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

the democratic political economy of progressive income taxation why do both left and right political parties typically propose progressive income taxation schemes in political competition analysis of this problem has been hindered by the two dimensionality of the issue space to give parties a choice over a domain that contains both progressive and regressive income tax policies requires an issue space that is at least two dimensional nash equilibrium in pure strategies of the standard two party game whose players have complete preferences over a two dimensional policy space generically fails to exist i introduce a new equilibrium concept for political games based on the fact of factional conflict within parties each party is supposed to consist of reformists militants and opportunists each faction has a complete preference order on policy space but together they can only agree on a partial order nash equilibria of the two party game where the policy space consists of all quadratic income tax functions and each party is represented by its partial order exist and it is shown that in such equilibria both parties propose progressive income taxation

sale of visas a smuggler s final song is there a way of eliminating human smuggling we set up a model to simultaneously determine the provision of human smuggling services and the demand from would be migrants a visa selling policy may be successful at eliminating human smugglers by eroding their profits but it necessarily increases immigration in contrast re enforced repression decreases migration but uses the help of cartelized smugglers to overcome this trade off we study how legalisation and repression can be combined to eliminate human smuggling while controlling migration flows this policy mix also has the advantage that the funds raised by visa sales can be used to finance additional investments in border and internal controls employer sanctions and deportations simulations of the policy implications highlight the complementarities between repression and legalisation and call into question the current policies

electoral competition with privately informed candidates we consider a model of elections in which two office motivated candidates receive private signals about the location of the median voter s ideal point prior to taking policy positions we show that at most one pure strategy equilibrium exists and provide a sharp characterization if one exists after receiving a signal each candidate locates at the median of the distribution of the median voter s location conditional on the other candidate receiving the same signal it follows that a candidate s position conditional on his her signal is a biased estimate of the true median with candidate positions tending to the extremes of the policy space we provide sufficient conditions for the existence of a pure strategy equilibrium essentially the pure strategy equilibrium exists if for each signal the other candidate is sufficiently likely to receive a signal in the same direction that is at least as extreme though the electoral game exhibits discontinuous payoffs for the candidates we prove that mixed strategy equilibria exist generally that equilibrium expected payoffs are continuous in the parameters of the model and that mixed strategy equilibria are upper hemicontinuous we investigate the robustness of the median voter theorem to private information pure strategy equilibria may fail to exist in models close to the downsian model but mixed strategy equilibria must and they will be close to the downsian equilibrium finally we provide bounds on the support of mixed strategy equilibria and restrictions on possible atoms of equilibrium mixed strategies

fungibility and the impact of development assistance evidence from vietnam s health sector how can the impact of aid be estimated in the presence of fungibility and how far does fungibility reduce its benefits these questions are analyzed in a context where a donor wants to target its efforts on a specific sector and specific geographic areas a traditional differences in differences method comparing the change in outcomes between the target and nontarget areas before and after the project risks misestimating the project s benefits the paper develops an alternative estimation method in which intersectoral fungibility reduces project benefits insofar as government spending has a smaller impact in the sector to which the funds leak than in the target sector while intrasectoral fungibility reduces benefits insofar as the donor is able to leverage productivity increases in government spending in the target areas the methods are applied to two contemporaneous world bank health projects that set out to target assistance on approximately one half of vietnam s provinces aid is not apparently fungible between vietnam s health sector and other sectors but is fungible across provinces within the health sector differences in differences yield an insignificant impact on infant mortality while the use of the new method yields a statistically significant impact of around 4 per 1000 live births the results however are ambiguous on the costs associated with intrasectoral fungibility

political motivations and electoral competition equilibrium analysis and experimental evidence we study both theoretically and experimentally the complete set of nash equilibria of a classical one dimensional majority rule election game with two candidates who might be interested in power as well as in ideology but not necessarily in the same way apart from obtaining the well known median voter result and the two sided policy differentiation outcome the paper uncovers the existence of two new equilibrium configurations called one sided and probabilistic policy differentiation respectively our analysis shows how these equilibrium configurations depend on the relative interests in power resp ideology and the uncertainty about voters preferences the theoretical predictions are supported by the data collected from a series of laboratory experiments as we observe convergence to the nash equilibrium values at the aggregate as well as the individual levels in all treatments and the comparative statics effects across treatments are as predicted by the theory

the illusion of fiscal illusion unsticking the flypaper effect recognizing that it is difficult to prove a negative this paper marshals evidence in support of the hypothesis that the widely documented flypaper effect of federal grants to state and local governments is purely a statistical artifact a review of previous studies and a monte carlo investigation suggest that the use of an inappropriate functional form may generate an illusory flypaper effect a local expenditure equation is then estimated in alternative specifications with ten years of state level data empirical results confirm the sensitivity of the flypaper effect to specification and tests of fit unambiguously favor one functional form that specification yields no statistical evidence of a flypaper effect

foreign aid and fiscal governance in melanesia summary recent research suggests that foreign aid is effective at spurring economic growth in recipient countries but its effectiveness is likely to depend upon a number of factors arguably the most important factor determining aid effectiveness is how recipient governments mediate foreign aid inflows this paper investigates this issue for the melanesian countries of fiji papua new guinea the solomon islands and vanuatu for the period 1989 2002 results suggest that foreign aid has led to increases in developmental expenditures and to falls in tax revenues and borrowing results also suggest a very different response to aid grants versus loans

foreign aid taxes and public investment abstract using time series data for india we test the foreign aid public investment hypothesis behavioral equations derived from a maximizing framework are estimated after correcting for econometric and data inadequacies of earlier models the results confirm earlier findings regarding the negative relationship between taxes and government investment in the presence of aid however in contrast to the earlier work we find that grants and loans generally go into development projects with no leakages into consumption moreover bilateral aid actually pulls resources out of consumption and puts them into development projects

an economic model of representative democracy this paper develops an approach to the study of democratic policy making where politicians are selected by the people from those citizens who present themselves as candidates for public office the approach has a number of attractive features first it is a conceptualization of a pure form of representative democracy in which government is by as well as of the people second the model is analytically tractable being able to handle multidimensional issue and policy spaces very naturally third it provides a vehicle for answering normative questions about the performance of representative democracy

testing the exogeneity of grants to local governments this paper examines the issue of exogeneity of grants both conditional and unconditional with respect to local expenditures the exogeneity weak strong and super tests show that these grants are not exogenous a model of fiscal response to endogenously determined grants is derived and tested on a pooled time series and cross section sample of forty nine upper tier municipalities in ontario 1977 84 the ols and 2sls estimates of reduced form coefficients differ significantly indicating a simultaneity between grants and expenditures the estimated grant coefficients are negative significant and less than one which implies a substitution of grant funds for own expenditures coefficient estimates of other socio economic factors conform to standard results

party polarization in legislatures with office motivated candidates we develop a theory of legislative competition in which voters care about local candidate valence and national party positions that are determined by the parties median legislators as long as election outcomes are sufficiently predictable the only stable equilibria exhibit policy divergence between the parties if the degree of uncertainty about election outcomes decreases and if voters place less weight on local candidates valence polarization between the parties increases furthermore a systematic electoral shock makes the party favored by the shock more moderate while the disadvantaged party becomes more extreme finally we examine data on state elections and the ideological positions of state legislatures and find patterns that are consistent with key predictions of our model

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

distributing the green cards permanent residency and personal income taxes after the immigration reform and control act of 1986 abstract we explore how permanent residency affects personal income tax participation and net personal income tax payments using variation from the immigration reform and control act of 1986 irca which authorized the largest u s amnesty to date we exploit the timing and geographic unevenness of irca s legalization programs alongside newly digitized data on personal income taxes in california home to the majority of applicants green cards induced the previously unauthorized to file state income tax returns at rates comparable to other california residents while the new returns generated little additional revenue through the end of the 1990s they did raise the incomes of families with children through new claims of the federal earned income tax credit

taxation and political mobilization evidence from andhra pradesh abstractthis article empirically investigates whether there are differences in a region s taxation burden on the basis of support for the centralized state government in the indian state of andhra pradesh using randomness introduced by close election outcomes this article finds that the government collected less tax revenues where opposition parties were more successful the decline in tax revenue was most likely targeted at agricultural producers and a similar pattern is found in other available agricultural policies these results are consistent with a model in which it is optimal for a centralized government to catch up in elections it trails as opposed to bolstering existing leads furthermore these results suggest that taxation responds to electoral pressures and that agricultural producers in particular are targeted during times of political competition

gender differences in the labor market impact of irca s amnesty provisions how to address the current record high number of unauthorized workers within our borders has been a hotly debated topic although a number of studies have examined the effect of employer sanctions bansak and raphael 2001 deborah a cobb clark clinton r shields and b lindsey lowell 1995 and border enforcement pia orrenius and madeline zavodny 2003 only a handful have examined the impact of amnesty on newly legalized immigrants sherrie a kossoudji and deborah a cobb clark 2002 neeraj kaushal 2006 while amnesty is being considered a current solution to immigration concerns the impact of past amnesty programs on the labor market outcomes and economic well being of immigrants has not been documented widely and the analysis has been limited largely to men in this paper we examine whether amnesty a provision of the 1986 immigration reform and control act irca affected the labor market outcomes and wages of the legalized population the analysis is carried out by gender to address male and female differences in labor supply and earnings legalization was intended to bring undocumented workers out of the shadows which may have affected their well being by reducing workplace vulnerabilities increasing job mobility and improving working conditions sherrie a kossoudji and cobb clark 2002 using data from the legalized population survey lps and a comparison sample from the 1979 national longitudinal survey of youth nlys79 we develop a quasi experimental framework to assess the impact of irca s amnesty provisions on the legalized population gender differences in the labor market impact of irca s amnesty provisions

party politics governors and economic policy in this article we evaluate the role of elections in governors state tax policy making does it matter for state taxes whether the governor is a democrat or republican and whether she is eligible for re election or faces a binding term limit using a regression discontinuity design and a panel of u s states we find that the manner in which governors of different parties implement different tax policies turns crucially on the incumbent s eligibility for re election re electable democratic governors increase income taxes relative to similarly situated republicans yielding divergence between party policy positions however governors facing a binding term limit exhibit the reverse policy difference resulting in a movement of policy back together

media and gridlock abstract i develop a model of the relation between the media environment and political obstructionism i show that when voters are less informed by media obstructionism becomes a more effective political signal for the minority party the model thus implies that media change can cause gridlock via signaling by contrast the previous literature on causes of gridlock focuses on polarization and other factors the model also makes several auxiliary predictions consistent with recent trends in u s politics

valence politics and equilibrium in spatial election models spatial models of two party or two candidatecompetition almost never have pure strategy nashequilibria when the issue space has more than onedimension this paper shows that the introduction ofvalence issues can create conditions where equilibriaexist even in a multidimensional setting we derivesufficient conditions for the existence of equilibria and characterize the spatial locations of twocompeting parties or candidates when such equilibriaexist the party with the advantage on the valencedimension will generally take a moderate position onthe positional issues we consider the implications ofthese results for public perceptions of the parties incumbency advantages and realigning elections

informative cheap talk in elections why do office motivated politicians sometimes espouse views that are non congruent with their electorate s can non congruent statements convey any information about what a politician will do if elected and if so why would voters elect a politician who makes such statements furthermore can electoral campaigns also directly affect an elected official s behaviour we develop a model of credible cheap talk costless and non binding communication in elections the foundation is an endogenous voter preference for a politician who is known to be non congruent over one whose congruence is sufficiently uncertain this preference arises because uncertainty about an elected official s policy preferences generates policymaking distortions due to reputation career concerns we show that cheap talk can alter the electorate s beliefs about a politician s policy preferences and thereby affect the elected official s behaviour informative cheap talk can increase or decrease voter welfare with a greater scope for welfare benefits when reputation concerns are more important

the flypaper effect and the revenue impact of grants in aid abstract using a median voter model which assumes grants as endogenous this paper finds strong evidence of the flypaper effect of unconditional grants to ontario municipalities unconditional grants are therefore not expected to reduce the tax burden of local residents

an overlapping generations model of electoral competition this paper presents a dynamic model of political competition between two parties with different policy preferences a party is explicitly modeled as a sequence of overlapping generations of candidates all of whom face finite decision horizons in general there is a conflict between the interests of the individual policymakers and those of the party which includes subsequent generations of candidates we characterize this conflict and suggest a scheme of intergenerational transfers within the party which can resolve or mitigate this conflict the paper shows how the overlapping generations model can be usefully applied to the political arena this abstract was borrowed from another version of this item

the fungibility of us assistance to developing countries and the impact on recipient expanditures a case study of pakistan abstract development assistance continues to be an important source of funds to developing nations donor countries prefer to provide categorical or project aid since it is believed that the typing of aid to a specific project will help to ensure that the funds are used in accordance with the designated objectives development literature indicates however that the ability to tie aid may be illusory specifically recipient nations can cut the ties associated with categorical aid and effectively transform it into purely income augmenting funds i e purely fungible resources the funds legally designated for specific developmental purposes may finance projects whose purposes are not in line with the developmental objective the fungibility of development assistance has received little empirical attention this paper is an effort to fill that gap we formulate an econometric model that explains the response of pakistan s spending for defense public nondefense and private consumption to us assistance within the fungibility framework our results suggest that us assistance to pakistan whether military or nonmilitary is fully transformed into fungible resources with impact on public spending less significant than expected

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

electoral contributions and the cost of unpopularity when considering electoral campaigns candidates receiving contributions from relatively unpopular industries should be regarded less favorably by voters that have information on the sources of funding to offset this unpopularity effect politicians may either demand more money for campaign advertising from these industries in order to persuade less informed voters or shy away from unpopular contributors to avoid losing the support of the informed electorate our model predicts that the first effect dominates and electoral contributions are increasing in industry unpopularity by using u s house elections data and different identification strategies we provide robust evidence in favor of our predictions jel d72 p16

impact of foreign aid on the fiscal behavior of ldc governments abstract the purpose of this paper is to examine the impact of foreign aid on the behavior of the recipient governments specifically we look at a sample of less developed countries in south and southeast asia and study their response to foreign aid received their response is measured in terms of their public investment and consumption as well as taxation our paper attempts to make two new contributions to the literature first we try to estimate the impact of foreign aid on a sample of five south and southeast asian countries secondly we improve on the earlier method of a combination of single equation and two step least squares by estimating the whole system with a nonlinear three step least squares method the results confirm the hypothesis that aid does affect consumption investment and taxation of these governments but they also show that the relationship is a complex one in particular grants and loans have different effects on investment and taxation

learning about challengers we examine a political agency problem in repeated elections where an incumbent runs against a challenger from the opposing party whose policy preferences are unknown by voters we first ask do voters benefit from attracting a pool of challengers with more moderate ideologies when voters and politicians are patient moderating the ideology distribution of centrist and moderate politicians those close to the median voter reduces voter welfare by reducing an extreme incumbent s incentives to compromise we then ask do voters benefit from informative signals about a challenger s true ideology we prove that giving voters informative but sufficiently noisy signals always harm voters because they make it harder for incumbents to secure re election

capital grants and regional public investment in spain fungibility of aid or crowding in effect the aim of capital grants to subcentral governments is to increase their investment however recipients may try to allocate additional resources to cut saving or deficit generating a crowding out effect on self financed investment using data from the spanish autonomous communities during the period 1984 to 1999 the effect of capital transfers on regional public investment saving and deficit are estimated econometric results demonstrate that capital grants have no relevance when explaining the dynamics of saving however in deficit regressions they are shown to be both significant and negative both results lead us to a partial long run crowding out effect of grants on self financed investment

information and strategic political polarisation we develop a model of electoral competition in which two opportunistic candidates select their policy position and invest in quality policy positions are observed and during the campaign the press reveals some information about quality we demonstrate that when information is imperfect the blackdowns median voter theorem fails to hold for intermediate information levels the unique equilibrium is such that candidates propose policies different from the median voter s bliss point by contrast convergence to the median occurs when quality is almost always or almost never revealed we also show that a profit maximising press may collect more information than socially optimal during the 1995 electoral campaign in belgium the vld a traditionally right wing

on the limitations of government borrowing a framework for empiricaltesting this paper seeks to distinguish empirically between two views on the limitations of government borrowing according to one view nothing precludes the government from running a permanent budget deficit paying interest due on the growing debt load simply by issuing new debt an alternative perspective holds that creditors would be unwilling to purchase government debt unless the government made a credible commitment to balance its budget in present value terms we show that distinguishing between these possibilities is mathematically equivalent to testing whether a continuing currency inflation might be fueled by speculation alone or is instead driven solely by economic fundamentals empirical tests which have been developed for this economic question lead us to conclude that postwar u s deficits are largely consistent with the proposition that the government budget must be balanced in present value terms this abstract was borrowed from another version of this item

the binary policy model abstract we introduce a model of electoral competition with office motivated candidates who are exogenously committed to particular positions on some issues while they choose positions for the remaining issues a position is majority efficient if a candidate cannot make a majority of the electorate better off given his fixed positions we characterize existence conditions for majority efficient positions the candidates fixed positions in our framework imply that only some voters are swing voters and we analyze how the distribution of swing voters determines whether candidates choose majority efficient positions we also analyze plurality and runoff elections with multiple candidates in our framework

immigrants minorities and labor market competition this paper investigates the extent of labor market competition among immigrants minorities and the native population an analysis of 1980 u s census data reveals that immigrants tend to be substitutes for some labor market groups and complements for others the effects of shifts in immigrant supply on the earnings of native born men are however very small on the other hand increases in the supply of immigrants do have a sizable impact on the earnings of immigrants themselves an increase of 10 percent in the supply of immigrants for example reduces the immigrant wage by about 10 percent

the case for responsible parties electoral platform convergence is perceived unfavorably by both the popular press and many academic scholars arguably to paraphrase it does not provide enough choice between candidates this article provides a formal account of the perceived negative effects of platform convergence we show that when parties do not know voters preferences precisely all voters ex ante prefer some platform divergence to convergence at the ex ante median after characterizing the unique symmetric equilibrium of competition between responsible policy motivated parties we conclude that all voters ex ante prefer responsible parties to opportunistic purely office motivated ones when parties are sufficiently ideologically polarized that platforms diverge but not so polarized that they diverge excessively however greater polarization increases the scope for office benefits as an instrument for institutional design we calculate the socially optimal level of platform divergence and show that office benefits can be used to achieve this first best outcome if parties are sufficiently ideologically polarized

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

fiscal illusion budget maximizers and dynamic equilibrium this paper extends previous work in grant induced fiscal illusion in two ways while previous models have focused on the existence of rational comparative static equilibria in the presence of illusion this work focuses on the dynamic process by which steady state equilibria can be achieved furthermore endogeneity in grants is incorporated which necessitates the use of a budget maximizing hypothesis however it is shown that a broader interpretation of the budget maximizing assumption is necessary in order for this characterization to make sense in a grantor recipient framework

aid growth nexus empirical evidence from fiji foreign aid to the island economies is a major source for foreign exchange and resource needs this paper presents an empirical analysis of the relationship between foreign aid and economic growth in the case of fiji a neoclassical production function is applied to estimate the aid growth nexus since the data employed are time series for the period 1968 to 1996 the autoregressive distributed lag approach to cointegration is utilized to estimate the models components of total aid such as grant aid loan aid technical cooperation bilateral and multilateral aid flows are also utilized to estimate a disaggregated short run and long run relationship between foreign aid and economic growth the results show that total aid flows and its various forms i e bilateral aid grant aid and technical cooperation grant aid has a significant impact on economic growth in fiji as for domestic resources only exports and private investments in two equations show positive contribution to growth

extremist platforms political consequences of profit seeking media we analyze how information about candidate quality affects the choice of electoral platforms made by an office motivated political challenger the incumbent is of known quality and located at the ideal policy of the voter the voter cares for both policy and the candidates quality and can learn about the challenger s quality by buying information a high quality challenger then has an incentive to signal her quality by choosing a policy that induces the voter to buy information we first study the benchmark case in which the information is supplied exogenously and its quality is independent of the challenger s platform this yields multiple equilibria and indeterminacy of equilibrium platforms by contrast when the information is supplied by a profit maximizing media outlet its quality depends on the challenger s platform and we obtain a unique equilibrium platform in particular when the incumbent s quality is relatively low the media coverage rises and the challenger s platform diverges further from the voter s ideal policy as the voter s preference for quality increases

employer sanctions on hiring illegal labor an experimental analysis of firm compliance abstract the employer sanctions provision of the 1986 immigration reform and control act penalizes employers who knowingly hire unauthorized workers under irca employers are subject to civil and or criminal penalties however given the widespread availability of counterfeit documentation in some cases it becomes difficult to discern the employment eligibility status of some workers using experimental methods this study provides some evidence that marginal increases in employer compliance rates are significantly higher when employers have perfect information on the employment eligibility status of its potential workers than when they do not the experimental results suggest that increases in government spending for employer sanctions enforcement may be more effective if the informational asymmetry faced by employers is solved first a possible solution to this problem may lie in the adoption of tamper proof documentation such as a national identification card

retrospective voting and party polarization we provide a new and favorable perspective on voter naivete and party polarization we contrast sophisticated nash versus retrospective voting in a model where two parties commit to policies retrospective voters do not understand the mapping between states and outcomes induced by a policy instead they simply vote for the party that delivers the highest observed performance as determined in equilibrium we show that parties have an incentive to polarize under retrospective compared to nash voting moreover this polarization often results in higher welfare due to a better match between policies and fundamentals

imperfect signalling affirmative action and black white wage differentials the existence of black white wage differentials has received considerable attention in the economics literature imperfect information provides the underpinning of several models which attempt to explain such differentials 1 2 3 4 11 arrow s work for example shows that when screening is costly and expectations of productivity differ across groups wages may differ between individuals with identical productivity 2 3 borjas and goldberg point out that biased screens may lead to wage differentials even when the two groups have identical distributions of productivity 4 it is important to note that these differentials arise in the absence of discriminatory tastes among market participants other researchers have investigated the impact of affirmative action programs on minority majority wage differentials welch indicates the kinds of wage differences which can arise under certainty about productivity levels 12 lazear demonstrates that the apparent narrowing of blackwhite differentials under affirmative action may well be an illusion due to the failure to measure non pecuniary income in the form of on the job training 7 while these models provide an appealing explanation of the main outlines of minoritymajority wage differentials they do not explain another stylized fact which has been observed recently a study of academicians revealed that black males with a number of publications earned more than their white counterparts whereas black male academics with no publications earned less than comparable whites 5 olneck showed that in terms of occupational status the return to college graduation was higher for non whites than for whites but the return to secondary education was lower 6 159 90 similarly while the income of college educated black males rose relative to that of whites of similar qualifications between 1967 and 1978 the income of less educated black males fell relative to that of their white counterparts over the same period sowell has argued that this skewing of the relative distributions is a result of affirmative action programs 9 10 although the quotas seem to increase the demand for minority workers their legislative framework increases the

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

aid the public sector and the market in less developed countries a reply the article in this journal by mosley et al i987 concludes its analysis of aid effectiveness as demonstrating inability of development aid over more than twenty years to provide a net increment to overall growth in the third world p 636 this note purports to show that this conclusion which is ostensibly distressing as the authors claim is not warranted the section of the study which is the basis of the conclusion cited and the subject of this note is a cross section regression analysis full details of which are shown in mosley et al table 3 the note is concerned with the relation between the dependent variable specified as the growth rate of real gdp per cent per annum hereafter gdp and aid specified as a percentage of gdp hereafter aid the aid results with only two significant positive coefficients in one subsample certainly give no basis for claiming aid effectiveness in terms of gdp growth the intention in this note is to interpret the results which are assumed to be valid this is made possible by the fact that the authors have helpfully provided the full input set of mean values derived from the raw data from this it is possible to calculate the gdp aid relationship for each country for the second and third period the procedure for deriving these relationships is as follows for each country the mean values of the time series of gdp and aid are extracted from the data for i 960 70 and for i 970 80 using i 960 70 as the base the signs of the change in the levels of the gdp and aid mean values between periods are recorded this is repeated for i980 4 with i970 80 mean values as the base the relationship between the two signs is an indication of the effect of aid on gdp in the period in which the change in levels is effected thus in the case of an increase in aid being combined with a decrease in gdp the latter must have fallen relatively to the former and aid effectiveness is negative mutatis mutandis for the other three sign combinations thus generating the appropriate gdp aid relationship for each country in each period a frequency distribution of the four sign combinations relating to the full sample is presented in table i since the signs of the changes in the levels of gdp and aid are derived by making explicit the arithmetic relationship implicit in the data they form a valid base from which to draw conclusions without requiring any test of

dynamic effects of federal grants on local spending abstract in a dynamic model of local government spending this paper examines both long run and short run effects of permanent federal grant changes on local public investment and recurrent expenditures it also utilizes the judd approach to quantify the short run effects of temporary current and future policy shocks the interesting perhaps surprising findings are 1 a permanent increase in the matching grants for investment and recurrent expenditures may accelerate or slow down public investment and 2 a current temporary grant increase stimulates current public investment but a temporary future increase in the nonmatching grant reduces current investment and raises current recurrent expenditures

government partisanship labor organization and macroeconomic performance a corrigendum alvarez garrett and lange 1991 used cross national data panel data on the organization for economic coordination and development nations to show that countries with left governments and encompassing labor movements enjoyed superior economic performance here we show that the standard errors reported in that article are incorrect reestimation of the model using ordinary least squares and robust standard errors upholds the major finding of alvarez garrett and lange regarding the political and institutional causes of economic growth but leaves the findings for unemployment and inflation open to question we show that the model used by alvarez garrett and lange feasible generalized least squares cannot produce standard errors when the number of countries analyzed exceeds the length of the time period under analysis also we argue that ordinary least squares with robust standard errors is superior to feasible generalized least square for typical cross national panel studies

manipulated news model electoral competition and mass media abstract this paper investigates the relationship between media manipulation the strategic suppression of relevant information by mass media and self mediatization the strategic exploitation of media coverage by candidates in elections in the model a voter cannot directly observe the policies proposed by two office motivated candidates the voter learns this information through media reports before voting takes place while the media outlet suppresses some of this information because the voter s decision making could be incorrect direct distortion the candidates have an incentive to win the election by influencing the media coverage through policy settings indirect distortion as a result policy convergence to the voter s ideal policy occurs if and only if the media bias is sufficiently small we then characterize the set of equilibria in terms of the degree of distortion the results suggest that if either strategic media manipulation or competition among the candidates is omitted then the distortion is nonnegligibly misspecified

a political theory of populism when voters fear that politicians may have a right wing bias or that they may be in uenced or corrupted by the rich elite signals of true left wing conviction are valuable as a consequence even a moderate politician seeking reelection chooses populist policies i e policies to the left of the median voter as a way of signaling that he is not from the right truly right wing politicians respond by choosing more moderate or even left of center policies this populist bias of policy is greater when the value of remaining in o ce is higher for the politician when there is greater polarization between the policy preferences of the median voter and right wing politicians when politicians are indeed more likely to have a hidden right wing agenda when there is an intermediate amount of noise in the information that voters receive when politicians are more forward looking and when there is greater uncertainty about the type of the incumbent we show that similar results apply when some politicians can be corrupted or in uenced through other non electoral means by the rich elite we also show that soft term limits may exacerbate rather than reduce the populist bias of policies

a minimalist model of federal grants and flypaper effects abstract this paper shows that flypaper effects can be observed for unconditional federal grants even in the absence of agenda setters voting intransitivities informational asymmetries etc in a simple representation of a regime of federal general revenue grants median citizen voters are decisive over the levels of grants taxation and spending by assumption federal grants received equal federal taxes paid in each recipient locallity the size of the federal grant varies endogenously with demand conditions and the efficiency of tax technologies the apparent flypaper effects positive or negative vary with the source of the change in grants

fiscal illusion intergovernmental grants and local spending islam m n 1998 fiscal illusion intergovernmental grants and local spending reg studies 32 63 71 this paper provides some evidence of fiscal illusion of a reduced tax price of public service engendered by provincial grants to local governments a model of fiscal response to grants based on expected vote maximization approach is tested on time series data as well as pooled time series and cross section data for 39 upper tier municipalities in ontario over the period 1977 91 a generalized two stage least square procedure is used to estimate the model adjusting for autocorrelation heteroscedasticity in errors and simultaneity between grants and expenditures the results show that the fiscally induced price effects of grants varies quite widely from one municipality to another and these variations can be attributed to differences in municipal characteristics and their institutional relations with the province additionally the results show evidence of considerable tax exporting and importing

foreign aid and government fiscal behaviour in low income south asian countries the major purpose of this study was to analyse the relationship between foreign aid and government fiscal behaviour using a pooled sample of three low income south asian countries pakistan india and sri lanka a simultaneous equation system was developed and estimated using nonlinear three stage least squares procedure the results confirm the hypothesis that foreign aid affects both the expenditure and the revenue side of the recipient government budgets both grants and loans are used for consumption as well as for investment purposes however grants leak into consumption more than loans thus if the purpose of aid is to generate investment it is more helpful if donors extend loans to the developing countries than by giving grants the results also indicate that both grants and loans increase the taxation effort multilateral aid actually pulls resources out of consumption and places them into investment projects thus the results confirm the assertion that a shift from bilateral to multilateral ai

a model of electoral competition with incomplete information a model of two candidate electoral competition is developed in which voters are uncertain about the policy either candidate would implement if elected candidates simultaneously announce policy positions from which voters attempt to infer the true positions the candidates would adopt announcing a position different from the true position is costly to the winning candidate with these costs increasing as the difference between the true policy and the announced policy increases a refinement of the sequential equilibrium concept is used to describe the behavior of candidates and voters

flip flopping ideological adjustment costs in the united states senate models of electoral competition in which candidates can change position at no cost predict the convergence of platforms in a two candidate election such convergence is at odds with empirical observation in this paper i undertake a study of candidate positioning in the united states senate and determine the extent to which electoral costs associated with changing position explain the ideological positions taken by senators using over 50 years of roll call voting data i use a simulated method of moments approach to estimate a dynamic model of candidate positioning for u s senators the ndings support a model in which senators face convex costs to changing position with the best tting model being one with linear costs of adjustment the model thus predicts severe punishments for ip opping senators those who make large changes in position as a result of the signi cant costs associated with adjusting position the empirical validity of the median voter theorem which depends upon candidates being able to change position at no cost is called into question

the social selection of flexible and rigid agents people differ in how they respond to their environment some individuals treat each situation as unique and tailor their behavior accordingly while others respond in the same manner regardless of the situation the authors objective is to explore how social systems select from such a heterogeneous population a class of simple hierarchical systems is considered which encompasses some features of corporations and electoral systems a selection process operates on this population which results in successful agents going on to compete against equally successful agents for further advancement the author characterizes the population dynamics and the type of agent that ultimately dominates copyright 1998 by american economic association

a model of candidate location when one candidate has a valence advantage that under some fairly weak assumptions for all levels of the valence advantage the advantaged candidate chooses a more moderate position than the disadvantaged candidate empirical studies of congressional elections by fiorina 1973 and ansolabehere snyder and stewart 2001 support this result d owns 1957 seminal work presents a puzzle for scholars of u s elections why do candidates not converge to the median voter one of the best explanations is that the candidates themselves have ideological preferences as calvert 1985 and wittman 1977 1983 have shown when candidates have such preferences and they are sufficiently uncertain about the preferences of the median voter then they do not converge although they may moderate their positions from their ideal point the basic version of the calvert wittman model however does not account for another basic fact of u s elections often one of the candidates has an advantage due to a nonpolicy factor such as incumbency greater campaign funds better name recognition superior charisma superior intelligence and so on stokes has dubbed such factors valence factors and he has noted their importance in u s elections stokes 1963 1992 1 in this article i extend the basic calvert wittman model by giving one candidate a valence advantage over the other i show that if the valence characteristics of the candidates are approximately equal then when a candidate s valence advantage increases this causes her to move toward the

immigration reform the effects of employer sanctions and legalization on wages the immigration reform and control act of 1986 irca represents an attempt to use labor market regulation to control illegal migration into the united states by imposing fines on employers who hire unauthorized workers sanctions lower wages directly because they act as a tax on hiring additional workers in addition irca legalized many longtime illegal aliens legalization affects wages by changing the relative supply of authorized and unauthorized workers this study estimates irca s impact on wages of manufacturing production workers in metropolitan areas and finds small but statistically significant effects sanctions lower wages while legalization raises them

the wage impact of undocumented workers evidence from administrative data using administrative individual level longitudinal data from the state of georgia this article finds that rising shares of undocumented workers results in higher earnings for documented workers but by a small amount a one percentage point increase in the share of undocumented workers in a documented worker s county industry results in an average wage boost of 0 44 within the firm a one percentage point increase in the percent of undocumented workers employed by the firm boosts wages by 0 09 0 11 0 12 and 0 04 in low medium and high skill firms respectively potential explanations for a positive wage impact are discussed

resource fungibility the flypaper effect and the expenditure impact of grants in aid the typical assumption that intergovernmental grants in aid alter a recipient s budget constraint according to the legal provisions of grant programs was first challenged by mcguire 1975 1978 in a model where local officials are able to convert some fraction of conditional aid into pure fungible resources this paper develops a model of local government expenditure decisions based on mcguire s original work and applies it to data for large u s city governments the results lend strong support to the fungibility hypothesis additionally and importantly the results provide very little evidence in support of the so called flypaper effect of unconditional grants this is due to a more appropriate specification of the unconditional aid variable

political markets property tax referenda and local school spending for better or worse fiscal decisions made through property tax referenda allow local political markets to work demand supply and voting process components of such markets are estimated for those oregon k 12 school districts that held referenda between 1981 and 1986 various attributes of the median voter were related to school spending but supply decisions by school boards and administrators were also important large districts used state aid to substitute for local property tax revenues on nearly a one for one basis while relying on reversion budgets inadequate property tax bases and implicit threats of school closures to extract greater than desired spending levels from the median voter

read my lips but only if i was elected experimental evidence on the effects of electoral competition on promises shirking and trust abstract we experimentally test whether electoral competition reduces shirking behavior by office holders and increases citizens trust using a novel multi person investment game with voting we indeed find that elected office holders shirk less i e they back transfer more to citizens relative to investments than randomly appointed office holders surprisingly this effect is not driven by electoral competition inflating office holders promises instead elected office holders feel more committed to their promises than their randomly appointed counterparts elections initially also increase citizens trust because voters select candidates with the right kind of promises neither low nor non credibly high however over the course of the entire experiment we find no evidence that electoral competition increases citizens trust

voters private valuation of candidates quality abstract different voters might have different valuations of candidates qualitative features we argue that this intuitive fact acts as a strong stabilizing force in electoral competition dynamics when candidates are office motivated pure strategy equilibria may exist unlike when all voters favor the same candidate perhaps more importantly it affects candidates platform moderation incentives in a rather intriguing manner when voters are evenly split in terms of their candidates quality valuations then both candidates have incentives to locate sufficiently near but not necessarily exactly at the center of the policy space however as the number of voters who favor the same candidate rises maximum equilibrium differentiation follows a non trivial u shaped pattern it is first decreasing and then increasing in the fraction of voters who prefer the more popular candidate

legal constraints and the choice of educational grant structures recent empirical work suggests that legalconstraints are significant in choosingstate educational grant structures unfortunately the literature has not takensuch constraints into account thus callinginto question particular grant structurerecommendations this paper studies theconditions under which a legislature underorder to reform its educational grantstructure prefers foundation grants overdistrict power equalization grants atheoretical model is presented in which thechoice is shown to depend on the legalbasis of the court s decision and theempirical validity of this conclusion isdemonstrated using connecticut data and aseparate model of school districtexpenditure choice

signaling character in electoral competition we study a one dimensional hotelling downs model of electoral competition with the following innovation a fraction of candidates have character and are exogenously committed to a campaign platform this is unobservable to voters character is desirable and a voter s utility is a convex combination of standard policy preferences and her assessment of a candidate s character this structure induces a signaling game between strategic candidates and voters since a policy platform affects voters utilities not only directly but also indirectly through inferences about a candidate s character the model generates a number of predictions starting with a failure of the median voter theorem jel d72 d82

roads out of poverty assessing the links between aid public investment growth and poverty reduction the authors develop a macroeconomic framework that captures links between aid public investment growth and poverty public investment is disaggregated into education infrastructure and health and affects both aggregate supply and demand dutch disease effects are captured by accounting for changes in the relative price of domestic goods the authors assess the impact of policy shocks on poverty by linking the model to a household survey they calibrate the model for ethiopia and simulate the changes in the allocation of aid and public investment the authors also calculate the amount by which foreign aid should increase to reach the poverty targets of the millennium development goals

risk preference immigration policy and illegal immigration abstract the paper analyzes the effects of government policy upon illegal immigration the model used as a vehicle for this analysis is an extension of ethier s one small country model of illegal immigration to a two country context we distinguish between the cases of capital immobility and free capital mobility and consider illegal immigration when there are border patrols by the government and when there are internal enforcement procedures in effect unlike previous researchers who have assumed risk neutrality we examine the impacts of government policy when prospective illegal immigrants exhibit risk averse and risk loving behavior the relaxation of the risk neutrality assumption leads to the possibility of multiple and unstable equilibria moreover attitudes to risk and the probability of detection are shown to have implications for some equilibrium responses to tighter surveillance

a reform dilemma in polarized democracies abstract we study the feasibility and efficiency of policy reforms in democracies we develop a simple election model where i reforms are costly for voters and politicians and these costs increase with the extent of policy change and ii politicians differ in their ability to carry out reforms efficiently we identify a so called reform dilemma which manifests itself in two variants from a static perspective low reform ability politicians are elected when political parties are polarized who then impose high costs on citizens for each reform step this property of elections arises as low reform ability is a substitute for policy commitment from a dynamic perspective incumbents may choose socially undesirable policies to align the social need for reform with their own reform ability and are thus re elected regardless of their reform ability

sincere and sophisticated players in an equal income market abstract we study the simultaneous direct revelation mechanism associated with each equal income competitive social choice function in the allocation of objects and money among sincere and strategic agents strategic agents take advantage of sincere agents they non cooperatively coordinate on the equal income competitive allocations for the true preferences that are pareto undominated for them within the set of equal income competitive allocations sincere agents are protected to some extent however their welfare is usually above their maximin payoff

export expansion and economic growth testing for cointegration and causality this paper develops a multivariate error correction model to test the causality between exports and growth in 15 asian countries 1967 91 the underlying series are tested as non stationary in levels but stationary in first differences the causal factors are cointegrated in five of these countries only causality test results indicate that export expansion causes growth in two third of these countries corrected for simultaneity between the causal factors a country with a large public sector higher level of economic development and which is less vulnerable to external economic shocks is more likely to reap the benefits of export promotion strategies the causal inferences are fairly stable over the sample period

candidates credibility and re election incentives i study elections between citizen candidates who cannot make binding policy commitments before taking office but who are accountable to voters due to the possibility of re election in each period a representative voter chooses among heterogeneous candidates with known policy preferences the elected candidate chooses the policy to implement and how much rent seeking to engage in when in office as the voter decides both which candidate to elect and subsequently whether the candidate is retained this framework integrates elements of electoral competition and electoral accountability i show that in the best stationary equilibrium when utility functions are concave over policy non median candidates are elected over candidates with policy preferences more closely aligned with the voter in this equilibrium there are two candidates who are elected at some history and the policies these candidates implement in office do not converge this divergence incentivizes candidates to engage in less rent seeking increasing voter welfare copyright 2013 oxford university press

candidate strategies in primaries and general elections with candidates of heterogeneous quality abstract i consider a model in which candidates of differing quality must win a primary election to compete in the general election i show that there is an equilibrium in which democrats choose liberal policies and republicans choose conservative policies but higher quality candidates choose more moderate policies than lower quality candidates in this equilibrium higher quality candidates choose more moderate policies if they have a larger quality advantage or there is less uncertainty about the median voter s ideal point in the general election and the candidates in a given primary choose closer policies to one another when there is a smaller quality difference between the candidates in a primary i further show that if the candidates have policy motivations then a low quality candidate may strategically choose to enter a primary even if running for office is costly and the candidate will lose the primary election with certainty in equilibrium

are there lasting impacts of aid to poor areas abstract the paper re visits the site of a large world bank financed rural development program in china 10 years after it began and four years after disbursements ended the program emphasized community participation in multi sectoral interventions including farming animal husbandry infrastructure and social services data were collected on 2000 households in project and non project areas spanning 10 years a double difference estimator of the program s impact on top of pre existing governmental programs reveals sizeable short term income gains that were mostly saved only small and statistically insignificant gains to mean consumption emerged in the longer term though in rough accord with the average gain to permanent income the use of community based beneficiary selection greatly reduced the overall impact given that the educated poor were under covered the main results are robust to corrections for various sources of selection bias including village targeting and interference due to spillover effects generated by the response of local governments to the external aid

is foreign aid fungible the case of indonesia this paper considers whether foreign aid given for specific categories of expenditure is fungible among them and whether aid reduces tax effort by the recipient government models developed to analyze the fiscal relations among different levels of government in the united states are applied to analysis of the impact of foreign aid econometric analysis of data for indonesia reveals that aid is largely spent as the donors intended that aid does not lead to a reduction in tax effort and that aid is not diverted to nondevelopment current expenditures copyright 1990 by royal economic society

foreign aid and the question of fungibility this paper analyzes whether the foreign assistance provided for specific categories of expenditure is shifted among them contrary to the wishes of donors it also considers whether aid reduces the tax effort of recipient governments econometric results are presented for the dominican republic that show that the fungibility of aid has resulted in a thwarting of the intentions of donors an attempt is made to account for the observed differences in behavior of individual countries in altering expenditures copyright 1993 by mit press

a model of political competition with citizen candidates the authors develop a model of electoral competition in which citizens choose whether or not to run as candidates a winner implements her favorite policy the equilibrium number of candidates depends negatively on the cost of running and positively on the benefits of winning for some parameter values all equilibria under plurality rule have exactly two candidates whose positions are distinct two candidate elections are more likely under plurality rule than under a runoff system the candidates positions are less differentiated under a runoff system there exist equilibria under both systems in which some candidates have no chance of winning

private polling in elections and voter welfare we study elections in which two candidates poll voters about their preferred policies before taking policy positions in the essentially unique equilibrium candidates who receive moderate signals adopt more extreme platforms than their information suggests but candidates with more extreme signals may moderate their platforms policy convergence does not maximize voters welfare although candidates platforms diverge in equilibrium they do not do so as much as voters would like we find that the electorate always prefers less correlation in candidate signals and thus private over public polling some noise in the polling technology raises voters welfare

fiscal illusion and the australian local government grants process how sticky is the flypaper effect it has been argued that evidence supporting the widely documented flypaper effect is a statistical artefact more specifically that previous studies are compromised by the use of inappropriate functional forms and the endogeneity of intergovernmental grant programs whilst the first issue may be resolved with careful econometric testing the second requires the incorporation of institutional constraints into governmental expenditure equations combining australian local government expenditure equations and intergovernmental grant parameters the flypaper controversy is analysed empirical results confirm the sensitivity of the flypaper effect to specification and tests of fit unambiguously favour one functional form that specification yields no evidence of a flypaper effect in the australian institutional milieu

the fungibility of u s military and non military assistance and the impacts on expenditures of major aid recipients abstract this paper examines the impact of u s military and non military assistance on the allocation of public and private sector spending for eight major recipients over the 1972 1987 period the model assumes that an aid recipient s effective post assistance budget constraint is a priori unknown and must be estimated two versions of the model are tested in version a the data is converted into real u s dollars using official exchange rates in version b the data is converted using purchasing power parity exchange rates provided by summers and heston 1991 major findings are the same for both versions u s aid is highly fungible with a significant portion channeled to the private sector where it finances current consumption relatively more than investment

flip flopping from primaries to general elections abstract i consider a model in which candidates must win a primary election to compete in the general election candidates may choose different policies in the primary and the general election but doing so results in accusations of flip flopping i show that candidates adopt extreme policies in the primaries but then try to move closer to the center for the general election even though primary voters are forward looking and anticipate this policy moderation the extent to which candidates move closer to the center is constrained by flip flopping costs and candidates choose divergent policies in the general election i obtain comparative statics results on candidate policy choices in terms of voter preferences