education poverty and terrorism is there a causal connection the paper investigates whether there is a connection between poverty or low education and terrorism we review evidence on hate crimes which are closely related to terrorism the occurrence of hate crimes is largely independent of economic conditions we analyze data on support for attacks against israeli targets from public opinion polls conducted in the west bank and gaza strip support for violent attacks does not decrease among those with higher education and higher living standards the core contribution of the paper is a statistical analysis of the determinants of participation in hezbollah militant activities having a living standard above the poverty line or a secondary or higher education is positively associated with participation in hezbollah we also find that israeli jewish settlers who attacked palestinians in the west bank in the early 1980s were overwhelmingly from high paying occupations although our results are tentative and exploratory they suggest that neither poverty nor education has a direct causal impact on terrorism

consensus building how to persuade a group many decisions in private and public organizations are made by groups the paper explores strategies that the sponsor of a proposal may employ to convince a qualified majority of group members to approve the proposal adopting a mechanism design approach to communication it emphasizes the need to distill information selectively to key members of the group and to engineer persuasion cascades in which members who are brought on board sway the opinion of others the paper unveils the factors such as the extent of congruence among group members and between them and the sponsor and the size and governance of the group that condition the sponsor s ability to maneuver and get his project approved

strategic extremism why republicans and democrats divide on religious values party platforms differ sharply from one another especially on issues with religious content such as abortion or gay marriage given the high return to attracting the median voter why do vote maximizing politicians take extreme positions in this paper we find that strategic extremism depends on an intensive margin where politicians want to induce their core constituents to vote or make donations and the ability to target political messages toward those core constituents our model predicts that the political relevance of religious issues is highest when around one half of the voting population attends church regularly using data from across the world and within the united states we indeed find a nonmonotonic relationship between religious extremism and religious attendance

witchcraft weather and economic growth in renaissance europe between the thirteenth and nineteenth centuries as many as one million individuals in europe were executed for the crime of witchcraft the majority of the trials and executions took place during the sixteenth and seventeenth centuries during this period the speed and volume of executions were astonishing in one german town as many as 400 people were killed in a single day midelfort 1972 the trials were ubiquitous conducted by both ecclesiastical and secular courts by both catholics and protestants the victims were primarily women primarily poor and disproportionately widows the persecutions took place throughout europe starting and ending earlier in southwest europe than in the northern and eastern areas and spread even across the atlantic ocean to salem massachusetts although witchcraft trials in europe and america largely ended by the late eighteenth century witchcraft accusations and killings still take place in many countries today particularly in the developing world for example witchcraft is often blamed for aids deaths in sub saharan africa ashforth 2001 and miguel 2003 shows that negative economic shocks are associated with increases in witch killing in modern tanzania belief in the witch and fear of her is enduring while much work has been done on the motivations behind the european trials the large scale causes remain unknown the existing work has primarily been concerned with the factors that played into trials on a small scale why a certain individual was targeted or why a certain type of individual was targeted in a given area this work has indicated that there was a diverse set of issues that played into trials on an individual level more broadly however there are few causal explanations for why witchcraft trials happened at all and on such a large scale in so many

communication structure and coalition proofness experimental evidence abstract the paper analyzes the role of the structure of communication i e who is talking with whom in a coordination game we run an experiment in a three player game with pareto ranked equilibria where a pair of players has a profitable joint deviation from the pareto superior equilibrium we show that specific communication structures lead to different coalition proof equilibria in this game results match the theoretical predictions subjects communicate and play the pareto superior equilibrium when communication is public when pairs of players exchange messages privately subjects play the pareto inferior equilibrium even in these latter cases however players beliefs and choices tend to react to messages despite the fact that these are not credible

the informational theory of legislative committees an experimental analysis we experimentally investigate the informational theory of legislative committees gilligan and krehbiel 1989 two committee members provide policy relevant information to a legislature under alternative legislative rules under the open rule the legislature is free to make any decision under the closed rule the legislature chooses between a member s proposal and a status quo we find that even in the presence of biases the committee members improve the legislature s decision by providing useful information we obtain evidence for two additional predictions the outlier principle according to which more extreme biases reduce the extent of information transmission and the distributional principle according to which the open rule is more distributionally efficient than the closed rule when biases are less extreme we find that the distributional principle dominates the restrictive rule principle according to which the closed rule is more informationally efficient overall our findings provide experimental support for gilligan and krehbiel s informational theory

uma investigacao economica da influencia do mercado de drogas il ocitas sobre a criminalidade brasileira this study examines the relationship between drug market and criminality a panel data of the brazilian states was used for estimation based on the becker economic model of crime there are strong evidences of the presence of unobservable state effects affecting the crime rates so it was used a methodology to take into account the presence of the individual heterogeneity among the states the results indicated that the drug market the income inequality and the urbanization rate affect the criminality positively it was also observed that the rotation of the job market is inversely related to criminality finally public security and private security effects on the criminality were not significant although of negatives according to economic theory of crime

crime rates and local labor market opportunities in the united states 1979 1997 the labor market prospects of young unskilled men fell dramatically in the 1980s and improved in the 1990s crime rates show a reverse pattern increasing during the 1980s and falling in the 1990s because young unskilled men commit most crime this paper seeks to establish a causal relationship between the two trends previous work on the relationship between labor markets and crime focused mainly on the relationship between the unemployment rate and crime and found inconclusive results in contrast this paper examines the impact of both wages and unemployment on crime and uses instrumental variables to establish causality we conclude that both wages and unemployment are significantly related to crime but that wages played a larger role in the crime trends over the last few decades these results are robust to the inclusion of deterrence variables controls for simultaneity and controlling for individual and family characteristics

growth forecasts belief manipulation and capital markets abstract we analyze how a benevolent privately informed government agency would optimally release information about the economy s growth rate when the agents hold heterogeneous beliefs we model two types of agent conforming and dissenting the former has a prior that is identical to that of the government agency whereas the latter has a prior that differs from that of the government agency we identify both informative and uninformative equilibria informative equilibria are equilibria in which the government agency s equilibrium signal leads to a revision of beliefs we demonstrate that the uninformative equilibria can in fact dominate the informative ones in terms of ex post social welfare

toward a public choice theory of monopoly regulation its many dimensions from the perspective of market economics this new thrust was consolidated in 1976 by s peltzman who developed a formal market model in which regulations were viewed as commodities brokered via political markets in response to bids and counter bids by those who stood to gain or to lose from specific regulation outcomes the subsequent contribution by becker 1983 added insights and institutional flesh to the stigler peltzman embryo confirming regulation as an integral component of mainstream market economics an important implication of such contributions especially those from the chicago perspective is that regulation for the most part confirms resource efficiency within market process that political markets in the absence of entry barriers are just as effective as are competitive commodity markets in achieving economic efficiency defined within a comparative institutions framework nowhere is this complacency more apparent than in the conclusion drawn by becker 1983 from a detailed formal analysis of competition among pressure groups for political influence

fiscal federalism at work central responses to internal migration in india summary internal migration is thought to have substantial benefits for migrants and for the development of migrant sending and migrant receiving areas in order to facilitate such migration central governments may need to use fiscal transfers to ensure services to migrants address infrastructure shortfalls and ameliorate labor market displacement of natives in fact an extensive mostly normative fiscal federalism literature has argued that central governments ought to use transfers to reduce interjurisdictional externalities such as those due to population displacements we extend this literature empirically by examining the degree to which exogenous longterm migration prompts the redirection of central fiscal resources in india following the literature on distributive politics we argue that transfers in decentralized systems addressing the costs of population movements are influenced by partisan politics using monsoon shocks to migration we show that increases in migration are met with greater central transfers but that these flows are at least 50 greater if the state level executive is in the prime minister s political party consistent with the theory the influence of politics is greatest on parts of the budget subject to greater executive control this politicization may explain why indian states maintain barriers to internal migration despite the development costs of doing so

inflexible rules in incentive problems in practice contracts involve standard terms or rules allowing for variations only under exceptional circumstances we develop a simple model in which optimal contracts display this feature even in the absence of transactions costs rules arise when an agent has countervailing incentives to misrepresent private information these incentives are created by endowing the agent with a critical factor of production ex ante applications in regulatory labor and legal settings

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

collective memory cultural transmission and investments memory plays a crucial role in the transmission of cultural and national identity in every soci ety and every country the collective memory1 transmitted to the young by the older generation through a variety of channels e g school textbooks the media monuments and commemora tive rituals influences their perception of their cultural identity and values and their willingness to invest in them with major economic as well as political and social consequences this natu rally raises two questions first what would be the socially optimal transmission of collective memory to the young is it the case as intuition might suggest that the older generation should strive to be as unbiased accurate and comprehensive as possible in communicating its collec tive memory to the younger generation if not why and how should it depart from this objec tive second is collective memory transmission in practice likely to differ from what would be socially optimal and if so how these questions are at the heart of many current debates including those over education policy e g how history should be taught the level of control the state should have over school textbooks and curriculum 2 over the media e g the role of the corporation for public broadcasting cpb in the united states or the british broadcasting corporation bbc in the united kingdom 3 and over cultural integration e g centralized ver sus decentralized institutions in the european union legislation affecting freedom of speech in the united kingdom 4

informative cheap talk in elections why do office motivated politicians sometimes espouse views that are non congruent with their electorate s can non congruent statements convey any information about what a politician will do if elected and if so why would voters elect a politician who makes such statements furthermore can electoral campaigns also directly affect an elected official s behaviour we develop a model of credible cheap talk costless and non binding communication in elections the foundation is an endogenous voter preference for a politician who is known to be non congruent over one whose congruence is sufficiently uncertain this preference arises because uncertainty about an elected official s policy preferences generates policymaking distortions due to reputation career concerns we show that cheap talk can alter the electorate s beliefs about a politician s policy preferences and thereby affect the elected official s behaviour informative cheap talk can increase or decrease voter welfare with a greater scope for welfare benefits when reputation concerns are more important

basic analytics of multilateral lending and surveillance abstract i analyse the role of multilateral financial institutions in a world of global capital markets assuming that they have an informational advantage over private lenders in the market for sovereign debt i show that the adverse selection problem in this market may be solved through certification if the multilateral agency does not care too much about borrower country welfare however with lending the private information of the agency will be revealed whatever its weighting of borrower welfare vs private lenders profits multilateral lending on concessional terms also alleviates the moral hazard problem that investment in creditworthy borrowers is reduced as private lenders seek to avoid ex post default by constraining credit

why only nixon could go to china right wing politicians sometimes can implement policies that left wing politicians cannot and vice versa contemporary wisdom has it that only nixon could have gone to china we develop a model to explain this phenomenon a policy issue could depend on information on which every one could potentially agree on policy or on values on which agreement is impossible politicians who value both reelection and policy outcomes realize the nature of the issue whereas voters do not only a right wing president can credibly signal the desirability of a left wing course of action the nixon paradox can hold then if citizens vote retrospectively on the issue

a servant of two masters communication and the selection of international bureaucrats international bureaucrats must often serve multiple principals who collectively choose policy how does this affect bureaucrats incentives to truthfully reveal their private information i construct a cheap talk model in which a bureaucrat possesses private information about how policies translate into outcomes the bureaucrat can communicate publicly observable messages about this information to two policymakers who must then bargain over a set of policy choices i find that both the bureaucrat s willingness to communicate informatively and the choice of an optimal bureaucrat are highly contingent on the bargaining powers of the two policymakers when each policymaker is bound to adhere to the bargaining outcome moderate bureaucrats are most preferred in contrast when at least one policymaker can leave the bargaining table and exercise an outside option biased bureaucrats can be optimal i illustrate my findings by examining un weapons inspections in iraq from 1991 to 2003 i wish to thank bruce bueno de mesquita michael gilligan catherine hafer matias iaryczower dimitri landa adam meirowitz alastair smith and the editor and two anonymous reviewers for their feedback previous drafts of this article were presented in the new york university politics department research workshop and the 2006 annual conference of the midwest political science association

information aggregation and optimal structure of the executive we model two aspects of executives in parliamentary democracies decision making authority is assigned to individuals and private information is aggregated through communication when information is relevant to all policies and communication is private all decisions should be centralized to a single politician a government that holds cabinet meetings where information is made available to all decision makers outperforms one where communication is private a multimember cabinet can be optimal it need not be single peaked around the most moderate politician or ideologically connected centralization is nonmonotonic in the degree of ideological divergence in a large cabinet all power should be given to the most moderate politician even when uncertainty is policy specific and a single politician is informed on each policy power should never be fully decentralized our model provides a justification for centralized authority and cabinet meetings that enhance the quality of policy

down and out in italian towns measuring the impact of economic downturns on crime the paper investigates the effect of local economic conditions on crime the study focuses on italy s local labor markets and analyzes the response of crime to the severe slump of 2007 2011 it shows that the downturn led to a significant increase in economic related offenses that do not require particular criminal skills or tools namely thefts

information provision by interest groups we investigate interest groups incentives to inform consumers about the damaging practices of firms and the impact such an ig has on firms technology choices the ig aims to reduce the production of some bad say pollution it can at a cost investigate firms production practices and inform consumers about its findings since consumers care about the environment revealing differences in pollution levels between firms leads to vertical product differentiation the information by shifting sales from dirty towards clean firms reduces pollution we show that the ig is most inclined to investigate firms in relatively competitive industries and that the threat of being unmasked as a polluter prompts dirty firms to adopt a clean technology

efficient secrecy public versus private threats in crisis diplomacy this paper explores when and why private communication works in crisis diplomacy conventional audience cost models suggest that state leaders must go public to reveal information in interstate crises because leaders cannot enhance their credibility by tying their hands if domestic audiences cannot observe their private signals i present a crisis bargaining game where both the sender and the receiver of signals have a domestic audience the equilibrium analysis demonstrates that a private threat albeit of limited credibility can be equally compelling as a fully credible public threat secrecy works in crisis diplomacy despite its informational ine cacy because secrecy insulates leaders from domestic political consequences when they capitulate to a challenge to avoid risking unwarranted war the logic of e cient secrecy may shed light on the unaccounted history of private diplomacy in international crises the alaska boundary dispute illustrates this logic

inequality and crime this paper considers the relationship between inequality and crime using data from urban counties the behavior of property and violent crime are quite different inequality has no effect on property crime but a strong and robust impact on violent crime with an elasticity above 0 5 by contrast poverty and police activity have significant effects on property crime but little on violent crime property crime is well explained by the economic theory of crime while violent crime is better explained by strain and social disorganization theories

lobbying and asymmetric information informational lobbying the use by interest groups of their alleged expertise or private information on matters of importance for policymakers in an attempt to persuade them to implement particular policies is often regarded as an important means of influence this paper analyzes this phenomenon in a game setting on the one hand the interest group is assumed to have private information which is relevant to the policymaker whilst on the other hand the policymaker is assumed to be fully aware of the strategic incentives of the interest group to mis report or conceal its private information

persuasion by cheap talk we consider the credibility persuasiveness and informativ eness of multidimensional cheap talk by an expert to a decision maker we find that an expert with state independent preferences can always make credible comparative statements that trade off the expert s incentive to exaggerate on each dimension such communication benefits the expert cheap talk is persuasive if her preferences are quasiconvex communication benefits a decision maker by allowing for a more informed decision but strategic interactions between multiple decision makers can reverse this gain we apply these results to topics including product recommendations voting auction disclosure and advertising jel d44 d72 d82 d83 m37

cheap talk with two senders and complementary information this paper studies a cheap talk model with two senders having partial and non overlapping private information communicating with an uninformed receiver the two senders private information is complementary in the sense that the marginal impact of one sender s private information on the receiver s ideal action depends on the other sender s private information when the two senders communicate simultaneously their information transmission exhibits strategic complementarity more information transmitted by one sender leads to more information transmitted by the other sender when the two senders have like biases it is always optimal for the receiver to delegate the decision rights to the sender with a smaller bias when two senders have opposing biases simultaneous communication is more likely to dominate delegation

cheap talk and bogus network externalities in the emerging technology market many emerging technologies exhibit path dependent demands driven by positive network feedback such network effects profoundly impact marketing strategists thinking in today s network economy however the significant network externalities expected by many people often fail to materialize in the emerging technology market we analyze this phenomenon in the context of a technology distribution channel by studying cheap talk strategies under information asymmetry we show that incentive compatible contracts are essential for achieving credible information transmission in our model the better informed technology vendor has an incentive to inflate the retailer s ex ante belief of network externalities when a wholesale price contract is adopted when properly termed revenue sharing contracts are implemented there are information efficient cheap talk equilibria where truthful information transmission is mutually beneficial when the vendor s information is imperfect even revenue sharing contracts cannot guarantee credible information transmission if there is significant prior belief disparity between the vendor and the retailer this study demonstrates how information inefficient equilibria e g information blockage arise because of the conflict of interest or the conflict of opinion among channel members it also explores the role of cheap talk in facilitating channel coordination

estimating the effects of climate shocks on collective violence ardl evidence from india this paper examines the causal relationship between climate shocks and collective violence in india using annual data over the period 1954 2006 we use the ardl bounds testing approach to deal with

the esteem theory of norms when esteem is costless to supply does it provide an effectivemeans of enforcing norms for public goods production i examine thebasic mechanics of an enforcement through esteem model whileesteem may enforce norms to considerable degree systematicunderenforcement remains the general result even in very basicsettings with a minimum of transactions costs i also examine whyesteem has positive value in equilibrium if it can be producedcostlessly i e why esteem remains scarce and what collectiveaction problems plague the supply of esteem

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

horizontal reputation and strategic audience management we study how a decision maker uses his reputation to simultaneously influence the actions of multiple receivers with heterogenous biases the reputational payoff is single peaked around a bliss reputation at which the incentives of the average receiver are perfectly aligned we establish the existence of two equilibria characterized by repositioning toward this bliss reputation that only differ through a multiplier capturing the efficiency of reputational incentives repositioning is moderate in the more efficient equilibrium but the less efficient equilibrium features overreactions and welfare may then be lower than in the no reputation case we highlight how strategic audience management e g centralization delegation to third parties with dissenting objectives alleviates inefficient reputational incentives and how multiple organizational or institutional structures may arise in equilibrium as a result

weather shocks agriculture and crime evidence from india we use detailed crime agriculture and weather data from india during the years 1971 2000 to conduct a systematic analysis of the relationship between weather shocks and multiple categories of crime we find that drought and heat exert a strong impact on virtually all types of crimes that the impact on property crimes is larger than for violent crimes and that this relationship has been relatively stable over three decades of economic development we then use seasonal and geographical disaggregations of weather and agricultural cultivation to examine the prevailing hypothesis that agricultural income shocks drive the weather crime relationship in developing countries the patterns we find are consistent with this hypothesis in the case of rainfall shocks but suggest additional mechanisms may play an important role in driving the heat crime relationship consistent with evidence from industrialized countries

optimal delegation with multi dimensional decisions this paper investigates optimal communication mechanisms in a framework with a twodimensional policy space and no monetary transfers contrary to the one dimensional setting if the conflicts of interests between the principal and the agent are different on each dimension the optimal mechanism never exhibits any pooling and the agent s ideal policies are never chosen simple delegation sets that trade off inflexible rules and full discretion are no longer optimal but take more complex shapes

warning labels as cheap talk why regulators ban drugs abstract one explanation for drug bans is that regulators know more than consumers about product quality but why not just communicate the information in their ban perhaps via a would have banned label because product labeling is cheap talk any small market failure tempts regulators to lie about quality inducing consumers who suspect such lies to not believe everything they are told in fact when regulators expect market failures to result in under consumption of a drug and so would not ban it for informed consumers regulators ex ante prefer to commit to not banning this drug for uninformed consumers

cheap talk and burned money we augment the standard crawford sobel 1982 econometrica 50 1431 1451 model of cheap talk communication by allowing the informed party to use both costless and costly messages the issues on which we focus are the consequences for cheap talk signaling of the option to burn money and the circumstances under which both cheap talk and burned money are used to signal information

cheap talk with two audiences these problems have in common a simple structure an informed sender says something to two interested but uninformed receivers who then take actions based on their beliefs these actions affect the sender as well as the receivers in this paper we study how costless nonverifiable claims cheap talk can affect these beliefs and hence the actions and how the incentives for truthful revelation to one receiver are affected by the presence of the other we then ask how welfare is affected by whether claims are made in public or in private as some of the above examples suggest public messages may be more credible than private messages addressed to either audience one possibility is that the presence of one audience can discipline the sender s relationship with the other we call this one sided

strategic communication networks in this paper we consider situations in which individuals want to choose an action close to others actions as well as close to a payoff relevant state of nature with the ideal proximity to the common state varying across the agents before this coordination game with heterogeneous preferences is played a cheap talk communication stage is offered to players who decide to whom they reveal the private information they hold about the state the strategic information transmission taking place in the communication stage is characterized by a strategic communication network we provide a direct link between players preferences and the strategic communication network emerging at equilibrium depending on the strength of the coordination motive and the prior information structure equilibrium strategic communication networks are characterized in a very tractable way and compared in term of efficiency in general a maximal strategic communication network may not exist and communication networks cannot be ordered in the sense of pareto however expected social welfare always increases when the communication network expands strategic information transmission can be improved when group or public communication is allowed and or when information is certifiable

identifying the effect of unemployment on crime abstract in this paper we analyze the relationship between unemployment and crime using u s state data we estimate the effect of unemployment on the rates of seven felony offenses we control extensively for state level demographic and economic factors and estimate specifications that include state specific time trends state effects and year effects in addition we use prime defense contracts and a state specific measure of exposure to oil shocks as instruments for unemployment rates we find significantly positive effects of unemployment on property crime rates that are stable across model specifications our estimates suggest that a substantial portion of the decline in property crime rates during the 1990s is attributable to the decline in the unemployment rate the evidence for violent crime is considerably weaker however a closer analysis of the violent crime of rape yields some evidence that the employment prospects of males are weakly related to state rape rates

what do we learn from the weather the new climate economy literature a rapidly growing body of research applies panel methods to examine how temperature precipitation and windstorms influence economic outcomes these studies focus on changes in weather realizations over time within a given spatial area and demonstrate impacts on agricultural output industrial output labor productivity energy demand health conflict and economic growth among other outcomes by harnessing exogenous variation over time within a given spatial unit these studies help credibly identify i the breadth of channels linking weather and the economy ii heterogeneous treatment effects across different types of locations and iii nonlinear effects of weather variables this paper reviews the new literature with two purposes first we summarize recent work providing a guide to its methodologies datasets and findings second we consider applications of the new literature including insights for the damage function within models that seek to assess the potential economic effects of future climate change jel c51 d72 o13 q51 q54

targeting transfers through restrictions on recipients our objective is to design transfer programs that maximize some social welfare function following the optimal income tax formulation we assume that a random process endows individuals with characteristics that influence welfare such as ability to earn income medical condition or unmonitorable income the goal is to maximize the utility of a randomly chosen individual other individualistic social welfare functions would lead to equivalent results if the random characteristics were observable a first best outcome could be achieved by making them the basis for lump sum transfers in practice however we can observe only indicators of these characteristics such as earnings medical expenditures or consumption patterns the challenge for policy is to design an efficient second best transfer program based on indicators in this paper we argue that 1 an optimal transfer program in general must sacrifice productive efficiency to target efficiency this is done by imposing restrictions on the choices made by intended beneficiaries 2 a program that incorporates restrictions such as means tested in kind transfers commodity specific taxes and subsidies and even ordeals i e the imposition of deadweight costs to qualify for a transfer will perform better than programs that rely solely on income taxes and cash transfers

the politics of ambiguity politicians face a trade off between the policies that maximize their chances of reelection and their most preferred policies or the policies most preferred by the constituency which they represent this paper analyzes this trade off in a dynamic electoral model in which the voters are not fully informed about the preferences of the incumbent first we show that the incumbent follows a policy which is intermediate between the other party s ideal policy and his own ideal policy second we show that often the incumbent has an incentive to choose procedures which make it difficult for voters to pinpoint his preferences with absolute precision thus politicians may prefer to be ambiguous

poverty and witch killing many observers have noted that poverty and violence go hand in hand there is a strong negative relationship between economic growth and crime across countries as well as across districts in india and a link between low income and the occurrence of civil war 1 yet existing studies are typically unable to resolve the key econometric identification issues of omitted variable bias and endogeneity to illustrate the unobserved quality of local government institutions may affect both income growth and crime rates and poverty could lead to violence if desperate people with nothing to lose commit more crimes but violence itself may in turn affect economic productivity this paper uses local rainfall variation to identify the impact of income shocks on murder in a rural tanzanian district 2 extreme rainfall resulting in drought or floods is exogenous and is associated with poor harvests and near famine conditions in the region and a large increase in the murder of witches there are twice as many witch murders in years of extreme rainfall as in other years the victims are nearly all elderly women typically killed by relatives these econometric results across 11 years in 67 villages provide novel evidence on the role of income shocks in causing violent crime and religious violence in particular and also provide insights into witchcraft an important social phenomenon in africa rarely studied by economists the view that economic conditions are a driving force behind witch murders is bolstered by the fact that most witch killing in tanzania takes place in poor rural areas largely dependent on rain fed agriculture and that most victims in our sample are from poor households however it is difficult to definitively disentangle this income shock theory from alternative socio cultural explanations the concentration of tanzanian witch murders in a region dominated by one particular ethnic group the sukuma and the especially high number of witch murders in villages where indigenous religious beliefs are strong both point to the important role of non economic factors economic theories and cultural theories are perhaps best viewed as complements the empirical findings demonstrate the power of economics to rationalize a phenomenon that has previously been understood almost solely through a socio cultural lens 3

cheap talk and the fed a theory of imprecise policy announcments this paper examines the problem faced by the federal reserve in announcing its private information about its future policies because it would like to manipulate expectations and pursue a time inconsistent policy the fed cannot reveal its policy objectives precisely and credibly it can however communicate some information about its goals through the cheap talk mechanism of vincent crawford and joel sobel making announcements that are imprecise and only giving ranges within which these goals may lie copyright 1989 by american economic association

guns violence and the efficiency of illegal markets in economics the standard mechanism for allocating scarce resources is the market a smoothly functioning market however is built upon legally enforceable contracts and property rights in the absence of law it is likely that violence or the threat thereof rather than prices is the means by which resources will be allocated interactions among animals provide clear evidence for this claim dominance hierarchies based on fighting ability also sometimes known as pecking orders have been documented across a wide variety of species e g primates chickens and other birds reptiles lobsters and a broad range of resources including food nesting sites and access to mates warder c allee 1938 john alcock 1993 evidence suggests that violence also plays a critical role in human interactions when property rights are not legally enforceable e g drug dealing and extortion see e g peter reuter 1983 geoffrey canada 1995 in this paper we analyze the determinants of the efficiency with which illegal markets allocate scarce resources we develop a stylized model in which players compete for a fixed prize with the winner determined by fighting ability efficiency in this context is determined by the amount of resources spent on fighting two factors affecting efficiency emerge from the model lethality and predictability perhaps surprisingly the use of more lethal mechanisms for resolving disputes does not have a clear impact on the social costs of violence the intuition underlying this result is that as the costs of losing a fight rise the willingness to fight falls we show that holding other factors constant the resources spent on fighting are lowest when the cost of losing is either very low or very high e g nuclear deterrence but over a wide range of lethality levels the overall social costs of fighting are fairly stable in contrast the costs of violence are critically linked to the predictability of dispute outcomes i e the certainty with which potential combatants know who will be victorious ex ante when the outcome of a conflict is highly correlated with observable characteristics such as strength or size there is little need to actually fight thus unpredictability all else equal increases the expected payoff to fighting for the lower ranked member leading to more conflicts

market distortions and government transparency in this paper we investigate how government transparency depends on economic distortions we first consider an abstract class of economies in which a benevolent policy maker is privately informed about the exogenous state of the economy and contemplates whether to release this information our key result is that distortions limit communication even if transparency is ex ante pareto superior to opaqueness it cannot constitute an equilibrium when distortions are sufficiently high we next confirm this broad insight in two applied contexts in which monopoly power and income taxes are the specific sources of distortions jel d82 e61

language meaning and games a model of communication coordination and evolution language is a powerful coordination device we generalize the cheap talk approach to pre play communication by way of introducing a meaning cor respondence between messages and actions and by postulating two axioms met by natural languages players have a lexicographic preference second to material payoffs against deviating from the meaning correspondence under two sided communication in generic and symmetric n 3 n coordination games a nash equilibrium component in such a lexicographic communication game is evolutionarily stable if and only if it results in the unique pareto efficient out come of the underlying game we extend the analysis to one sided communica tion in arbitrary finite two player games jel c72 c73 z 3

who benefits from a sender s credibility concern the sender or a receiver abstract in an information transmission situation a sender s concern for its credibility could endow itself with an invisible power to control a receiver s decision so that the sender can manipulate information without being detected the current paper models this paradoxical role of the sender s credibility concern

a model of electoral competition with incomplete information a model of two candidate electoral competition is developed in which voters are uncertain about the policy either candidate would implement if elected candidates simultaneously announce policy positions from which voters attempt to infer the true positions the candidates would adopt announcing a position different from the true position is costly to the winning candidate with these costs increasing as the difference between the true policy and the announced policy increases a refinement of the sequential equilibrium concept is used to describe the behavior of candidates and voters

estimating the economic model of crime employment versus punishment effects ann dryden witte 1980 has recently argued in this journal that new support is found for the deterrent hypothesis or the economic model of crime when individual data are employed to estimate the determinants of rearrest rates witte estimates a conventional economic model of crime using a rich and carefully constructed microdata set of released prisoners in north carolina her principal findings are that 1 increases in the certainty and severity of punishment tend to reduce participation in crime measured by number of arrests or convictions per month free and 2 higher legal wages have an extremely weak deterrent effect on crime in this comment i describe two separate data sets within which i find just the opposite results using a sample of offenders released from federal prisons in 1972 i find that increases in the severity of punishment are weakly related to participation in crime while increases in the certainty of punishment are positively related to participation in crime in addition using a sample of male repeat property offenders released from maryland prisons i find that higher wages have a strong and consistent deterrent effect on crime the conclusion is reached at least from these data sets that improving legitimate employment opportunities may be as effective if not more effective in reducing crime as is an increase in punishment

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

communication in bargaining over decision rights abstract this paper develops a model of bargaining over decision rights between an uninformed principal and an informed but self interested agent we introduce two different bargaining mechanisms tacit and explicit bargaining in tacit bargaining an uninformed principal makes a take it or leave it price offer to the agent who then decides whether to accept or reject the offer in the equilibrium of the game the principal inefficiently screens out some agent types so that the agent s private information cannot be fully utilized when the decision is made in explicit bargaining in which parties can communicate explicitly via cheap talk before tacit bargaining however an equilibrium with no such inefficient screening exists even when the conflict of interest is arbitrarily large we also follow a mechanism design approach showing that under certain conditions explicit bargaining is an optimal bargaining mechanism that maximizes the joint surplus of the parties

discretionary policy implementation and reform abstract regulatory agencies treaty negotiators and other delegates often possess considerable authority over the details of policy change i examine how such discretion can block a pareto improving reform when policy change requires the support of both the liberal and conservative factions gridlock reform and reform paradoxes all emerge as cases in a general model with perfect information a reformer with unknown policy preferences can facilitate escape from a gridlock equilibrium

crime induced poverty traps abstract poverty makes thieves and thieves hamper economic growth we study these linkages in a model of modern sector job creation job creation has two effects higher labor demand tends to lower crime while higher output gives more to steal tending to increase crime at low levels of modernization the second effect dominates and as a consequence the model has decreasing returns to scale at higher levels of modernization there is increasing returns to scale due to declining crime the economy may end up in a poverty trap with high crime and low production or obtain full modernization with low crime rates the danger of ending up in a poverty trap has implications for economic policies we show for instance that a reform intended to improve efficiency may throw the economy into a vicious circle of increasing crime and stagnation if implemented too fast

what causes violent crime this study uses panel data of intentional homicide and robbery rates for a sample of developed and developing countries for the period 1970 1994 based on information from the united nations world crime surveys to analyze the determinants of national crime rates both across countries and over time a simple model of the incentives to commit crimes is proposed which explicitly considers possible causes of the persistence of crime over time criminal inertia a panel data based gmm methodology is used to estimate a dynamic model of national crime rates this estimator controls for unobserved country speci ce ects the joint endogeneity of some of the explanatory variables and the existence of some types of measurement errors a icting the crime data the results showthat increases in income inequality raise crime rates crime tends to be countercyclical and criminal inertia is signi cant 2002 elsevier science b v all rights reserved

altruism the samaritan s dilemma and government transfer policy this paper shows that altruism provides an efficiency rationale for public provision of insurance to the poor the framework is one in which there are rich altruists and risk averse poor who face some possibility of loss the government represents the rich and makes transfers on their behalf with unconditional transfers the poor may forgo insurance and rely on private charity to bail them out in the event of loss this reliance on private charity has adverse efficiency effects these may be avoided if the government makes in kind transfers of insurance copyright 1995 by american economic association

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

vaporware suddenware and trueware new product preannouncements under market uncertainty a firm may want to preannounce its plans to develop a new product in order to stimulate future demand but given that such communications can affect rivals incentives to develop the same new product a firm may decide to preannounce untruthfully in order to deter competitors we examine an incumbent s preannouncement strategy when there is uncertainty regarding the commercial viability of a new product opportunity and a threat of rival entry each firm has a private assessment of the market potential for the new product two competitive incentives arise for the incumbent in terms of discouraging rival entry it can use preemptive communication or it can remain silent and instill a pessimistic market potential outlook we find that an incumbent prefers to follow a vaporware strategy i e declares plans to pursue a new product opportunity even when it may have no development intentions when its market forecasting capabilities are weak and the demand side benefits from preannouncing are small by contrast when the incumbent has strong market forecasting capabilities and the demand side benefits are small the incumbent adopts a suddenware strategy i e remains silent about its new product plans even when it actually plans to develop the new product finally when its market forecasting capabilities are strong and the demand side benefits are large the incumbent prefers to engage in a trueware strategy i e truthfully preannounces development plans we show that an interplay between competition related and demand related considerations is what allows trueware to emerge as an equilibrium in the absence of any ex post cost to engaging in vaporware in an extension we let the incumbent s actual development plans leak out and allow the entrant to wait and learn those plans prior to setting a research and development level we identify conditions for the entrant to postpone development despite the risk of being late to market as well as conditions for the entrant to commence development immediately despite not knowing the incumbent s plans based on the observed preannouncement strategy

persistent commodity shocks and transitory crime effects abstract this paper studies the dynamic response of crime to a positive income shock we estimate the short and medium run effects that an increase in copper price had on the local economy and on criminal activity in chile which is the world s leading copper producer after a decade of high prices mining municipalities did not exhibit lower crime rates compared to non mining municipalities to explain this counterintuitive result we investigated heterogeneous dynamic effects and observed that property crimes decreased only at the beginning of the boom as the dynamics of unskilled employment are consistent with the crime cycle we argue that crime evolves due to temporary labor market adjustments

information incentives and organizational mode we examine the choice of organizational mode for a two stage production process wherein cost realizations at each stage are observed only by the producing party when these costs are positively correlated the principal prefers to undertake second stage production herself when the correlation is negative and sufficiently small she will prefer that the agent who performs the first stage also perform the second for large negative correlation either mode might be preferred when costs are uncorrelated the principal is indifferent between modes

money or friends social identity and deception in networks abstract strategic communication occurs in virtually all committee decision environments theory suggests that small differences in monetary incentives between committee members can leave deception a strategically optimal decision crawford and sobel 1982 galeotti et al 2013 at the same time in natural environments social incentives can also play an important role in determining the way people share or withhold truthful information unfortunately little is known about how monetary and social incentives interact to determine truth telling we investigate this issue by first building a novel model and then testing its equilibrium predictions using laboratory data in the absence of social identity the model s predictions are supported there is more truthful communication between those who share monetary incentives than those who do not we find that the effect of identity is asymmetric sharing the same identity does not promote truth telling but holding different identities reduces truthfulness overall as compared to environments lacking social identity committees with both monetary and social incentives exhibit truthful communication substantially less frequently

language and government coordination an experimental study of communication in the announcement game one of the key roles of government is to coordinate the activities of citizens one reason why governments are efficient facilitators of coordinated action in addition to their ability to force compliance or tax is that they are typically endowed with more information than the individuals they govern this advantage creates a dilemma for them however since it forces them to decide on how they should distribute the information in their possession to the population this paper investigates this question we investigate the announcement game defined by the government and those it governs and focus on communication strategy that government uses to communicate private information to the citizens this communication strategy involves 1 partitioning the state space in an attempt to mask the true state of the world and 2 choosing what type of language to use in order to communicate elements of this partition we present evidence that the language used to execute a communication strategy does affect the efficiency of the equilibrium convergence process and also demonstrate that subjects playing the role of the government exhibit a great deal of sophistication in the communication strategies they employ and the language they use to execute them

secessions and political extremism why regional referenda do not solve the problem this paper shows that an uninformed player can increase his bargaining power by committing to receive information from an expert more skeptical to cooperation this general idea is applied to a model in which a regional political leader the expert influences voting in a referendum on independence by strategically disseminating information about the consequences of separation i show that this motivates a moderate electorate to appoint a more extreme leader to receive biased information that increases their bargaining power over the gains of staying unified however a trade off between bargaining power and precision of information causes inefficient outcomes in equilibrium jel c73 d72 d82 h77

when does ethical code enforcement matter in the inter organizational context the moderating role of switching costs drawing on signaling theory we suggest that a supplier s enforcement of ethical codes sends signals about the supplier that affect a buyer s decision to continue their commitment to the supplier we then draw on side bet theory to hypothesize how switching costs influence the importance of a supplier s enforcement of ethical codes in predicting a buyer s continuance commitment to a supplier we empirically test our model with data from 158 purchasing managers across three manufacturing industries results confirm the connection between ethical code enforcement and continuance commitment but suggest that a supplier s enforcement of ethical codes matter less when switching suppliers is perceived as too costly

estimating the economic model of crime with panel data previous attempts at estimating the economic model of crime with aggregate data relied heavily on cross section econometric techniques and therefore do not control for unobserved heterogeneity this is even true of studies that estimated simultaneous equations models using a new panel data set of north carolina counties the authors exploit both single and simultaneous equations panel data estimators to address two sources of endogeneity unobserved heterogeneity and conventional simultaneity their results suggest that both labor market and criminal justice strategies are important in deterring crime but that the effectiveness of law enforcement incentives has been greatly overstated copyright 1994 by mit press

setting quality expectations when entering a market what should the promise be this paper examines optimal advertised quality actual quality and price for a firm entering a market it develops a two period model where advertised quality influences expectations and hence trial and the gap between actual quality and expectations determines satisfaction which in turn impacts second period sales in such situations a company makes a choice between advertising high quality and getting trial but little repeat and advertising low quality and getting low trial but high repeat results are derived by numerical methods as well as analytically for a special case of the model the model suggests it is optimal to overstate quality when i customers rely relatively less on advertising to form quality expectations and ii customers intrinsic satisfaction with a product is high these results are consistent with deceptive advertising cases at the ftc which showed more deception for unknown firms and for firms whose customers were more satisfied they are also consistent with the decisions made by future managers mbas except that the respondents would advertise higher versus lower quality when advertising was effective

persuasive puffery sellers often make claims about product strengths without providing evidence even though such claims are mere puffery we show that they can be credible because talking up any one strength comes at the implicit trade off of not talking up another potential strength puffery pulls in some buyers who value product attributes that are talked up or emphasized while pushing away other buyers who infer that the attributes they value are relative weaknesses when the initial probability of making a sale is low there are more potential buyers to pull in than to push away so puffery is persuasive overall this persuasiveness requires that buyers have some privacy about their preferences so that the seller does not completely pander to them more generally the results show how comparative cheap talk by an expert to a decision maker can be credible and persuasive in standard discrete choice models used throughout marketing economics and other disciplines

economic shocks and crime evidence from the crash of ponzi schemes abstract in november 2008 colombian authorities dismantled a network of ponzi schemes making hundreds of thousands of investors lose tens of millions of dollars throughout the country using original data on the geographical incidence of the ponzi schemes this paper estimates the impact of their breakdown on crime we find that the crash of ponzi schemes differentially exacerbated crime in affected districts confirming the intuition of the standard economic model of crime this effect is only present in places with relatively weak judicial and law enforcement institutions and with little access to consumption smoothing mechanisms such as microcredit in addition we show that with the exception of economically motivated felonies such as robbery violent crime is not affected by the negative shock

poverty and crime in 19th century germany we estimate the impact of poverty on crime in 19th century bavaria germany rainfall is used as an instrumental variable for grain rye prices to address econometric identification problems in the existing literature the rye price was a major determinant of living standards during this period the rye price has a positive effect on property crime a one standard deviation increased property crime by 8 ols estimates are twice as large as instrumental variable estimates highlighting the value of our empirical approach higher rye prices lead to significantly less violent crime though and we argue that higher beer prices caused by the higher rye prices are a likely explanation

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

information reliability and welfare a theory of coarse credit ratings abstract an enduring puzzle is why credit rating agencies cras use a few categories to describe credit qualities lying in a continuum even when ratings coarseness reduces welfare we model a cheap talk game in which a cra assigns positive weights to the divergent goals of issuing firms and investors the cra wishes to inflate ratings but prefers an unbiased rating to one whose inflation exceeds a threshold ratings coarseness arises in equilibrium to preclude excessive rating inflation we show that competition among cras can increase ratings coarseness we also examine the welfare implications of regulatory initiatives

lying for strategic advantage rational and boundedly rational misrepresentation of intentions starting from hendricks and mcafee s 2000 example of the allies decision to feint at calais and attack at normandy on d day this paper models misrepresentation of intentions to competitors or enemies allowing for the possibility of bounded strategic rationality and rational players responses to it yields a sensible account of lying via costless noiseless messages in many cases the model has generically unique pure strategy sequential equilibria in which rational players exploit boundedly rational players but are not themselves fooled in others the model has generically essentially unique mixed strategy sequential equilibria in which rational players strategies protect all players from exploitation