budget processes and commitment to fiscal discipline abstract we present a framework of investigation into the political economy of the budget process our model suggests that institutional rules governing the budget process can be found to limit the importance of fiscal illusion empirical evidence supports that proposition the choice of rules depends on the political environment as well as the dominant source of uncertainty in the budget process

interest rate deregulation monetary policy efficacy and rate rigidity abstract this paper examines the effects of interest rate regulation and subsequent deregulation on the efficacy of monetary policy and rigidity of retail bank deposit rates in hong kong using an error correction model we find that interest rate deregulation increases the efficacy of monetary policy by improving the correlation between retail bank deposit rates and market interest rates and increasing the degree of long term pass through for retail bank deposit rates our study also shows that the adjustments in retail bank deposit rates are asymmetric and rigid upwards during the regulated period but tend to be rigid downwards during the deregulated period the spreads between retail bank deposit rates and market rates have also tightened sharply after the removal of interest rate controls

agendas strategic voting and signaling with incomplete information the literature on agendas with sincere and strategic voting represents an important contribution to our understanding of committees of institutions and of the opportunities to manipulate outcomes by the manipulation of institutions that literature though imposes an assumption that may be unrealistic in many situations namely that everyone knows the preferences of everyone else in this essay we apply bayesian equilibrium analysis to show that the properties of agendas that others derive by assuming complete information do not hold necessarily under incomplete information first a condorcet winner need not be selected even if nearly everyone on the committee most prefers it second the two step theorem that any outcome reachable in n voting stages via some amendment agenda is reachable in two stages under sophisticated voting need not hold third nonbinding votes such as straw polls can critically affect final outcomes

environmental pricing of externalities from different sources of electricity generation in chile abstract the rapid increase in electricity demand in chile means a choice must be made between major investments in renewable or non renewable sources for additional production current projects to develop large dams for hydropower in chilean patagonia impose an environmental price by damaging the natural environment on the other hand the increased use of fossil fuels entails an environmental price in terms of air pollution and greenhouse gas emissions contributing to climate change this paper studies the debate on future electricity supply in chile by investigating the preferences of households for a variety of different sources of electricity generation such as fossil fuels large hydropower in chilean patagonia and other renewable energy sources using double bounded dichotomous choice contingent valuation a novel advanced disclosure method and internal consistency test are used to elicit the willingness to pay for less environmentally damaging sources policy results suggest a strong preference for renewable energy sources with higher environmental prices imposed by consumers on electricity generated from fossil fuels than from large dams in chilean patagonia policy results further suggest the possibility of introducing incentives for renewable energy developments that would be supported by consumers through green tariffs or environmental premiums methodological findings suggest that advanced disclosure learning overcomes the problem of internal inconsistency in sb db estimates

a common pool theory of supranational deficit ceilings abstract the budget deficit bias is modeled as the result of a domestic common pool problem and of an international externality deficits can be used to finance both unproductive and productive public spending an optimally set supranational deficit ceiling is examined and welfare is compared to the unconstrained outcome and to the case of nationally set deficit ceilings the supranational deficit ceiling is found to be welfare improving relative to similar national arrangements but does not fully eliminate the deficit bias unless combined with a domestic fiscal institution allowing for precommitment to productive public spending

interest rate pass through and monetary transmission evidence from individual financial institutions retail rates official interest rate changes should influence short rates on money market instruments and retail products such as deposit accounts and mortgages but complete pass through is often taken for granted this paper provides a theoretical and econometric framework for assessing the evidence for this assumption using seventeen years of monthly data for rates on thirteen deposit and mortgage products offered by individual uk financial institutions the methodology allows for asymmetries and non linearities in adjustment and the results show that the speed of adjustment in retail rates depends on whether the perceived gap between retail and base rates is widening or narrowing

capital budgets borrowing rules and state capital spending abstract this paper compares the level and composition of government spending in u s states that maintain separate budgets for capital and operating expenditures with that in states that employ unified budgets it also investigates the effects of pay as you go financing rules for capital projects the empirical findings suggest that states with separate capital budgets spend more on public capital projects than comparable states with unified budgets there is no evidence that the presence or absence of a capital budget affects the level of non capital spending pay as you go requirements for financing capital projects are associated with lower levels of both capital and non capital spending

asymmetric information and price competition in small business lending abstract this paper examines the relationship between bank lending rates and their cost of funds in new zealand our results show that on average mortgage rates respond more quickly to changes in the cost of funds than base business lending rates we also find an asymmetry in the initial short run response of banks to changes in funding costs in particular our results show banks adjust mortgage rates downwards faster than upwards the speed to which lending rates revert back to their equilibrium relationship with funding costs varies across the lending markets we find the adjustment speed is faster when mortgage rates are below equilibrium whereas it is slower when business lending rates are above long run levels in relation to funding costs our analysis suggests that banks prefer the plain vanilla type of lending such as mortgages in comparison to small business lending consistent with asymmetric information associated with business loans

residential consumers in the cape peninsula s willingness to pay for premium priced green electricity a number of studies have explored the willingness i e stated willingness as opposed to actual willingness of consumers to pay a premium for green electricity in developed countries however little is known about how this translates into an emerging economy context this study investigates the level of willingness of residential households in south africa s cape peninsula to pay a premium for electricity from renewable energy it methodologically drew on recent contributions in the literature on norm motivated behaviour used to identify testable factors that could influence residential consumers willingness to pay wtp interestingly the study found a significant positive link between household income and wtp for green electricity contrary to the findings of some previous studies not only are higher income households more likely to pay a premium but typically they are also willing to pay a bigger premium it was also further established that the view that green electricity is reliable involvement in the recycling of waste and the belief that everyone should contribute to green electricity generation drive the wtp

on the political economy of national tax revenue forecasts evidence from oecd countries sustainable budgets are important quality signals for the electorate politicians might thus have an incentive to influence tax revenue forecasts which are widely regarded as a key element of national budget plans looking at the time period from 1996 to 2012 we systematically analyze whether national tax revenue forecasts in 18 oecd countries are biased due to political manipulation drawing on theories from the field of political economy we test three hypotheses using panel estimation techniques we find support for partisan politics left wing governments seem to produce more optimistic or less pessimistic tax revenue forecasts than do right wing ones contrary to the theoretical prediction based on the common pool problem we find that more fragmented governments and parliaments tend to produce more pessimistic or less optimistic tax revenue forecasts we find no empirical evidence that political business cycles play a role in tax revenue forecasts

the analysis of committee power an application to senate voting on the minimum wage a widely noted empirical regularity of congressional behavior is that standing committees exert disproportionate influence on congressional choices the observed phenomenon has a number of labels committee influence committee power and from the parent chamber s perspective deference to committees and a large body of theoretical and empirical research has sought to determine when and why it exists this paper takes as given only the weakest form the observation namely that committee power exists sometimes it does not directly address the questions of when and why committee power exists although much of the relevant literature is reviewed rather it focuses on a prerequisite to the resolution of disputes about committee power how can committee power be assessed empirically section i reviews three classes of explanations and identifies obstacles to convincing empirical tests of the accounts section ii introduces an econometric approach for analyzing committee power section iii applies the technique to a sequence of votes on minimum wage legislation in the senate in 1977 section iv extends the technique to multi dimensional choice spaces section v is a discussion and summary

consumer demand for green power and energy efficiency abstract this article examines reported willingness to pay for electric utility investments in renewable energy and energy efficiency resources using the results of deliberative polls conducted by electric utilities in texas 1 age education and salary tend to affect reported willingness to pay for utility investments in these resources intensive exposure to information about energy resource issues led to an increase in the number of respondents interested in paying a modest premium to support investments in both renewable energy resources and energy efficiency however average reported premiums actually declined following the polls as very high outlier responses moved to more reasonable values following the polls these results support the contention that informed dialogue about energy alternatives will result in broader interest in providing a modest level of support for these resources

selection and influence interest groups and congressional voting on trade policy studies of the effects of interest groups on congressional roll call voting typically view party and ideology as competing factors and rely on a factoral model of interests or a sectoral model including only interest groups with a direct stake in the vote we depart from that strategy in several ways we define interest groups at the level of standard industrial classification two digit codes and observe the universe of interests for 1979 90 we use measures of geographically and nongeographically based economic interests to estimate the representative s party and ideology we also consider the factor endowments of individuals within a district to examine their impact on floor votes we then investigate the influence of these interests on members party affiliation and ideology as well as a pool of five floor votes on foreign trade using instrumental variables for party and ideology economic interests account for a substantial portion of the variance in all cases and models that also include other explanatory variables are highly accurate in estimating floor votes

elections coalitions and legislative outcomes predictions of electoral behavior in a multiparty setting should be a function of the voters beliefs about how parties will perform following an election similarly party behavior in a legislature should be a function of electoral promises and rewards we develop a multistage game theoretic model of three party competition under proportional representation the final policy outcome of the game is generated by a noncooperative bargaining game between the parties in the elected legislature this game is essentially defined by the vote shares each party receives in the general election and the parties electoral policy positions at the electoral stage parties and voters are strategic in that they take account of the legislative implications of any electoral outcome we solve for equilibrium electoral positions by the parties and final policy outcomes

an examination of the market for favors and votes in congress this paper examines the strategies that horse traders and power brokers adopt in trading favors to pass legislation although the favors that they trade are generally impossible to observe the paper develops a model that allows tests of favor trading with data from the senate vote on the byrd amendment to the 1990 clean air act i conduct such a test the test provides evidence that on this vote i favor trading occurred ii the coalition leaders practiced price discrimination and iii the coalition leaders did not collude with each another

the role of business in sustainable consumption abstract this paper explores the role of the business community in promoting sustainable consumption while businesses play an important role in shaping social trends including the growth of material consumption allegations that individual corporations wield excessive power may have been overstated most of the time corporations are simply playing by the rules and culture of the market businesses have mostly assumed that their contribution to sustainability lies in improving eco efficiency staying within the current business framework but sustainable consumption will require wider change including shifts in the incentives that shape the actions of businesses and others and a change in the culture that underlies market expectations firms governments the media and civil society may need to enter a dialogue together to develop a new story about the nature of prosperity and the role of the business community in promoting it the initiative is most likely to come from civil society

a partisan model of government expenditure partisan models of budget politics largely concentrate on the size of government budget deficits and debt but most theories have little to say as to what the effect of party politics on both the size and the composition of budgets is this paper seeks to extend previous literature in two directions first a model of spending preferences is developed that relates actors preferred level and allocation of expenditure to electoral gains from fiscal policies second changes in both total expenditure and the expenditure mix of two budget categories are analyzed for the effect of parties spending preferences as stated in their election manifestos using data on 19 oecd countries from 1971 to 1999 the paper finds support for general partisan hypothesis the results suggest that the actual spending preferences of parties matter whereas they do not indicate that parties of the left consistently differ from parties of the right in their spending behavior

separation of powers and the budget process abstract we study budget formation in a model featuring separation of powers in our model the legislature designs a budget bill that can include a cap on total spending and earmarked allocations to designated public projects each project provides random benefits to one of many interest groups the legislature can delegate spending decisions to an executive agency that can observe the productivity of all projects before choosing which to fund however the ruling coalition in the legislature and the executive serve different constituencies so their interests are not perfectly aligned we consider settings that differ in terms of the breadth and overlap in the constituencies of the two branches and associate these with the political systems and circumstances under which they most naturally arise earmarks are more likely to occur when the executive serves broad interests while a binding budget cap arises when the executive s constituency is more narrow than that of the powerful legislators

predicting committee behavior in majority rule voting experiments in past experiments committees voting under majority rule have often failed to choose the condorcet alternative the core since this failure of theory might be due to flaws in experimental design we developed a voting procedure in which the unique element in the core is also the unique outcome when a nash equilibrium in undominated strategies for the whole game induces a nash equilibrium in undominated strategies for every subgame nevertheless our committees frequently chose other alternatives to explain these results we formulated a new theory that takes account of threshold effects and identifies a selection set predicted to contain the committee s choice the revised theory performs well both in our experiments and in past experiments

budget processes theory and experimental evidence this paper studies budget processes both theoretically and experimentally we give a sufficient condition for top down and bottom up budget processes to have the same voting equilibrium furthermore at a voting equilibrium it is not always true as often presumed that a top down budget process leads to a smaller overall budget than does a bottom up budget process to test the implications for budget processes of voting equilibrium theory we conduct a series of 128 voting experiments using subjects in a behavior laboratory the experimental evidence from these experiments is well organized by voting equilibrium theory both at the aggregate level and at the individual subject level in particular subjects display considerable evidence of rationality in their proposals and votes more complete information and fewer spending categories lead to greater predictive success of voting equilibrium theory and reduce the time needed to reach a budget decision

a problem with euclidean preferences in spatial models of politics abstract euclidean public sector preferences can not be induced from a strictly quasiconcave primitive utility function and a linear constraint

a theorem of voting rules and budget deficits abstract a theorem showing that deficits under a procedure requiring expenditures to accompany revenues as they are enacted followed by a vote on the size of deficit are smaller than under current procedure in which votes on expenditures and taxes are unlinked

constituency opinion and congressional policy making the reagan defense buildup representatives votes on a series of defense budget roll calls in the first year of the reagan administration s pentagon buildup are related to constituency opinions on defense spending during the 1980 election campaign the strong aggregate constituency demand for increased defense spending in 1980 is estimated to have added almost 17 billion about 10 to the total fiscal year 1982 pentagon appropriation the impact of constituency opinion was largely independent of specific political circumstances differential responsiveness in districts with partisan turnover intense districtlevel competition and strong presidential coattails together accounted for less than 1 billion in additional appropriations with the remaining 16 billion attributable to across the board responsiveness by even the most safely incumbent representatives t he appeal of representative democracy hinges on the responsiveness of elected politicians to the preferences and interests of their constituents given the theoretical and practical significance of the connection between constituents opinions and their representatives legislative activities it is remarkable that the large and in some ways quite sophisticated empirical literature addressing this connection includes so few direct estimates of the relationship between constituency opinion and specific legislative outcomes 1 my aim here is to provide one such estimate the policy issue i have chosen to examine is the level of total pentagon spending in the first fy 1982 defense appropriations bill of the reagan administration that bill the first in a series of annual appropriations resulting in a 40 real increase in defense spending during reagan s first five years in office is of obvious political significance but the issue of defense spending is also especially interesting from a broader theoretical perspective because the strong public demand for a defense spending increase at the beginning of the reagan era provides unusual analytical leverage for assessing the potential impact of public opinion on the making of public policy i shall describe some alternative mechanisms of congressional responsiveness to constituency opinion briefly characterize the politics of defense at the beginning of the reagan era present my analysis of representatives preferences regarding fy 1982 defense appropriations relating those preferences to constituency opinions on the defense spending issue and to other political characteristics of the representatives and their districts extend the analysis of fy 1982 defense appropriations from the individual to the aggregate level in an attempt to estimate the impact of congressional responsiveness on the total level of pentagon appropriations and finally touch upon some of the implications of my analysis for the study of linkages between public opinion and public policy

budgetary policy with unified and decentralized appropriations authority the divestiture of the house appropriations committee in the1880 s has received considerable attention of an empiricalnature this paper presents a formal model of legislativedecisionmaking using a common agency formulation to representinterest group lobbying of legislators this framework is usedto analyze the effects of decentralizing appropriationsauthority the conditions under which decentralization leadsto higher spending are characterized it is argued that theconventional view that divestiture caused higher levels ofspending only holds if decentralization created barriers tolobbying and political bargaining across different committees in addition the role of specialized committee knowledge isexamined

the statistical analysis of roll call data modern studies of legislative behavior focus upon the relationship among the policy preferences of legislators institutional arrangements and legislative outcomes in spatial models of legislatures policies are represented geometrically as points in a low dimensional euclidean space each legislator has a most preferred policy or ideal point in this space and his or her utility for a policy declines with the distance of the policy from his or her ideal point see davis hinich and ordeshook 1970 for an early survey the primary use of roll call data the recorded votes of deliberative bodies 1 is the estimation of ideal points the appeal and importance of ideal point estimation arises in two ways first ideal point estimates let us describe legislators and legislatures the distribution of ideal points estimates reveals how cleavages between legislators reflect partisan affiliation or region or become more polarized over time e g mccarty poole and rosenthal 2001 roll call data serve similar purposes for interest groups such as americans for democratic action the national taxpayers union and the sierra club to produce ratings of legislators along different policy dimensions second estimates from roll call analysis can be used to test theories of legislative behavior for instance roll call analysis has been used in studies of the u s congress both contemporary and

market structure and the pass through of the federal funds rate abstract we study the effect of local market bank concentration on business loan originations and on the pass through of the federal funds rate to business loan originations economic theory on the relationship between concentration and the pass through of input prices to quantity or price is ambiguous we find that more concentrated markets have lower business loan originations and experience smaller changes in business loan originations in response to changes in the federal funds rate our results support the idea that market concentration dampens quantity reactions to input price changes

beyond ecolabels what green marketing can learn from conventional marketing ecolabels have emerged as one of the main tools of green marketing although a great deal of effort has been invested in making them more effective and efficient the market share of ecolabelled products is still low partly because they have been addressed mainly to green consumers in a theoretical exposition of marketing theory we find that green marketing could learn from conventional marketing in discovering other means than labelling to promote green products examples include addressing a wider range of consumers working with the positioning strategies of price place and promotion and actively engaging in market creation

sequential voting with endogenous voter forecasts we investigate a sequential voting model in which voters forecasts of outcomes on future issues are determined endogenously voters are assumed to make decisions in an environment in which future outcomes are uncertain the uncertainty arises from two possible sources voters may be uncertain of other voters preferences in addition events that occur before future issues are decided may affect voters preferences on future votes information available to voters at each point in time is characterized an equilibrium to the voting problem if one exists is one for which the outcome on the issue currently being decided and voters forecasts of outcomes on future issues are determined simultaneously we show that an equilibrium exists under a particular voting institution and characterize voters forecasts for this equilibrium

asymmetric adjustment of commercial bank interest rates evidence from malaysia and singapore abstract this paper examines the rigidity of commercial bank interest rates using evidence from singapore and malaysia an asymmetric error correction technique is used to test whether mean adjustment lags are different when retail rates are above or below their equilibrium levels it is concluded in both countries that the mean adjustment lag is shorter when the deposit rate is above its equilibrium than when it is below its equilibrium using the framework of hannan and berger 1991 this finding implies that the hypothesis of collusion cannot be rejected

the effects of congressional appropriation committee membership on the distribution of federal research funding to universities i introduction in 1994 members of the republican party pledged to seek legislation to impose term limits on members of congress this pledge stemmed from the popular belief that senior members of congress tend to promote personal interests or are more influenced by lobbying efforts that may not be representative of their constituents today term limits continue to be discussed but have not been enacted instead many members have focused their energies toward minimizing the time spent on any particular committee of congress believing that tenure on a committee is a more serious concern than simple tenure in congress implicit in these concerns is the issue whether as incumbent politicians plan to retire they will behave differently and if so whether tenure on a congressional committee exacerbates this behavior this article explores the role of membership on the appropriations committee on the distribution of federal research funding to universities specifically it explores whether funding is diverted to these universities because politicians use their position on a committee to promote personal or constituent interests previous research on shirking compares the voting records of politicians on certain issues with demographic and economic characteristics of the politicians constituents this article explores the issue of shirking differently i explore how membership on congressional appropriations committees affects the distribution of federal research funding to universities i look at two types of relationships between the members and the universities first i consider the relationship between members and the universities that are located in the members districts states in the case of senators second i examine the relationship between members and their undergraduate alma mater i use district representa tion to proxy favoritism that reflects a politician s constituents given that in most instances an alma mater affiliation is not the same as district representation i use alma mater affiliation to proxy favoritism that reflects the politician s personal interests federal research funding accounts for more than 60 of research funding received by research universities previous research has shown a positive impact of federal funding on research outcomes see adams and griliches 1998 arora and gambardella 1997 connolly 1997 payne and siow 2002 and payne 2001 except for payne and siow 2002 however these articles do not consider that political diversion of funds may promote or detract from research productivity as with any other federal program this article concentrates on the impact of membership on the house and senate appropriations committees because they wield the greatest power in the allocation of funding 1 using a panel data set spanning 26 years i explore how changes in the composition of the appropriations committees affects the distribution of research funding after controlling for the heterogeneity that exists across different universities the results suggest that both district representation and alma mater affiliation matter thus there is evidence of shirking for personal interests and evidence of members representing their constituents with respect to the representation of one s constituents the strongest results suggest that public universities benefit from representation on both the senate and house committees private universities however only benefit from representation in the senate with respect to alma mater affiliations the results suggest again that public universities benefit from representation on both the senate and house committees private universities also benefit from representation on both the senate and house committees the results also suggest that the tenure of the member on the committee matters as does whether the member is a part of the majority party in power in the congressional chamber

the budget process and the size of the budget the new congressional budget process provides members of congress with a new set of institutional mechanisms for making budget decisions this article addresses the question of whether or under what conditions rigid application of the new budget process modeled as first selection of the size of the budget and second its division produces smaller budgets than a piecemeal appropriations process in which the size of the budget is determined residually the theoretical result is that the new process sometimes results in relatively large budgets a testable implication of the theory is that given a choice of how stringently the budget process is to be employed members of congress jointly consider preferences and the expected outcomes under available institutional arrangements and select the arrangement usually a rule that yields the most favorable outcome empirical results from the budget process in the house from 1980 to 1983 are generally supportive of the theoretically derived hypothesis of rational choice of institutional arrangements

an analysis of the impact of deposit rate ceilings on the market values of thrift institutions this paper examines the impact of changes in deposit interest rate regulations on the common stock values of savings and loan institutions the analysis indicates that stockholder owned savings and loans s l s have experienced statistically significant declines in equity market values at the announcement of the removal of ceilings on certain consumer small saver certificate accounts and the introduction of short term variable rate money market certificates we find the evidence to be consistent with the hypothesis that s l s have earned economic rents from restrictions on interest rates paid to small saver accounts and that relaxation of interest rate ceilings has reduced these rents a central issue in the economics of regulation is whether regulators behave in a way that primarily benefits the economic agents whose actions they are supposed to regulate the proposition that regulation is demanded and acquired by the regulated and that regulations are designed and administered primarily for their benefit was originally put forth by stigler 19 and has come to be known as the capture theory of regulation an alternative view is that regulators adopt policies which serve some other perhaps public or possibly the regulators own interest and that administration of these policies does not benefit the regulated entities this paper examines the regulation of savings and loan associations deposit interest rates and reports evidence pertaining to the impact of the administration of regulation regulation of interest rates paid to depositors in federally insured savings and loan associations began in 1966 since that time several changes in the maximum allowed interest rates deposit rate ceilings have been made these changes present an opportunity to observe the impact of one form of regulatory action on savings and loan institutions deposit rate regulation has been the subject of extensive previous research the empirical investigations have focused primarily on two issues 1 the allocational efficiency and wealth redistribution effects of rate ceilings and 2 the impact of deposit rate ceilings on the flow of funds into the residential

menu costs posted prices and multiproduct retailers we use a unique store level data set to directly measure menu costs and to study the price change process at a large u s drugstore chain we compare and contrast the magnitude of these measures with similar measures from four large u s supermarket chains we find that 1 the actual magnitude of menu costs as a share of revenues 2 menu costs per price change 3 the frequent use of promotional pricing and 4 the use of weekly pricing rules are similar across both retail formats given that the main common features of these two types of retail formats are that i they both use posted prices and ii both are multiproduct retailers selling a large number of products our findings suggest that the magnitude of the menu cost components we measure and the price change practices we document may be generalizable across retail formats with these two features

propensity of green consumption behaviors in representative cities in china abstract green consumption behaviors are based on consumers attitude however there is a gap between them improving green consumption attitude will to a large extent affect the acceptance of green consumption the study interviewed consumers in four representative cities in china through questionnaires which was to search for a solution that affect consumers willingness to pay for green products by employing a multivariate logistic regression furthermore an empirical analysis was made to study their green consumption behaviors it is shown that chinese consumers have already been aware of green consumption to a certain extent and that green consumption willingness is influenced by age location sources of information and a host of other factors at present nearly half of the consumers are willing to pay an extra of no more than 5 for green products which is lower than the premium price for green products relative to non green ones however the actual premium price of green products in china exceeds this level in general rendering green products a less advantageous position in markets approaches including multiple marketing channels trade in services and green branding can effectively raise consumers reserve price for green products

announcements and the effectiveness of monetary policy a view from the us prime rate abstract until 1994 the us prime rate was said to be sticky because of its irresponsiveness to short term interest rates after the fed started the practice of announcing its intended funds rate in 1994 however the prime rate has come to react immediately to shifts in the target rate this paper attempts to explain how the fed s policy announcements changed the behavior of the prime rate by using a simple menu cost model it shows that an increase in the expected duration of funds rate targets was essential to the improvement in the target rate pass through

the limits of tax and expenditure limits tel implementation as a principal agent problem previous scholarship has shown that tax and expenditure limits tels often fail to constrain government growth this paper views the implementation of tels as a principal agent problem agency theory predicts that delegation is affected by the preferences of agents and the costs of monitoring those agents using panel data for the us states from 1970 through 2008 i conduct an empirical test of the validity of the principal agent model for tels i find that state spending limitations are only effective at cutting the growth of state and local spending under the direction of agents who have a preference for limited government additionally state property tax limitations are only effective when monitoring does not require costly coordinated action these findings contradict an alternative theory of tel implementation that looks towards the policy s origin my research suggests that the arrangements of delegation determine when and under what conditions tels effectively reduce government growth

the congressional budget process aggregate spending and statutory budget rules abstract this paper compares the congressional budget process instituted in 1974 and the piecemeal appropriations process that preceded it previous theoretical analysis using spatial models of legislator preferences finds no systematic difference in relative spending levels under the two regimes this paper instead uses a model of interest group lobbying a legislature determines spending on a national public good and on subsidies to sector specific interest groups in the appropriations process the appropriations committee proposes a budget that because of interest group influence involves overspending on subsidies in the budget process the budget committee proposes an aggregate level of spending the budget resolution then the appropriations committee proposes a budget a free rider problem among the interest groups inhibits the lobbying of the budget committee to increase the aggregate budget if each group is sufficiently small it takes the budget resolution as given and lobbies the appropriations committee aggregate spending is lower and social welfare is higher under the budget process however provision of the national public good is suboptimal the paper also analyzes statutory budget rules that limit spending levels but can be revised by a simple majority vote here the free rider problem prevents the groups from securing the required changes to budget rules

executive veto and spending limitation positive political economy with implications for institutional choice the consequences of institutional change in the budgetary process are not generally determinate independent of the preferences of political actors nonetheless this study shows for a general class of preference configurations that the legislative branch cannot be made better off by a spending limitation unless the executive is empowered with a line item veto in the absence of executive item veto authority there is no incentive for the legislature to constrain spending

accounting for uncertainty in willingness to pay for environmental benefits previous literature on the distribution of willingness to pay has focused on its heterogeneity distribution without addressing exact interval estimation in this paper we derive and analyze bayesian confidence sets for quantifying uncertainty in the determination of willingness to pay for carbon dioxide abatement we use two empirical case studies household decisions of energy efficient heating versus insulation and purchase decisions of ultralow emission vehicles we first show that deriving credible sets using the posterior distribution of the willingness to pay is straightforward in the case of deterministic consumer heterogeneity however when using individual estimates which is the case for the random parameters of the mixed logit model it is complex to define the distribution of interest for the interval estimation problem this latter problem is actually more involved than determining the moments of the heterogeneity distribution of the willingness to pay using frequentist econometrics a solution that we propose is to derive and then summarize the distribution of point estimates of the individual willingness to pay under different loss functions

mechanisms for the control of fiscal deficits abstract this paper shows that a simple two stage voting mechanism may implement a constrained optimal state dependent decision about the size of the fiscal deficit i consider a setup with strategic fiscal deficits similar to alesina and tabellini 1990 three groups of voters are informed about the relative desirability of current public spending voters differ in their preferences for public goods and swing voters preferences may change over time the current government decides on the current spending mix and it has an incentive to strategically overspend a simple two stage mechanism under which a deficit requires the approval by a supermajority in parliament approximates a constrained optimal decision and under certain conditions increases social welfare relative to both a strict rule and a laissez faire constitution when the current majority is small political bargaining may further increase social welfare however when the current majority is large a supermajority mechanism with bargaining leads to a biased spending mix and it may reduce welfare whereas the laissez faire mechanism may yield the first best an appropriately adjusted majority threshold can avoid inefficient bargaining whenever necessary

strategic voting in agenda controlled committee experiments this paper reports results of committee voting experiments with a fixed agenda that specified a sequence of binary decisions in this particular context the agenda setter can control the ultimate committee decision if it is known whether voting behavior is myopic or strategic subjects initially voted in accordance with myopic voting rules strategic behavior was more prevalent with experience the use of the same induced preferences in successive meetings was more likely to induce strategic voting than the provision of public information concerning the numbers of voters of each preference type copyright 1989 by american economic association

excess liquidity bank pricing rules and monetary policy abstract this paper studies the implications of excess bank liquidity for the effectiveness of monetary policy in a simple model with credit market imperfections the demand for excess reserves is determined by precautionary factors and the opportunity cost of holding cash it is argued that excess liquidity may impart greater stickiness to the deposit rate in response to a monetary contraction and induce an easing of collateral requirements on borrowers which in turn may translate into a lower risk premium and lower lending rates as a result asymmetric bank pricing behavior under excess liquidity may hamper the ability of a contractionary monetary policy to lower inflation

competition transmission and bank pricing policies evidence from belgian loan and deposit markets abstract this paper addresses the pass through from market interest rates to retail bank interest rates the paper advocates a heterogeneous approach and applies it to the belgian banking market a substantial proportion of the heterogeneity in bank pricing policies can be explained by the bank lending channel and the relative market power hypothesis the results also suggest that the long term pass through is typically less than one for one rejecting the completeness hypothesis while there is no convincing evidence for asymmetry in retail rates large deviations from equilibrium mark ups are faster reduced than small deviations overall conditions for corporate loans are more competitive compared to consumer loans demand and savings deposits have by far the most rigid prices

leveraging factors for sustained green consumption behavior based on consumption value perceptions testing the structural model changing lifestyle and consumption pattern being the aftermath of growth and urbanization is putting a strain on environment and sustainable development the consumption value perceptions are identified in the study as the drivers of sustained green product consumption and intention to pay the green price premium using the theory of consumption values these value perceptions are certain parameters measuring consumer utilities along multiple value dimensions impacting choice behavior environmental attitude contextual factors and consumer innovativeness were included as the first order constructs data was collected through survey based method using structured questionnaires structural equation modeling was applied for testing the hypothesized model results confirmed consumers price and knowledge perceptions to be the major determinants of the behavioral outcome of sustained green consumption and behavioral intention to pay the green price premium is the outcome of sustained green consumption implications of the research were discussed

monetary policy transparency and pass through of retail interest rates abstract this paper examines the degree of pass through and adjustment speed of retail interest rates in response to changes in benchmark market rates in new zealand during the period 1994 2004 we consider the effects of policy transparency and financial structure of the monetary transmission mechanism new zealand is the first oecd country to adopt a full fledged inflation targeting regime with specific accountability and transparency provisions policy transparency was further enhanced by a shift from quantity settlement cash to price interest rate operating targets in 1999 using phillips loretan estimates of cointegrating regressions we find complete long term pass through for some but not all retail rates our results also show that the introduction of the official cash rate ocr increased the pass through of floating and deposit rates but not fixed mortgage rates in line with previous studies we find the immediate pass through of market interest rates to bank retail rates to be incomplete although we find no statistical evidence for asymmetric response of retail rates to changes in market rates other than for business lending rates in the pre ocr period differences in the magnitude of mean adjustment lags indicate that banks appear to pass on decreases to fixed mortgage rates faster overall our results confirm that monetary policy rate has more influence on short term interest rates and that increased transparency has lowered instrument volatility and enhanced the efficacy of policy

testing explanations of strategic voting in legislatures a reexamination of the compromise of 1790 a difficult yet prevalent problem in legislative politics is how to assess explanations when observable actions may not represent true and unobserved legislator preferences we present a method for analyzing the validity of theoretical historical accounts that unifies theory history and measurement we argue that approaches to testing accounts of legislative behavior which are theoretically and historically agnostic are not always best and present an approach which 1 forms an explicit explanation of behavior here a simple dynamic voting game that yields estimable parameter constraints and 2 tests these constraints using a customized empirical model that is as consistent as possible with the explanation we demonstrate the method using legislative voting data from the first congress 1789 1791 using the idea of sophisticated equivalents from voting theory we subject the traditional account of the compromise of 1790 to a statistical test and find that there is reason to doubt the claim that legislators of the time believed the specified log roll was taking place the results suggest that the capital location and assumption issues were resolved independently

asymmetric effects of the business cycle on bank credit risk abstract prior empirical research on the relation between credit risk and the business cycle has failed to properly investigate the presence of asymmetric effects to fill this gap we examine this relation both at the aggregate and the bank level exploiting a unique dataset on italian banks borrowers default rates we employ threshold regression models that allow to endogenously establish different regimes identified by the thresholds over below which credit risk is more less cyclical we find that not only are the effects of the business cycle on credit risk more pronounced during downturns but cyclicality is also higher for those banks with riskier portfolios

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

the political economy of the fair labor standards act of 1938 this paper examines the congressional passage of the american minimum wage law the fair labor standards act of 1938 voting on the act is modeled as a function of the concentration of the constituencies for minimum wage legislation north south differentials and legislator ideology it is shown that the house radically altered the final content of the bill abandoning a proposed wages and hours board with discretionary powers to determine minimum wages in favor of a flat rate following the objections of several interest groups north south divisions over the bill had little influence over congressional voting and the influence of constituent groups increased relative to legislators ideology as the bill became an important election issue

electoral and financial effects of changes in committee power the gramm rudman hollings budget reform the tax reform act of 1986 and the money committees in the house most rational choice theories of legislatures locate the source of committee power in the restrictive procedural rules that enforce committee jurisdictions however there is no empirical support for this claim further there is little evidence for the natural implication that membership on more powerful committees confers electoral benefits i address these puzzles by exploiting the occurrence of major budget and tax reforms in the mid eighties these reforms provide a natural experiment for measuring the electoral and financial consequences of changes in committee power i show that the procedural rule changes instituted by the gramm rudman hollings budget reform caused an increase in campaign contributions to members of the budget committee and led to a reduction in the vote share of members of the appropriations committee this heretofore unrecognized effect of the gramm rudman hollings budget reform on the welfare of members of the house rivals that of a more widely recognized policy shock th

how consumers are willing to pay for low carbon products results from a carbon labeling scenario experiment in china carbon labeling has been recently developed to lead the public towards lower carbon consumption in an attempt to create a low carbon economy by identifying the greenhouse gas emissions produced during the full life cycle of a product carbon labeling can affect the behavior of the consumers who purchase low carbon products based on data from a carbon labeling scenario experiment conducted by the research group in six cities throughout china we adopted the dunnett s t3 test approach for single factor variance analysis to find the differences in consumers willingness to pay for low carbon products between different types of consumers then we used a logistic regression model to analyze the relationship between the consumers willingness to pay and their demographic variables the results indicate 1 significant differences exist in the willingness to pay for low carbon products for different consumers and 2 education level and monthly income significantly impact consumer willingness to pay based on these findings we proposed relevant policy implications

the strategy of manipulating conflict two decision makers choose hawkish or dovish actions in a con ict game with incomplete information the decision making can be manipulated by extremists who send publicly observed cheaptalk messages the power of extremists depends on the nature of the underlying con ict game if actions are strategic complements a hawkish extremist provocateur can increase the likelihood of con ict by sending messages which trigger a fear spiral of hawkish actions this reduces the welfare of both decision makers if actions are strategic substitutes a dovish extremist paci st can send messages which cause one decision maker to back down and become more dovish this reduces his welfare but bene ts the other decision maker the hawkish extremist is unable to manipulate the decision makers if actions are strategic substitutes and the paci st is equally powerless if actions are strategic complements

agenda control and reciprocity in sequential voting decisions we study how reciprocity affects the extent to which a chair can exploit her control over an agenda if a committee votes sequentially on a known series of binary proposals we show in a parsimonious laboratory experiment that committee members form vote trading coalitions favoring early proposals not only when the sequence of proposals is exogenously given but also when a chair controls the sequence of proposals vote trading occurs even though chairs manipulate the agenda in their favor punishment for chairs exploiting agenda control is weak as chairs reciprocate support by others more frequently than nonchairs jel c92 d71 d72

fiscal discipline and the budget process the critical economic policy issue for many oecd countries developing countries and transition economies currently is fiscal consolidation and the maintenance of long run fiscal balance two related components underlie this general goal first several countries face the issue of deficit reduction particularly those countries with high debt gdp ratios second it is becoming increasingly apparent that major reforms of the welfare system and specifically of social security systems are critical ingredients of a long lasting fiscal consolidation see alesina and perotti 1995a in the case of monetary policy a constructive discussion has generated a widespread consensus about the benefits of different monetary institutions relatively few economists dispute the benefits of a certain amount of central bank independence even though different commentators and policymakers may disagree on the optimal degree of independence also a contracting approach has highlighted the benefit of inflation targeting and of certain institutional relationships contracts between the executive and the central bank a similar theoretical and empirical discussion on the role of budget procedures and budget institutions is just beginning in this paper we ask the following two questions i do budget procedures matter for the determination of the budget balance and its composition ii are there certain institutional reforms that one should feel comfortable in recommending based on the relatively scarce empirical evidence available we tentatively answer yes to the first question budget procedures matter on the second question we suggest that the two critical areas of reform are first more transparency second a strengthening of the roles of the executive branch vis a vis the legislature and of the treasury minister vis a vis the rest of the executive branch in order to achieve a centralized and top bottom approach to the budget process

public debt sustainability and endogenous seigniorage in brazil time series evidence from 1947 1992 abstract in this paper we investigate three central issues in public finance first was the path of public debt sustainable during 1947 1992 second how has the government balanced the budget after shocks to either revenues or expenditures were observed third are expenditures exogenous the results show that i debt is sustainable in econometric tests with the budget being balanced almost entirely through changes in taxes regardless of the cause of the initial imbalance expenditures are weakly exogenous ii the behavior of a rational brazilian consumer may be consistent with ricardian equivalence iii seigniorage revenues are critical in restoring intertemporal budget equilibrium

monetary transmission via the administered interest rates channel abstract this paper examines the dynamics of administered interest rate changes in response to changes in the benchmark money market rate in singapore our results show that the administered rates adjustment speed differs across both financial institutions and financial products the financial institutions administered lending and deposit rates moreover are more rigid when they are below their equilibrium level than when they are above our finding hence implies that the speed of monetary transmission is not uniform across all sectors of the economy and that a tightening monetary policy takes a longer time to impact the economy than an expansionary monetary policy

an alternative approach to the modelling of interest rate pass through and asymmetric adjustment abstract we propose an alternative approach to examine the nonlinear asymmetric behaviour of interest rates which can be both size and sign dependent compared to other widely used approaches our model performs quite well based on two model selection criteria

an endogenous policy model of hierarchical government endogenous policy models usually neglect that government policies are frequently the result of decisions taken at different tiers by different agents each enjoying some degree of autonomy in this paper policies are the outcome of the choices made by two agents within a hierarchy a legislator decides on the budget to be successively spent by a bureaucrat both agents are lobbied by one or two interest groups the combination of sequential decisionmaking and lobbying implies that the interaction between the agent at one tier and the interest group s depends on the exchange between the same interest group s and the agent at the other tier our results concerning multi tier lobbying and legislatorial oversight substantially qualify the conventional wisdom related to one tier lobbying in particular the reaction of the legislator to lobbying at the bureaucratic tier may make lobbying wasteful even when there is no competition from other lobbies moreover the legislator benefits from lobbying only when there is competition between interest groups at the upper tier it is also shown that competition for influence at the bureaucratic tier may work as a perfect substitute for legislatorial oversight extensions of the model indicate its usefulness for the analysis of decisionmaking in other multilevel governance structures like federations or firms

the political economy of fiscal consolidations in the context of recent research in political economy this paper addresses the policy problem of fiscal consolidation in terms of three types of issues i the macroeconomic effects of alternative strategies to consolidate ii the institutional setups conducive to a consolidation and iii the best strategy for implementing a consolidation in order to maximize its political feasibility one methodological feature of this survey is an emphasis on policy feasibility one methodological feature of this survey is an emphasis on policy issues in order to bridge the gap between the level of abstraction of politico economic models of fiscal policy and the issues faced by a policymaker when attempting a fiscal consolidation

modelling british interest rate adjustment an error correction approach an error correction model is used to capture the dynamics of british retail deposit and loan rate responses to changes in the central bank s base rate the test is conducted using a monthly series of interest rates for four generic retail banking products over the period 1986 93 the adjustment process is found to vary considerably between and within banks and products the results suggest that this market continues to exhibit many features of imperfect competition and that adjustment differences could affect the speed of the money transmission mechanism

logical deficiencies in spatial models a constructive critique a fundamental property of any good theoryis logical consistency however two commonassumptions in the rational choice approach topolitical analysis that induced preferences overpolicy are separable and that such preferences areindependent of changes in exogenous factors are notconsistent with the archetypal assumptions ofindividual utility maximization these particularpathologies of spatial models of politics have notbeen well recognized in the political scienceliterature

measuring rents and interest rate risk in imperfect financial markets the case of retail bank deposits traditional measures of interest rate risk assume that prices of financial assets and liabilities are set in perfectly competitive markets however evidence suggests that many retail financial markets do not follow the competitive paradigm in this paper we employ a general contingent claims framework to value rents earned by banks in demandable retail deposit markets our analysis provides a natural and economically meaningful measure of interest rate risk for these imperfectly competitive markets using monthly survey data on now accounts and mmdas we estimate the value of retail deposit rents and deposit durations for more than 200 commercial banks

can the government talk cheap communication announcements and cheap talk a great deal of attention has recently been focused on communication in economic contexts while some models of credible announcements have been based on reputational forces or penalties imposed by third parties as in sobel 21 and cothren 4 several recent papers have addressed the possibility of communication through cheap talk that is talk in situations with no explicit penalties for deception perhaps the most prominent application of cheap talk in the literature is the recent model of federal reserve announcements by stein 22 this paper will show that cheap talk equilibria of the sort modeled by stein and others often depend in a fundamental way on implausible discontinuities in public responses to government announcements that is cheap talk equilibria are frequently only possible if certain infinitesimally small changes in government announcements are capable of causing large discontinuous changes in public expectations and behavior intuitively if public expectations are a continuous function of government announcements then the government can fine tune these expectations the government will therefore often be tempted to deviate from the cheap talk equilibrium announcements in order to manipulate expectations this causes the equilibrium to unravel discontinuous public reactions sometimes prevent these equilibria from unraveling because they convert continuous choice problems which allow manipulative fine tuning into discrete choice problems where such fine tuning is impossible these discontinuities are implausible however and this may often rule out cheap talk as a realistic model of governmental policy announcements 2

executive budget proposal executive veto legislative override and uncertainty a comparative analysis of the budgetary process this study examines the roles of the executive budgetary proposal the executive veto the legislative override and legislative uncertainty about the executive s preferences in determining the outcome of a budgetary process a sequential model of the budgetary process with three institutional agents a legislature an appropriations committee and an executive is presented to focus attention on the executive proposal the veto the override provision and uncertainty simplifying assumptions are made 1 the appropriations committee has monopoly agenda power and 2 there is a closed amendment control rule in order to characterize sequential equilibria of various combinations of veto rules and override provisions we examine a particular arrangement of agents preferences and a two item budget the results demonstrate that the final budget depends critically on the executive proposal the executive veto rule the override provision and the uncertainty we achieve three striking results first the executive proposal may be effective in reducing the frequency of the exercised veto second for a given override provision a movement from the item veto to the item reduction veto leaves the executive worse off in some cases third with the same change in institutions the government budget may increase

ideology economic interests and congressional roll call voting partisan instability and bank of the united states legislation 1811 1816 we introduce a wrinkle into the study of congressional roll call voting by focusing on a period of partisan instability in american history the era of good feelings during deviations from normal periods of two party rule the dominant model of voting behavior the ideological model loses precision in correctly classifying individual votes we contend that a pooled voting model comprised of both ideological and economic variables performs better than the basic ideological model during these unstable periods when party mechanisms no longer constrain or structure actions we believe the electoral connection is especially important and thus economic based constituency factors must be included in models of vote choice to explore this belief we focus on a particularly contentious issue the rechartering of the bank of the united states bus which was dealt with before and after a partisan decomposition occurred in the house using measures developed by poole and rosenthal 1985 1997 we find that the vote on the first bus in 1811 during a stable partisan period is organized along ideological lines by 1816 the two party system collapsed and we do not find the vote on the second bus to exhibit much ideological structure conversely we find that our pooled model predicts the vote on the second bus quite well providing a substantial improvement in fit over the basic ideological classification