the solution to the tullock rent seeking game when r 2 mixed strategy equilibria and mean dissipation rates in tullock s rent seeking model the probability a player wins the game depends on expenditures raised to the power r we show that a symmetric mixed strategy nash equilibrium exists when r 2 and that overdissipation of rents does not arise in any nash equilibrium we derive a tight lower bound on the level of rent dissipation that arises in a symmetric equilibrium when the strategy space is discrete and show that full rent dissipation occurs when the strategy space is continuous our results are shown to be consistent with recent experimental evidence on the dissipation of rents

the impact of political majorities on firm value do electoral promises or friendship connections matter this paper simultaneously estimates the impact of political majorities on the values of firms that would benefit from the platforms of the two main candidates at the 2007 french presidential election segolene royal and nicolas sarkozy and of those that are ruled or owned by sarkozy s friends we use prediction market data to track each candidate s victory probability and investigate how this relates to firms abnormal returns our estimates suggest that the value of firms that would likely benefit from the platforms of royal and sarkozy changed by 1 and 2 respectively with the candidates victory probabilities and that firms connected to sarkozy out performed others by 3 due to his election

political donations and the allocation of public procurement contracts abstract we study whether and when firms donations to political parties induce favouritism in public procurement allocations our analysis builds on a unique comprehensive dataset covering all public procurement contracts and all corporate donations to major political parties in the czech republic over the period from 2007 to 2014 and exploits changes in political control over regional governments within this period for identification purposes we find that firms donating 10 more to a political party gaining losing power witness an increase decrease in the value of their public procurement contracts by 0 5 0 6 importantly and in line with theoretical expectations these effects only arise for contracts allocated under less restrictive procurement allocation processes assessing the underlying mechanisms we show that donating firms receive more small contracts allocated under less regulated procurement procedures face less competition in more regulated and open procurement procedures and tend to win with bids further above the estimated cost of the procurement contract

betting on hitler the value of political connections in nazi germany this paper examines the value of connections between german industry and the nazi movement in early 1933 drawing on previously unused contemporary sources about management and supervisory board composition and stock returns we find that one out of seven firms and a large proportion of the biggest companies had substantive links with the national socialist german workers party firms supporting the nazi movement experienced unusually high returns outperforming unconnected ones by 5 to 8 between january and march 1933 these results are not driven by sectoral composition and are robust to alternative estimators and definitions of affiliation

are policy platforms capitalized into equity prices evidence from the bush gore 2000 presidential election abstract this paper tests for the capitalization of policy platforms into equity prices using a sample of 70 firms favored under bush or gore platforms during the 2000 u s presidential election two sources of daily data during the six months leading up to the election are incorporated firm specific equity returns and the probability of a bush victory as implied by prices from the iowa electronic market for this group of politically sensitive firms the daily baseline estimates demonstrate that platforms are capitalized into equity prices under a bush administration relative to a counterfactual gore administration bush favored firms are worth 3 more and gore favored firms are worth 6 less implying a statistically significant differential return of 9 estimates based on weekly returns are even stronger suggesting a differential return of 16 the most sensitive sectors include tobacco worth 13 more under a favorable bush administration microsoft competitors worth 15 less under an unfavorable bush administration and alternative energy companies worth 16 less under an unfavorable bush administration a corresponding analysis of campaign contributions which allows for heterogeneity in the importance of policy platforms to the firms supports the baseline estimates

bureaucratic capacity delegation and political reform thecentraltensionmotivatingcontemporarytheories of delegation from politicians to bureaucrats lies in the potential conflict between the value of bureaucratic expertise on one hand and the desire for political control on the other this tension is well known and has been debated at least since weber s classic work on bureaucracy modern bureaucracies are staffed with individuals who by virtue of rational bureaucratic organization are highly skilled policy experts who in principle should be able to help less knowledgeable politicians achieve their goals however the very skills and expertise that bureaucrats enjoy create the possibility that bureaucrats will usurp the rightful role of politicians in policymaking processes because the way this tension is resolved determines the ultimate compatibility of democracy and bureaucracy existing theories of delegation typically focus on understanding how and to what extent politicians can resolve it 1 in many contexts particularly developing democracies bureaucracy does not fit the weberian characteristics that are assumed in the existing delegation literature the bureaucracies may be staffed with individuals who lack the personal capacity to execute orders effectively the organizational structure may lead to breakdowns within bureaucratic hierarchies making it difficult for senior administrators to control their subordinates departments and ministries may lack basic budgets and resources to undertake implementation actions they may suffer from incentives for

how elastic is the government s demand for weapons abstract we estimate the elasticity of the government s demand for specific weapons by econometric analysis of the relationship between quantity and cost revisions across the population of major weapon systems the cost revisions are due in part to technological information generated in the course of research and development the elasticity of demand is 0 55 and is significantly different from both zero and unity thus the government s demand for specific weapons is inelastic but not perfectly inelastic weapons acquisition is evidently characterized by increasing returns the elasticity of total cost with respect to quantity is about 0 75

u s corporate interests and the political economy of trade policy this paper examines the behavior of american corporations with respect to international trade policy initiatives during the 1970s using survey generated data on revealed corporate trade policy interests and firmand industry level data on company characteristics direct or proxy variables were developed and applied in linear regression equations using an ordered probit specification and in an alternative approach using factor analysis to construct a composite dependent variable hypothesized relationships were verified between corporate positions on trade liberalization and the intensity of competition from imports the benefits from improved access to foreign markets and internal risk pooling capabilities of firms firms exposed to the international competitive environment inevitably have a stake in national trade policy this paper explores the revealed behavior of u s corporations on matters of trade policy in the 1970s it develops a set of hypotheses linking corporate trade policy positions to a series of company and industry attributes these hypotheses are tested using survey generated information regarding corporate behavior on trade policy matters beginning with the protectionist burke hartke initiatives of the early 1970s through the post tokyo round period at the end of the decade studies of the political economy of protection typically begin with the proposition that import barriers create rents that can be appropriated by the protected industry the size of the rents to be obtained and their probable division among the various participants in the industry partly determine the intensity of protection seeking behavior lobbying undertaken by participants in the industry brock and magee 1978 the intensity is also influenced by the degree of success expected in the political arena and by imperfections in the lobbying process for instance the incentive to be a free rider on the lobbying efforts of others walter and jones 1981 the actual outcome of protection seeking activity is conditioned by a variety of political considerations as well for instance politicians may be constrained by the possibility of repercussions from groups adversely affected by protection including consumers and export oriented industries foreign competitors are also affected so that issues concerning foreign relations enter into the decision process in addition politicians may be influenced more generally by ideology party platforms or attitudes toward equity a number of researchers including ball 1967 fieleke 1976 clark 1980 and ray 1981a 1981b have verified that a significant positive correlation exists between nominal tariff rates or effective rates of protection across manufacturing industries and low skilled labor intensity taken to be an indicator of the intensity of import competition and thus related to the size of the rents that could be obtained by protection cheh 1974 and bale 1977 analyzed the determinants of the percentage reductions in rates of duty resulting from the kennedy round tariff cuts concluding that the cuts were determined in such a way as to minimize labor adjustment costs see also allen lewis and tower 1980 marvel and ray 1983 also explored the determinants of kennedy round tariff cuts finding the size of tariff cuts tended to be smaller if an industry was more concentrated or sold a larger fraction of its output to household consumers and larger if the industry was more intensive in research and development r d or more highly unionized the result for r d presumably represents the desire at the industry level for improved access to export markets achievable through larger reciprocal reductions in protection on the part of foreign countries along somewhat different lines baldwin 1976 analyzed several key congressional votes on the received for publication november 21 1983 revision accepted for publication december 14 1984 new york university the authors are grateful to robert lipsey robert j levenson j peter jarrett and james green for providing data that contributed to this study to jang ro lee ashok chatterjee and monica kaufmann for research assistance and to bill greene for providing advice on the estimation technique and computer program used to perform the statistical analysis thomas a pugel is also grateful for the support of an esmee fairbaim research fellowship at the university of reading 1 in both studies ray also explores nontariff barriers ntbs across u s manufacturing industries aside from finding a positive relationship between tariff rates and ntbs the results are not easily interpreted however there is some inferential evidence in walter 1971 which finds a significant positive relationship between ntb incidence and presumably relatively low skill intensive developing country exports

coups corporations and classified information we estimate the impact of coups and top secret coup authorizations on asset prices of partially nationalized multinational companies that stood to benefit from u s backed coups stock returns of highly exposed firms reacted to coup authorizations classified as top secret the average cumulative abnormal return to a coup authorization was 9 over 4 days for a fully nationalized company rising to more than 13 over 16 days precoup authorizations accounted for a larger share of stock price increases than the actual coup events themselves there is no effect in the case of the widely publicized poorly executed cuban operations consistent with abnormal returns to coup authorizations reflecting credible private information we also introduce two new intuitive and easy to implement nonparametric tests that do not rely on asymptotic justifications

the jeffords effect abstract in may 2001 senator james jeffords left the republican party and tipped control of the u s senate to the democrats this paper uses the surprise event to demonstrate what i term the jeffords effect changes in the political landscape have large effects on the market value of firms i use a firm s soft money donations to the national parties as the measure of how the firm aligns itself politically in this event study a firm lost 8 percent of market capitalization the week of jeffords s switch for every 250 000 it gave to the republicans in the previous election cycle on the basis of the point estimates the stock price gain associated with democratic donations is smaller than the loss associated with republican donations but the estimates are consistent with the effects being equal and opposite the results withstand several robustness checks and the effects appear to persist over time

do lenders favor politically connected firms rent provision in an emerging financial market corruption by the politically connected is often blamed for economic ills particularly in less developed economies using a loan level data set of more than 90 000 rms that represents the universe of corporate lending in pakistan between 1996 and 2002 we investigate rents to politically connected rms in banking classifying a rm as political if its director participates in an election we examine the extent nature and economic costs of political rent provision we nd that political rms borrow 45 percent more and have 50 percent higher default rates such preferential treatment occurs exclusively in government banks private banks provide no

the kennedy round evidence on the regulation of international trade in the united states the purpose of this paper is to analyze and provide empirical evidence regarding the regulation of international trade flows our goal is to provide an explanation of the changes in the interindustry pattern of trade restrictions which emerged from the kennedy round of tariff negotiations the principal conclusion of the analysis is that the pattern of protection which resulted from the kennedy round was shaped to minimize the domestic political disruption resulting from liberalization industries which faced significant import threats and whose characteristics enhanced their potential political influence were able to maintain tariff protection in the face of overall liberalization the potential impact of the agreed upon tariff reductions was partially undermined by the introduction of offsetting nontariff trade barriers ntbs in addition ntbs were introduced systematically in industries that were becom

hidden protectionism evidence from non tariff barriers to trade in the united states abstract can the enforcement of product standards be protectionism in disguise this paper estimates the costs of non compliance with u s product standards using a new database on u s import refusals from 2002 to 2014 we find that import refusals decrease exports to the united states this trade reducing effect is driven by developing countries and by refusals without any product sample analysis in particular during the subprime crisis and its aftermath we also provide evidence that given product standards were enforced more strictly during the crisis while the quality of imported products did not deteriorate these results are consistent with the existence of counter cyclical hidden protectionism due to non tariff barriers to trade in the united states

competition policy rivalries and defense industry consolidation declining outlays for new weapons programs have triggered a process of consolidation that promises to shrink the u s defense industry drastically consolidation in the defense industry raises complex competition policy issues that are not amenable to conventional antitrust merger analysis this paper presents a framework for identifying important contractor competencies assessing rivalries in defense industry segments and evaluating the competitive effects of mergers and other consolidation events as applied to antitrust oversight and to department of defense funding program and acquisition strategy decisions this framework can help preserve supply alternatives for developing state of the art weapons needed to satisfy national security requirements

the value of the revolving door political appointees and the stock market abstract we analyze stock market reactions to announcements of political appointments from the private sector and corporate appointments of former government officials using unique data on corporate affiliations and announcements of all senate confirmed u s defense department appointees of six administrations we find positive abnormal returns for political appointments these estimates are not driven by important observations volatile stocks industry wide developments or the omission of further commonly used return predictors placebo events for close competitors and alternative dates yield no effects effects are larger for top government positions and less anticipated announcements we also find positive abnormal returns for corporate appointments and positive effects of political connections on procurement volume our results suggest that concerns over conflicts of interest created by the revolving door seem justified even in a country with strong institutions

politicians payments in a proportional party system abstract are there monetary returns to politics this question is approached in this paper as one of few to quantify the monetary returns to holding political office in a country with proportional representation system i apply a difference in difference setting with a carefully chosen control group to rich data on candidates to the swedish national parliament both short and long run effects of being elected on different types of income are estimated results show that yes mostly thanks to relatively high remuneration while still in office politics can yield positive monetary returns in the long run however the effect is instead compositional in the sense that ex politicians receive more pension income and work less

partisan impacts on the economy evidence from prediction markets and close elections analyses of the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections we sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during election day analyzing high frequency financial fluctuations following the release of flawed exit poll data on election day 2004 and then during the vote count we find that markets anticipated higher equity prices interest rates and oil prices and a stronger dollar under a george w bush presidency than under john kerry a similar republican democrat differential was also observed for the 2000 bush gore contest prediction market based analyses of all presidential elections since 1880 also reveal a similar pattern of partisan impacts suggesting that electing a republican president raises equity valuations by 2 3 percent and that since ronald reagan republican presidents have tended to raise bond yields

propagation through endogenous investment specific technological change abstract many real business cycle models lack a significant propagation mechanism consequently most of the serial correlation in output is inherited from the serial correlation in the exogenous shocks a simple model is presented to show there need not be any relationship between the serial correlation of the exogenous shocks and that of output this is accomplished by incorporating the well documented fact that research spending has generated changes in the real price of capital

revolving door lobbyists we study how ex government ocials benet from the personal connections acquired during public service lobbyists with experience in the oce of a us senator suer a 24 drop in generated revenue when that senator leaves oce the eect is immediate discontinuous around the exit period and long lasting consistent with the notion that lobbyists sell access to powerful politicians the drop in revenue is increasing in the committee assignments power held by the exiting politician

event studies in economics and finance the event study is an important research tool in economics and finance the goal of an event study is to measure the effects of an economic event on the value of firms event study methods exploit the fact that given rationality in the marketplace the effects of an event will be reflected immediately in security prices thus the impact can be measured by examining security prices surrounding the event in this paper event study methods are described including some of the potential complications an example is included to illustrate the approach