war peace and the size of countries this paper studies the relationship between international con ict and the size distribution of countries in a model in which both peaceful bargaining and non peaceful confrontations are possible we show how the size distribution of countries depends on the likelihood bene ts and costs of con ict and war we also study the role of international law and show how better de ned international property rights may lead to country breakup and more numerous local con icts

candidate reputations and the incumbency effect abstract a major shortcoming of the classical median voter model is that its central prediction convergence of platforms to the median voter s ideal is seldom observed one reason is that the classical model neglects the importance of voter expectations as a determinant of votes here we associate voters expectations about candidates with past as well as current candidate pronouncements and assume that incumbents whose actions are consistent with their reputations are perceived as less risky than challengers in equilibrium candidates choose distinct platforms typically neither adopts the median voter s ideal point either candidate may win depending on how well the incumbent s reputation reflects current voter tastes and how relatively risky the electorate perceives the challenger to be

setting the agenda electoral competition commitment of policy and issue salience by committing policy an incumbent in effect disowns an issue when she maintains policy flexibility the issue remains electorally salient electoral competition shapes political commitment decisions and collapses the multi dimensional issue space into a low dimensional space of electorally salient issues

relative prices consumer preferences and the demand for food shocks to world commodity prices and the depreciation of sterling led to a large increase in the price of food in the uk it also resulted in large changes in the relative prices of different foods we document these changes and consider how they affected the composition of households shopping baskets we isolate the impact of changes in relative food prices from variation in preferences using data on purchasing decisions made by a representative panel of british households we show that changes in relative food prices led to a worsening in the nutritional quality of households shopping baskets though this was partially mitigated by offsetting changes in preferences

time consistency and bureaucratic budget competition high employment protection in the public sector results in strategic over employment if government divisions compete for budgets in a dynamic setting bureaucrats who are interested in maximising their divisions output employ excess labour since this induces the sponsor to provide complementary inputs in the future restrictions on hiring decisions in the public sector can be regarded as provisions to reduce strategic hiring we also provide evidence from a survey of decision makers in a public sector bureaucracy with very high employment protection the results confirm that decision makers are aware of the strategic effects of their hiring decisions on budget allocation 2008 the author s journal compilation royal economic society 2008

macroeconomic policy in a two party system as a repeated game this paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward looking wage setters if discretionary policies are followed an economic cycle related to the political cycle results in equilibrium this cycle is significantly different from the traditional political business cycle reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations

on the feasibility of unpopular policies under re election concerns 1 introduction a common concern about political decision making is that re election motives lead incumbent politicians to select policies that although popular among the electorate are inferior to available less popular alternatives this concern reflected in the notions such as demagogy and mob rule implies that politicians may be penalized for choosing policies that they believe to be the best but ironically are rewarded for choosing popular policies that they do not necessarily believe to be the best in this paper i study this common concern through a series of models 1 for the main model that i will study politicians differ only in utility from holding office the main result is that strong re election motives on the part of the incumbent politicians in general do not render efficient and unpopular policies infeasible in fact i will show that under very general conditions voters voting decisions do not depend on whether the incumbents have chosen popular policy options nor are incumbents policy decisions responsive to policy popularity we may call this result the irrelevance or neutrality of policy popularity note that voters only have limited information and there is a possibility that the unpopular policy may be superior to its alternatives voters would take their policy opinions as tentative and be willing to revise them upon the arrival of new information then an incumbent s re election chances will not deteriorate simply because of her choice of unpopular policies foreseeing this incumbents with even strong re election motives will not find it beneficial to choose popular but inefficient polices 2 to convey the above ideas i will examine an infinite horizon political agency model along the line pioneered by barro 1973 there are two important ingredients in this model first politicians are of two types strong and weak both types of politicians are concerned about both social welfare and the utility gained from holding office whereas the strong type puts a smaller weight on the latter each politician s type is the politician s private information if the politicians were homogeneous the choice between different incumbents would be inconsequential if their heterogeneity were public information voters would not need the politicians past records to infer their preferred future policies in either case the question of policy manipulation would no longer exist in section 6 i will introduce a third type of politicians the second ingredient is a proper modelling of a policy that could be unpopular but potentially superior a policy is popular when more voters think that the policy will yield a welfare greater than those of its alternatives such a policy s popularity reflects its ex ante efficiency as perceived by the electorate the incumbent politician nevertheless observes an additional imperfect information signal about the likely efficacy of the policy 3 therefore a popular policy might be interim inefficient whereas an unpopular policy might be interim efficient one crucial assumption for the policy popularity irrelevance result is that the only difference among politicians is their utility derived from holding office this suggests that for policy popularity to be relevant other sorts of heterogeneity among politicians are needed suppose for instance that the public believes with some probability that the incumbent is ignorant in the sense that she knows about different policy options even less than the public does then a choice of an unpopular policy might signal the incumbent s ignorance an incumbent who is informed but with a strong re election motive might then reject the unpopular policy even if it is interim efficient the rest of the paper is organized as follows section 2 introduces the model section 3 prepares preliminaries for later sections section 4 establishes the efficient perfect bayesian equilibrium under the assumption that voters vote for the candidate who has a greater probability of being strong

a political economy theory of the soft budget constraint why do soft budget constraints exist and persist in this paper we argue that the prevalence of soft budget constraints can be best explained by the political desirability of softness we develop an infinite horizon political economy model where neither democratic nor autocratic politicians can commit to policies that are not ex post optimal we show that because of the dynamic commitment problem inherent in the soft budget constraint politicians can in essence commit to make transfers to entrepreneurs which otherwise they would not be able to do this encourages such entrepreneurs to support them politically though the soft budget constraint may induce economic inefficiency it may be politically rational because it influences the probability of political survival in consequence even when information is complete politicians may fund bad projects which they anticipate they will have to bail out in the future we show that maybe somewhat surprisingly dictators who are less likely to lose power are more likely to use the soft budget constraint as a strategy to gain political support

who participates in household scanning panels we compare two widely used household scanning panels maintained by the nielsen company and information resources inc to a random sample of the u s population results indicate that the demographic characteristics of the random sample more closely match the census bureau data than the household scanning panels we also show that after controlling for demographic differences participants in the household scanning panels are slightly more price sensitive than participants in the random sample the two household scanning panels yield similar results in relation to one another which suggests that the household scanning panels may suffer from sample selection and participation biases

testing the positive theory of government finance researchers characterizing optimal tax policies for dynamic economies have reasoned that tax rates should follow a random walk we conduct a frequency domain examination of u s tax rates and reject the hypothesis that the first difference in the series is white noise the source of the rejection is pronounced activity of tax changes at an eight year cycle regression analysis confirms the finding that there is a cyclical component to tax changes corresponding to changes in political party administration the results suggest that the positive theory of government finance needs to be refined to incorporate features of political equilibrium

advertising as information an empirical note lamm r mcfall unionism and prices in the food retailing industry journal of labor research 3 winter 1982 69 79 marion bruce w willard f mueller ronald w cotterill frederick e geithman and john r schmelzer the food retailing industrv market structure profits and prices new york praeger 1979a the price and profit performance of leading food chains a merican journal of a gricultural economics 61 aug 1979b 420 433 salinger michael a tobin s q unionization and the concentration profits relationship rand journal of economics 15 summer 1984 159 170 voos paula b and lawrence r mishel the union impact on profits evidence from the supermarket industry working paper no 88 north central project 117 university of wisconsin madison oct 1985 the union impact on profits evidence from industry price cost margin data journal of labor economics 4 jan 1986 105 133

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

arming as a strategic investment in a cooperative equilibrium to develop a positive economic theory of military spending this analysis focuses on a game theoretic general equilibrium model of international conflict in which consumption peaceful investment and military spending are endogenously determined the analysis illustrates that when there is repeated interaction between nations a game of threats and punishments generally will not support a disarmament outcome and that fluctuations in military spending can be an endogenous result of fluctuations in aggregate economic activity furthermore the analysis shows how the relation between aggregate economic activity and military spending qualitatively depends on whether governments are acting opportunistically or cooperatively copyright 1990 by american economic association

a positive theory of discretionary policy the cost of democratic government and the benefits of a constitution we offer an explanation of government s preference for discretionary policy action the main elements are asymmetric information and the ability and desire of governments to maximize reelection prospects discretionary policy imposes a social cost we show that the cost is eliminated if all voters have the same information as the government an optimal state contingent policy rule that precommits government through a constitution eliminates the cost by removing government s opportunities to exploit its informational advantage rules of this kind and constitutional restrictions are difficult to enforce in the presence of uncertainty and different information available to government and the public

social contracts as assets a possible solution to the time consistency problem this paper presents a new solution to the time consistency problem that appears capable of enforcing ex ante policy in a variety of settings in which other enforcement mechanisms do not work the solution involves formulating a social contract institution or agreement that specifies the optimal ex ante policy the social contract is effectively sold by succesive old generations to successive young generations who pay for the social contract through the payment of taxes both old and young generations have an economic incentive to fulfill the social contract for the old generation breaking the social contract makes the social contract valueless and the generation suffers a capital loss by not being able to sell it for the young generation the economic advantage of purchasing the existing social contract exceeds its price as well as the economic gain from setting up the a new social contract

salience agenda choices by competing candidates which issues are discussed by candidates in an election campaign why are some issues never discussed model tractability is lost quickly when dealing with these questions partly because of the multidimensional voting inherent in models of multiple issues our model features two candidates for office who can talk about any subset of issues allowing uncertainty both on the part of voters and candidates and taking candidates to be office motivated candidates move first and simultaneously announcing any positions they choose on any issues to us salience is simply the discussion of an issue in a campaign if both candidates and voters are expected utility maximizers we find salience results in that candidates typically want to talk about everything or they are indifferent between talking and nonsalience leaving the expected utility framework we present an example using knightian uncertainty or maxmin expected utility with multiple priors of gilboa schmeidler to illustrate how robust nonsalience and salience of issues might be generated

the president and the political use of force throughout the post world war ii period the president has been called upon to make decisions concerning the use of force as a political instrument the explanation that is offered is based upon a characterization of the president as a cybernetic human decision maker facing limitations these limitations in conjunction with the complexity of the environment lead presidents to develop and use a relatively simple decision rule the dependent variable which is the probability of the use of force at any point in time is explained in terms of enduring and essential concerns which are operationalized as coming from the international domestic and personal environments data are taken from blechman and kaplan s force without war on the basis of our estimation and evaluation presidential decisions to use force are based on factors in all three arenas

time inconsistency and fiscal policy empirical analysis of u s states 1969 89 abstract we offer an extensive and robust test of the time inconsistency theory of fiscal politics we employ data of u s states from 1969 to 1989 and the results of our tests indicate the variables such as legislative stability and executive term limits have strongly predictable impacts on the volatility of various measures of fiscal policy

the politics of infrastructure a number of recent studies attempt to measure the productivity of public capital some estimates indicate that government investments are a potential well spring for economic progress while others indicate that public infrastructure has a negligible effect on private sector output this article investigates political institutions and processes underlying the decisions for public infrastructure spending we apply the framework of strategic models of fiscal policy and develop an empirical model to analyze the substantial differences in public capital across american states institutions such as term limits citizen initiative and budgeting procedures were significant determinants of state public capital stocks and the flow of new public investments during the 1980s the results further suggest that political conditions such as legislative stability and voter volatility are systematically related to infrastructure differences across states

an objective measure of search versus experience goods i introduction search goods and experience goods have been part of the lexicon of economics for twenty years now during this time a substantial body of research has been influenced by nelson s 1970 and 1974 papers which enlarged upon stigler s 1961 seminal paper despite the appeal of the search versus experience dichotomy to members of the economics profession empirical development and application of the concepts involved has not been impressive 1 stigler 1961 argued that consumers efforts to acquire information about the quality or performance of products and vendors are a function of expected benefits and costs nelson s 1970 1974 work attempted to measure the expected benefits and to a lesser extent expected costs to consumers of acquiring product and vendor information unfortunately although this search versus experience dichotomy now is part of economists conventional wisdom it has led to little empirical analysis beyond nelson s investigations the root problem seems to be a lack of agreement over the definition of a search good versus an experience good to nelson 1970 the latter is one whose qualitative characteristics are not ascertainable by buyer inspection prior to purchase thus information about the product s quality or performance can be obtained only through buying and using the item we can however ascertain performance information about search goods prior to purchase porter s 1976 analysis of the acquisition of product information by consumers classified items as convenience and non convenience goods the former are characterized by low unit price and high frequency of purchase the opposite holds for non convenience goods the low unit price of convenience goods implies that relevant performance information will be acquired via sampling experience even though one might be able to acquire the information from other sources but at higher cost an experience good is not such by design rather by virtue of consumer choice in the face of varying informational costs thus porter s measure of the incentive to acquire product vendor information is product price as opposed to nelson s ad hoc search experience dichotomy using porter s classification meisel 1979 argues that the degree to which consumers efforts to acquire information take the form of search rather than sampling experience depends on the expected costs and benefits for any given product similarly laband 1986 argues that consumer demand for product and vendor information in advance of purchase is affected by both price and frequency of purchase nelson s classification scheme is at odds with his definitions for example he regards food as an experience item although much relevant information about it is available prior to purchase 2 product classification is admittedly ambiguous e g jewelry and silverware in fact the search vs experience classification more logically represents the two extremes of product classification with most items falling somewhere in between by subdividing experience goods into durable and nondurable categories nelson 1974 validates this assertion given this ambiguity it is understandable that empirical research in this nexus of producer consumer interaction has been limited to use the search experience classification for empirical analysis one must either borrow nelson s existing scheme which is limited in product coverage or create new product classifications which are of dubious merit on the other hand the porter meisel analyses which do provide the micro foundations of consumer behavior in the face of uncertain product vendor quality have never supplanted or integrated nelson s work into their broader framework the purpose of this paper is to bridge these two strands of the advertising as information literature i argue that the discussion of search versus experience goods and more importantly the behavior of buyers and sellers is driven by the cost to the buyer of a disappointing purchase

advertising as information further evidence in the past 30 years the economics of information has become an important feature of the revolution in modern microeconomic theory the seminal literature includes theoretical advances by stigler 10 nelson 7 8 spence 9 and darby and karni 1 in an original approach laband 3 tests the proposition that the supply of product quality signals increases with a rise in the expected marginal return to consumers utilizing yellow pages advertisements in various urban settings in later expositions laband 4 5 provides further evidence of the durability of the informational content and the differences in information provision of television and commercial advertisements for different types of goods the present paper extends and provides alternatives to laband s tests of the impact of time costs faced by consumers on the informational content of advertising this study employs a supplementary category to laband s of credence goods developed in the literature 2 6 and analyzes the impact of income as a proxy for time and information costs with a unique intra city data set from new york city and los angeles

globalization and the changing logic of collective action globalization transforms collective action in domestic and international politics as the scale of markets widens and as economic organization becomes more complex the institutional scale of political structures can become insufficient for the provision of an appropriate range of public goods a process of this sort occurred prior to the emergence of the modern nation state which itself constituted a paradigmatic response to this predicament today however a complex process of globalization of goods and assets is undermining the effectiveness of state based collective action overlapping playing fields are developing made up of increasingly heterogeneous transnational local and intermediate arenas the residual state retains great cultural force and innovative projects for reinventing government are being tried nevertheless the state s effectiveness as a civil association has eroded significantly and this may lead to a crisis of legitimacy

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

redistributive politics and economic efficiency the political process often compensates the losers from technical change or international competition in an economically inefficient way namely by subsidizing or protecting declining industries instead of encouraging the movement of resources to other more productive uses we find that a dynamic inconsistency in the game of redistributive politics contributes to this outcome to achieve economically efficient outcomes it is necessary that those making economically inefficient choices not be given offsetting transfers but the political process distributes income on the basis of political characteristics which are in general different from the economic characteristics that are rewarded by the market we identify circumstances in which the inefficient choosers have desirable political characteristics and are therefore immune from threats of having to face the economic consequences of their choices

advertising as special service provision under non price vertical restraints exclusive territories in beer distribution this article presents statistical evidence which supports lester telser s 1960 hypothesis that when vertical restraints are made illegal intrabrand competition results which diminishes the provision of point of sale special services this results because of the public goods problem exhibited by the special services increased special service provision by the national manufacturer must then substitute for the special service provision left unfilled by the wholesaler evidence relating to the efficacy of such substitution is also presented

equilibrium political budget cycles political business cycle theories generally rely on nominal rigidities and voter myopia this paper offers an equilibrium theory that preserves some basic insights from earlier models though with significant refinements the political budget cycle emphasized here is in fiscal policy rather than output and inflation it arises via a multidimensional signal process one can consider the welfare implications of proposals to mitigate the cycle and the effects of altering the electoral structure copyright 1990 by american economic association

does legislative turnover adversely affect state expenditure policy evidence from indian state elections the effect of legislative turnover on the size and composition of government expenditures in indian states over the 1980 2000 period is examined the paper finds that excessive turnover in indian state elections results in inefficient government expenditure policy first the higher the turnover the larger the government size second excessive turnover affects the allocative efficiency of government expenditures by skewing the composition of government spending toward pure consumption and away from more productive investment expenditures third the effect of turnover on fiscal policy is not linear public consumption expenditure is convex in turnover while public investment expenditure is concave in turnover

cost pass through in differentiated product markets the case of u s processed cheese in this paper we estimate a mixed logit model for demand in the u s processed cheese market the estimates are used to determine pass through rates of cost changes under different behavioral regimes we find that under collusion the pass through rates for all brands fall between 21 and 31 while under nash bertrand price competition the range of pass through rates is between 73 and 103 the mixed logit model provides a more flexible framework for studying pass through rates than the logit model since the curvature of the demand functions depends upon the empirical distribution of consumer types

pass through in retail and wholesale this paper studies how prices comove across products firms and locations to gauge the relative importance of retailer versus manufacturer level shocks in determining prices i make use of a large panel data set on prices for a cross section of retailers in the u s i analyze prices at the barcode or universal product code upc level for individual stores i find that only 16 of the variation in prices is common across stores selling an identical product 65 of the price variation is common to stores within a particular retail chain but not across retail chains while 17 is completely idiosyncratic to the store and product product categories with frequent temporary sales exhibit a disproportionate amount of completely idiosyncratic price variation my results suggest that most of the observed price variation arises from retail level rather than manufacturer level demand and supply shocks however the behavior of prices is difficult to relate to observed variation in costs and demand at the retail level this suggests that retail prices may vary largely as a consequence of dynamic pricing strategies on the part of retailers or manufacturers rather than static demand and supply shocks this abstract was borrowed from another version of this item

how cynical can an incumbent be strategic policy in a model of government spending abstract when parties with different preferences compete for election strategic manipulation of state variables for electoral purposes can occur even with rational voters this paper presents a model in which government resources can be used productivity for the benefit of everybody or unproductively for the benefit of the ruling party s constituency a government more inclined to unproductive spending may choose to collect public resources inefficiently in order to produce the importance of spending decisions in the election the model highlights the strategic role of policy decisions that affect incentives and constraints faced by future governments and their impact on election results

war politics an economic rational voter framework the frequency of foreign conflict initiations in the united states is found to be significantly greater following the onset of recessions during a president s first term than in other periods the authors develop an economic theory of the political use of wars which links the election cycle war decisions and economic performance consistent with the observed relationships among these events an incumbent leader with an unfavorable economic performance record may initiate a war to force the learning of his war leadership abilities and thus salvage with some probability his reelection this obtains despite voter rationality and informational symmetry copyright 1995 by american economic association

learning aversion and voting rules in collective decision making abstract in collective decisions with uncertainty some voters may oppose the arrival of new information this note formalizes a justification for supermajority as a voting rule in such environments this is optimal when arrival of information is responsive to voters learning aversion and conservative minorities have some power to block information

effects of term limits on fiscal performance evidence from democratic nations political reputation models feature forward looking rational voters who re elect incumbents based on their estimate of an incumbent s ability level fiscal policy is one of the ways an incumbent establishes a reputation and thereby signals this ability level to voters the reputation building framework implies that term limits should affect fiscal performance a term limited incumbent places less value on reputation building than an incumbent eligible for re election does we examine differences in fiscal performance in democratic countries under alternative executive term limit regimes our results generally agree with the prior findings of besley and case 1995a who analyzed gubernatorial term limits in the american states we provide new evidence that the fiscal effects of term limits differ under a two term rule versus a single term rule

how much does violence tax trade abstract we investigate the empirical effect of violence as compared to other trade impediments on trade flows our analysis is based on a panel data set with annual observations on 177 countries from 1968 to 1999 which brings together information from the rose data set the iterate data set for terrorist events and data sets of external and internal conflict we explore these data with traditional and theoretical gravity models we calculate that for a given country year the presence of terrorism together with internal and external conflict is equivalent to as much as a 30 tariff on trade this is larger than estimated tariff equivalent costs of border and language barriers and tariff equivalent reduction through generalized systems of preference and wto participation

why a stubborn conservative would run a deficit policy with time inconsistent preferences a conservative government in favor of a low level of public consumption knows that it will be replaced by a government in favor of a larger level of public consumption we show that the resulting level of public consumption is in between the levels the two governments would choose if each were in power both in the present and in the future in particular we show that if the conservative government is more stubborn in a particular sense than the succeeding government the conservative government will borrow more than it would had it remained in power in the future

the political economy of benefits and costs a neoclassical approach to distributive politics this essay offers a rational political explanation for the notorious inefficiency of pork barrel projects with an optimization model of legislative behavior and legislative institutions the model emphasizes the economically arbitrary from a welfare point of view importance of the geographic incidence of benefits and costs owing to the geographic basis for political representation we explore the implications of a legislator s objective function and derive conditions under which a representative legislature will select an omnibus of projects each of which exceeds the efficient scale

empirical evidence on the role of non linear wholesale pricing and vertical restraints on cost pass through abstract how a cost shock is passed through to final consumer prices may relate to nominal price stickiness and rigidities the existence of nonadjustable cost components strategic markup adjustments or other contract terms along the supply distribution chain this paper presents a simple framework to assess the potential role of nonlinear pricing contracts and vertical restraints such as resale price maintenance or wholesale price discrimination in the supply chain in explaining the degree of pass through from upstream cost shocks in the ground coffee category to downstream retail prices we find that resale price maintenance increases pass through rate

the option to wait in collective decisions we also explore the robustness of our model when second period valuations are correlated across individuals and when each individual s first and second period types are correlated

the disadvantage of tying their hands on the political economy of policy commitments incumbents are more likely to be re elected if they have a comparative advantage in the eyes of voters on some central issue this paper argues that incumbents have an incentive to avoid reforms that reduce the government s role in deciding these issues in order to increase their chances of re election this point is illustrated in the context of the choice of an exchange rate regime in an economy characterized by an inflation bias a flexible exchange rate allows the government to use monetary policy as a stabilization tool while fixed exchange rates remove the inflation bias of the economy on the one hand it is shown that a more inflation averse government may refrain from choosing fixed exchange rates in order to capitalize on the inflationary reputation of its opponent this incentive is contrasted with the opposite incentive to tie the hands of the future government should be incumbent be defeated on the other hand it is shown that electoral considerations may reinforce the incentive of the more inflationary government to tie its own hands with fixed exchange rates

majority rule bargaining and the under provision of public investment goods abstract despite evidence that modern democracies systematically shortchange public investment goods relatively little theoretical work exists to explain this phenomenon we build on baron and ferejohn s american political science review 83 4 1989 1181 1206 bargaining model to describe public investments in a setting of budgetary politics specifically we show that underinvestment inherently arises from distributive politics within a majoritarian institution the inability of current majorities to contract with future ones drives a wedge between spending on consumption today and investing for future consumption extensions to the model demonstrate that earmarking future returns to specific players and or detaching consumption from investment decisions yields more efficient levels of public investment

do prices and attributes explain international differences in food purchases food purchases differ substantially across countries we use detailed household level data from the united states france and the united kingdom to i document these differences ii estimate a demand system for food and nutrients and iii simulate counterfactual choices if households faced prices and nutritional characteristics from other countries we find that differences in prices and characteristics are important and can explain some difference e g united states france difference in caloric intake but generally cannot explain many of the compositional patterns by themselves instead it seems an interaction between the economic environment and differences in preferences is needed to explain cross country differences jel d12 i12 l11 l66 q11 food purchases differ across countries within countries over time and across demographic groups these differences seem to be correlated with rates of excess weight gain and diet related illness economists tend to attribute the difference in food purchases across markets to differences in prices an alternative explanation is that they are due to inherent differences in preferences and eating habits in this article we study the differences in food purchases and nutritional outcomes across countries focusing on the united states united kingdom and france we start by systematically documenting the differences in food purchases for consumption at home between the united states united kingdom and france we show that us households purchase different foods from french and uk households for example us households purchase more calories per person a greater percentage of those calories comes in the form of carbohydrates and a lower share in the form of proteins a higher share of expenditure is on drinks and prepared foods and

network effects in the german magazine industry this paper examines the two sided network effects in the german magazine industry we specify and estimate the network effect functions for readers and advertisers nonparametrically and find that they are neither linear nor monotonic

the evaluation of risky projects by voters abstract the results of a public project can change the attitudes of voters towards subsequent public projects the dynamic inconsistency problems which arise can make voters oppose risky projects favor projects expected to benefit a minority and favor income redistribution

sources of inefficiency in a representative democracy a dynamic analysis this paper studies the efficiency of policy choice in representative democracies it extends the citizen candidate model of democratic policy making to a dynamic environment equilibrium policy choices are shown to be efficient in the sense that in each period conditional on future policies being selected through the democratic process there exists no alternative current policy choices which can raise the expected utilities of all citizens however policies that would be declared efficient by standard economic criteria are not necessarily adopted in political equilibrium the paper argues that these divergencies are legitimately viewed as politicalfailures

is there a politically optimal level of judicial independence independent courts render current policy more durable by raising the cost of future policy changes but may also engage in policy making of their own this paper asks is there an optimal level of judicial independence from the perspective of incumbent officials in the other branches to answer that question the paper develops a model of strategic institutional choice and tests it on the judicial institutions of the american states consistent with the model s predictions the most independenceenhancing institutions are found where political competition between rival parties is tightest and differences between party platforms are largest

incentive contracts and elections for politicians with multi task problems abstract we consider a model with a politician facing a multi task problem while in office the reelection mechanism distorts the allocation of effort in favor of tasks whose outcomes can be measured more precisely than others we show that a combination of elections and incentive contracts can alleviate this inefficiency the incentive contract does not require direct information about the performance of the politician and is self financing across terms

divided government and u s trade policy theory and evidence if different parties control the u s congress and white house the united states may maintain higher import protection than otherwise this proposition follows from a distributive politics model in which congress can choose to delegate trade policymaking to the president when the congressional majority party faces a president of the other party the former has an incentive to delegate to but to constrain the president by requiring congressional approval of trade proposals by up or down vote this constraint forces the president to provide higher protection in order to assemble a congressional majority evidence confirms that 1 the institutional constraints placed on the president s trade policymaking authority are strengthened in times of divided government and loosened under unified government and 2 u s trade policy was significantly more protectionist under divided than under unified government during the period 1949 90

the option to wait in collective decisions and optimal majority rules abstract we consider a model in which voters over time receive more information about their preferences concerning an irreversible social decision voters can either implement the project in the first period or they can postpone the decision to the second period we analyze the effects of different majority rules individual first period voting behavior may become less conservative under supermajority rules and it is even possible that a project is implemented in the first period under a supermajority rule that would not be implemented under simple majority rule we characterize the optimal majority rule which is a supermajority rule in contrast to individual investment problems society may be better off if the option to postpone the decision did not exist these results are qualitatively robust to natural generalizations of our model

an economic theory of vertical restraints vertical restraints imposed by manufacturers on the prices locations and sales of retail firms represent a puzzling departure from the simple price mediated exchange of conventional markets in this article we analyze the theoretical basis for these restraints in a setting where retailers inform consumers and are imperfectly competitive and where a manufacturer has some monopoly power we identify three potential externalities affecting retailers decisions these externalities lead to the failure of simple uniform price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits we identify the packages of vertical restraints that are minimally sufficient under various conditions to neutralize the externalities and to achieve the joint profit maximum

the political economy of fiscal deficits and government production abstract this paper studies how disagreement over which goods government should provide affects resource allocation in the public sector an incumbent combines pre determined capital with labor to produce different goods in the current period and accumulates physical and financial capital for future production capital labor complementarity determines how anticipated political turnover shapes governments choice between saving in physical capital or financial assets turnover tends to render the stock of physical capital for public production too low and inefficiently combined with labor the main cost of political turnover is production inefficiency in the public sector not a suboptimal savings level

accounting for incomplete pass through recent theoretical work has suggested a number of potentially important factors in causing incomplete pass through of exchange rates to prices including markup adjustment local costs and barriers to price adjustment we empirically analyze the determinants of incomplete passthrough in the coee industry the observed pass through in this industry replicates key features of pass through documented in aggregate data prices respond sluggishly and incompletely to changes in costs we use microdata on sales and prices to uncover the role of markup adjustment local costs and barriers to price adjustment in determining incomplete pass through using a structural oligopoly model that nests all three potential factors the implied pricing model explains the main dynamic features of short and long run pass through local costs reduce long run pass through by a factor of 59 relative to a ces benchmark markup adjustment reduces pass through by an additional factor of 33 where the extent of markup adjustment depends on the estimated super elasticity of demand the estimated menu costs are small 0 23 of revenue and have a negligible eect on long run pass through but are quantitatively successful in explaining the delayed response of prices to costs we nd that delayed passthrough in the coee industry occurs almost entirely at the wholesale rather than the retail level

advertising restrictions and concentration the case of malt beverages the relationship between state imposed advertising restrictions and state level market concentration in the malt beverage industry is examined the authors find that the presence of proscriptions on price advertising significantly increases market concentration at the state level both absolutely and relative to a measure of national concentration the evidence also indicates that banning local nonprice advertising in addition to price advertising yields no marginal significant change in either measure of state level concentration analysis of individual brewers market shares suggests that large national brewers gain at the expense of smaller brewers when price advertising is restricted copyright 1995 by mit press

non separable time preferences novelty consumption and body weight theory and evidence from the east german transition to capitalism abstract this paper develops a dynamic model to illustrate how diet and body weight change when novel food products become available to consumers we propose a microfounded test to empirically discriminate between habit and taste formation in intertemporal preferences moreover we show that novelty consumption and endogenous preferences can explain the persistent correlation between economic development and obesity by empirically studying the german reunification we find that east germans consumed more novel western food and gained more weight than west germans when a larger variety of food products became readily accessible after the fall of the wall the observed consumption patterns suggest that food consumption features habit formation

voting on the budget deficit this paper analyzes a model in which a group of rational individuals votes over the composition and time profile of public spending all voters agree that a balanced budget is ex ante optimal however if there is disagreement between current and future majorities a balanced budget is not a political equilibrium under majority rule under certain conditions a majority of the voters favors a budget deficit and the equilibrium deficit is larger the greater is the polarization among voters copyright 1990 by american economic association

emergence and persistence of inefficient states we present a theory of the emergence and persistence of inefficient states based on patronage politics the society consists of rich and poor the rich are initially in power but expect to transition to democracy which will choose redistributive policies taxation requires the employment of bureaucrats by choosing an inefficient state structure the rich may be able to use patronage and capture democratic politics so reducing the amount of redistribution in democracy moreover the inefficient state creates its own constituency and tends to persist over time intuitively an inefficient state structure creates more rents for bureaucrats than would an efficient one when the poor come to power in democracy they will reform the structure of the state to make it more efficient so that higher taxes can be collected at lower cost and with lower rents for bureaucrats anticipating this when the society starts out with an inefficient organization of the state bureaucrats support the rich who set lower taxes but also provide rents to bureaucrats we obtain that the rich bureaucrats coalition may also expand the size of bureaucracy excessively so as to generate enough political support the model shows that an equilibrium with an inefficient state is more likely to arise when there is greater income inequality when bureaucratic rents take intermediate values and when individuals are sufficiently forward looking jel p16 h11 h26 h41

the politics of infrastructure investment the role of product market competition abstract in spatial competition public infrastructure plays a crucial role in determining product market outcomes in our model consideration of infrastructure s impact on the product market drives the preferences of consumers in their dual role as voter taxpayers the spatial heterogeneity of consumers produces conflicting political interests and in many cases inefficient outcomes however across both exogenous and endogenous market environments product market competition consistently leads to higher levels of publicly funded infrastructure than monopoly collusion furthermore competition s boost to the popular support for infrastructure investment is often excessive while monopoly leads to underinvestment

charles k rowley william f shughart ii and robert d tollison eds the economics of budget deficits the international library of critical writings in economics 153 ed by mark blaug cheltenham u k and northampton ma u s a edward elgar 2002 2 vols 1 112 pages usd 370 00 gbp 245 00 cloth

legislative turnover fiscal policy and economic growth evidence from u s state legislatures an examination of how increased turnover among legislators in the fifty u s states affects fiscal policy and economic growth finds that it makes legislators short sighted turnover increases the size of government by increasing the shares of both total spending and taxes in income in particular turnover increases capital expenditure and income taxes both of which may cause long run distortions in the economy further increased turnover by resulting in inefficient fiscal policy reduces long term economic growth

the strategic advantage of being poor private and public provision of public goods when people know that a public good is to be privately provided in the future economic behaviour may change in periods before the one with the private provision game individuals have a distortionary incentive to reduce their disposable income so as to shift the burden of provision to others the incentive is eliminated if the government provides a sufficient amount of the public good in a second best world private provision of public goods has been claimed to be a reasonably good alternative to public provision this claim needs to be reconsidered in the light of these results

a structural approach to identifying the sources of local currency price stability the inertia of the local currency prices of traded goods in the face of exchange rate changes is a well documented phenomenon in international economics this paper develops a structural model to identify the sources of this local currency price stability and applies it to micro data from the beer market the empirical procedure exploits manufacturers and retailers first order conditions in conjunction with detailed information on the frequency of price adjustments following exchange rate changes to quantify the relative importance of local non traded cost components markup adjustment by manufacturers and retailers and nominal price rigidities in the incomplete transmission of such changes to prices we find that on average approximately 60 of the incomplete exchange rate pass through is due to local non traded costs 8 to markup adjustment 30 to the existence of own brand price adjustment costs and 1 to the indirect strategic effect of such costs though these results vary considerably across individual brands according to their market shares

has leviathan been bound a theory of imperfectly constrained government with evidence from the states this paper develops a formal theory that combines power maximizing leviathan political parties with well defined imperfections in the political process the model implies that both parties tend to make government larger as their likelihood of electoral victory increases empirical tests on state level data confirm this prediction racing the leviathan hypothesis against alternative theories of party motivation indicates that both the leviathan and the contrasting ideologies views have some degree of validity the leviathan motive of politicians to maximize their power is a central assumption of the public choice approach to political economy this approach has been strongly attacked for underestimating the importance of competitive checks on politicians wittman 1989 1995 in particular broadly argues that electoral competition is an effective solution to whatever principalagent problem might exist between politicians and voters yet recent research in political economy dixit and londregan 1995 1996 1998 grossman and helpman 1996 casts renewed doubt on the efficiency of political markets formal models incorporating imperfections in the electoral process show that politicians have the latitude to deviate somewhat from citizen interests although politicians face constraints they retain some measure of monopoly power a conclusion consistent with the public choice literature the main difference between recent political economy and the public choice tradition arises from their assumptions about politicians objective functions the public choice approach tends to view all political parties as power maximizers whereas others see parties as either vote

the economic theory of vertical restraints the types of contracts arising in a typical vertical manufacturer retailer relationship are more sophisticated than a simple uniform price in addition to setting per unit prices manufacturers and retailers also revert to non linear pricing and non price instruments these instruments or contracts are referred to as vertical restraints and can take the form of franchise fees resale price maintenance exclusive dealing exclusive territories and slotting allowances the use and the effects of one type of instrument versus another depend crucially on specific market assumptions upstream and downstream and on the division of bargaining power between manufacturers and retailers this paper surveys the industrial organization literature on retail pricing and shows that vertical restraint instruments have important effects on producer and consumer prices market structure efficiency and welfare

the estimation of prewar gross national product methodology and new evidence the paper develops new methodology for the estimation of prewar gnp taps previously unused data sources and develops new estimates for the periods 1869 1908 and 1869 1928 primary among the new data sources are direct measures of output in the transportation communications and construction sectors and estimates of the consumer price index new measures of real gnp nominal gnp and the gnp deflator are developed the new estimates of real gnp are as volatile on average over the business cycle as the traditional kuznets kendrick series but dampen the amplitude of some cycles while raising the amplitude of others the new estimates of the gnp deflator are distinctly less volatile than the traditional series and in fact no more volatile than those in the postwar period

shopping around how households adjusted food spending over the great recession over the great recession real wages stagnated and unemployment increased concurrently food prices rose sharply outstripping growth in food expenditure and leading to a reduction in calories purchased this has led to concern about rising food poverty we study british households to assess how they adjusted to changes in the economic environment we show they switched to cheaper calories implying food consumption was smoother than expenditure we use longitudinal data to quantify the way households lowered their per calorie spending and show they done this in part by increasing shopping eort and without lowering the nutritional quality of

electoral competition through issue selection politics must address multiple problems simultaneously in an ideal world political competition would force parties to adopt priorities that reflect the voters true concerns in reality parties can run their campaigns in such a way as to manipulate voters priorities this phenomenon known as priming may allow parties to underinvest in solving the issues that they intend to mute we develop a model of endogenous issue ownership in which two vote seeking parties a invest in policy quality to increase the value of their platform and b choose a communication strategy to prime voters we identify novel feedback between communication and investment in particular we find that stronger priming effects can constrain parties to invest more resources in all issues we also identify the conditions under which parties prefer to focus on their historical issues or to engage in issue stealing