be to tie foreign aid to an overall public expenditure program that provides adequate resources to crucial sectors

the democratic effect of direct democracy a key requirement of democratic governance is that policy outcomes and the majority preference of the electorate are congruent many studies argue that the more direct democratic a system is the more often voters get what they want but the empirical evidence is mixed this analysis explores the democratic effect of initiatives and referendums theoretically and empirically the prediction of the formal model is that bad representation i e a large preference deviation between the electorate and the political elite is good for the democratic effect of direct democracy an empirical investigation of original voter and elite survey data analyzed with multilevel modeling and poststratification supports this argument building on the literature the findings of the analysis suggest that the extent to which direct democratic institutions are conducive for policy congruence and may thus be advisable as democratic correctives to representative systems depends on the political conflict structure

hyperbolic discounting and the phillips curve using a standard dynamic general equilibrium model we show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long run effects on real variables

the peculiar scale economies of lotto the best selling lottery game in the united states is lotto a parimutuel game of long odds and large jackpots unlike in the other popular lottery games numbers and instant there is a strong tendency for per capita lotto sales to increase with the size of the population base the fact that the jackpot also tends to increase with population size is not a complete explanation since the probability of winning tends to be inversely proportional to state population our explanation for why the games are more successful in large states is that players tend to judge the likelihood of winning based on the frequency with which someone wins then a larger state can offer a game at longer odds but the same perceived probability of winning as a smaller state this abstract was borrowed from another version of this item

quasi hyperbolic discounting and retirement abstract some people have self control problems regularly this paper adds endogenous retirement to laibson s quasi hyperbolic discounting savings model quarterly journal of economics 112 1997 443 477 earlier selves think that the deciding self tends to retire too early and may save less to induce later retirement still earlier selves may think the pre retirement self does this too much saving more to induce early retirement the consumption pattern may be different from that with exponential discounting other observational non equivalence includes the impact of changing mandatory retirement rules or work incentives on savings and a possibly negative marginal propensity to consume out of increased future earnings naive agents are briefly considered

does foreign aid promote the expansion of government building on the literature on public finance i seek to advance our understanding of variations in government size by exploring the impact of official development assistance on fiscal policy i hypothesize that foreign aid operates in accordance with the flypaper effect systematically generating incentives and opportunities for the expansion of government spending results from a time series cross sectional regression analysis of growth in government spending over the 1970 99 time period are consistent with the hypothesis for middle and lower income nations aid represents an important determinant of government expansion looking at the tax and revenue side of the equation however reveals a more perverse pattern of response aid promotes not only increased spending but also reduced revenue generation the results have important implications from both a theoretical and policy perspective inter alia they point to the potentially self defeating nature of efforts to promote market oriented programs of state retrenchment via development assistance as well as to the importance of incorporating international transfers into future research on government spending

tax policy and present biased preferences paternalism under international capital mobility this paper deals with tax policy responses to quasi hyperbolic discounting earlier research on optimal paternalism typically abstracts from capital mobility if capital is mobile between countries it may no longer be possible for national governments to control domestic savings via capital taxation as in a closed economy in this paper we take a broad perspective on public policy responses to self control problems by showing how these responses vary i between closed and open economies ii between small open and large open economies and iii depending on whether or not both source based and residence based capital taxes can be used

estimating tax incidence market power and market conduct the european cigarette industry abstract recent theoretical work has shown that the incidence of ad valorem and specific taxes may differ and each may be over or under shifted onto consumers in the presence of imperfect competition these results are used to derive a method of estimating market power and conduct an application is made to the european cigarette industry previous empirical comparison of the incidence of ad valorem and specific taxes is limited for a group of countries with broadly similar cigarette industries there is evidence of undershifting of both taxes with the specific tax having a significantly greater impact on price the extremes of both perfect competition and monopoly can be rejected behaviour is no less competitive than the equivalent of cournot

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

imperfectly informed voters and strategic extremism we analyze a two candidate downsian model considering that voters use shortcuts e g interest group media endorsements to infer candidates policy platforms that is voters do not observe candidates exact platforms but only which candidate offers the more leftist rightist platform relative positions in equilibrium candidates behavior tends to maximum extremism but it may converge or diverge depending on how voters behave when indifferent policywise between the candidates when the tie breaking rule used by the voters is sufficiently fair candidates converge to the extreme preferred by the median voter but when it strongly favors a certain candidate each candidate specializes in a different extreme

knowledge is power a theory of information income and welfare spending no voters cast their votes based on perfect information but better educated and richer voters are on average better informed than others we develop a model where the voting mistakes resulting from low political knowledge reduce the weight of poor voters and cause parties to choose political platforms that are better aligned with the preferences of rich voters in us election survey data we find that income is more important in affecting voting behavior for more informed voters than for less informed voters as predicted by the model further in a panel of us states we fi nd that when there is a strong correlation between income and political information congress representatives vote more conservatively which is also in line with our theory

the empirical evidence for citizen information and a local market for public goods in their 1993 article in this review paul teske mark schneider michael mintrom and samuel best sought to establish the microfoundations for a model of a competitive market for public 5 services between local governments in polycentric regions an important part of their model focused on subgroups of informed citizens especially recent movers theoretical analysis was supplemented by an empirical study of the factors shaping accuracy of long island homeowners information about relative expenditures and tax rates of their school districts david lowery w e lyons and ruth hoogland dehoog criticize the relevance of this empirical evidence suggesting the atypical nature of education as a service especially in this site and challenging the sufficiency of the demonstrated levels of information for generating a competitive market teske and his colleagues reply by pointing out the general importance of education throughout american local policymaking and by defending the relevance of their measures and conclusions for their market model

elections with limited information a fulfilled expectations model using contemporaneous poll and endorsement data as information sources a one dimensional model of two candidate elections under asymmetric information is theoretically developed and experimentally tested candidates do not know voter utility functions and most voters are uninformed about candidate policy positions a fulfilled expectations equilibrium is defined using poll and endorsement data as information sources it is proved that with any positive fraction of informed voters any equilibrium extracts all available information all participants voters and candidates alike act as if they were fully informed for fixed candidate strategies a dynamic is given for convergence to voter equilibrium and this process is shown to imply a bandwagon effect

changing tastes and effective consistency in a single commodity setting with changing tastes an individual s consumption plan can be obtained using naive or sophisticated choice we provide two sufficient conditions for when the solutions are unique and agree and the common plan is representable by a non changing tastes utility because the solution is not revised over time the plan and associated preferences are referred to as being effectively consistent afriat style revealed preference tests are derived the assumption of effective consistency can mitigate the problems of vulnerability to dutch books non existence of a competitive equilibrium and the aggregation of heterogeneous agents with changing tastes abstract from author

social security and self control preferences abstract we analyze the welfare effects of an unfunded social security system we do so using an overlapping generations economy wherein agents have self control preferences face mortality risk individual income risk and borrowing constraints given our specification of preferences unfunded social security helps reduce the agents temptation to consume in every period consequently the welfare costs it otherwise entails are substantially mitigated while both social security and self control when considered separately reduce welfare their combination renders this effect considerably less severe moreover if the cost of resisting temptation is very high the introduction of social security might even improve welfare

an information rationale for the power of special interests political decisions are often biased in favor of special interests at the expense of the general public and they are frequently inefficient in the sense that the losses incurred by the majority exceed the gains enjoyed by the minority this article explains the bias in terms of information asymmetries and the free rider problem first incumbents increase their reelection prospects by biasing policy toward groups that are better able to monitor their activities second because smaller groups are better able to overcome the free rider problem of costly monitoring policy will be biased in their favor third the effect of asymmetric monitoring on voter welfare is ambiguous the inefficiencies created by the policy bias are offset by a positively valued selection bias incumbents of above average quality are more likely to survive voter scrutiny than are low quality types

foreign aid and statehood in africa has foreign aid destroyed state institutions in africa african states depend on development assistance to conduct basic government operations yet few of these states are well governed or effective at providing public goods the two trends mounting foreign aid and static or diminishing state performance raise an obvious question is aid dependency contributing to misrule and state failure in africa many critics argue the two phenomena are related i find they are not my analysis fails to show a negative association between aid receipts and two measures of democracy and economic freedom instead the evidence is consistent with a small positive relationship between aid and these indicators of state performance since the international community seems bent on reducing foreign aid an important issue is how african states can maintain and improve their performance with less foreign assistance

understanding economic policy reform one of the eventual consequences of the global debt crisis was a wave of market oriented economic reforms this paper discusses the state of our knowledge on the political economy of this process why were inefficient and often unsustainable policies maintained for so long why are so many governments reforming now after decades of adherence to policies of an opposite kind have the reformers internalized the correct lessons from the east asian experience finally are there any helpful rules for reformers to follow in guiding their policies through complicated political terrain

retirement consumption insights from a survey abstract prior research has established that consumption falls significantly at retirement what is not known is the extent to which this fall is anticipated during the working years using data from a new survey we show that many working households do expect a considerable fall in consumption when they retire in fact those who are already retired report significantly smaller falls in consumption than are expected by those who are still working

the perils of unearned foreign income aid remittances and government survival given their political incentives governments in more autocratic polities can strategically channel unearned government and household income in the form of foreign aid and remittances to finance patronage which extends their tenure in political office i substantiate this claim with duration models of government turnover for a sample of 97 countries between 1975 and 2004 unearned foreign income received in more autocratic countries reduces the likelihood of government turnover regime collapse and outbreaks of major political discontent to allay potential concerns with endogeneity i harness a natural experiment of oil price driven aid and remittance flows to poor non oil producing muslim autocracies the instrumental variables results confirm the baseline finding that authoritarian governments can harness unearned foreign income to prolong their rule finally i provide evidence of the underlying causal mechanisms that governments in autocracies use aid and remittances inflows to reduce their expenditures on welfare goods to fund patronage

did aid promote democracy in africa the role of technical assistance in africa s transitions did foreign aid impede or catalyze democratization in africa in the 1990s we argue that after the cold war donors increased their use of technical assistance in aid packages improving their monitoring capacity and thus reducing autocrats ability to use aid for patronage to remain in power autocrats responded by conceding political rights to their opponents from legalizing opposition parties to staging elections we test our theory with panel data for all sub saharan african countries while other factors played pivotal roles in africa s political liberalization we find technical assistance helps to explain the timing and extent of africa s democratization

the economics of casino taxation in this article a model of the costs of a casino is developed that focuses on the implications for economic welfare of different taxation schemes for casinos the situation being considered is in a country where casinos cater exclusively to foreign tourists the goal of the country is to determine the maximum amount of taxes that can be extracted from the activities of this sector under different systems of taxation when the price of gambling is set by regulation above its competitive level the economic losses created by excessive investment in the sector can be reduced by taxation a turnover tax on the amount gambled can maximize both tax revenue and the economic welfare of the country due to administrative constraints a number of countries rely on the taxation of the casinos fixed assets or a combination of a turnover tax and a tax on fixed costs the model is applied to the situation in north cyprus the annual economic efficiency loss from its poorly designed tax policies on casino gambling is

international investment agreements and services markets locking in market failure summary bilateral investment treaties bits and investment chapters in preferential trade agreements have become popular measures to guarantee investor friendly policies while they reassure multinational firms they also constrain host country authorities in regulating markets to stimulate competition these problems are widespread in service industries characterized by significant economies of scale this paper presents case studies of the difficulties the chilean regulatory authorities faced in regulating the financial services telecom and energy industries it concludes that able regulators are necessary but that international agreements need to also leave enough policy space

does political knowledge increase turnout evidence from the 1997 british general election a number of recent formal models predict a positive effect of political knowledge on turnout both information acquisition and turnout however are likely to be determined by a similar set of variables rendering hard the identification of a causal link in empirical investigations available empirical regularities should therefore be interpreted as mere correlations i address this problem by using an intrumental variables approach where the instruments are represented by various proxies of information supply on mass media using survey data from the 1997 british general election study i show that political knowledge has a sizeable influence on the probability of voting and that mass media play an important role in influencing political participation

monopoly agenda control and asymmetric information this paper extends the romer rosenthal 1978 1979 model of monopoly agenda control to an environment where only the agenda setter knows with certainty the outcome associated with a failed proposal the presence of this asymmetric information implies that any take it or leave it proposal may provide information crucial to the decision calculus of the voters a fact which an optimal proposal strategy will incorporate the equilibrium behavior of the agenda setter and voters is characterized and contrasted with that in the complete information environment and a number of empirical predictions concerning the nature of elections with monopoly controlled agendas are derived

lifetime incidence and the distributional burden of excise taxes this implies that low income households in one year have some chance of being higher income households in other years and significantly affects the estimated distributional burden of excise taxes this paper shows that household expenditures on gasoline alcohol and tobacco as a share of total consumption a proxy for lifetime income are much more equally distributed than expenditures as a share of annual income from a longer horizon perspective excise taxes on these goods are therefore much less regressive than standard analyses suggest this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

heterogeneity in perceptions of national economic conditions empirical findings concerning economic voting differ according to the level of analysis employed a widely accepted explanation for the inconsistency between macroand microlevel evidence of economic voting is the high degree of random variation that plagues survey data according to this explanation aggregation purges individual level noise from mass opinions on policy issues and outcomes building on the research of bartels 1996 we debate the validity of this explanation by demonstrating that public evaluations of the national economy vary systematically with information media exposure political attitudes personal experiences and demographic characteristics furthermore we show that these sources of subjective heterogeneity produce systematic biases when national economic evaluations are aggregated these findings challenge a widely accepted notion that because error in individual level measures or expressions of preferences is random the aggregation of these individual measures ensures that they correctly represent the collective preference mpirical findings concerning the influence of the economy on political behavior differ depending on the level of analysis employed using aggregate level data numerous studies have established a statistical relationship between economic conditions and election outcomes or executive popularity e g kramer 1971 mackuen erikson and stimson 1992 on the basis of the macro level evidence alone one would have little reason to doubt that the economy matters in contrast individual level studies using survey data have produced only mixed evidence that voters consider economic conditions when evaluating the incumbent government and its leaders e g fiorina 1978 1981 kinder and kiewiet 1979 1981 moreover the strongest survey evidence of economic voting suggests that voters primarily care about national economic conditions not their personal financial situation this finding contradicts the egocentric theory posited by early macro level research that national economic indicators matter because they are correlated with personal financial circumstances the micro macro dichotomy in economic voting research reflects a similar dichotomy in research on voter sophistication and representation aggregate level studies tend to indicate that voters are reasonably well informed about the economy and make forward looking rather sophisticated voting decisions e g alesina londregan and rosenthal 1993 suzuki and chappell 1996 palmer and whitten 1999 these studies infer that mass political decisions conform to rational expectations or at least limited information rationality e g mackuen erikson and stimson 1992 in contrast to this macro level image of the voter individual level survey research has shown that the public in general has low levels of political sophistication lacking much knowledge of and interest in politics e g

what accounts for the variation in retirement wealth among u s households even among households with similar socioeconomic characteristics saving and wealth vary considerably life cycle models attribute this variation to differences in time preference rates risk tolerance exposure to uncertainty relative tastes for work and leisure at advanced ages and income replacement rates these factors have testable implications concerning the relation between accumulated wealth and the shape of the consumption profile using the panel study of income dynamics and the consumer expenditure survey we find little support for these implications the data are instead consistent with rule of thumb mental accounting or hyperbolic discounting theories of wealth accumulation jel di d91 e21

fighting corruption to improve schooling evidence from a newspaper campaign in uganda what are the most effective ways to increase primary school enrollment and student learning we argue that innovations in governance of social services may yield the highest return since social service delivery in developing countries is often plagued by inefficiencies and corruption we illustrate this by using data from an unusual policy experiment a newspaper campaign in uganda aimed at reducing capture of public funds by providing schools parents with information to monitor local officials handling of a large education grant program the campaign was highly successful and the reduction in capture had a positive effect on enrollment and student learning jel d73 i22 o12

partisan cycles in congressional elections and the macroeconomy in the postwar united states the president s party has always done worse in the midterm congressional elections than in the previous congressional election republican administrations exhibit below average and democratic administrations above average economic growth in the first half of each term whereas in the latter halves the two see equal growth our rational expectations model is consistent with these two regularities in presidential elections voters choose between two polarized candidates they then use midterm elections to counterbalance the president s policies by strengthening the opposition in congress since presidents of different parties are associated with different policies our model predicts a spurious correlation between the state of the economy and elections our predictions contrast with those of retrospective voting models in which voters reward the incumbent if the economy is doing well before the election our model performs empirically at least as well as and often better than alternative models

oil nontax revenue and the redistributional foundations of regime stability nontax revenues make up a substantial amount of government revenue around the world though scholars usually focus on individual sources of such revenue for example foreign aid and state owned oil companies using a theory of regime change that builds on recent models of the redistributional foundations of dictatorships and democracies i generate hypotheses regarding all nontax revenue and regime stability i argue that an increase in nontax revenue should be associated with less taxation of elites in democracies more social spending in dictatorships and more stability for both regime types i find support for all three of these hypotheses in a cross sectional time series analysis covering all countries and years for which the necessary data are available significantly i show that the particular source of nontax revenue does not make a difference they all act similarly with regard to regime stability and the causal mechanisms

commitment savings in informal banking markets abstract i study the provision of commitment savings by informal banks to sophisticated hyperbolic discounters since a consumer is subject to temptation in the period that he signs a contract banks might exploit his desire for instant gratification even as they help him to commit for the future without banking savings decisions and welfare are not monotonic in the degree of time inconsistency consequently commitment savings will lower welfare for moderately time inconsistent agents if loan contracts are enforceable pure commitment savings will disappear this will further lower welfare if the lender is a profit maximizing bank but raise welfare if the lender is a welfare maximizing ngo finally i consider the coexistence of a bank and ngo there will be zero takeup of ngo provided commitment savings if there is competition from a moneylender but the ngo s offer will raise the agent s reservation utility thus reducing the surplus that can be extracted by the moneylender

exploring the capability to reason backwards an experimental study with children adolescents and young adults this is the first study investigating the development of the capability to reason backwards in children adolescents and young adults aged 6 to 23 under controlled laboratory conditions the experimental design employs a modified version of the race game as in the original game subjects need to apply backward analysis in order to solve the games we find that subjects capability to reason backwards improves with age but that this process systematically differs across genders our repetition of the games indicates that differences exist also in learning between age groups and across genders

supersized votes ballot length uncertainty and choice in direct legislation elections voters in polities that make heavy use of direct democracy are frequently confronted with ballots that contain a multitude of propositions claims that direct legislation elections overwhelm voters with choices they are not competent to make should particularly apply to such demanding settings yet evidence on the effects of lengthy ballots on voting behavior is scant this study reviews theories of decision making under uncertainty and tests their predictions in a mixed heteroscedastic model of vote choice that is fitted to a unique collection of survey and contextual data on swiss referendums increasing ballot length is demonstrated to interfere with the voters ability to translate their political preferences into consistent policy choices

fiscal games and public employment a theory with evidence from russia why do some governments both in different countries and in regions within those countries employ more workers than others existing theories focus on the level of economic development political redistribution and social insurance but they raise additional puzzles and do not account for all evidence or for a global trend toward decentralization of public employment the authors propose a new theory inspired by russia s recent experience that locates one motive for subnational public employment growth in a political and fiscal game between central and subnational governments in countries with weak legal systems local and regional officials may deliberately set their employment levels beyond their fiscal capacity prompting bailouts from the central government which fears the political cost to it if wage arrears accumulate and provoke strikes the authors model the logic of such brinkmanship derive several propositions and show that they and the model s assumptions fit empirical evidence from russia in the 1990s deficiencies of that country s overstaffed underequipped irregularly paid ineffective and strike prone public sector appear to result in part from a system of dysfunctional incentives created by the interaction of electoral pressures with the system of fiscal federalism the authors suggest parallels with latin american countries such as argentina and brazil

myth and reality of pension reform the latin american evidence abstract starting in 1981 with chile to the end of 2000 10 countries in latin america implemented structural pension reforms totally or partially privatizing their former public systems the latin american models have shaped similar reforms in eastern europe and influenced changes in western europe and the current debate in the united states in 1999 the then chief economist of the world bank nobel laureate joseph stiglitz coauthored with peter orszag a provocative paper examining the myths of the narrowly interpreted reform model sponsored by the bank but without using crucial data from latin america this article contrasts 12 myths of structural pension reforms in that region with data collected from eight countries in the last seven to 20 years confirming and expanding several of orszag and stiglitz s conclusions

predicting retirement savings using survey measures of exponential growth bias and present bias in a nationally representative sample we predict retirement savings using survey based elicitations of exponential growth bias egb and present bias pb we find that egb the tendency to neglect compounding and pb the tendency to value the present over the future are highly significant and economically meaningful predictors of retirement savings these relationships hold controlling for cognitive ability financial literacy and a rich set of demographic controls we address measurement error as a potential confound and explore mechanisms through which these biases may operate back of the envelope calculations suggest that eliminating egb and pb would increase retirement savings by approximately 12 percent

market structure and casino taxation in tourist resorts this article examines the association of tax effects with market structure for casino gaming we show that if market structure is uncompetitive much of casino taxation falls on tourists whose demand is inelastic relative to supply the tax is likely to be efficient under strong external demand if imposed on oligopoly casinos with a monopoly location in a cross border market the likelihood of economically good taxation is greater under oligopoly than under competition but lower than under monopoly casino taxes should be lowered in a more competitive market with weaker external demand our prediction is consistent with the evidence found from casino tourism development in macao with high gambling taxes

relying on the information of interested parties we investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information we find that if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties competition may be unnecessary to achieve this result if the decisionmaker is unsophisticated or not well informed competition is not generally sufficient if the interested parties interests are sufficiently opposed however or if the decisionmaker is seeking to advance the parties welfare then competition can reduce or even eliminate the decisionmaker s need for prior knowledge about the relevant variables and for strategic sophistication in other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking

who delivers partisan clients in the argentine electoral market why do some parties fail to benefit from patronage in pork ridden political systems this article analyzes the interaction between patronage and partisanship to explain why some incumbents are more likely to benefit from pork politics than others we explain such differences by focusing on political parties access to resources supply side and voters dependence on fiscal largesse demand side we show how these differences affect the patron s choice of public sector wages and employment we use subnational level data to show different electoral returns from patronage for the two major political coalitions in argentina peronism and the ucr alianza and their effect on preferences over public sector wages and employment w hy do some political parties fail to benefit from patronage in pork ridden political systems this article analyzes the interaction between patronage and partisanship to explain why some incumbents are more likely to benefit from pork politics than others we explain returns to patronage by highlighting differences in the political parties access to resources supply side and the voter s dependence on public sector jobs demand side we propose that just as political parties cater their policies to particular groups of voters they pursue different strategies when allocating pork in exchange for support on the supply side we highlight the importance of partisan biases in the fiscal and electoral institutions that regulate the access and distribution of public resources on the demand side we show that patronage is a distributive mechanism that provides different returns to voters with different skills and labor market expectations

aid and government fiscal behavior assessing recent evidence this paper reviews evidence published in the last 10 years that has added to our understanding of the effects of aid on government spending and tax effort in recipient countries with a discussion of when general budget support is a fiscally efficient aid modality three generalizations are permitted by the evidence aid finances government spending the extent to which aid is fungible is over stated and even where it is fungible this does not appear to make the aid less effective and there is no systematic effect of aid on tax effort beyond these conclusions effects are country specific

public employees as swing voters empirical evidence on opposition to public reform reform offers economic gains for society atlarge but can represent a threat to theinterests of public employees publicsector reform faces opposition from votersemployed in public sector norwegian dataallow for an analysis this interpretation survey data show that public employeesprefer less reform than the rest of thepopulation the voting behavior of publicemployees is more sensitive to reform thanis that of other voters the swing voterhypothesis and hence shares of publicemployees in a local jurisdiction have anegative impact on the probability ofreform

busy voters agenda control and the power of information t he correspondence between individual preferences and electoral outcomes is often affected by the existence of information asymmetries among electoral participants and the presence of individuals or groups who exercise some form of agenda control while the effects of agenda control in political decision making are widely recognized the effects of information asymmetries are not as well understood since information asymmetries are fundamental characteristics of most elections a deep understanding of the correspondence between individual preferences and electoral outcomes requires a serious consideration of the effects of information i develop a generalizable agenda control model that takes as given the observation that most voters are not naturally inclined to invest in political information the model allows me to provide a dynamic description of how voters and political elites can adapt to the information problems that characterize political decision making it also allows me to demonstrate the effect of these adaptations on electoral outcomes

more dollars than sense refining our knowledge of development finance using aiddata summary in this introductory essay to the special issue we introduce a new dataset of foreign assistance aiddata that covers more bilateral and multilateral donors and more types of aid than existing datasets while also improving project level information about the purposes and activities funded by aid we utilize that data to provide a brief overview of important trends in foreign aid contributors to this special issue draw on aiddata as well as other sources to analyze aid transparency new donors not previously described or analyzed aid allocation and aid effectiveness our recurring theme in this introductory essay is that aiddata and these initial academic projects refine rather than revolutionize our understanding of aid the database has added significant numbers of new projects dollar amounts donors and details about those projects though there is much more yet to add we worry that aid debates have been driven by too little information and that many claims are based on limited or very poor evidence rectifying these problems will not be instantaneous refining knowledge takes a lot of time and hard work the common feature of the papers in this special issue is their careful attention to nuance and detail in spite of what some recent authors have claimed aid is neither a simple solution nor a sufficient cause of most problems in developing countries its motivations distribution and effects are complex and shifting capturing this complexity requires detailed data careful thought and sophisticated methods that allow scholars to make conditional causal and descriptive inferences 2011 elsevier ltd all rights reserved