bargaining over governments in a stochastic environment in this paper i structurally estimate a stochastic bargaining model of government formation in a multiparty parliamentary democracy and i conduct policy experiments to evaluate the effects of changes in the bargaining procedure i show that the model fits well data on the duration of negotiations and government durations in postwar italy also i show that changes in the proposer selection process would not affect either the duration of negotiations or government durations whereas the imposition of a strict deadline would in general reduce the incentives to delay agreement as well as government durations

vote buying supermajorities and flooded coalitions in a recent paper banks 2000 adopting the framework of our model groseclose and snyder 1996 derives several new and noteworthy results in addition he provides a counterexample to our proposition 4 here we explain the error in our proposition but note that we can correct it easily if we invoke an additional assumption in equilibrium the winning vote buyer constructs a nonflooded coalition that is she does not bribe every member of her coalition we conclude with a brief discussion of the substantive implications of banks s proposition 1 we note that it provides additional support for our general claim that minimal winning coalitions should be rare in a vote buying game

centralized versus decentralized provision of local public goods a political economy approach abstract this paper takes a fresh look at the trade off between centralized and decentralized provision of local public goods it argues that the sharing of the costs of local public spending in a centralized system will create a conflict of interest between citizens in different jurisdictions when spending decisions are made by a legislature of locally elected representatives this conflict of interest will play out in the legislature depending on precisely how the legislature behaves the result may be excessive public spending or allocations of public goods characterized by uncertainty and misallocation across districts the extent of the conflict of interest between districts is affected by spillovers and differences in tastes for public spending thus the relative performance of centralized and decentralized systems depends upon spillovers and differences in tastes for public spending but for different reasons than suggested in the existing literature

on the endogenous allocation of decision powers in federal structures abstract this paper provides a political economy explanation of the degree of centralization in economic policy making to determine which policies are to be centralized regions select representatives who then negotiate the degree of centralization and the regional cost shares of centrally decided policies we show that the resulting degree of centralization is suboptimally low voters strategically delegate to representatives who are averse to public spending and hence prefer decentralized decisions in order to reduce their region s cost share when spillovers are asymmetric strategic delegation is stronger at the periphery than at the center

endogenous federal grants and crowd out of state government spending theory and evidence from the federal highway aid program contrary to simple theoretical predictions existing evidence suggests that federal grants do not crowd out state government spending a legislative bargaining model with endogenous grants documents a positive correlation between grant receipts and preferences for public goods this correlation has likely biased existing work against measuring crowd out to correct for such endogeneity the model motivates instruments based on the political power of state congressional delegations exploiting this exogenous variation in grants the instrumental variables estimator reports crowd out that is statistically and economically significant this endogeneity may explain the flypaper effect a nonequivalence between grant receipts and private income jel d70 h40 h77

divided we reform evidence from us welfare policies abstract divided government is often thought of as causing legislative deadlock i investigate the link between divided government and economic reforms using a novel data set on welfare reforms in us states between 1978 and 2010 panel data regressions show that under divided government a us state is around 25 more likely to adopt a welfare reform than under unified government several robustness checks confirm this counter intuitive finding case study evidence suggests an explanation based on policy competition between governor senate and house

predictability and power in legislative bargaining the rules and procedures of legislatures often provide legislators with information bearing on the identities of upcoming proposers for a broad class of legislative bargaining games we establish that markovian equilibria necessarily deliver all economic surplus to the first proposer whenever the information structure permits the legislators to rule out some minimum number of proposers one round in advance this result holds regardless of the recognition process and even if players vary in patience and risk aversion it raises the possibility that procedures adopted in the interest of transparency may contribute to the imbalance of political power

when does it take a nixon to go to china substantial policy changes like market oriented reforms by populist parties and steps towards peace by hawks are sometimes implemented by unlikely parties to account for such episodes this paper develops a framework in which incumbent politicians have better information about the state of the world than voters the incumbent is unable to credibly transmit all this information since voters are also imperfectly informed about his ideology the paper identifies conditions under which an incumbent party s electoral prospects increase the more atypical the policy it proposes popular support for a policy or its credibility depends on the policymaker policy pair copyright 1998 by american economic association

a carrot and stick approach to agenda setting this paper models a legislature in which the same agenda setter serves for two periods showing how he can exploit a legislature completely in the first period by promising future benefits to legislators who support him in equilibrium a large majority of legislators vote for the first period proposal because they thereby maintain the chance of belonging to the minimum winning coalition in the future legislators may therefore approve policies by large majorities or even unanimously that benefit few or even none of them the results are robust but institutional arrangements such as entitlements can reduce the agenda setter s power by reducing his discretion to reward and punish legislators and rules such as sequential voting can increase a legislator s ability to resist exploitation

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

parochial interests and the centralized provision of local public goods evidence from congressional voting on transportation projects abstract local public goods financed from a national tax base provide concentrated benefits to recipient jurisdictions but disperse costs creating incentives for legislators to increase own district spending but to restrain aggregate spending due to the associated tax costs while these common pool incentives underpin a variety of theoretical analyses which tend to predict inefficiencies in the allocation of public goods there is little direct evidence that individual legislators respond to such incentives to test for reactions to such incentives this paper analyzes 1998 congressional votes over transportation project funding the empirical results provide evidence that legislators respond to common pool incentives the probability of supporting the projects is increasing in own district spending and decreasing in the tax burden associated with aggregate spending having found that legislators do respond to such incentives i use the parameter estimates to calculate the efficient level of public goods which suggest over spending in aggregate especially in politically powerful districts and large associated deadweight loss

an analysis of the impact of congressional term limits we examine the impact of a six term tenure limit on members of the u s house of representatives the first part of this study develops a methodological framework for simulating the quantitative impact of term limits the second part of this study uses this framework to estimate the effects of term limits on i the value of holding office ii turnover and iii the size of the democratic majority in the house both steady state and transition period effects are explored i introduction the widespread support for term limitations seems to have caught both popular commentators and academic researchers by surprise 1 why do voters want them and what is the likely impact of such legislation a small but growing literature concentrates on the first of these two questions adams and kenny 1986 dick and loft 1993 in contrast this paper addresses the second in particular it investigates the empirical consequences of imposing a twelve year six term tenure limit on the members of the u s house of representatives both the degree and timing of the impact of the alternative regimes are investigated here the issue of timing arises because term limits can have very different effects depending upon how they treat currently serving congressmen we focus our investigation on the two legislative regimes that we believe have the greatest chance of being implemented limited grandfathering and complete grandfathering 2 assuming term limit legislation is passed in 1992 we trace out the time paths of the effects associated with each of these regimes as we shall see there are important transitional differences between the two the paper proceeds as follows section ii addresses the methodology used in this analysis section iii considers the impact of term limits on i the value of holding office ii turnover and iii the democratic majority in the house section iv concludes ii methodology the first concern of this paper is to model the seniority structure of the house in the absence of congressional term limits let n t identify the number of congressmen in their nth term at time t let r define the proportion of congressmen that successfully move from term n to term n l note that there are a number of reasons for not continuing to an additional term besides electoral defeats there are voluntary departures to seek other elective office or private sector employment retirements and deaths given any set of continuation rates r sub 1 r sub 2 and an initial distribution of representatives across terms n sub 1 t n sub 2 t one can construct what the seniority structure of congress will look like any number of periods into the future for instance the number of congressmen in their jth term at time t m is given by mathematical expression omitted where n sub 1 t 1 m j identifies the number of representatives who enter congress in time period t 1 m j t 1 and j and m o ifj m 1 one simply takes the number of congressmen currently serving their j m th term and multiplies this by the appropriate product of continuation rates if j m 1 one needs to identify the number of congressmen who will enter congress in time period t l m since congress always has 435 members the number of arrivals must always equal the number of departures the number of first term congressmen who leave office at the end of time period t is given by 1 r sub 1 n sub 1 t similarly the number of second term congressmen who leave office at the end of time period t is given by 1 r sub 2 n sub 2 t thus the number of representatives who will enter congress in time period t l is given by mathematical expression omitted equations 1 and 2 allow one to recursively solve for n sub 1 t 1 m j for all m j 1 i

communication in federal politics universalism policy uniformity and the optimal allocation of fiscal authority the paper presents a positive model of policy formation in federal legislatures when delegates engage in the strategic exchange of policy relevant information depending on the type of policy under consideration communication between delegates generally suffers from a bias that makes truthful communication difficult and sometimes impossible this generates inefficient federal policy choices that are often endogenously characterized by overspending universalism and uniformity building on these findings i develop a theory of fiscal de centralization which revisits the work of oates in a world of incomplete information and strategic communication empirical results from a cross section of us municipalities are consistent with the predicted pattern of spending

bargaining and distribution in marriage the standard economic model of the family is a common preference model that assumes that a family maximizes a single utility function and implies that family behavior is independent of which individuals receive income or control resources in recent years this model has been challenged by game theoretic models of marriage that do not impose pooling and are therefore consistent with empirical evidence that income controlled by husbands and wives does have different effects on family behavior in this paper the authors review a number of simple bargaining models and relevant empirical evidence and discuss their implications for distribution within marriage

measuring personal savings consumption and disposable income in canada this paper highlights the fact that more adequate measurement of personal savings as well as a consumption and disposable income in canada yields a totally different picture from that projected by the national accounts niea the author measures of consumption excludes purchases of durables but includes their depreciation savings are measured as the change in the net real market value of the end of year balance sheet while according to the niea the savings income ratio reached 15 percent in 1981 their measure suggests that this ratio was negative and amounted to 10 5 percent in conclusion possible implications of the mismeasurement of savings on economic policy decisions are considered

recognition without replacement in legislative bargaining abstract this paper studies infinite horizon sequential bargaining among n 3 players in which a proposer is randomly selected from the pool of potential proposers if the proposal is rejected the current and previous proposers are excluded from the pool of potential proposers and the game moves on to the next round until every player has had the same number of opportunities to be the proposer to analyze the model with a particular time dependency within each sequence of n rounds a cycle i characterize the stationary equilibrium of a stochastic game which i call cycle stationary subgame perfect cssp equilibrium the cssp equilibrium is unique in payoffs and analogous to the subgame perfect equilibrium of some forms of finite horizon bargaining even when every player is entirely patient the proposer s share in the cssp equilibrium is smaller than that predicted by the stationary equilibrium of the baron ferejohn legislative bargaining model

should economists be kicked upstairs academic folklore has it that faculty of the same discipline seldom meet together even for merriment and diversion but that the conversation turns to a conspiracy inevitably being wrought upon them by their university s administration 1 economists are not immune from such suspicions about the competence of academic administrators if economists were running academe they tend to believe a good dose of competition incentives marginal analysis and a realistic appreciation for opportunity costs would surely boost efficiency some economists do get to reallocate inputs on the basis of marginal revenue products and some have actually met a payroll a handful have worked their way into executive offices of fortune 500 firms others manage smaller consulting businesses the largest concentration of economists in complex leadership and management positions however is in academe itself these economists are the subject of this article the belief of colleagues in the humanities and natural sciences that economists would make better administrators than incumbents seems widespread the only exception to this faith in economists occurs it seems at institutions where an incumbent is already an economist the esteem in which economists are held as prospective university administrators by noneconomists however seems frequently based on false premises consider this quotation from a conversation in the faculty lunchroom economists know all about money and balancing and cutting a budget they can read a balance sheet and an income statement and know how to reconcile a checkbook these proponents of economists as good administrators have apparently never conducted empirical research to check for example the accuracy of their premises with a few economists spouses who have struggled to untangle a checkbook bordering on chaos or who have tried in vain to convince their economist partners that personal expenditures are also subject to a budget constraint seldom do the champions of economists as academic administrators argue that an understanding of economics provides an edge in recognizing trade offs tracing indirect effects of policy changes being alert to alternatives focusing on incremental benefits and costs ignoring past mis

cross border externalities and cooperation among representative democracies abstract this paper analyzes the provision of public goods with cross border externalities by representative democracies the level of provision of each country is decided by a policy maker elected by majority rule at the country level we compare the case in which policy makers set their policies noncooperatively with the case in which they set their policies through coasian cooperation cooperation induces policy makers to internalize cross border externalities but it also induces strategic voters to elect a policy maker who cares less about the public good to reduce their public good contribution the former effect increases public good provision while the latter reduces it we show that once voters incentives are taken into account whether cooperation is beneficial depends neither on voters preferences nor on the magnitude of spillovers nor on the size bargaining power or efficiency of each country instead it depends only on the curvature of the demand for the public good cooperation increases decreases public good provision when the demand function is more less convex than the unit elastic demand function hence the desirability of international cooperation depends mostly on the type of public good considered

inefficiency in legislative policymaking a dynamic analysis this paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining the policy space incorporates both productive and distributive public spending and distortionary taxation the productive spending is investing in a public good that benefits all citizens e g national defense and the distributive spending is district specific transfers e g pork barrel spending investment in the public good creates a dynamic linkage across policymaking periods the analysis explores the dynamics of legislative policy choices focusing on the efficiency of the steady state level of

uniqueness of stationary equilibrium payoffs in coalitional bargaining we study a model of sequential bargaining in which in each period before an agreement is reached the proposer s identity is randomly determined the proposer suggests a division of a pie of size one each other agent either approves or rejects the proposal and the proposal is implemented if the set of approving agents is a winning coalition for the proposer the theory of the fixed point index is used to show that stationary equilibrium expected payoffs of this coalitional bargaining game are unique this generalizes eraslan 34 insofar as a there are no restrictions on the structure of sets of winning coalitions b different proposers may have different sets of winning coalitions c there may be a positive probability that no proposer is selected

political equilibrium and the provision of public goods this paper treats interest groups peoplein their role as consumers of a public goodand people in their role as taxpayers asthe unit of account for representativevoting each group is allowed to make aneffort to support its preferred candidateand at the margin the effort benefitratio is the political price the group iswilling to pay to secure an additionaldollar of benefits

majority rule and election models abstract this paper surveys the theoretical work that has been done on majority rule and economic models of elections section i provides an overview of the topic section 2 reviews the most important results that have been obtained about majority rule as an abstract collective choice rule section 3 identifies some alternative inferences that can be made from those results section 4 covers some models that include additional features that are present in political institutions where majority rule is used section 5 concentrates on some alternative election models and equilibrium concepts section 6 focuses on election models with abstentions and or candidate uncertainty about voter behaviour section 7 compares and contrasts models where candidates are certain about what the voters choices will be contingent upon about the choices made by the candidates and models where they are uncertain about those choices section 8 closes the survey by identifying some emerging areas of research

demand commitment in legislative bargaining morelli 1999 provides a model of government formation in which the parties make payoff demands and the order of moves is chosen by the leading party morelli s main proposition states that the ex post distribution of payoffs inside the coalition that forms is proportional to the distribution of relative ex ante bargaining power we provide a counterexample in which the leading party is able to obtain the entire payoff furthermore there are coalitions for which proportional payoff division does not occur for any order of moves

politics institutions and fiscal performance in a federal system an analysis of the argentine provinces abstract we posit that the fiscal behavior of argentine provinces is determined by a common pool game at two levels within each province and across political units in the latter game the national government has a greater incentive than the provincial governments to internalize the negative externality of fiscal imprudence given relatively strong party discipline the president is able to induce governors from his party to internalize a portion of the externality to a greater extent than opposition governors in argentina party matters for fiscal behavior but it does so for reasons different from those identified in studies of oecd countries

the economics of split ticket voting in representative democracies in u s elections voters often vote for candidates from different parties for president and congress voters also express dissatisfaction with the performance of congress as a whole and satisfaction with their own representative the authors develop a model of split ticket voting in which government spending is financed by uniform taxes the benefits from this spending are concentrated while the model generates split ticket voting overall spending is too high only if the president s powers are limited overall spending is too high in a parliamentary system the authors model can be used as the basis of an argument for term limits copyright 1997 by american economic association

non cooperative bargaining theory an introduction the paper provides an informal introduction to some of the main themes of the recent literature on non cooperative or sequential bargaining models it focuses in particular on the relationship between the new approach and the traditional axiomatic approach exemplified by nash bargaining theory it illustrates the new insights offered by the non cooperative approach by reference to a detailed analysis of the manner in which the presence of an outside option available to one of the parties will affect the negotiated outcome finally the difficulties which arise in extending this analysis to two person bargaining with incomplete information and to n person bargaining are discussed this is a revised version of the fourth review of economic studies lecture presented in april 1985 at the joint meeting of the association of university teachers of economics and the royal economic society held in oxford the choice of lecturer is made by a panel whose members are currently professors hahn mirrlees and nobay and the paper is refereed in the usual way this paper aims to provide an informal and elementary introduction to an approach to bargaining which has received a great deal of attention over the past few years the approach involves writing down some particular sequence of moves offers and replies to be made over time in the course of negotiations and then looking for a non cooperative equilibrium in the game thus specified in practice a perfect equilibrium or in games of incomplete information a sequential equilibrium while the approach appears at first sight to be very different in spirit from the traditional axiomatic approach in which a bargaining solution is specified by appealing to a number of general requirements which are deemed appropriate on the basis of some a priori considerations the two approaches are in fact complementary while the

legislative bargaining with heterogeneous disagreement values theory and experiments we study a legislative bargaining game in which failure to agree in a given round may result in a breakdown of negotiations in that case each player receives an exogenous disagreement value we characterize the set of stationary subgame perfect equilibria under all q majority rules under unanimity rule equilibrium payoffs are strictly increasing in disagreement values under all less than unanimity rules expected payoffs are either decreasing or first increasing and then decreasing in disagreement values we conduct experiments involving three players using majority and unanimity rule finding qualitative support for several but not all of our main predictions having a high disagreement value is indeed an advantage under unanimity under majority the player with the highest disagreement value is more likely to be excluded but this does not consistently result in a lower average payoff

legislative bargaining under weighted voting organizations often distribute resources through weighted voting we analyze this setting using a non cooperative bargaining game based on the baron ferejohn 1989 model unlike analyses derived from cooperative game theory we find that each voter s expected payoff is proportional to her voting weight an exception occurs when many high weight voters exist as low weight voters may expect disproportionately high payoffs due to proposal power the model also predicts that ex post the coalition formateur the party chosen to form a coalition will receive a disproportionately high payoff using data from coalition governments from 1946 to 2001 we find strong evidence ofsuch formateur effects

coalitional bargaining games with random proposers theory and application abstract we consider a non cooperative coalitional bargaining game with random proposers in a general situation for which players differ in recognition probability and time preference we characterize an efficient equilibrium as the generalized nash bargaining solution that belongs to the core the model is applied to wage bargaining between an employer and multiple workers although involuntary unemployment may occur in equilibrium full employment emerges as players become sufficiently patient

does raiding explain the negative returns to faculty seniority i introduction economists have studied various aspects of faculty mobility research shows that turnover is greater among nonunion faculty rees 1994 female faculty average slightly more employers than male faculty barbezat and hughes 2001 ginther and kahn 2004 1 the responsiveness of turnover to relative pay diminishes with rank ehrenberg kasper and rees 1991 and research productivity enhances prospects for upward mobility ault rutman and stevenson 1979 1982 coupe smeets and warzynski 2005 still questions remain unanswered where do faculty go when they leave a university how does faculty turnover vary with time at a university what percentage of faculty move upward and what percentage move downward because of tenure denials or the prospect of being turned down for tenure the present article contributes to our understanding of these issues but its primary objective was to use data on faculty mobility to provide insights on another issue returns to academic seniority the negative returns to seniority that many studies find are commonly attributed to one of two factors 2 the first view is that negative returns reflect monopsony power on the part of universities faculty with high mobility costs acquire high seniority and because they are unlikely to move they are paid less than equally productive faculty that employers view as more likely to leave a competing explanation is that highly productive faculty are raided according to this story returns to seniority are biased negatively because faculty with high seniority tend to have low unmeasured productivity the best faculty are bid away moving on to better jobs those who remain are the faculty without outside offers and the negative returns estimated for senior faculty actually reflect a penalty for low unmeasured productivity rather than a true penalty for seniority the raiding story has several implications first estimated returns to seniority should become less negative the more fully the productivity is measured second estimated returns should be less negative once we control for faculty who are bid away finally and of particular importance estimated returns to seniority should not be negative for faculty who are bid away the faculty for whom unmeasured productivity is presumably high with the right data set these hypotheses can be tested rejection of the raiding hypothesis would provide tacit evidence of monoposony in academic markets 3 this article contributes to the literature in several ways it is the first research to directly test the raiding hypothesis it provides a detailed look at faculty mobility in one segment of the academic labor market it extends and improves bratsberg ragan and warren 2003 in the following ways it expands the sample to cover three decades of faculty pay records it includes additional controls for productivity number and types of books recent and prospective articles and so forth resulting in the most complete specification of research productivity to date and it allows for heterogeneity in the seniority penalty via phd pedigree and direction of move finally it tests for the possibility that the academic job market does a better job of matching faculty and universities in recent years as might be expected because of the information revolution the sample consists of five public phd granting universities in the midwest we track all tenure track economics faculty employed in these universities over a 30 yr period we measure their productivity their pay and their mobility as such the study provides a rich and detailed investigation of one subset of economics programs it is possible that mobility may be greater in urban areas where faculty can more readily obtain alternative employment without relocating and prior research indicates that pay structures depend on the university s stature and its relative emphasis on research and teaching

reconciling voters behavior with legislative term limits a puzzle exists over why voters continually re elect their congressional and state representatives although these same voters often support initiatives to limit the number of terms that their legislators may serve residents of california colorado and oklahoma voted in 1990 to limit the terms of their state legislators to tenures ranging from six to twelve years 1 in california these same voters however re elected 87 of 91 or 96 percent of all incumbent state representatives and senators whose terms they sought to limit 2 among re elected incumbents 67 or 77 percent had served as long as or longer than the maximum term prescribed under their state s term limit initiative voters defeated only two incumbents who would have been removed under the terms of california s tenure restrictions had they been in effect similar voter behavior characterized recent state elections in colorado and oklahoma 3 more generally these seemingly contradictory voter preferences also are apparent in public opinion polls at the federal level while 62 percent of voters immediately prior to the 1990 general elections indicated their intentions to reelect their congressman that same poll showed that only 24 percent said they approve of the way congress is handling its job gallup and newport 1990 pp 36 37 support for term limit initiatives and the low public esteem of legislators as a group both appear to be inconsistent with voters strong preferences for their own representative and the regular reelection of incumbents

an institutional theory of divided government and party polarization this paper develops a simple model of institutionally driven party competition which may explain the persistence of divided government in the basic model two parties that are solely motivated to win elections compete for two offices the legislature and the executive parties offer positions in a single dimension to a single district sophisticated electorate that understands the institutionally defined relationship between electoral and policy outcomes when parties are risk averse competition for the two offices leads to a prisoner s dilemma the parties can jointly improve on the one shot nash equilibrium in which they adopt convergent positions several extensive form election games are shown to allow the parties to solve their prisoner s dilemma in a subgame perfect nash equilibrium in such an equilibrium parties adopt widely separated positions and divided government and splitticket voting occur with high probability unlike typical voting models in the basic model there is no tendency for electoral equilibrium to produce the expected median voter s ideal policy outcome these results are robust to a variety of extensions including significant sincere voting multiple policy dimensions and defections by incumbent candidates

does the size of the legislature affect the size of government evidence from two natural experiments this paper makes use of regression discontinuity designs to estimate the effect of the number of legislators on the size of government the results indicate a negative effect i e the larger the size of the legislature the smaller is the size of government this runs counter to conventional wisdom one potential explanation is that more legislators can better control a budget maximizing bureaucracy i present evidence that is consistent with the proposed mechanism

on majoritarian bargaining with incomplete information abstract this paper studies a finite horizon version of baron and ferejohn s 1989 majoritarian bargaining with incomplete information our devised model essentially blends spence s signaling and the coalition formation of majoritarian bargaining the main findings include i oversized coalitions may arise in equilibrium and allowing for delay can be optimal for a proposer ii whether being regarded as a high type makes a player better or worse off is not predetermined a priori but depends on two conflicting concerns the offer concern a la spence s signaling the higher the type the higher the offer and the coalition concern in majoritarian bargaining the higher the type the lower the probability of being a member of the majoritarian coalition iii players take action to distinguish themselves via delay however separating equilibria often fail to exist due to the incapability or unprofitability of exercising separation iv separating equilibria if they exist can have a no envy property and pooling equilibria may coexist with the least cost separating equilibrium even after refining the equilibrium set by the intuitive criterion and v equilibria may be non stationary and exhibit the novel feature that pooling proposals arise if a game lasts an even number of sessions but not if there is an odd number of sessions

the response of employees to severance incentives the university of california s faculty 1991 94 in response to huge budgetary shortfalls in the early 1990s the university of california offered its older and longer service employees financial inducements to leave this paper analyzes the responses of uc s faculty to three waves of buyout incentives it is estimated that an individual presented with 10 percent higher severance benefits has a 7 8 percent higher probability of quitting however quit probabilities are very difficult to forecast with accuracy this casts doubt on arguments that maintain that buyouts are superior to employer initiated layoffs as a mechanism to effect large employment changes

are moderates better representatives than extremists a theory of indirect representation few if any elected representatives are capable of unilaterally implementing their platforms rather they choose between options generated by other actors and or external events we present a theory of voters preferences over representatives who will cast votes on their behalf and show that in this setting voters preferences over candidates platforms will not look like voters preferences over policies we demonstrate that these induced preferences for representation tend to favor more extreme representatives and we present two models of electoral competition in which induced preferences over representatives lead to elite polarization

legislative representation bargaining power and the distribution of federal funds evidence from the us congress this article investigates the relationship between representation in legislatures and the geographic distribution of federal funds in a legislative bargaining model we demonstrate that funds are concentrated in high representation areas and two channels underlie this result the proposal power channel reflects the role of representation in committee assignments and the vote cost channel reflects the role of representation in coalition formation in our empirical analysis we find that small states relative to large states receive more funding in the us senate relative to the house we also find empirical support for the two channels underlying this relationship throughout the history of federations and international organisations a key consti tutional design question involves how jurisdictions of different sizes are represented in legislative bodies and how their votes will ultimately be weighted large jurisdictions typically argue for delegation sizes or voting weights that are roughly proportional to population whereas small jurisdictions typically argue for an equal number of delegates or votes for each jurisdiction this conflict over representation is presumably driven at least in part by a belief that increased representation strengthens bargaining power in the battle over the geographic distribution of funds authorised by these legislative bodies in this article i analyse the relationship between legislative representation bar gaining power and the geographic distribution of federal funds from both a theoretical and empirical perspective in addition to investigating the existence of a relationship between representation and federal funds i also explore the underlying mechanisms that is i ask which political institutions such as agenda control provided to commit tees and the formation of coalitions under majority rule shape the bargaining power of jurisdictions in central legislatures and thus facilitate the relationship between repre sentation and the distribution of federal spending to provide a framework for analysing these issues i begin by developing a simple theoretical model of a central legislature that determines the crossjurisdiction distri bution of local public goods which are financed by a national tax base both delegation sizes and population are variable allowing me to consider a variety of institutional arrangements for jurisdictional representation legislators represent local interests and given the common pool problem associated with concentrated benefits and dis persed tax costs attempt to increase ownjurisdiction spending but to restrain spending elsewhere the model follows a recent literature on legislative bargaining in which a proposer must secure a majority of votes in order to pass legislation and due to the

delegation effects in representative democracies do they foster extremism abstract we analyze the political equilibria of a model of representative democracy with strategic delegation where the policy which maximizes ex ante the welfare of a citizen is not in general the one he would select ex post if he were elected we show that these effects give rise to an abstention effect which is likely to lead to the unopposed election of extremist representatives and prevents policy convergence in two candidate elections

budgetary devices for curbing spending prone ministers and bureaucrats in this paper i study asimple game of the budgetary process thegame has three players a spending proneminister who proposes a budget a primeminister who accepts or vetoes and abureaucrat who provides non verifiableinformation about policy the bureaucratis appointed by the spending minister ishow that in this setting public spendingis excessive this result stems from theproposal power of the minister and hisincentive to appoint a spending pronebureaucrat next i examine two devices forcontrolling public spending binding budgettargets imposed by the prime minister anddelegating veto power to a spending aversefinance minister it is shown that thelatter device is more effective than theformer device to curb a spending proneminister because it not only reduces theproposal power of the spending minister but also induces him to appoint lessspending prone bureaucrats

the dynamics of coalition formation a multilateral bargaining experiment with free timing of moves abstract we experimentally investigate behavior in a finitely repeated coalition formation game played in continuous time subjects interact in groups of three bargaining over the distribution of payments which occur at regular time intervals during a given interval payments occur if and only if a majority is in agreement about their allocation aside from these rules we purposefully impose little structure on the bargaining process we investigate the frequency and stability of different types of agreements as well as transitions between them two thirds of payments involve divisions where one player receives nothing almost half of which are equal splits of the entire surplus between two players the most stable division is the three way equal split transitions between agreements are frequent and are generally consistent with myopic payoff maximization in the sense that subjects do not accept short term losses we also find that transitions between coalitions are not markovian in particular players more often forgo short term gains in order to remain in a coalition if it has proven stable in the past

optimal financial aid policies for a selective university our paper provides a model of optimal financial aid policies for a selective university the model implies that the financial aid package to be offered to each category of admitted applicants depends on the elasticity of the fraction who accept offers of admission with respect to the financial aid package offered them the propensity of the category to enroll the elasticity of the category s average quality with respect to the number admitted and the relative weight the university assigns them in the utility function while the latter must be determined subjectively the former parameters are subject to empirical estimation we conclude with a study of one institution s data and illustrate how they may be estimated these estimates are then applied to illustrate what the optimal financial aid policy would be for the university

formal versus informal legislative bargaining we study how the formality of a bargaining procedure affects its outcome we compare a formal baron ferejohn bargaining procedure to an informal procedure where players make and accept proposals in continuous time both constitute non cooperative games corresponding to the same bargaining problem a three player median voter setting with an external disagreement point this allows us to study formality in the presence and absence of a core and provides a natural explanation for the effects of preference polarization our results show that polarization hurts the median player and that formality matters the median player is significantly better off under informal bargaining

consumption permanent income and financial wealth in canada empirical evidence on the intertemporal approach to the current account the intertemporal approach to the current account is rejected as a complete explanation of the canadian current account federal government fiscal policy plays an important role in the determination of the current account a private sector agent that treats its holdings of net liabilities of the federal government as net wealth accumulates the sum of these liabilities and the net liabilities of non residents as part of an intertemporally optimal plan this result indicates both fiscal policy and intertemporal considerations are important determinants of current account behaviour consommation revenu permanent et richesse financiere au canada resultats empiriques d une approche au compte courant mettant l accent sur la dimension intertemporelle cet article montre que l approche mettant l accent sur la dimension intertemporelle ne produit pas une explication complte du comportement du compte courant canadien i1 semble que la politique fiscale du gouvernement federal joue un r6le important dans la conformation du compte courant un agent economique prive composite qui traite son portefeuille de dettes nettes du gouvernement federal comme richesse nette va accumuler la somme de ces dettes et des dettes nettes des non residents dans le cadre de son plan intertemporel optimal les resultats montrent que la politique fiscale et des considerations intertemporelles sont des elements determinants du comportement du compte courant

voting weights and formateur advantages in the formation of coalition governments over the last two decades a large and important literature has emerged that uses game theoretic models of bargaining to study legislative coalitions to test key predictions of these models we examine the composition of coalition governments from 1946 and 2001 these predictions are almost always expressed in terms of parties minimal integer voting weights we calculate such weights for all parliamentary parties in addition we develop a statistical model that nests the predictions of many of these models of the distribution of posts we find that for parties that join but did not form the government there is a linear relationship between their share of the voting weight in parliament and their share of cabinet posts the party that forms the government the formateur receives a substantial bonus relative to its voting weight the latter finding is more consistent with proposal based bargaining models of coalition formation and suggests that parties gain disproportionate power not because of their size but because of their proposal power

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

demand bargaining and proportional payoffs in majority games abstract we study a majoritarian bargaining model in which players make payoff demands in decreasing order of voting weight the unique subgame perfect equilibrium outcome is such that the minimal winning coalition of the players that move first forms with payoffs proportional to the voting weights this result advances previous analysis in terms of one or more of the following a the simplicity of the extensive form finite horizon with a predetermined order of moves b the range of the majority games covered c the equilibrium concept subgame perfect equilibrium is sufficient for a unique prediction

the empirical content of nash bargained household behavior in households whose allocation decisions can be represented as nash bargained household decisions extrahousehold environmental parameters eeps serve as pure shifters of the threat points the comparative statics of changes in demands due to changes in these eeps are given these are incorporated into a comprehensive statement of the empirical content of nash bargained household behavior including a nash generalization of barten s 1966 fundamental matrix equation of the theory of consumer demand estimation and data requirements are discussed along with nested testing of the following structure the neoclassical model is nested in the nash bargained model which in turn is nested in an unrestricted model of household demands emphasized throughout is the enriched menu of explanatory variables for demand analysis provided by the nash model as well as the model s ability to jointly analyze i household formation and ii intrahousehold allocation decisions

old school ties financial aid coordination and the governance of higher education abstract this paper analyzes the role of financial aid coordination among the group of top northeastern colleges and universities known as the overlap group members of the overlap group met annually to tailor financial aid packages so that the out of the pocket contribution of parents to their children s education was the same regardless of the school the students chose to attend i argue that the practices and stability of the overlap group are difficult to reconcile with traditional cartel theory and that financial aid coordination was a solution to organizational problems encountered in the education industry particularly to matching and externality problems arising in the allocation of elite students among educational institutions

legislative bargaining and coalition formation abstract the finite horizon version of d p baron and j ferejohn s 1989 amer polit sci rev 83 1181 1206 legislative bargaining model is investigated with three or more periods a continuum of divisions is supportable as subgame perfect equilib ria there exist equilibria where coalitions larger than a minimal winning coalition receive strictly positive shares with sufficiently patient players and a sufficiently long horizon any interior distribution is supportable as an equilibrium in contrast a generic uniqueness result applies when introducing heterogenous time preferences the unique backwards induction equilibrium in the perturbed game is nonstationary and neither the original symmetric nor the perturbed game provides guidance for equilibrium selection in the infinite game journal of economic literature classification numbers c73 c78 d72 d78 h49

on the need for fiscal constraints in a monetary union the desirability of fiscal constraints in monetary unions depends critically on whether the monetary authority can commit to following its policies if it can commit then debt constraints can only impose costs if it cannot commit then fiscal policy has a free rider problem and debt constraints may be desirable this type of free rider problem is new and arises only because of a time inconsistency problem

adam smith goes to college an economist becomes an academic administrator the author asks whether it is useful to view universities in a utility maximizing framework and shows that university organizing virtually guarantees that the utility maximizing model is the incorrect approach he then discusses resource allocation issues at cornell and reflects upon how concepts that are obvious to economists helped or hindered decision making at cornell the author hopes to convey not that economic concepts are irrelevant in operating a university but rather that it takes a long time to explain to all the actors in the system why these concepts should matter and even longer to actually make them matter

seniority in legislatures we construct a stochastic game model of a legislature with an endogenously determined seniority system we model the behavior of the legislators as well as their constituents in an infinitely repeated divide the dollar game each legislative session must make a decision on redistributional issues modeled as a divide the dollar game however each session begins with a vote in which the legislators decide by majority rule whether or not to impose on themselves a seniority system legislative decisions on the redistributional issues are made by the baron ferejohn rule an agenda setter is selected by a random recognition rule which in our model is a function of the seniority system selected the agenda setter makes a proposal on redistributional issues and the legislature then votes whether to accept or reject the agenda setters proposal if the legislature rejects the proposal another agenda setter is randomly selected and the process is repeated if the legislature accepts the proposal the legislative session ends and the voters in each legislative district vote whether to retain their legislator or throw it out of office the voters verdict determines the seniority structure of the next period legislature we find a stationary equilibrium to the game having the property that the legislature imposes on itself a non trivial seniority system and that legislators are always reelected

estimating the value of proposal power this paper investigates the role of proposal power in the allocation of transportation projects across u s congressional districts in 1991 and 1998 the evidence supports the key qualitative prediction of legislative bargaining models members with proposal power those sitting on the transportation authorization committee secure more project spending for their districts than do other representatives support for the quantitative restrictions on the value of proposal power is more mixed i then empirically address several alternative models of legislative behavior including partisan models informational roles for committees models with appropriations committees and theories of committees as preference outliers

electoral systems and income inequality abstract the goal of this paper is to determine if electoral systems and inequality are linked using high quality data lis database and simple panel methods we show that when the degree of proportionality of a system increases inequality decreases

dynamics and stability of constitutions coalitions and clubs a central feature of dynamic collective decision making is that the rules that govern the procedures for future decision making and the distribution of political power across players are determined by current decisions for example current constitutional change must take into account how the new constitution may pave the way for further changes in laws and regulations we develop a general framework for the analysis of this class of dynamic problems under relatively natural acyclicity assumptions we provide a complete characterization of dynamically stable states as functions of the initial state and determine conditions for their uniqueness we show how this framework can be applied in political economy coalition formation and the analysis of the dynamics of clubs the explicit characterization we provide highlights two intuitive features of dynamic collective decision making 1 a social arrangement is made stable by the instability of alternative arrangements that are preferred by sufficiently many members of the society 2 efficiency enhancing changes are often resisted because of further social changes that they will engender

tenure issues in higher education the system of tenure that dominates american higher education has long been a source of controversy the institution of tenure has been attacked for entrenching a lazy professoriate more interested in attending faraway conferences and producing unreadable research than in teaching or developing practical insights while on the other hand it has long been defended as an absolute necessity for the defense of open intellectual inquiry the tenure controversy has been sharpened in recent years by several events the end of mandatory retirement which was abolished by federal law effective january 1 1994 has heightened concerns about the productivity and commitment of professors who received tenure long ago and who no longer have the same incentives to invest in long term reputation there is also ongoing concern over the steadily rising cost of higher education which raises the question of what students as well as the taxpayers who support public institutions of higher education are getting for their money 1 the idea that tenure is a wasteful institution for universities runs up against the puzzling fact that the commitment to tenure is one that academic institutions impose on themselves although the american association of university professors aaup provides a powerful lobby in favor of tenure generally colleges and universities most notably private ones are under no legal requirement to observe tenure constraints although as administrators we certainly feel the weight of those constraints our view is that a tenure system in fact provides important benefits to society and to colleges and universities we argue here that the role of tenure is

strategic delegation in a legislative bargaining model with pork and public goods abstract this paper examines the incentives of voters to appoint legislators with different preferences from their own the paper adopts an underlying legislative bargaining model proposed by volden and wiseman 2007 in which legislators with heterogeneous preferences divide a fixed budget between a public good and pork projects local public goods we show that voters have an incentive to strategically delegate to affect how the budget is divided at the legislative level when voters preferences for pork are not too strong the incentives for strategic delegation exist to appoint representatives who will direct more money to the public good and not to pork projects this generally results in at least as many representatives as districts that favor the public good the comparative statics predict that when strategic delegation occurs increasing the size of the legislature increases the fraction of the budget spent on the public good

waiting to settle multilateral bargaining with subjective biases abstract we study multilateral bargaining games where agents disagree over their bargaining power we show that if agents are extremely optimistic there may be costly delays in an arbitrarily long finite game but if optimism is moderate all sufficiently long games end in immediate agreement we show that the game with extreme optimism is highly unstable in the finite horizon and we examine the ramifications of this instability on the infinite horizon problem finally we consider other voting rules and show that the majority rule may be more efficient than the unanimity rule when agents are optimistic