equitable representation in councils theory and an application to the united nations security council we analyze democratic equity in council voting games cvgs in a cvg a voting body containing all members delegates decision making to a time varying subset of its members as describes e g the relationship between the united nations general assembly and the united nations security council unsc we develop a theoretical framework for analyzing democratic equitability in cvgs at both the country and region levels and for different assumptions regarding preference correlation we apply the framework to evaluate the equitability of the unsc and the claims of those who seek to reform it we find that the individual permanent members are overrepresented by between 21 3 times united kingdom and 3 8 times china from a country level perspective while from a region perspective eastern europe is the most heavily overrepresented region with more than twice its equitable representation and africa the most heavily underrepresented our equity measures do not preclude some unsc members from exercising veto rights however

concentration of shareholder voting power in finnish industrial companies wide concern has recently arisen in finland regarding an observed increase in the relative shareholdings of institutional owners in a single year 1985 households shareholdings in listed companies fell by six percentage points from the average of 43 per cent prevailing in the early 1980s this change has been especially noticeable with respect to industrial companies in which the direct share of households currently averages only 25 per cent among institutions the shareholdings of nonfinancial corporations have increased the most followed by the holdings of investment trusts and banks in february 1987 the finnish parliament passed a new law permitting the establishment of unit trusts as it was anticipated that such funds would be set up by banks and insurance companies parliament also introduced legislation restricting the rights of these financial institutions to own companies outside of banking or insurance the intention was to prevent further concentration of economic power in the hands of financial institutions the upper limit on a bank s shareholding in another company was reduced from 20 to 10 per cent of the stock or voting rights and the limit on an insurance company s holdings was similarly lowered from 50 to 20 per cent banks will have five years to adjust their current holdings whereas insurance companies are allowed to keep previously acquired shares in excess of the new limit what is interesting about the reasons given by parliament for the new measures is the view that companies can be minority controlled this is believed to be the case when the ownership structure consists of a few relatively large and many small holdings minor shareholders may not be motivated enough to attend company meetings no quantitative estimate is given however of the relationship between shareholding concentration and shareholder voting power

market share and price rigidity abstract survey evidence shows that the main reason why firms keep prices stable is that they are concerned about losing customers or market share we construct a general equilibrium model in which firms care about the size of their customer base firms and customers form long term relationships because consumers incur costs to switch sellers in an environment with sectoral productivity shocks we show that cost pass through is a non monotonic function of the size of switching costs specifically prices tend to become more stable as the fraction of repeat customers increases and the elasticity of the customer base falls

income dispersion and counter cyclical markups recent advances in measuring cyclical changes in the income distribution raise new questions how might these distributional changes affect the business cycle itself we show how counter cyclical income dispersion can generate counter cyclical markups in the goods market without any preference shocks or price setting frictions in recessions idiosyncratic labor productivity shocks raise income dispersion lower the price elasticity of demand and increase imperfectly competitive firms optimal markups the calibrated model explains not only many cyclical features of markups but also cyclical and long run patterns of standard business cycle aggregates

supply side and demand side cost sharing in deregulated social health insurance which is more effective abstract microeconomic theory predicts that if patients are fully insured and providers are paid fee for service utilization of medical services exceeds the efficient level moral hazard effect in switzerland both demand side and supply side cost sharing have been introduced to mitigate this problem analyzing a panel dataset of about 160 000 adults we find both types of cost sharing to be effective in curtailing the use of medical services however when moral hazard mitigation is traded off against risk selection the minimum deductible supply side cost sharing option ranks first followed by the medium deductible demand side alternative making the supply side option somewhat more effective

beyond the racial census the political salience of ethnolinguistic cleavages in south africa careful attention to social demographics can be valuable in understanding how patterns of interethnic competition vary between countries but social demographics can also vary across different levels of social aggregation within the same polity it may be improper to draw conclusions about the political importance of a particular cleavage based on data from only one level of social aggregation in south africa race is considered to be the primary cleavage around which political competition is organized intraracial ethnolinguistic cleavages are often dismissed as unimportant especially at the national level by focusing the analysis on the local level this article demonstrates that ethnolinguistic identities are in fact broadly salient in south africa these subracial identities appear to influence aggregate political outcomes and individual vote choices the article thereby offers substantive lessons for students of south african politics and methodological lessons for students of ethnic politics more

an institutional critique of intergovernmentalism most intergovernmentalist analyses of european integration focus on treaty bargaining among european union member governments recent articles also have examined everyday decision making through power index analysis an approach that asserts that a government s ability to influence policy is a function of all possible coalitions in the council of ministers to which it is pivotal this approach suffers from two major weaknesses first it fails to take into account the policy preferences of governments it overestimates the influence of governments holding extreme preferences and underestimates that of more centrist governments second power index analysis fails to consider the important roles of the commission of the european communities and the european parliament in legislative processes today s procedures affect the mix of agenda setting and veto power and this has systematic effects on policy outcomes if intergovernmentalism is to explain choices made during treaty rounds it must take into account these legislative dynamics

voting power in the ec decision making and the consequences of two different enlargements abstract in this paper we study the voting power in the council of ministers of the ec the purpose of this paper is twofold first to evaluate the voting power for the member states of today s community and second to analyse the balance of power after two different enlargements of the community the analysis is based on the shapley shubik and the banzhaf power indices of simple cooperative games the modified version of the shapley shubik index is used to analyse how the sub systems of the ec can change the distribution of power in the decision making process

optimal fiscal and monetary policy in customer markets a growing body of evidence suggests that ongoing relationships between consumers and firms may be important for understanding price dynamics we investigate whether the existence of such customer relationships has important consequences for the conduct of both long run and short run policy our central result is that when consumers and firms are engaged in long term relationships the optimal rate of price inflation volatility is very low even though all prices are completely flexible this finding is in contrast to those obtained in first generation ramsey models of optimal fiscal and monetary policy which are based on walrasian markets echoing the basic intuition of models based on sticky prices unanticipated inflation in our environment causes a type of relative price distortion across markets such distortions stem from fundamental trading frictions that give rise to long lived customer relationships and makes pursuing inflation stability optimal

what determines eu decision making needs power or both this paper examines the determinants of power in the council of the european union it argues that quantitative power indices stemming from voting theory provide a good description of the actual distribution of power among eu members of course we cannot directly verify the accuracy of such indices since it is impossible to measure power directly instead we evaluate whether these power measures explain a quantifiable manifestation of the exercise of power namely members shares of eu budget allocation as an alternative explanation of the eu budget we also consider a needs view of the budget where members allocations are determined by principles of solidarity our empirical analysis is based on 1976 2001 data on the patterns of the eu budget shares and on measures of each member state s needs and political power our results indicate that at least 60 of the budget expenditures can be attributed to selfish power politics and the remaining 40 to the declared benevolent eu budget policies however when we apply specific voting power measures that allow correlated preferences and cooperative voting patterns between the member states our estimates indicate that the power politics view can explain as much as 90 of the budget shares we conclude that power politics can explain a major part of the council decisions and that correlated preferences and voting cooperation between eu countries potentially play significant roles in eu decision making heikki kauppi and mika widgren

voters information heterogeneity and the dynamics of aggregate economic expectations theory it is argued here that previous studies analyzing the formation of voters economic expectations overlook important subtleties found in a differentiated heterogeneous electorate since different segments of the electorate possess varying information capabilities it is asserted that they will form their prospective economic evaluations differently from one another hypotheses the impact of expectational electoral cycles news coverage of the economy reported by voters retrospective economic evaluations and personal financial expectations are hypothesized to have a differential impact on their economic expectations based on varying levels of information education among subsets of the electorate methods time series multiple regression analysis is conducted for the monthly period between january 1978 and december 1990 the empirical analysis involves testing for the properties of the statistical time series i e integration and cointegration as well as specification of an error correction mechanism ecm that captures long run statistical relationships in appropriate circumstances results these findings uncover electoral heterogeneity based on information education differences with respect to voters prospective economic evaluations specifically the information capabilities of voters is inversely related to their reliance on past retrospective sources of information when forming both egocentric and sociotropic economic expectations the main implication of this research is that the assumption of electoral homogeneity contained in previous longitudinal analyses of aggregate economic opinion formation provides misleading results that either overlook intra electoral variations introduce aggregation bias or possibly both

sticky price models of the business cycle can the contract multiplier solve the persistence problem we construct a quantitative equilibrium model with firms setting prices in a staggered fashion and use it to ask whether monetary shocks can generate business cycle fluctuations these fluctuations include persistent movements in output along with the other defining features of business cycles like volatile investment and smooth consumption we assume that prices are exogenously sticky for a short time persistent output fluctuations require endogenous price stickiness in the sense that firms choose not to change prices much when they can do so we find that for a wide range of parameter values the amount of endogenous stickiness is small thus we find that in a standard quantitative model staggered price setting alone does not generate business cycle fluctuations

enlargement processes and distributional conflicts the politics of discriminatory membership in the european union this paper examines discriminatory membership in the european union from a game theoretical perspective i argue that discriminatory membership enables the enlargement of international organizations with heterogenous member states eu members impose discriminatory measures on new members to redistribute enlargement gains from new members to particularly negatively affected eu members as to render expansion pareto efficient the empirical findings of a probit analysis on the eu accession negotiations and outcomes of all five eu enlargement rounds support the theoretical claim the eu grants acceding states restricted membership rights if distributional conflicts emerge moreover the candidate s bargaining power and the possibility of alternative compensation schemes influence the enlargement outcomes

what drives the swing voter in africa what makes african voters up for grabs existing approaches to the swing voter have several liabilities this article introduces a new measure enabling a more comprehensive assessment of swing voting including the differentiation between clientelistic and collective goods motivations the issue of swing voting is then brought to an environment where voters are rarely considered persuadable africa using a count model estimation technique and original survey data from ghana s critical 2008 elections the analysis challenges the near consensus in african politics on clientelism as the only electoral strategy when voters perceive politicians as providing collective developmental goods the efficacy of clientelism as a tool to win over voters is reduced many persuadable voters can also be won over by both clientelistic and collective goods thus contradicting the literature presenting these as mutually exclusive finally the analysis shows that incumbents do better when they provide collective goods even in highly clientelistic environments

the role of product market regulations in the process of structural change abstract the sectoral allocation of labor differs considerably across developed economies even in the presence of similar patterns of structural change a general equilibrium model that captures the stylized facts of structural change is presented in this framework economy wide product market regulations hinder the development of dynamic sectors such as service industries this is consistent with the negative cross country relationship between product market regulations and the service employment share discussed in the paper additionally the model suggests that higher service prices and rents in regulated economies reduce labor supply providing a rationale for the negative association between product market regulations and the employment rate previously found in the literature

job matching and propagation in the u s labor market the vacancy unemployment ratio and employment react sluggishly to productivity shocks we show that the job matching model in its standard form cannot reproduce these patterns due to excessively rapid vacancy responses extending the model to incorporate sunk costs for vacancy creation yields highly realistic dynamics creation costs induce entrant firms to smooth the adjustment of new openings following a shock leading the stock of vacancies to react sluggishly

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

optimal monetary policy in a model of the credit channel we study a simple extension of the basic new keynesian set up in which we relax the assumption of frictionless financial markets due to asymmetric information and default risk bank lending rates incorporate a spread over the deposit rate we demonstrate that financial frictions affect aggregate dynamics mainly through their impact on firms financing costs which increase in both the deposit rate and in the spread between lending and deposit rates welfare includes a concern for smoothing these two financial market variables our numerical simulations suggest that an aggressive easing of policy is optimal in response to adverse financial market shocks

market structure and cyclical fluctuations in u s manufacturing the relevance of imperfect competition for models of economic fluctuations has received increased attention from researchers in both macroeconomics and industrial organization the authors outline a new methodology for estimating industry markups of price over marginal cost and the influence of market structure on cyclical movements in total factor productivity measures of industry concentration import competition and unionization are important for explaining markups in some industry groups much of the estimated markup of price over marginal cost is accounted for by noncapital fixed costs finally the authors show that their estimated margins fluctuate substantially over the cycle in particular markups are countercyclical especially in concentrated durable goods industries copyright 1988 by mit press

an economic capital model integrating credit and interest rate risk in the banking book banks often measure credit and interest rate risk in the banking book separately and then add the risk measures to determine economic capital this approach misses complex interactions between the two risk types we develop a framework where these risks are analysed jointly since banking book positions are generally not marked to market our model is based on book value accounting our simulations show that interactions matter and that ignoring them leads to risk overstatement the magnitude of the errors depends on the structure of the balance sheet and on the repricing characteristics of assets and liabilities

evaluating the performance of the search and matching model abstract does the search and matching model fit aggregate u s labor market data while the model has become an important tool of macroeconomic analysis recent literature pointed to some significant failures in accounting for the data this paper aims to answer two questions i does the model fit the data and if so on what dimensions ii does the data fit the model i e what are the data which are relevant to be explained by the model the analysis shows that the model fits certain specifications of the data on many dimensions though not on all this includes capturing the high persistence and high volatility of most of the key variables the negative co variation of unemployment and vacancies and the behavior of the worker job finding rate a key role in this fit is played by the convexity of hiring costs and the stochastic properties of the separation rate the latter is a major component of the rate discounting the future value of the job worker match the paper offers a workable empirically grounded version of the model for the analysis of aggregate u s labor market dynamics

computing power indices for large voting games voting power indices enable the analysis of the distribution of power in a legislature or voting body in which different members have different numbers of votes although this approach to the measurement of power has been known for a long time its application to large games has been limited by the difficulty of computing these indices this paper presents a new method for computing power indices that combines exact methods with an approximate method due to owen this method is of most utility in situations where the number of players is large and the voting weights are concentrated in the hands of a small number of members

health insurance and the demand for medical care evidence from a randomized experiment we estimate how cost sharing the portion of the bill the patient pays affects the demand for medical services the data come from a randomized experiment a catastrophic insurance plan reduces expenditures 31 percent relative to zero out of pocket price the price elasticity is approximately 0 2 we reject the hypothesis that less favorable coverage of outpatient services increases total expenditure for example by deterring preventive care or inducing hospitalization

choosing how to choose self stable majority rules and constitutions constitutional arrangements affect the decisions made by a society we study how this effect leads to preferences of citizens over constitutions and ultimately how this has a feedback that determines which constitutions can survive in a given society constitutions are stylized here to consist of a voting rule for ordinary business and possibly a different voting rule for making changes to the constitution we define an equilibrium notion for constitutions called self stability whereby under the rules of a self stable constitution the society would not vote to change the constitution we argue that only self stable constitutions will endure we prove that self stable constitutions always exist but that most constitutions even very prominent ones may not be self stable for some societies we show that constitutions where the voting rule used to amend the constitution is the same as the voting rule used for ordinary business are dangerously simplistic and there are many societies for which no such constitution is self stable we conclude with a characterization of the set of self stable constitutions that use majority rule for ordinary business

macroeconomic effects of regulation and deregulation in goods and labor markets product and labor market deregulation reduce and redistribute rents leading economic players to adjust to this new distribution it typically comes with distribution and dynamic effects to study these effects we build a macroeconomic model on two central assumptions monopolistic competition in the goods market which determines the size of rents and bargaining in the labor market which determines the distribution of rents product market regulation determines entry costs and the degree of competition labor market regulation determines the bargaining power of workers we show the effects of deregulation we then use our results to discuss the political economy of deregulation and recent macroeconomic evolutions in europe

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

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

european monetary policy and the ecb rotation model voting power of the core versus the periphery this paper analyses the voting power of individual members of the ecb governing council and in particular that of the executive board in the light of recent information published by the ecb using the randomization scheme based on the multilinear extension of games we modify the standard analysis in three ways first we include heterogeneous preferences of the governing council members second we address the agenda setting power of the ecb president third we take into account the dynamic decision setting we show that the rotation model is able to stabilize the position of the core countries of the euro area

international deviations from the law of one price the role of search frictions and market share this article examines the size and persistence of international deviations from the law of one price in an industry with search frictions cost differences lead foreign and domestic firms to price differently within countries when local firms are more common in each country there are large and persistent price differences across countries large and persistent changes in international relative costs lead to large and persistent changes in international relative prices dynamic considerations imply that the amount of a cost shock firms pass through to prices is u shaped in the market share of firms receiving the shock

managing the evolution of multilateralism author s downs george w rocke david barsoom peter n abstract in the past five years a relatively extensive literature has emerged that explores the demand for multilateral cooperation that is those factors that motivate states to develop or resist developing formal institutions that operate to increase interstate economic military or environmental cooperation 1 these factors include the transaction costs associated with ad hoc and multiple bilateral arrangements increased interstate trade the diffusion of liberal trade theory information about the costs of environmental degradation and trends in elite ideology to date however our understanding of the supply side of multilateralism the standards that are set for admission the order and speed with which candidate states are admitted and the impact of expansion on cooperation and future evolution has been relatively undeveloped 2 partly as a result theorists have had little to say about how multilateral institutions are likely to evolve or what the policy consequences of their expansion will be 3 supply side issues are important because multilateral organizations usually do not spring forth full blown they grow instead of forming an inclusive agreement that is one that covers nearly all of the states that its designers eventually hope to include many multilateral organizations start out with substantially smaller memberships and generally expand over time we argue that among the many possible explanations for the choice of this design strategy there is a rational choice argument

constitutional political economy in the european union this article surveys recent research in constitutional political economy in europe although not all of theworks discussed necessarily focus only on european constitutional issues or are written by europeans european constitutional issues figure importantly in each area surveyed the article examines the literatures linking constitutional institutions to economic growth government size government deficits and corruption bicameralism direct democracy and federalism three exclusively european topics also are covered constitutional issues in the transition countries the structure of the european union and the draft constitution for the european union

on the weights of nations assigning voting weights in a heterogeneous union we study indirect democracy in which countries states or districts each elect a representative who later votes at a union level on their behalf we show that the voting rule that maximizes the total expected utility of all agents in the union involves assigning a weight to each district s vote and then sticking with the status quo unless at least a threshold of weighted votes is cast for change we analyze how the weights relate to the population size of a country and the correlation structure of agents preferences and then we compare the voting weights in the council of the european union under the nice treaty and the recently proposed constitution

the relationship between shareholding concentration and shareholder voting power in british companies a study of the application of power indices for simple g ames this paper reports an analysis of the relationships between shareholding and voting power distributions in a sample of british companies it applies two standard approaches to the measurement of power in simple games the shapley shubik and the banzhaf power indices the results indicate that power is more concentrated than ownership in every case a comparison of the two indices reveals that typically the banzhaf index gives a more concentrated power distribution for the shapley shubik index the power ratio for the largest shareholder is accurately described in terms of the size of holding and the concentration of the remainder the corresponding banzhaf power ratio is less dependent on these variables there is no association between power concentration and company size

the demand for episodes of treatment in the health insurance experiment abstract this paper analyzes claims data from the rand health insurance experiment which were grouped into episodes of treatment the insurance plans in the experiment have coinsurance and a cap on out of pocket spending using new statistical techniques to adjust for the increased sickliness of those who exceed the cap the effects of coinsurance on cost per episode and number of episodes are estimated cost sharing reduced the number of episodes but had little effect on cost per episode people in the experiment responded myopically as their current insurance status changed through the year the price elasticity of spending was about 0 2 throughout the range of coinsurance studied when data permit it the study of episodes complements analyses of annual medical spending by revealing more about how decisions to spend are made within the year

search in the product market and the real business cycle empirical evidence suggests that most firms operate in imperfectly competitivemarkets we develop a search matching model between wholesalers and retailers firms face search costs and form long term relationships price bargain results in both wholesaler and retailer markups depending on firms relative bargaining power we simulate the model to explore the role of product market search frictions in business cycles we show that the way search costs are modelled is crucial to provide a realistic picture of firms business environment and improve the cyclical properties of an otherwise standard real business cycle model

the relation between price and marginal cost in u s industry an examination of data on output and labor input reveals that some u s industries have marginal cost well below price the conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output in booms firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs the paper documents the disparity between price and marginal cost where marginal cost is estimated from annual variations in cost it considers a variety of explanations of the findings that are consistent with competition but none is found to be completely plausible

consumer search price dispersion and international relative price fluctuations this article develops a model of consumer search consistent with the evidence of substantial price dispersion and time spent shopping within countries to study international deviations from the law of one price lop and relative price fluctuations search frictions lead firms to price discriminate across markets based on the opportunity cost of search which depends on the local wage with productivity and taste shocks estimated from the data deviations from the lop are as volatile and persistent as in the data fluctuations in relative wages real exchange rates and the terms of trade are also consistent with the data

flexible integration emu and relative voting power in the eu this paper studies the implications offlexible integration in the european union itanalyses the voting power of member states in thecouncil of ministers when differently sized subgroupsof the eu are set up european monetary union isreferred to as the most important example of flexibleintegration the banzhaf index is calculated to studythe distribution of voting power in the decisionmaking process according to the stability and growthpact the results show considerable fluctuations especially for smaller countries in relative votingpower the latter being defined as the relationbetween voting power and relative voting weight

ownership concentration and the theory of the firm a simple game theoretic approach a model of the shareholder constraint is described in terms of the relationship between shareholding concentration and corporate control a unified perspective including takeovers as a special case is developed whereby leading coalitions are costly to form and possess power in a shareholder voting game control is defined in terms of power indices for simple games a static theory of the firm is developed in terms of the optimal formation of controlling coalitions a dynamic theory of an owner controlled firm is described which explains increasing shareholding dispersion accompanying growth i introduction capital market constraints on managerial discretion are usually described in terms of two mechanisms i the ability of large shareholders to organise their voting power to enforce wealth maximisation and ii the threat of takeover following a fall in the share price most writers have tended to emphasise the takeover mechanism on the assumption that the capacity of shareholders to organise voting coalitions is weak however as aoki 1983 has recently argued the trend towards greater shareholding concentration with the growing importance of institutional shareholders gives a greater role to the first mechanism large shareholders cannot easily sell their holdings without adversely affecting the share price and therefore become locked in to dealing directly with management despite its central role the treatment of share concentration has usually been ad hoc most writers have taken low concentration as implying a loose constraint or management control by making it difficult for shareholders to organise by contrast a tight constraint ownership control prevails where there is at least a sizeable minority holding however little attention has been this paper and leech 1987 are based on warwick economic research paper no 262 ownership concentration and the theory of the firm a simple game theoretic approach applied to us corporations in the 1930s july 1985 i wish to thank peter law for helpful discussions of the ideas contained in them i am also grateful for comments to john cable keith cowling paul geroski donald hay two anonymous referees and participants in a staff seminar at warwick university aoki concludes that the tendency toward a managerial revolution in the sense of wider dispersal of shareholders control is now definitely reversed he suggests that the takeover mechanism is losing its role in disciplining management which fails to maximise share values rather it is becoming a means for large acquisition minded corporations to take over well managed small and medium firms

microeconomic uncertainty and macroeconomic indeterminacy we propose a stylized intertemporal macroeconomic model wherein the combination of decentralized trading and microeconomic uncertainty taking the form of privately observed and uninsured idiosyncratic shocks creates an information problem between agents and generates indeterminacy of the macroeconomic equilibrium for a given value of the economic fundamentals the economy admits a continuum of equilibria that can be indexed by the sales expectations of firms at the time of investment the walrasian equilibrium is one of these possible equilibria but it is reached only if firms are optimistic enough with a weaker degree of optimism equilibrium output employment and real wages will be lower than in the walrasian equilibrium moreover the range of possible equilibria will depend positively on the wage elasticity of the labour supply and on the magnitude of the information problem between buyers and sellers in our case the variance of the idiosyncratic shocks stochastic simulations performed on a calibrated version of the model show that pure demand expectation shocks may generate business cycle statistics that are not inconsistent with the observed ones 2006 elsevier b v all rights reserved

democracy stability and dichotomies an early debate in the empirical study of political democracy concerned the measurement of democracy initial work employed dichotomous indicators and incorporated stability into political democracy measures evidence accumulated showing that this approach could adversely affect analyses particularly in the study of income inequality despite this some recent studies have renewed the flawed practices we draw upon recent work to highlight the confusion that can result when democracy and stability are confounded and the problems with dichotomous indicators we propose that stability is analytically distinct from political democracy and should be treated as such empirically and we suggest ways to estimate incremental effects of political democracy we further argue that political democracy is continuous and that measures of it should reflect this it is important that the measurement history of this construct not repeat itself

designing the voting system for the council of the european union this paper examines the system of qualified majority voting used by the council of the european union from the perspective of enlargement of the union it uses an approach based on power indices due to penrose 1946 banzhaf 1965 and coleman 1971 to make two analyses 1 the question of the voting power of member countries from the point of view of fairness and 2 the question of how the threshold number of votes required for qmv should be determined it studies two scenarios for change from 2005 onwards envisaged by the nice treaty 1 no enlargement the eu comprising 15 member countries and 2 full enlargement to 27 members by the accession of all the present twelve candidates the proposal is made that fair weights be determined algorithmically as a technical or routine matter as the membership changes the analysis of how the threshold affects power shows the trade offs that countries face between their blocking power and the power of the council to act the main findings are 1 that the weights laid down in the nice treaty are close to being fair the only significant discrepancies being the under representation of germany and romania and the over representation of spain and poland 2 the threshold required for a decision is set too high for the council to be an effective decision making body

business cycles and labor market search the quantitative implications of labor market search for economic fluctuations are evaluated in the context of a real business cycle model incorporating labor market search into the model is found to improve its empirical performance along several dimensions in particular hours now fluctuate substantially more than wages and the contemporaneous correlation between hours and productivity falls in addition the model replicates the observation that output growth displays positive autocorrelation at short horizons overall the empirical results suggest that the labor market search environment embodies a quantitatively important propagation mechanism copyright 1996 by american economic association

microfoundations of macroeconomic price adjustment survey evidence from swedish firms this paper presents the results of a survey on price setting behavior conducted on a large random sample of swedish firms the median firm adjusts the price once a year state and time dependent price setting are about equally important the four highest ranked explanations for price rigidity in this study implicit contracts sluggish costs explicit contracts and the kinked demand curve have close correspondents among the top five places in two similar large scale surveys carried out in the uk and the u s the results point to the importance of the long term relations with customers for the rigidity of prices the estimated share of sales that go to regular customers is more than 80

aggregate demand idle time and unemployment this paper develops a model of unemployment fluctuations the model keeps the architecture of the barro and grossman 1971 general disequilibrium model but replaces the disequilibrium framework on the labor and product markets by a matching framework on the product and labor markets both price and tightness adjust to equalize supply and demand there is one more variable than equilibrium condition on each market so we consider various price mechanisms to close the model from completely flexible to completely rigid with some price rigidity aggregate demand influences unemployment through a simple mechanism higher aggregate demand raises the probability that firms find customers which reduces idle time for firms employees and thus increases labor demand which in turn reduces unemployment we use the comparative statics predictions of the model together with empirical measures of quantities and tightnesses to re examine the origins of labor market fluctuations we conclude that 1 price and real wage are not fully flexible because product and labor market tightness fluctuate significantly 2 fluctuations are mostly caused by labor demand and not labor supply shocks because employment is positively correlated with labor market tightness and 3 labor demand shocks mostly reflect aggregate demand and not technology shocks because output is positively correlated with product market tightness

financial shocks and the us business cycle employing the financial accelerator fa model of bernanke gertler and gilchrist 1999 enhanced to include a shock to the fa mechanism we construct and study shocks to the efficiency of the financial sector in post war us business cycles we find that financial shocks are very tightly linked with the onset of recessions more so than tfp or monetary shocks the financial shock invariably remains contractionary for sometime after recessions have ended the shock accounts for a large part of the variance of gdp and is strongly negatively correlated with the external finance premium second moments comparisons across variants of the model with and without a stochastic fa mechanism suggests the stochastic fa model helps us understand the data

clientelism and voting behavior evidence from a field experiment in benin the author conducted a field experiment in benin to investigate the impact of clientelism on voting behavior in collaboration with four political parties involved in the 2001 presidential elections clientelist and broad public policy platforms were designed and run in twenty randomly selected villages of an average of 756 registered voters using the survey data collected after the elections the author estimated the effect of each type of message by comparing voting behavior in the villages exposed to clientelism or public policy messages treatment groups with voting behavior in the other villages control groups the author found that clientelist messages have positive and significant effect in all regions and for all types of candidates the author also found that public policy messages have a positive and significant effect in the south but a negative and significant effect in the north in addition public policy messages seem to hurt incumbents as well as regional candidates finally the evidence indicates that female voters tend to have stronger preference for public policy platforms than male voters

the swing voter s curse the authors analyze two candidate elections in which some voters are uncertain about the realization of a state variable that affects the utility of all voters they demonstrate the existence of a swing voter s curse less informed indifferent voters strictly prefer to abstain rather than vote for either candidate even when voting is costless the swing voter s curse leads to the equilibrium result that a substantial fraction of the electorate will abstain even though all abstainers strictly prefer voting for one candidate over voting for another copyright 1996 by american economic association

a comparison of alternative models for the demand for medical care we have tested alternative models of the demand for medical care using experimental data the estimated response of demand to insurance plan is sensitive to the model used we therefore use a split sample analysis and find that a model that more closely approximates distributional assumptions and uses a nonparametric retransformation factor performs better in terms of mean squared forecast error simpler models are inferior either because they are not robust to outliers e g anova anocova or because they are inconsistent when strong distributional assumptions are violated e g a two parameter box cox transformation

excluded coalitions and the distribution of power in parliaments abstractin this article we introduce a new value for cooperative games this value is based on the shapley 1953 value and takes into account that players exclude coalitions with other players one example of such exclusions are the coalition statements of parliamentary parties a case study demonstrates the application of the new value for these situations

bargaining power at europe s intergovernmental conferences testing institutional and intergovernmental theories this article examines how european union member states make choices about political institutions at intergovernmental conferences the grand negotiations where many key institutional changes are made using data on member state preferences from the intergovernmental conference leading to the treaty of amsterdam i test competing bargaining theories institutionalism and intergovernmentalism and present strong evidence that institutionalism better captures negotiations compared to intergovernmentalism i present a formal model to discern between these competing theories of bargaining power derive a statistical model directly from this formal model and then use data from the european union s treaty of amsterdam to test these theories and corresponding power sources veto power associated with institutional models better explains intergovernmental conference outcomes compared to power from size and economic might often associated with intergovernmental analyses i would like to thank kathy bawn julia gray tim groseclose james honaker joe jupille thomas konig jeff lewis sven oliver proksch george tsebelis and the participants in ucla s graduate student formal theory and statistical methods workshops for their insightful comments on various drafts of this article i am also grateful for the comments from several anonymous reviewers and the editors at international organization an earlier version of this article was presented at the annual meeting of the midwest political science association april 2006 data and replication material are available at http faculty unlv edu jslapin

solving the mystery of the africa dummy abstract most empirical studies have reported a negative effect on growth of being an african country even when accounting for ethnic heterogeneity modeling policy choices has reduced this effect in recent studies but these have begged the question of why africa appears adverse to developmental policies this paper uses a cross sectional data set to show that the governments of arbitrary postcolonial states as are most african states face substantial limitations to their power and are constrained in their responses deriving greater relative power payoffs from neo patrimonial than from developmental policies differing levels of state legitimacy account therefore largely for the policy choices which characterize most of africa

risk equalization and voluntary deductibles a complex interaction the presence of voluntary deductibles in the swiss and dutch mandatory health insurance has important implications for the respective risk equalization systems in a theoretical analysis we discuss the consequences of equalizing three types of expenditures the net claims that are reimbursed by the insurer the out of pocket expenditures and the expenditure savings due to moral hazard reduction equalizing only the net claims as done in switzerland creates incentives for cream skimming and prevents insurers from incorporating out of pocket expenditures and moral hazard reductions into their premium structure in an empirical analysis we examine the effect of self selection and conclude that the swiss and dutch risk equalization systems do not fully adjust for differences in health status between those who choose a deductible and those who do not we discuss how this may lead to incentives for cream skimming and to a reduction of cross subsidies from healthy to unhealthy individuals compared to a situation without voluntary deductibles