efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

financial mechanism and enforceability of international environmental agreements we examine how international coordination among countries generates a trend towards establishing an international institution for the provision of global public goods in the present model the forces creating international agreement are a politician s motive for re election and a financial mechanism for compliance if a politician expects another politician in a neighboring country to signal his good performance to his citizen by participating in the agreement and is aware that his ex post deviation will be deterred by the financial mechanism he too decides to participate in the agreement which then corrects externality problems

central bank design abstract starting with a blank slate how could one design the institutions of a central bank for the united states this paper explores the question of how to design a central bank drawing on the relevant economic literature and historical experiences while staying free from concerns about how the fed got to be what it is today or the short term political constraints it has faced at various times the goal is to provide an opinionated overview that puts forward the trade offs associated with different choices and identifies areas where there are clear messages about optimal central bank design

how delegation improves commitment abstract mccallum 1995 american economic review papers and proceedings 85 2 207 211 conjectures that delegation merely relocates the commitment problem but does not solve it this holds if optimal ex ante policies do not change if additional information becomes available however with a flexibility credibility trade off delegation improves credibility

intrinsic motivation in public service theory and evidence from state supreme courts abstractthis paper provides a theoretical and empirical analysis of the intrinsic preferences of state appellate court judges we construct a panel data set using published decisions from all state supreme courts from 1947 to 1994 we estimate the effects of changes in judges employment conditions on a number of measures of judicial performance the results are consistent with the hypothesis that judges are intrinsically motivated to provide high quality decisions and that at the margin they prefer quality over quantity when judges face less time pressure whether from the introduction of an intermediate appellate court the weakening of electoral demands or an increased salary they write more well researched opinions that are cited more often by other judges these effects are strongest when judges have more discretion to select their portfolios of cases

a political economy model of merger policy in international markets this paper looks at the political economy of merger policy under autarky and in international markets we assume that merger policy is decided by antitrust authorities whose objective is to maximize welfare but can be influenced by governments which are subject to lobbying by firms insiders or outsiders to the merger we argue that political economy distortions may explain some of the recently observed merger policy conflicts between authorities and politicians as well as between institutions belonging to different countries we illustrate our analysis with applications motivated by recent merger cases that have been widely debated in the international press

bureaucrats or politicians part ii multiple policy tasks abstract policies are typically chosen by politicians and bureaucrats this paper investigates first the normative criteria with which to allocate policy tasks to elected policymakers politicians or non elected bureaucrats politicians are preferable if there is uncertainty about social preferences and flexibility is valuable or if policy complementarities and compensation of losers is important bureaucrats are preferable if time inconsistency and short termism is an issue or if vested interests have large stakes in the policy outcome we then compare this normative benchmark with the case in which politicians choose when to delegate and show that the two generally differ

to elect or to appoint bias information and responsiveness of bureaucrats and politicians in this paper we address empirically the trade offs involved in choosing between bureaucrats and politicians in order to do this we map institutions of selection and retention of public officials to the type of public officials they induce we do this by specifying a collective decision making model and exploiting its equilibrium information to obtain estimates of the unobservable types we focus on criminal decisions across us states supreme courts we find that justices that are shielded from voters influence bureaucrats on average i have better information ii are more likely to change their preconceived opinions about a case and iii are more effective make less mistakes than their elected counterparts politicians we evaluate how performance would change if the courts replaced majority rule with unanimity rule

economic environments and differentiation a comparative study of informal sector economies in nigeria abstract the paper examines the relative importance and source of informal sector differentiation in terms of firm characteristics and business behavior based on data from metal and wood processing firms in the nigerian cities of lagos and ibadan the paper investigates branch specific and locational differences among firms using multivariate analysis the study demonstrates the primacy of the larger economic environment in which informal sector firms operate and shows that locational factors are better predictors of firm characteristics and business behavior than industry specific factors the results suggest a shift in focus from economic sectors to regional economics implications for research and policy are discussed

bureaucrats and short term politics this paper proposes a simple probabilistic voting model where the society consists of three groups of voters belonging to different generations since the youngest generation is excluded from participating in elections the political process results in an allocation of public expenditures that is shifted towards public consumption we show that the influence of bureaucrats who favor an excessive supply of public goods increases investment expenditures and limits the leeway of politicians to capture rents for themselves finally we discuss the conditions under which the impact of bureaucrats is welfare enhancing

a model of public opinion management abstract policymakers often motivate their decisions using information collected by government agencies while more information can help hold the government to account it may also give policymakers an incentive to meddle with the work of bureaucrats this paper develops a model of biased information gathering to examine how different disclosure rules and the degree of independence of government agencies affect citizen welfare disclosure rules and agency independence interact in subtle ways we find that secrecy is never optimal and yet insulating the agency from political pressure so that its information is always unbiased may also not be socially optimal a biased information gathering process can benefit the government by helping it to shape public opinion but it can also benefit the public by curbing the government s tendency to implement its ex ante favored policy thus mitigating the agency conflict between policymakers and the public

hoping for the best unprepared for the worst abstract we explore the incentives for a career minded policymaker to take preventative action to protect a principal against a possible crisis the policymaker s ability and the action he takes are unobserved but the principal draws inferences about the policymaker s ability based on the resulting outcome before deciding whether to retain him when the crisis is potentially catastrophic it is in the principal s interest for the policymaker to take preventative action however when the crisis is sufficiently rare he fails to do so instead the policymaker directs his efforts toward activities that enhance the principal s welfare when the crisis doesn t materialize this distortion is driven by the policymaker s desire to be retained together with the inability of the principal to observe the policymaker s action our framework provides a novel explanation for why policymakers often fail to prepare effectively for rare disasters and other potential crises and contributes to a growing literature on electorally induced distortions in multi task problems

are tenured judges insulated from political pressure tenured public officials such as judges are often thought to be insulated from political pressure and as a result indifferent to the concerns of the electorate we investigate this proposition empirically using data on promotion decisions taken by senior english judges between 1985 and 2005 throughout this period the popular view was one of ill disciplined elitism senior judges were alleged to be favouring candidates from elite backgrounds over their equally capable non elite counterparts we find evidence in support of this view to be surprisingly weak most of the unconditional difference in promotion prospects between the two groups can simply be explained by differences in promotion relevant characteristics we then exploit an unexpected proposal to remove control over promotions from the judiciary and find that judges behaviour dramatically changed when faced by the prospect of losing autonomy senior judges began to favour non elite candidates as well as candidates who were unconnected to members of the promotion committee

bureaucrats or politicians comment alesina and tabellini 2007 investigate the normative criteria for allocating policy tasks to bureaucrats versus politicians while they establish criteria with respect to a number of parameters they do not give a criterion with respect to the degree of imperfect monitoring we establish an unambiguous criterion about imperfect monitoring jel d72 d73

accountability with large electorates we show that ignorant voters can succeed in establishing high levels of electoral accountability in our model an incumbent politician is confronted with a large number of voters who receive fuzzy private signals about her performance a sampling effect enables the incumbent to form a precise estimate of the median voter s signal and the resulting level of accountability is as if the incumbent faced a perfectly informed social planner public information or ideological preferences can impair the beneficial impact of the sampling effect on accountability overconfidence of voters can restore the full benefit of the sampling effect

information polarization and term length in democracy abstract this paper considers term lengths in a representative democracy where the political issue divides the population on the left right scale parties are ideologically different and better informed about the consequences of policies than voters are a short term length makes the government more accountable but the re election incentive leads to policy distortion as the government seeks to manipulate swing voters beliefs to make its ideology more popular this creates a trade off a short term length improves accountability but gives distortions a short term length is best for swing voters when the uncertainty is large and parties are not very polarized partisan voters always prefer a long term length when politicians learn while in office a long term length becomes more attractive for swing voters

mass media instrumental information and electoral accountability journalism is widely believed to be crucial for holding elected officials accountable at the same time economic theory has a hard time providing an instrumental explanation for the existence of accountability journalism according to the common downsian reasoning rational voters should not be willing to pay for information out of purely instrumental motives because the individual probabilities of casting the decisive vote are typically very low we show that this rationale does not apply when a group of voters shares a common goal such as accountability and information is delivered via mass media in contrast to the pessimistic downsian view rational voters can have a considerable willingness to pay for the provision of instrumental information in these scenarios our model thus reconciles the rational voter approach with the common perception of journalism as a watchdog that holds elected officials accountable

uncertainty electoral incentives and political myopia we study the determinants of political myopia in a rational model of electoral accountability with informational frictions and uncertainty when politicians ability is ex ante unknown and policy choices are unobservable elections improve political accountability and selection however incumbents underinvest in costly policies with future returns to signal high ability and increase re election probability surprisingly uncertainty reduces political myopia and may increase social welfare we also address the socially optimal political rewards and the desirability of a one term limit our predictions are consistent with several stylised facts and with a new empirical observation aggregate uncertainty is positively correlated with fiscal discipline

the economics of career concerns part i comparing information structures many incentives in organizations arise not through explicit formal incentive contracts but rather implicitly through career concerns this paper models career concerns through agents trying to manipulate the market assessment of their future productivity the information flow from current actions to market assessment is therefore crucial in determining the nature of these incentives improved information may either increase or reduce incentives the impact of information provides a major distinction between the explicit and implicit incentives model the paper derives general results on comparisons of information structures which serve as counterparts to the standard results on information structures in the principal agent model sufficient statistic impact of a blackwell garbling comparison of inclusive information structures 1999 the review of economic studies limited

government debt threshold contracts politicians tend to push the amount of public debt beyond socially desirable levels in order to increase their reelection chances we develop a model that provides a new explanation for this behavior office holders undertake debt financed public projects but postpone the timing of part of the output to the next term this makes it difficult to replace them as a consequence the office holders reelection chances rise as does public debt as a potential remedy for this inefficiency we allow candidates for public office to offer government debt threshold contracts such a contract contains an upper limit for government debt and the sanction that an office holder violating this limit cannot stand for reelection we show that such competitively offered contracts contain low debt levels that limit debt financing and improve the citizens welfare when negative macroeconomic events occur government debt threshold contracts may be violated and the economy is stabilized jel d7 d82 h4

the urban subsistence labor force toward a policy oriented and empirically accessible taxonomy abstract this paper responds to recent arguments that the informal sector is an extremely fuzzy concept and that the formal informal dichotomy does not serve as a useful description of welfare or income a taxonomic system is proposed that is intended to supplement but not replace the long accepted formal informal system by focusing on labor force units rather than firms the proposed system provides an analytical category that is equivalent to the urban working poor and thus has significant advantages for the study of such topics as income distribution rural urban migration and poverty

politics and monetary policy abstract how and why do politicians preferences about monetary policy differ from the interest rates set by independent central banks looking at the european central bank ecb this paper shows that politicians on average favor significantly lower interest rates three factors explain the different preferences first politicians put relatively less weight on inflation and more on output in their preferred monetary policy reaction function second their preferences are affected by political economy motives third different preferences are also and largely due to different constituencies as politicians primarily focus on national economic objectives rather than the euro area as a whole

intergovernmental grants as signals and the alignment effect theory and evidence this paper provides a simple political agency model to explain the effect of political alignment between different tiers of government on intergovernmental grants and election outcomes key features of the model are i rational voters interpret public good provision as a signal of incumbent competence and ii realistically grants are unobservable to voters in this setting the national government will use the grant as an instrument to manipulate the public good signal for the benefit of aligned local incumbents and challengers then aligned municipalities receive more grants with this effect being stronger before elections and the probability that the aligned local incumbent is re elected is higher these predictions are tested using a regression discontinuity design on a new data set on italian municipalities at a second empirical stage the national grant to municipalities is instrumented with an alignment indicator allowing estimation of a flypaper effect for italian municipalities

accountability and incentives of appointed and elected public officials political agency models suggest that elected public officials choose different policies than appointed officials do this paper is the first a to apply a clean empirical design to study whether t

from institutions to financial development and growth what are the links this paper presents an integrated overview of the literature linking institutions financial development and economic growth from the large body of research on institutional development the paper first selects those contributions that make it possible to study the role of institutional arrangements in ameliorating worsening the information frictions and transaction costs that characterize the development of financial markets the paper then investigates the theoretical mechanisms by which these specific frictions affect economic growth and presents the stock of empirical evidence quantifying the impact of institutions on growth through financial development

business as usual politicians with business experience government finances and policy outcomes abstract are government finances and policy outcomes different under politicians with business experience we study california city councils and implement a regression discontinuity strategy to provide causal evidence on this issue ultimately we find no evidence that the election of a candidate with business experience impacts city expenditures revenues unemployment rates and other outcomes future vote shares for candidates with business experience are also unaffected which suggests that these politicians are not having an impact that is observed to voters but unobserved in our data

pandering and pork barrel politics abstract we develop a model of pork barrel politics in which a government official tries to improve her reelection chances by spending on targeted interest groups the spending signals that she shares their concerns we investigate the effect of such pandering on public spending pandering increases spending relative to a non accountable official one who does not have to run for reelection if either the official s overall spending propensity is known or if it is unknown but the effect of spending on the deficit is opaque to voters by contrast an unknown spending propensity may induce the elected official to exhibit fiscal discipline if spending is transparent

civil service and the growth of government abstract i study a model of elections which links the scale of government activity to civil service rules without tenure protections bureaucrats career prospects are tied to the electoral prospects of the party that hires them to avoid wasteful partisan spending voters only consent to minimal taxation if bureaucrats are protected by tenure they have no incentive to favour one party over another and governments only produce public goods in turn voters consent to high taxes however because higher tax revenues increase the ability of governing parties to co opt the bureaucracy through favourable compensation large scale government activity is accompanied by inefficiently high public sector wages

the role of local officials in new democracies evidence from indonesia this paper shows that the body of appointed officials that a new democracy inherits from the previous regime is a key determinant of the extent of electoral fraud and clientelistic spending in new democracies i develop a model that predicts that appointed officials have stronger incentives to influence voters during national level elections because of their career concerns i test the implications of the model using data from indonesia s transition to democracy both the pattern of alignment of electoral results between village and district levels and the pattern of subsequent turnover of appointed village heads corroborate the predictions of the model

elected or appointed how the nomination scheme of the city manager influences the effects of government fragmentation abstract empirical research on the causal effect of government fragmentation derives diverse results one reason for this diversity might be that studies are typically settled in a variety of institutional environments to assess the extent to which the local political system might shape the effects of fragmentation this study measures the causal effect of a change in the nomination scheme of the city manager on the council size effect i combine a regression discontinuity design with a difference in differences approach in a large panel dataset of german municipalities the study finds that when the manager is appointed by council there is no significant council size effect but that there is a negative effect when the manager is elected by voters for those expenditure categories over which the manager has the most discretion these findings suggest that the nature of the political system does indeed matter

politicians bureaucrats and targeted redistribution abstract the paper argues that for political reasons elected politicians are more likely to be engaged in targeted redistribution than appointed bureaucrats it uses the example of patronage jobs in the u s local governments to provide empirical support for this claim it shows that the number of public employees is higher for elected chief executives this difference is stronger in public services with bigger private public wage differential and it increases during election years it also finds that the number of public employees increases with the age of bureaucrats while there is no such relationship in the case of politicians which is consistent with younger bureaucrats having stronger career concerns

civil service reform abstract civil service rules governing the selection and motivation of bureaucrats are among the defining institutions of modern democracies although this is an active area of reform in the us and elsewhere economic analyses of the issue are virtually nonexistent this paper provides a welfare evaluation of civil service reform it describes the effect of reform on the interaction of politicians voters and bureaucrats and shows that society often faces trade offs between improving the bureaucracy and improving the performance of politicians my results characterize the conditions under which merit based recruitment and civil service protections such as tenure can improve welfare

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

preferences and incentives of appointed and elected public officials evidence from state trial court judges we study how two selection systems for public officials appointment and election affect policy outcomes focusing on state court judges and their criminal sentencing decisions first under appointment policy congruence with voter preferences is attained through selecting judges with homogeneous preferences in contrast under election judges face strong reelection incentives while selection on preferences is weak second the effectiveness of election in attaining policy congruence critically depends on payoffs from the job which implies that the effectiveness of election may vary substantially across public offices third reelection incentives may discourage judges with significant human capital from holding office jel d72 k41 understanding systems concerning the selection and retention of public officials and their effects on policy outcomes has long been an important issue in economics e g barro 1973 and ferejohn 1986 in this paper we compare two selection systems for public officials appointment by the head of the executive branch and election by popular votes we study the influence of the selection systems on public officials behavior focusing on state court judges and their criminal sentencing decisions specifically we quantitatively assess the separate role of preference heterogeneity versus reelection incentives in determining sentencing decisions we focus on the behavior of state court judges in the state of kansas which has within state variation in the selection systems 1 we conduct three key analyses

do elected leaders in a limited democracy have real power evidence from rural china abstract do elected leaders in an authoritarian regime have any real power does grassroots democracy in a one party state entail parochial problems making use of primary survey data covering two election cycles in a mountainous area of china where an administrative village consists of several natural villages nvs we find that elected village heads favor their home nvs in resource allocations especially when these nvs have a large population in contrast the home nvs of appointed communist party secretaries do not receive disproportionately more resources on average this pattern of resource allocation is compatible with the interest of village heads and suggests that as elected leaders village heads have some true power in resource distribution

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

independent fiscal agencies abstract there has been a considerable literature regarding the incentives of policymakers as a prime reason for persistent fiscal deficits and a variety of fiscal rules have been proposed as a remedy however the often inadequate flexibility of rules and the success of policy delegation in the monetary realm have motivated a small but growing number of studies that suggest delegating some aspects of fiscal policy to what will here be called independent fiscal agencies this paper surveys the related literature with a focus on three aspects the motivation for the establishment of such agencies their potential design and the experience with these types of institutions

the economics of career concerns part ii application to missions and accountability of government agencies the paper uses a simple multitask career concern model in order to analyse the incentives of government agencies officials incentives are impaired by the agency pursuing multiple missions a lack of focus is even more problematic in the case of fuzzy missions that is when outsiders are uncertain about the exact nature of the missions actually pursued by the agency consequently agencies pursuing multiple missions receive less autonomy the paper further shows that professionalization creates a sense of mission for the agency and that the specialization of officials raises their incentives last the paper compares its predictions with the stylized facts on government bureaucracies 1999 the review of economic studies limited

what should fiscal councils do fiscal watchdogs so called fiscal councils have been proposed as a method to counter deficit bias of fiscal policy the paper analyses theoretically what role fiscal councils could play and surve

shared accountability and partial decentralization in local public good provision abstract recent decentralization reforms in developing countries have often lead to the coexistence of multiple tiers of government in given policy areas triggering new accountability issues this paper provides a novel theoretical treatment of the efficiency consequences of such partial expenditure decentralization it develops a political agency model in which two levels of government are involved in the provision of a local public good with voters imperfectly informed about each government s contribution to the public good a central result of the model is that partial decentralization is desirable only if the benefits of vertical complementarity in public good provision outweigh the costs of reduced accountability which result from detrimental vertical strategic interactions operating through the electoral process through variants of the model the interplay between decentralization and democratization is analyzed from a positive point of view the model predicts a relationship between electoral incentives and equilibrium decentralization

on quitting rights in mechanism design quitting rights play a major role in many economic interactions whether in the precontractual phase or after contracts have been signed clearly no party can be forced to sign a contract if she is unwilling to thus implying that quitting rights can be exerted at the ex ante stage when no contract has been signed but quitting rights can also be exerted after explicit contracts have been signed in a number of instances for example most labor contracts allow employees to leave their job if they want to also quitting rights may be asymmetric across agents as labor contracts illustrate employers are generally constrained in their ability to replace their employees

reputation and school competition abstract stratification is a distinctive feature of competitive education markets that can be explained by a preference for good peers learning externalities can lead students to care about the ability of their peers resulting in across school sorting by ability this paper shows that a preference for good peers and therefore stratification can also emerge endogenously from reputational concerns that arise when graduates use their college of origin to signal their ability reputational concerns can also explain puzzling observed trends including the increase in student investment into admissions exam preparation and the decline in study time at college jel i21 i23 i26 j24

learning about voter rationality we model the accountability relationship between voters and politicians to clarify what can and can t be learned about voter rationality from existing evidence from the behavior literature we make two key points first we show that evidence on the electoral consequences of natural disasters and economic shocks typically interpreted as evidence for voter irrationality is consistent with a canonical model with rational voters second we show that the evidence on the electoral consequences of disaster response typically interpreted as evidence for voter rationality is consistent with the same model with irrational voters hence neither body of evidence can adjudicate between rational and irrational voting behavior we also derive new hypotheses that can better guide future empirical work attempting to assess voter rationality

lame ducks and local fiscal policy quasi experimental evidence from portugal i use the introduction of mayoral term limits in portugal to identify how an exogenous variation in eligibility for office affects policy decisions relying on a quasi experimental difference in differences approach i find that term limited incumbents pursue more conservative fiscal policies than those who are eligible for re election heterogeneous effects show that the treatment effects primarily reflect the behaviour of right leaning term limited incumbents results are in line with a model in which right leaning officeholders try to maintain a good reputation by pleasing an electorate prone to redistribution while they are eligible but adopt policies closer to their true preferences when term limited

are bureaucrats paid like ceos performance compensation and turnover of top civil servants abstract recent research explores the effect of financial and career incentives on public sector hiring processes and subsequent performance the reverse relation between performance and bureaucrats compensation and turnover has received only limited attention due to the distinct features of public sector organizations bureaucrats are traditionally argued to require either permanent positions and fixed wages or low powered performance incentives this article studies how the performance of top civil servants in norwegian local governments affects their compensation and turnover we thereby build on a unique new dataset over the period 1991 2014 our results indicate that better performing top civil servants obtain a higher compensation and are less likely to be replaced nonetheless these incentives remain low powered in line with agency theory prescriptions

bureaucrats or politicians part i a single policy task this paper investigates the normative criteria that guide the allocation of a policy task to an elected politician versus an independent bureaucrat the bureaucrat is preferable for technical tasks for which ability is more important than effort or if there is great uncertainty about whether the policymaker has the required abilities the optimal allocation of redistributive tasks is ambiguous and depends on how the bureaucrat can be instructed but irrespective of the normative conclusion the politician prefers not to delegate redistributive policies

competition and incentives with motivated agents a unifying theme in the literature on organizations such as public bureaucracies and private nonprofits is the importance of mission as opposed to profit as an organizational goal such mission oriented organizations are frequently staffed by motivated agents who subscribe to the mission this paper studies incentives in such contexts and emphasizes the role of matching the mission preferences of principals and agents in increasing organizational efficiency matching economizes on the need for high powered incentives it can also however entrench bureaucratic conservatism and resistance to innovations the framework developed in this paper is applied to school competition incentives in the public sector and in private nonprofits and the interdependence of incentives and productivity between the private for profit sector and the mission oriented sector through occupational choice jel d23 d73 h41 l31 the late twentieth century witnessed a historic high in the march of market capitalism with unbridled optimism in the role of the profit motive in promoting welfare in the production of private goods moreover this generated a broad consensus on the optimal organization of private good production through privately owned competitive firms when it comes to the provision of collective goods no such consensus has emerged debates about the relative merits of public and private provision still dominate this paper suggests a contracting approach to the provision of collective goods it focuses on two key issues how to structure incentives and the role of competition between providers at its heart is the idea that organizations that provide collective goods cohere around a mission 2 thus production of collective goods can be viewed as mission oriented

a political agency theory of central bank independence we propose a theory to explain why and under what circumstances a politician endogenously gives up rent and delegates policy tasks to an independent agency we apply this theory to mon etary policy by extending a stochastic general equilibrium model this model provides a theory of central bank independence that is unrelated to the standard time inconsistency problem which underlies all formalized theories of central bank independence we derive five key predictions of the model and show that they are broadly consistent with the data finally we show that while instrument independence of the central bank is desirable goal independence is not

traveling agents political change and bureaucratic turnover in india abstract we develop a framework to empirically examine how politicians with electoral pressures control bureaucrats with career concerns and the consequent implications for bureaucrats career investments unique microlevel data on indian bureaucrats support our key predictions politicians use frequent reassignments transfers across posts of varying importance to control bureaucrats high skilled bureaucrats face less frequent political transfers and lower variability in the importance of their posts we find evidence of two alternative paths to career success officers of higher initial ability are more likely to invest in skill but caste affinity to the politician s party base also helps secure important positions

political budget cycles and the civil service evidence from highway spending in us states abstract we study political budget cycles in infrastructure spending that are conditional on bureaucratic organization bureaucrats can facilitate or hinder politicians ability to engage in voter friendly spending around elections to test this idea we use civil service reforms undertaken by us states in the second half of the 20th century to study political budget cycles in highway spending under civil service and patronage we find that under patronage highway spending is 12 higher in election years and 9 higher in the year before an election by contrast under civil service highway spending is essentially smooth over the electoral cycle these findings provide a novel way through which civil service rules can stabilize government activity

elected versus appointed policymakers evidence from city treasurers abstract this paper investigates whether the method of selecting public officials affects policy making i compare the policy choices of bureaucrat city treasurers and politician city treasurers who are selected and held accountable in very different ways the analysis draws on rich data from california to examine whether cities with appointed or elected city treasurers pay lower costs to borrow the results demonstrate that having appointive treasurers reduces a city s cost of borrowing by 19 31 percent holding officials directly accountable to voters can result in lower levels of performance in complex policy areas

full extraction of the surplus in bayesian and dominant strategy auctions we consider auctions for a single indivisible object in the case where the bidders have information about each other which is not available to the seller we show that the seller can use this information to his own benefit and we completely characterize the environ ments in which a well chosen auction gives him the same expected payoff as that obtainable were he able to sell the object with full information about each bidder s willingness to pay we provide this characterization for auctions in which the bidders have dominant strate gies and for those where the relevant equilibrium concept is bayesian nash in both set ups the existence of these auctions hinges on the possibility of constructing lotteries with the correct properties we consider the situation in which an agent the seller possesses one indivisible unit of a good to which he attaches no value but the good has value to a number of potential buyers and its transfer to one of them would increase social welfare in particular the transfer to the buyer with the highest valuation maximizes social welfare in this paper we completely characterize environments in which the seller can design an auction that will enable him to capture for himself the full increase in social welfare induced by the transfer of the good to the bidder with the highest willingness to pay if the seller had full information about the reservation prices of potential buyers his optimal selling strategy would be very simple he would announce a price equal or very close to the highest reservation value the optimal strategy for the bidder with the highest evaluation would be to accept the offer note that we are treating a situation in which the seller can commit himself to a price as a result of the exchange the utility of the seller increases by the full amount of the increase in social welfare and he has been able to fully extract the surplus in many circumstances however a seller has only imperfect knowledge of the buyers willingnesses to pay in this case he must find some mechanism or auction which will enable him to maximize his benefit from the sale of the object the auction literature starts with this observation and shows how the seller can by an astute choice of auction extract the largest possible fraction of the surplus in general the literature has shown that this proportion is strictly less than one in some circumstances the bidders will have information about each other which is not available to the seller for instance in auctions for petroleum drilling rights bidders know the results of geological tests which they have

an idea in good currency and how it grew the informal sector abstract the informal sector is an exceedingly fuzzy concept which has come into wide use because it seemed to address the interests of a number of very diverse groups those interested in growth planning those interested in alleviating poverty marxist structuralists and those interested in economic accounting the use of the concept has been helpful in directing attention to phenomena previously ignored but adopting the term obscures analysis of central issues and is counterproductive we should rather specify critical policy issues and design field research around these

is more information always better party cues and candidate quality in u s judicial elections abstract we investigate the influence of electoral rules on voting behavior and the quality of judges using newly collected data on judicial elections and ratings from 39 u s states we find that in partisan elections where candidates party affiliations are listed on the ballot party drives voting behavior and candidate quality has little effect on outcomes in nonpartisan elections where party affiliation is not on the ballot party has a much smaller influence on voting behavior and candidate quality has a substantial effect on outcomes if the primary task of public officials is not to represent voters ideology and their decisions have little variability across parties then we need to seriously consider the potential cost of partisan competition to the extent that partisan voting behavior crowds out the influence of candidate quality on voting outcomes the desirability of the partisan election system should be carefully assessed

reputation concerned policy makers and institutional status quo bias abstract we study the policy choice of an office holding politician who is concerned with the public s perception of his capabilities the politician decides whether to maintain the status quo or to conduct a risky reform the reform s success depends critically on the politician s capabilities which are privately known to the politician the public observes both his policy choice and the outcome of the reform and assesses his competence we show that the politician may engage in socially detrimental reform in order to be perceived as more capable we investigate the institutional remedy that balances the gains and costs when the policy maker is subject to reputation concerns conservative institutions that thwart beneficial reform may potentially improve social welfare