rational household labor supply traditionally household behavior is derived from the maximization of a unique utility function in this paper we propose an alternative approach in which the household is modeled as a two member collectivity taking pareto efficient decisions the consequences of this assumption are analyzed in a three good model in which only total consumption and each member s labor supply are observable if the agents are assumed egoistic i e they are only concerned with their own leisure and consumption it is possible to derive falsifiable conditions upon household labor supplies from both a parametric and nonparametric viewpoint if alternatively agents are altruistic restrictions obtain in the nonparametric context useful interpretation stems from the comparison with the characterization of aggregate demand for a private good economy

issue costs in the eurobond market the effects of market integration this study compares the issuance costs of eurobonds before and after the completion of the economic and monetary union emu in 2002 we find that the introduction of the euro has significantly reduced the issue cost of euro denominated bonds compared to bonds denominated in the legacy currencies the reduction in issue cost is not due to a decrease in underwriter compensation but rather to the elimination of underpricing the difference between the market price after trading commences and the offering price underwriter fee has declined substantially after the completion of the emu but this decline has been offset by an increase in underwriter spread the difference between the offering price and the guaranteed price to the issuer leaving total underwriter compensation unchanged the emu is also associated with significant reductions in bond maturity and syndicate size consistent with its expected effects on liquidity and issue costs in the eurobond market

surge and decline negative voting and the midterm loss phenomenon a simultaneous choice analysis campbell s surge and decline and kernell s negative voting theories have been employed most frequently by researchers who seek to explain the invariable pattern of administration party vote loss in midterm house elections despite the original emphasis placed on voting as the act of selecting jointly from among the three options of abstention democratic choice or republican choice all efforts to corroborate the theories have inappropriately treated the decisions of whether and how to vote as independent questions for investigation applying the more suitable technique of nested multinomial logit analysis i find little support for negative voting s two key contentions that negative presidential evaluations hurt white house party candidates more than positive appraisals help or that the president s backers have disproportionately low turnout however a rational basis for abstention emerges that differs from the one postulated by negative voting in contrast on year defections to presidential party candidates by regular voters who normally favor the opposition do seem a cause of the biennial electoral cycle as surge and decline indeed would have us to believe

coordination and policy moderation at midterm coordination and policy moderation at midterm eligible voters have been coordinating their turnout and vote decisions for the house of representatives in midterm elections coordination is a noncooperative rational expectations equilibrium stochastic choice models estimated using individual level data from nes surveys of years 1978 1998 support the coordinating model and reject a nonstrategic model the coordinating model shows that many voters have incentives to change their votes between presidential year and midterm after learning the outcome of the presidential election but this mechanism alone does not explain the size of midterm cycles the largest source of loss of support for the president s party at midterm is a regular pattern in which the median differences between voters ideal points and the parties policy positions have become less favorable for the president s party than they were at the time of the presidential election nonvoters show the same pattern the interelection changes are not consistent with the theory of surge and decline do americans coordinate their electoral choices in midterm congressional elections we use coordination to describe a situation in which two conditions hold for everyone who is eligible to vote i e every elector each elector combines information that each elector has privately with information that everyone has in common to make the best possible prediction of the election outcome and each elector makes the choice consistent with the elector s prediction that is most likely to produce the best possible result for the elector each elector s prediction takes into account what all electors best strategies would be given the information they have in common a condition described by saying that each elector has rational expectations the choice each elector makes is part of the elector s private information when every elector makes choices according to a strategy that is consistent with the elector s rational expectations and no elector can produce a personally better outcome by using a different strategy then there is a noncooperative equilibrium coordination is defined as the existence of a noncooperative equilibrium that is based on everyone having rational expectations beyond implications for the regularity with which the president s party loses vote share in midterm elections which we discuss below the existence of coordination is important because coordination implies that electors take one another into account in a constitutionally significant way in american elections coordination is based on the separation of powers between the president and congress coordination occurs when electors anticipate how election outcomes will affect bargaining about policy within the legislature and between the legislature and the executive by instituting the constitutional separation of powers madison believed that elected officials pursuit of their selfish interests and ambitions would lead them to act with regard to one another in ways that would prevent governmental tyranny carey 1978 159 160 even electors who did not coordinate might hope with madison that the separation of powers would affect officials in that way but if coordination exists electors shift from being mere observers of consequences the constitutional provisions may produce to being agents who are led to counteract one another by the constitutional incentives coordinating electors are as wary of one another as they are of officials

coordination moderation and institutional balancing in american presidential and house elections outcome in the theoretical equilibrium the proportion of voters who split their ticket in order to balance the house with the president has been small but large enough to affect election outcomes moderation has usually been based on voters expectations that the president will be at least an equal of the house in determining postelection policy d o americans coordinate their votes for president and for congress suppose a voter knows that policy outcomes are compromises between the positions taken by the president and congress and believes the two political parties push for distinct policy alternatives then the voter believes that different combinations of party control of the presidency and congress will produce different policy outcomes if the voter cares about the policy outcomes then the voter s choices among candidates should depend on the combination of party control the choices will help bring

trying to explain home bias in equities and consumption investors hold a substantially larger proportion of their wealth portfolios in domestic assets than standard portfolio theory would suggest a phenomenon called equity home bias in the absence of this bias investors would optimally diversify domestic output risk using foreign equities therefore consumption growth rates would tend to co move across countries even when output growth rates do not empirically however consumption growth rates tend to have a lower correlation across countries than do output growth rates a phenomenon i call consumption home bias in this paper i discuss these two biases and their potential relationship as suggested by the literature

collective decisions and competitive markets in a general equilibrium model we allow for households with several typically heterogeneous members households that make efficient collective consumption decisions where different households may use different collective decision mechanisms yet households that operate within a competitive market environment the interaction of two allocation mechanisms collective decisions and competitive markets is investigated with a focus on the efficiency properties and decentralization possibilities of the dual allocation mechanism

u s presidential elections 1968 80 a spatial analysis a methodology is presented for empirical estimation of spatial models of voting in mass elections the basic choice model posits utility functions that depend on spatial distance and a random error term the parameters of the utility functions are estimated by a polytomous logit model which is applied to spatial maps of voters and candidates for all presidential elections since 1968 these maps indicate that presidential candidates take positions at the periphery of the distribution of voters results based on these maps support the hypothesis of sincere spatial voting in two candidate elections in three candidate elections the coefficients of the voter utility function adjust to proxy for the lesser viability of the minor party candidate in contrast to choice turnout shows only weak spatial effects the data are inconsistent with the proposition that turnout is low because voters are not offered distinct alternatives while the utility function used by voters appears stable through time and candidate and voter positions appear stable in the last few months prior to an election voter and candidate positions exhibit substantial change over longer time periods

capital market imperfections and the theory of optimum currency areas this paper studies how within and cross country capital market imperfections affect the welfare effects of forming a currency union the analysis considers a bank only world where intermediaries compete in cournot fashion and monitoring and state verification are costly the first part determines the credit market equilibrium and the optimal number of banks prior to joining the union the second part discusses the benefits from joining a currency union a competition effect is identified and related to the added monitoring costs that banks may incur when operating outside their home country through an argument akin to the brander krugman reciprocal dumping model of bilateral trade however in our framework whether joining a union raises welfare of the home country is ambiguous it depends on the relative strength of investment creation and intermediation diversion effects

uninformed votes information effects in presidential elections theory recent scholarship has emphasized the potential importance of cues information shortcuts and statistical aggregation processes in allowing relatively uninformed citizens to act individually or collectively as if they were fully informed hypotheses uninformed voters successfully use cues and information shortcuts to behave as if they were fully informed failing that individual deviations from fully informed voting cancel out in a mass electorate producing the same aggregate election outcome as if voters were fully informed methods hypothetical fully informed vote choices are imputed to individual voters using the observed relationship between political information and vote choices for voters with similar social and demographic characteristics estimated by probit analysis of data from national election study surveys conducted after the six most recent united states presidential elections results both hypotheses are clearly disconfirmed at the individual level the average deviation of actual vote probabilities from hypothetical fully informed vote probabilities was about ten percentage points in the electorate as a whole these deviations were significantly diluted by aggregation but by no means eliminated incumbent presidents did almost five percentage points better and democratic candidates did almost two percentage points better than they would have if voters had in fact been fully informed

a theory of ambiguity credibility and inflation under discretion and asymmetric information this paper develops a positive theory of credibility ambiguity and inflation under discretion and asymmetric information the monetary policymaker maximizes his own politically motivated objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth the relative importance he assigns to each target shifts stochastically through time his current preference trade off is known to him but not to the public when choosing the state contingent path of money growth for the present and the future the policymaker compares the benefits from current stimulation with the costs associated with higher future inflation expectations current monetary growth conveys information to the public about future money growth because there is persistence in the policymaker s objectives although expectations are rational information is imperfect because monetary control procedures are imprecise as a result the public cannot correctly distinguish persistent changes of emphasis on different policy objectives from transitory monetary control errors the public becomes aware of changes gradually by observing past monetary growth credibility is defined in terms of the speed with which the public recognizes changes in the objectives of the policymaker credibility is lower the noisier monetary control and the more stable the objectives of the policymaker looser monetary control and a higher degree of time preference on the part of the policymaker induce him to produce higher and more variable monetary growth when the policymaker is free to determine the accuracy of monetary control he does not always choose the most effective control available in spite of the fact that monetary surprises always have an expected value of zero the reason is that ambiguous control procedures enable the policymaker to generate positive surprises when he cares more than on average about economic stimulation he leaves the inevitable negative surprises for periods in which he cares more about inflation prevention this result provides an explanation for the fed s preference for ambiguity recently documented by goodfriend 1986 the policymaker is more likely to pick more ambiguous control procedures the more uncertain his objectives and the higher his time preference the paper also provides a theoretical underpinning for the well documented crosscountry positive correlation between the level and the variability of inflation

nash bargained household decisions reply pierre andre chiappori s 1988 claim that the nash bargaining model is of weak empirical relevance and neither convenient nor really restrictive is incorrect nash bargained household behavior implies a rich set of empirical implications extending well beyond the pareto efficiency of intrafamily distributions by systematically accounting for the impact of opportunities outside the family on resource distribution within the family nash bargained demand theory considerably expands the scope of neoclassical demand theory such expansion can elucidate issues ranging from the impact of alimony and child support laws in developed societies to the intrafamily distribution of nutrition in less developed countries copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

valuation equilibrium with clubs abstract this paper considers model worlds in which there is a continuum of individuals who form finite sized associations to undertake joint activities we show how through a suitable choice of commodity space restrictions on the composition of feasible groups can be incorporated into the specification of the consumption and production sets of the economy we also show that if there are a finite number of types then the classical results from the competitive analysis of convex finite agent economies can be reinterpreted to apply journal of economic literatureclassification numbers d51 h41

did the ems reduce the cost of capital we propose a dynamic arbitrage pricing theory apt multi factor model with time varying volatility for currency bond and stock returns for ten european countries over 1977 97 we exploit the cross sectional dimension of the model to construct world portfolios which when added to the original list of assets allow us to develop simple consistent methods of estimation and testing our results reject the implicit asset pricing restrictions and suggest decreases in idiosyncratic exchange rate risk tend to lower the cost of capital although the effect is small we assess the potential gains from increased stock market integration

household labor supply what kind of data can tell us how many decision makers there are although in empirical work the neoclassical assumption of the household as a homogeneous decision making unit is still predominant there appears to be an increasing interest in models of household labor supply based on game theoretic notions examples are ashworth and ulph 1981 bjorn and vuong 1984 1985 brown and chuang 1981 brown and manser 1978 horney and mcelroy 1988 mcelroy and horney 1981 mcelroy 1990 schultz 1990 thomas 1990 quite a few of these papers also attempt to test the assumption of one decision maker against the more general bargaining framework typically these take the form of tests for certain restrictions on the data that should hold if the neoclassical model were valid and which need not hold in the game theoretic framework chiappori 1988b argues that a truly valid test of a bargaining model should leave from the notion that observed data are the result from some cooperative game being played by the household members without specifying the solution concept he then goes on to argue that the restrictions placed on the data by such an assumption are quite mild indeed in a separate paper chiappori 1988a derives restrictions on observed labor supply functions based on this notion however his main result is based on rather special assumptions in this note we put the various results in perspective our basic obser

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

a model of the political economy of the united states we develop and test a model of joint determination of economic growth and national election results in the united states the formal model which combines developments in the rational choice analysis of the behavior of economic agents and voters leads to a system of equations in which the dependent variables are the growth rate and the vote shares in presidential and congressional elections our estimates support the theoretical claims that growth responds to unanticipated policy shifts and that voters use both on year and midterm elections to balance the two parties on the other hand we find no support for rational retrospective voting we do reconfirm in a fully simultaneous framework the naive retrospective voting literature s finding that the economy has a strong effect on presidential voting we find congressional elections unaffected by the economy except as transmitted by presidential coattails

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

nash bargained household decisions a rejoinder this note is a rejoinder to marjorie b mcelroy and mary jean horney s 1990 reply it discusses the scope of mcelroy and horney s previous results and the possibility of estimating a nash bargained model from independent observation of threat points copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

household decisions and equilibrium efficiency a general equilibrium model is introduced where a household may consist of several members each with individual preferences and or resources when households obey collective rationality certain intrahousehold externalities can be fully internalized by the respective households so that competitive exchange among households is efficient as a rule however such intrahousehold externalities are not fully internalized by individual household members acting in their personal interest so that competitive exchange among such individuals is only efficient in exceptional cases

static and intertemporal household decisions we discuss the most popular static and dynamic models of household behavior our main objective is to explain which aspects of household decisions different models can account for using this insight we describe testable implications identification results and estimation findings obtained in the literature particular attention is given to the ability of different models to answer various types of policy questions

a theory of divided government this paper extends the spatial theory of voting to an institutional structure in which policy choices depend upon not only the executive but also the composition of the legislature voters have incentives to be strategic since policy reflects the outcome of a simultaneous election of the legislature and the executive and since the legislature s impact on policy depends upon relative plurality to analyze equilibrium in this game between voters we apply coalition proof type refinements the model has several testable implications which are consistent with voting behavior in the united states for instance the model predicts a split tickets where some voters vote for one party for president and the other for congress b for some parameter values a divided government with different parties controlling the executive and the majority of the legislature and c the midterm electoral cycle with the party holding the presidency always losing votes in midterm congressional elections

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

collective labor supply and welfare the paper develops a general collective model of household labor supply in which agents are characterized by their own possibly altruistic preferences and household decisions are only assumed to be pareto efficient an alternative interpretation is that there are two stages in the internal decision process agents first share nonlabor income according to some given sharing rule then each one optimally chooses his or her own labor supply and consumption this setting is shown to generate testable restrictions on labor supplies moreover the observation of labor supply behavior is sufficient for recovering individual preferences and the sharing rule up to a constant finally the traditional tools of welfare analysis can be adapted to the new setting

industrial structure in the eurocredit underwriting market abstract while the complexity of underwriting syndicates is well known there has been very little empirical analysis of syndicate structure the short term eurocredit market is a promising market for the analysis of industrial structure because underwriting syndicates generally come in a two tier structure the structures of syndicates in this market are analyzed here empirically our evidence suggests that the lead managers in these syndicates seem to be recruited primarily for paycosts of risk bearing and sharing while the regular managers appear to be recruited primarily for the purpose of dealing with expanded underwriting distribution risks held constant contract parameters that affect syndicate size and structure are examined in detail for various instruments

currency composition of international bonds the emu effect abstract we analyze the impact that the launch of the emu had on the currency denomination of private international bond issues in 1990 2006 using micro level data our stylized model predicts that the introduction of the euro would lead to an increase in the share of euro denominated debt and a decline in the share of dollar denominated debt issued by firms located in countries outside both the united states and the euro area moreover our model predicts that the euro effect would be particularly pronounced for nonfinancial firms our empirical results are consistent with these predictions in addition we find that among nonfinancial firms the impact on new issuers is larger than on seasoned issuers extending the model to allow for differences in issuance volumes across future monetary union countries prior to integration we also predict larger increases in euro denominated issuance among firms from smaller monetary union countries we confirm this prediction for international bond issues by euro area firms

decentralization in replicated club economies with multiple private goods abstract we show that exhaustion of blocking opportunities is a sufficient condition such that every allocation in the core of a replicated club economy can be decentralized as a competitive equilibrium and that a related condition efficient scale is necessary and under an assumption on endowments sufficient such that competitive equilibrium exists and the core is nonempty these results do not require the euclidean structure and monotonicity assumed in lindahl equilibrium do not require convexity of preferences or costs and do not require the strong assumption that private goods are essential journal of economic literature classification numbers d46 d50 d61 h40

the revised theory of surge and decline the status of angus campbell s theory of surge and decline is a matter of considerable controversy while analysis of the composition and voting behavior of presidential and midterm electorates fails to support the theory analysis of aggregate congressional election results yields supporting evidence this research seeks to reconcile these findings by proposing and examining a revised version of the surge and decline theory the analysis finds that in presidential elections there is a surge in turnout among partisans of the advantaged party and a surge in support for the advantaged party among independent voters both surges are proportional to the magnitude of short term forces as measured by the partisan division of the presidential vote in midterm elections both the one sided partisan turnout surge and the independent vote surge for the advantaged party recede

market standards in financial contracting the euro s effect on debt securities abstract the introduction of the euro ushered in a rise to dominance of english contract law in european debt securities corporate issuers in the euro zone chose english law significantly more often than a control group from other european countries the euro effect on choice of law is particularly strong for debt securities in local markets that arguably were most affected by the euro the euro effect is not explained by differences in the suitability of english law compared to other laws a change in issuer composition or debt securities types and the greater market share of british and american underwriters we argue that increased standardization benefits network effects from a boost in cross border investment provide the best account of why english law conquered the european debt securities market

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

clubs and the market large finite economies abstract this paper builds a general equilibrium model of finite economies with exchange and club formation agents trade multiple private goods widely in the market can belong to several clubs and care about the characteristics of other club members because club memberships are indivisible and choices of club memberships must be coordinated across the population the core of such an economy may be empty and equilibrium may not exist however for large finite club economies an approximate core is not empty and states in this approximate core can be approximately decentralized by prices for private goods and for club memberships the arguments use convexification tools familiar from the literature on private goods economies and a new tool of some independent interest that addresses the special problems created by the nature of club memberships journal of economic literature classification numbers d2 d5 h4

clubs and the market this paper defines a general equilibrium model with exchange and club formation agents trade multiple private goods widely in the market can belong to several clubs and care about the characteristics of the other members of their clubs the space of agents is a continuum but clubs are finite it is shown that i competitive equilibria exist and ii the core coincides with the set of equilibrium states the central subtlety is in modeling club memberships and expressing the notion that membership choices are consistent across the population

presidential elections and federal reserve policy an empirical test traditional macro economic models of federal reserve fed behavior typically assume that the fed enjoys a well defined objective function based on social welfare and generally predict counter cyclical monetary policy the increasing observation of procyclical monetary policy has led many researchers to investigate new models of fed behavior several recent papers imply that procyclical fed behavior is due to a lack of political accountability friedman 7 toma 23 and shughart and tollison 21 all attribute considerable bureaucratic discretion to the fed and seek to explain monetary policy by examining typical bureaucratic objectives other papers such as pierce 19 20 weintraub 26 and kane 10 11 argue that the fed operates in an arena filled with political constraints that cause sub optimal monetary policy but these constraints are not modeled explicitly one possible political constraint on fed behavior is the incumbent president s desire for re election in the political business cycle pbc literature presidential re election opportunities are enhanced by the production of a precise set of inflation and unemployment outcomes leading up to the election thus to the extent that presidents desire cyclical macro economic outcomes there will be executive pressure on the fed to create or accommodate such outcomes the effect this pressure will have on fed policy is ultimately an empirical question but most models deal with it by assumption traditional macro modeling assumes a zero effect while the pbc models implicitly assume that a favorable election cycle is a primary goal of all economic policymakers this paper examines presidential influence on the federal reserve by testing for an election cycle in money growth the major result is the identification of a regular 16 quarter cycle in money growth corresponding with presidential elections this cyclical effect is found to be stable over time and significant under a wide range of model specifications further when the cyclical component of money growth is used to simulate a simple macro model it produces a classic political business cycle in inflation and real output growth

groups collective decisions and markets abstract we consider a general equilibrium model where multi member households make efficient collective consumption decisions and operate in a competitive market environment individuals have the option to leave the household and make it on their own or join another household we study the effect of these outside options on household formation household stability and equilibrium existence

the ecological fallacy revisited aggregate versus individual level findings on economics and elections and sociotropic voting several aggregate level studies have found a relationship between macroeconomic conditions and election outcomes operating in intuitively plausible directions more recent survey based studies however have been unable to detect any comparable relationship operating at the individual voter level this persistent discrepancy is puzzling one recently proposed explanation for it is that voters actually behave in an altruistic or sociotropic fashion responding to economic events only as they affect the general welfare rather than in terms of self interested pocketbook considerations it is argued here that the discrepancies between the macro and micro level studies are a statistical artifact arising from the fact that observable changes in individual welfare actually consist of two unobservable components a government induced and politically relevant component and an exogenous component caused by life cycle and other politically irrelevant factors it is shown that because of this individual level cross sectional estimates of the effects of welfare changes on voting are badly biased and are essentially unrelated to the true values of the behavioral parameters of interest they will generally be considerable underestimates and may even be of the wrong sign an aggregate level time series analysis on the other hand will often yield reasonably good if somewhat attenuated estimates of the underlying individual level effects of interest thus in this case individual behavior is best investigated with aggregate rather than individual level data it is also shown that the evidence for sociotropic voting is artifactual in the sense that the various findings and evidence which ostensibly show sociotropic behavior are all perfectly compatible with the null hypothesis of self interested pocketbook voting

equivalence of the core and competitive equilibrium in a tiebout economy with crowding types abstract we propose a new model of a local public goods economy with differentiated crowding the new feature is that taste and crowding characteristics of agents are distinguished from one another we prove that if the economy satisfies strict small group effectiveness then the core is equivalent to the set of tiebout equilibrium outcomes equilibrium prices are defined to depend solely on crowding characteristics this implies that only publicly observable information and not private information such as preferences is needed to induce agents to sort themselves into efficient jurisdictions thus our model allows us to satisfy bewley s 6 anonymity requirement on taxes in his well known criticism of the tiebout hypothesis

exposure and markups this article examines how to properly specify and test for factors that affect exchange rate exposure starting from theoretical underpinnings and a sample of u s manufacturing industries between 1979 and 1995 we find that 4 of 18 industry groups are significantly exposed to exchange rate movements through the effect of industry competitive structure export share and imported input share on average a 1 appreciation of the dollar decreases the return of the average industry by 0 13 consistent with our model s predictions as an industry s markups fall rise its exchange rate exposure increases decreases exchange rate movements are an important source of risk for a firm they affect a firm s expected cash flows and or change the terms of competition for exporters importers and multinationals hung 1992 estimates that during the 1980s u s manufacturing industries lost approximately 23 billion year or 10 of total profits due to the dollar s movements surprisingly early studies which assume exchange rate exposure to be constant e g jorion 1990 bodnar and gentry 1993 and amihud 1994 find that exchange rates have no effect on the stock returns of u s multinationals exporters or manufacturing industries recently however allayannis 1997 and bodnar dumas and marston 1998 examine time varying exposure of industry returns 1 in particular the former article focuses on the effect the variation of u s industries import and export shares have on exposure while the latter focuses on pass through and exposure in a sample of japanese export oriented industries besides trade shares and pass through exchange rate exposure also depends on the markup of an industry specifically in industries with