inequality aversion and voting on redistribution some people have a concern for a fair distribution of incomes while others do not does such a concern matter for majority voting on redistribution fairness preferences are relevant for redistribution outcomes only if fair minded voters are pivotal pivotality in turn depends on the structure of income classes we experimentally study voting on redistribution between two income classes and show that the effect of inequality aversion is asymmetric inequality aversion is more likely to matter if the rich are in majority with a poor majority we find that redistribution outcomes look as if all voters were exclusively motivated by self interest

pocketbook voting social preferences and expressive motives in referenda we develop and test a theory of voting and turnout decisions that integrates self interest social preferences and expressive motives our model implies that if pocketbook benefits are relevant voters either perceive their impact on the outcome to be non negligible or expressive motivations do not play a role in the decision on how to vote conversely if own pocketbook benefits do not explain voting then voting is expressive if the perceived probability of being pivotal is non negligible social preferences and expressive concerns are observationally equivalent our empirical analysis studies collective choices which are analogous to decisions on local public goods we consider referenda among university students on whether to collectively purchase deeply discounted flat rate tickets for public transportation and cultural amenities individual usage data allow quantifying the monetary benefits associated with each ticket as voters had precise information on the individual costs and benefits our setting comprises a real world laboratory of direct democracy we find that monetary benefits strongly influence participation and voting however social or expressive motives such as stated altruism environmental concerns and paternalism are decisive for a significant minority our results rule out purely expressive voting and imply that a substantial share of the electorate perceived their impact on the outcome to be non negligible

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

bridging the gap between the field and the lab environmental goods policy maker input and consequentiality abstract this paper explores the criterion validity of stated preference methods through experimental referenda that capture key characteristics of a stated preference survey for a proposed environmental program in particular we investigate whether advisory referenda where participant votes have either known or unknown weight in the policy decision can elicit values comparable to that of a standard incentive compatible referendum when participants regard their votes as consequential our results suggest there is no elicitation bias with advisory referenda for advisory referenda where participants view their votes as inconsequential and for purely hypothetical referenda we observe elicitation bias

expressive voting and electoral equilibrium there are two rival accounts of rational voting in the public choice tradition the mainstream instrumental account that sees the vote as a revelation of preference over possible electoral outcomes essentially analogous to a market choice and the expressive account that sees the vote as expressing support for one or other electoral options rather like cheering at a football match this paper attempts to lay out some of the implications of the expressive account of voting for the issue of who votes as well as for the nature of political equilibrium and to compare these implications with those derived from the instrumental account we also identify and discuss the alternative views of the domain of electoral politics associated with the instrumental and expressive accounts of voting and sketch a route towards the integration of expressive and instrumental ideas in the analysis of rational electoral politics

partisan bias and expressive voting abstract we conduct an experiment to characterize the expressive voting behavior of political partisans we find that participants who are asked to vote on the answer to factual questions tend to offer more partisan responses than those who must answer as decisive individuals we further test whether voters exploit corrective information that sometimes challenges their partisan views when information is available we observe smaller partisan gaps and more correct responses especially when the information is free when information is costly to acquire we find that voters generally choose to remain uninformed consistent with the downsian theory of rational ignorance

optimal clearing margin capital and price limits for futures clearinghouses abstract we provide a model for a futures clearinghouse to use for setting optimal levels of clearing margin capital and price limits which minimizes the costs to clearing firms and simultaneously protects the clearinghouse from default by clearing firms we show how to estimate the capital requirement which supports the clearinghouse s residual default risk that is not covered by the clearing margin we apply our model to the winnipeg commodity exchange and demonstrate that price limits reduce the sum of optimal clearing margin and capital to a level that is substantially lower than that required in the absence of price limits

voter motivation and the quality of democratic choice abstract the efficiency of committee voting and referenda with common interest issues critically depends on voter motivation i e on voters willingness to cast an informed vote if voters are motivated voting may result in smart choices because of information aggregation but if voters remain ignorant delegating decision making to an expert may yield better outcomes we experimentally study a common interest situation in which we vary voters information cost and the competence of the expert we find that voters are more motivated to collect information than predicted by standard theory and that voter motivation is higher when subjects demand to make choices by voting than when voting is imposed on subjects

an expressive voting theory of strikes i introduction economists usually make the realistic assumption that individuals commonly choose to further their material interests other things equal they will choose the higher paying job make the investment with a higher expected return for a given risk and so on recent work however has pointed out that individuals do not always pursue their immediate selfish interests evolutionary pressures for example may promote emotional outbursts which have little immediate benefit social pressures may lead to behavior which is not pareto optimal but which is individually rational in short recent work has shown that behavior which at first looks irrational need not be for further discussion see akerlof 1984 chs 4 and 9 etzioni 1988 frank 1988 simon 1990 this paper considers emotional behavior which cannot be explained by its long term benefits it instead focuses on behavior which is not costly when practiced by one person but is when practiced by many unlike other works i do not require that individuals usually act emotionally or that they do so at significant cost to themselves i only require that when the cost of emotional behavior is sufficiently small individuals will pursue it indeed in my model individuals rationally calculate when to behave emotionally in particular under some circumstances the action of any one individual has negligible effects on his wealth though the similar actions of numerous persons will have significant effects individuals may then free ride letting emotional motives guide their activity this paper presents one important application of such behavior the decision of a union member to vote for a strike indeed it has long been recognized that though union members may vote for strikes to increase wages emotional considerations can also be important in 1921 hansen claimed that strike decisions are motivated primarily by a sense of grievance about wages ashenfelter and johnson 1969 37 write that union leaders may prefer to call a strike because under strike conditions the leadership may at least appear as adversaries against management in a crusade which may even raise their political stock and will unify the workers newspapers tell of strikes that appear to have little economic rationale for example the wall street journal march 17 1989 reported that with the eastern airlines walkout now nearly two weeks old what boils to the surface is an intense highly personal anger a feeling that their self respect honor and dignity have been undercut by a management obsessed with pinching pennies the new york times april 23 1989 reported that four years after the end of a strike against united airlines union pilots were harassing non union pilots the harassment ranged from verbal abuse and refusal to shake hands to more serious breaches like not advising a pilot that he is approaching an altitude assigned by air traffic controllers work by getman goldberg and herman 1976 suggests that a worker in union representation elections is more likely to favor unionization the more effectively the company threatened the loss of jobs following unionization this view of non instrumental union behavior is also consistent with a large body of evidence which finds that union members are less likely to ratify a contract the worse the relations between management and labor indeed cappelli and sterling 1988 find that the state of labor relations in a plant is the strongest predictor of union voting outcomes similarly kaufman and martinez vazquez 1988 find that union members are least likely to vote in favor of wage concessions in plants with adversarial labor relations though much evidence is consistent with the hypothesis that strike votes are not based solely on economic considerations the approach suffers from two faults as a basis for an economic theory first intuition suggests that the emotional gain from a strike is likely to be far smaller than the monetary cost of a strike a strike may cost a worker over 1 000 a week in lost wages 1 yet we rarely find people wasting that much money in emotional outbursts

a little fairness may induce a lot of redistribution in democracy we use a model of self centered inequality aversion suggested by fehr and schmidt 1999 to study voting on redistribution we theoretically identify two classes of conditions when an empirically plausible amount of fairness preferences induces redistribution through referenda we test the predictions of the adapted inequality aversion model in a simple redistribution experiment and flnd that it predicts voting outcomes far better than the standard model of voting assuming rationality and strict self interest

valuing the futures market clearinghouse s default exposure during the 1987 crash futures market clearinghouses are intermediaries that make large volume trading between anonymous parties feasible during the market crash in october 1987 rumors spread that a clearinghouse might fail this paper presents estimates of three measures of the default exposure the authors estimate the traditional summary statistic for risk exposure the tail probabilities they also estimate two economic measures the expected value of the payoffs in the tails and expected value of the payoffs in the tails conditional on landing in the tail the authors estimates indicate the market thought another crash was unlikely but that if one occurred it would be large

the triple c approach to local industrial policy abstract in both developed and developing countries there is mounting evidence that clustering and networking help small and medium sized manufacturers to raise their competitiveness the role of public policy in this process is less clear the european experience suggests that local and regional government can play an important role equally if not more interesting experiences can be found in developing countries their analysis constitutes the core of this paper the lessons can be summarized as the triple c which stands for customer oriented collective and cumulative

discriminatory taxes are unpopular even when they are efficient and distributionally fair abstract we explore the political acceptance of taxation in commodity markets participants in our experiment earn incomes by trading and must collectively choose one of the two tax regimes to raise a given tax revenue a uniform tax ut imposes the same tax rate on all markets and is fair in that it yields the same but low income to participants in all markets the discriminatory tax dt imposes a higher burden on markets with inelastic demand and is therefore efficient but it is also unfair in that incomes are unequal across markets we find that dt is unpopular as predicted surprisingly however dt remains unpopular when they are both efficient and produce a fair equal distribution we conclude that non discrimination equal treatment is a salient fairness principle in taxation that shapes voting on commodity taxes above and beyond concerns for efficiency and equal distribution

are political statements only expressive an experiment abstract many forms of political communication are thought to be expressive rather than instrumental we present evidence suggesting the presence of a perceived instrumental benefit of individual political communication subjects may send a sometimes costly comment on another person s choice of how to donate to two rival political groups subjects who may comment before the choice is made when they may have some persuasive impact are more than twice as likely to comment as those who may only send a message after the decision when the timing of the messages pre or post decision remains fixed but the experimenter alone receives the message there is no difference in the proportion of messages sent pre and post decision moreover most of the comments made to the decision maker prior to the decision use an imperative construction while few do so after the decision is made or when writing to the experimenter alone taken together these results indicate that political expression is both expressive and instrumental

leadership and conflict we model the choice of leaders of groups within society where leaders influence both the mode of interaction between groups either peaceful compromise or costly conflict and the outcome of these interactions group members may choose leaders strategically instrumentally or they may choose leaders expressively we characterize the equilibria of the instrumental choice model and also argue that leadership elections may overemphasise the role of expressive considerations in the choice of leader and that this may result in increased conflict between groups

a passion for voting we model expressive voting as a dynamic game with informed and ignorant voters a voter has selective memory for actions and he is aware of it we find a unique symmetric equilibrium with ignorant voting public signal in favor of one particular alternative creates the bandwagon and underdog effects when the signal is sufficiently strong the majority outcome is biased this is a possible reason for persistence of public policies

do jumps contribute to the dynamics of the equity premium abstract this paper investigates whether risks associated with time varying arrival of jumps and their effect on the dynamics of higher moments of returns are priced in the conditional mean of daily market excess returns we find that jumps and jump dynamics are significantly related to the market equity premium the results from our time series approach reinforce the importance of the skewness premium found in cross sectional studies using lower frequency data and offer a potential resolution to sometimes conflicting results on the intertemporal risk return relationship we use a general utility specification consistent with our pricing kernel to evaluate the relative value of alternative risk premium models in an out of sample portfolio performance application

the behavioural economics of climate change this paper attempts to bring some central insights from behavioural economics into the economics of climate change in particular it discusses i implications of prospect theory the equity premium puzzle and time inconsistent preferences in the choice of discount rate used in climate change cost assessments and ii the implications of various kinds of social preferences for the outcome of climate negotiations several reasons are presented for why it appears advisable to choose a substantially lower social discount rate than the average return on investments it also seems likely that taking social preferences into account increases the possibilities of obtaining international agreements compared to the standard model however there are also effects going in the opposite direction and the importance of sanctions is emphasized

applying threshold models to donations to a green electricity fund this study applies a threshold model proposed by granovetter 1978 to analyze the diffusion process of donating behavior for renewable energy we first use a stated preference survey to estimate the determinants of a decision to support the donation scheme under various predicted participation rates using the estimated coefficients we simulate how herd behavior spreads and the participation rate reaches the equilibrium the participation rate at the equilibrium is estimated as 37 88 when the suggested donation is 500 yen while it is 17 76 when the suggested amount is 1000 yen the influence of environmentalism and altruism is also examined and we find that these motivations increase the participation rate by 31 51 on average

rational moralists the role of fairness in democratic economic politics in this paper we empirically test for the influence of fairness considerations on the willingness to redistribute income in private and in democratic decisions in contrast to standard explanations of income redistribution our theory takes into account that prices shift decisively as we move from the sphere of private contributions to politics at the polls it is nearly costless to observe social norms therefore we expect individuals to behave more fairly in the political sphere than in the market place we present experimental evidence which is consistent with this hypothesis in distributive struggles social norms moderate the inclination of human beings to behave like gangsters

otc clearing arrangements for bank systemic risk regulation a simulation approach based on a simulation approach this paper compares different over the counter otc clearing models regarding their netting efficiency and loss concentration implications the results indicate that the mandatory clearing of all standardized otc derivatives by a central counterparty ccp propagated by regulators would significantly decrease systemic risk as compared to existing clearing arrangements only if the multilateral netting benefits of the ccp and loss mutualization are fully attained therefore regulators have to ensure that there is a critical mass of asset classes under mandatory clearing that broad market participation in the ccp is enabled and that there is an appropriate client asset protection regime

advocacy and political convergence under preference uncertainty we study the formation of advocacy groups and how they can impact policy outcomes by revealing information about voters preferences to uninformed political candidates we conduct a laboratory experiment based on a two candidate spatial electoral competition setting where the policy preferences of voters are initially unknown and change over time in the control treatment candidates learn about the preferred policy of the median voter through the voting outcome of elections in the advocacy treatments voters can organize themselves into advocacy groups in order to reveal their policy preferences we find that voters often overcome the collective action problem of forming an advocacy group in fact we observe the formation of both informative advocacy groups which convey new information and uninformative advocacy groups which do not overall advocacy groups significantly speed up the convergence to the preferred policy of the median voter however advocacy does not lead to higher earnings as the gains from faster convergence are offset by the costs of group formation

learning and asset price jumps w e develop a general equilibrium model in which income and dividends are smooth but asset prices contain large moves jumps these large price jumps are triggered by optimal decisions of investors to learn the unobserved state we show that learning choice is determined by preference parameters and the conditional volatility of income process an important model prediction is that income volatility predicts future jump periods while income growth does not consistent with the model large moves in returns in the data are predicted by consumption volatility but not by consumption growth the model quantitatively captures these novel features of the data jel g00 g12 g14 d83 a prominent feature of financial markets is infrequent but large price movements jumps 1 in this article we develop a model in which income and dividends have smooth gaussian dynamics however asset prices are subject to large infrequent jumps in our model large moves in asset prices obtain from the actions of the representative agent to acquire more information about the unobserved state of the economy for a cost we show that the optimal decision to incur a cost and learn the true economic state is directly related to the level of uncertainty in the economy this implies that aggregate economic volatility as well as market volatility should predict jumps in returns we show that indeed in the data consistent with the model return jumps are predicted by consumption volatility market volatility further the implied asset price implications from our model are consistent with the key findings from parametric models about frequency and predictability of jumps as well as nonparametric jump detection analysis of barndorff nielsen and shephard 2006 based on

moral bias in large elections theory and experimental evidence in this article we provide evidence that voters in large elections tend to vote against their material self interest and to vote for a morally or ethically appealing alternative it may seem puzzling that voters might behave differently in small elections than they do in large ones however we show that such behavior is a logical consequence of voters having a conflict between obtaining a better material outcome and choosing a moral action we develop a simple model of this conflict and show that decreasing the probability that a single vote is decisive i e pivot probability reduces the importance of outcomes relative to actions in voter decision making because pivot probability is generally small in large elections alternatives that are understood by voters to be morally superior are more likely to win in large elections than in small ones thus compared to the preferences of voters election results will be biased in favor of moral alternatives 1 the model produces a set of predictions that we test in a laboratory experiment to clarify ideas consider a situation in which two outcomes are possible a and b assume that b gives

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

maximum likelihood estimation of latent affine processes this article develops a direct filtration based maximum likelihood methodology for estimating the parameters and realizations of latent affine processes filtration is conducted in the transform space of characteristic functions with a version of bayes rule used for recursively updating the joint characteristic function of latent variables and the data conditional upon past data an application to daily stock returns over 1953 96 reveals substantial divergences from emm based estimates in particular more substantial and time varying jump risk the implications for stock index options prices are discussed

pivotality and responsibility attribution in sequential voting this paper analyzes responsibility attributions for outcomes of collective decision making processes in particular we ask if decision makers are blamed for being pivotal if they implement an unpopular outcome in a sequential voting process we conduct an experimental voting game in which decision makers vote about the allocation of money between themselves and recipients without voting rights we measure responsibility attributions for voting decisions by eliciting the monetary punishment that recipients assign to individual decision makers we find that pivotal decision makers are punished significantly more for an unpopular voting outcome than non pivotal decision makers our data also suggest that some voters avoid being pivotal by voting strategically in order to delegate the pivotal vote to subsequent decision makers

selfishness versus public regardingness in voting behavior abstract the selfishness hypothesis in voting behavior is formalized and tested for the first time individual net benefits from a bond proposal computed using the median voter model are used to explain voting behavior it was found that taxpayers in general voted according to their self interest as defined by net benefits however high income groups voted in favor of proposals that would have redistributed income to the poor their behavior is consistent with either the public regardingness hypothesis or with an extension of the selfishness hypothesis which includes real estate speculation

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

price limits and capital requirements of futures clearinghouses abstract futures clearinghouses need capital to provide liquidity in case of default by clearing members price limits truncate observed futures prices and prevent observation of clearinghouses true default risk exposure we show how to estimate the true default risk exposure from observed futures prices and model capital requirements using an option pricing model which accounts for non normality of and truncation in observed futures returns we apply the model to the clearinghouse associated with the winnipeg commodity exchange compare required capital levels with actual capital levels and show that ignoring non normality of futures returns causes overall capital requirements to be significantly underestimated

margin adequacy and standards an analysis of the crude oil futures market this article proposes two value based standards for setting the initial margin requirements on futures positions based on the observation that the distributions of the payoffs to futures traders and the potential losses to the futures clearinghouse can be described in terms of the payoffs to barrier options using both margin standards we examine the adequacy of initial margin requirements in the crude oil futures market our results suggest that on average the initial margin requirements set by the new york mercantile exchange exceed the minimum margins required under our option based standards for adequacy

voting when money and morals conflict an experimental test of expressive voting abstract moral considerations may matter much in voting because the costs of expressing support for a morally worthy cause may be low in a referendum these costs depend on whether a voter expects to affect the outcome of the referendum to test the low cost theory of expressive voting we experimentally investigate a proposal to tax everyone and to donate tax revenues the analysis of expectations and voting decisions shows that the low cost theory fails to explain voting decisions instead we find that voters tend to approve of the proposal if they expect others to approve too

the political feasibility of pension reform options the case of switzerland this paper investigates the political feasibility of different hypothetical reform options of an unsustainable pay as you go public pension system in calibrating the model to the swiss economy we find that low internal rates of return and high distortions can reduce political support for an increase in earmarked taxes up to a point where a reduction in the size of the social security program receives a majority of votes our simulations show that the consideration of non social security taxes is crucial in welfare analysis this is especially true for countries in which the public pension system is explicitly or implicitly subsidized