a political economy model of congressional careers our main goal is to quantify the returns to a career in the united states congress we specify a dynamic model of career decisions of a member of congress and estimate this model using a newly collected dataset given estimates of the structural model we assess reelection probabilities estimate the effect of congressional experience on private and public sector wages and quantify the value of congressional seat moreover we assess how an increase in the congressional wage or the imposition of term limits would affect the career decisions of politicians and the returns from a career in congress

empirical tests of information aggregation abstract this paper proposes tests to empirically examine whether auction prices aggregate information away from the limit these tests are applied to a unique data set containing winning bids and measures of the value and dispersion of information signals in ebay auctions for computers results suggest that prices partially aggregate information but do not converge to the common value even away from the limit more bidders and stronger information have a significant effect on the convergence of prices and information aggregation even partial information aggregation may represent a potential efficiency gain over one to one trade of used goods with uncertain common values

information aggregation in common value auctions a key question in information economics and finance is whether prices aggregate information in a competitive environment that is when agents are endowed with private information does competition lead in the limit to prices which would occur if all information were public this paper examines the asymptotic properties of prices in common value auctions when the number of bidders becomes large the main idea in this paper is to separate the issue of information aggregation from the issue of revenue efficiency we also distinguish between the amount of information prices contain and the degree to which prices approximate the asset s value using this approach we get a simple characterization of the limiting distribution of prices we are not only able to answer whether prices converge to the asset s value but also get an explicit form for the limiting distribution prices converge to the expected value of the asset conditional on the information possessed by what we call the pivotal bidder this provides insights on how the auction format and the information structure influence the limiting behavior of prices it shows that the limiting distribution of prices can be derived from the statistical properties of certain order statistics this lets us abstract from the specific equilibrium bidding strategies for example we show that while the first and second price auction have different equilibrium strategies they share a similar limiting distribution of prices these auctions yield different limiting distributions from auctions such as the english auction or kn auction our

is the linkage principle valid evidence from the field we present field evidence involving experienced bidders tha t supports the linkage principle specifically the prediction that in affiliat ed values auction environments the expected revenues generated at open outcry ascending bid english auctions are higher than those under other auction formats that reveal less information to participants using field data from a large seller of automobiles whi ch experimented with different selling formats we find that the seller s average r evenues were significantly higher under an english auction than under a dynamic internet auction that revealed far less information to bidders 1 introduction and motivation in an influential and classic paper milgrom and weber 1982 derived a powerful result and coined the term linkage principle to describe it simply put in auction environments having affiliated values the linkage principle state s that a seller can expect to increase revenues by providing more information to bidders both before and during the auction an implication of the linkage principle is that open outcry ascending price auctions often referred to as english auctions will on average earn more revenue for the seller than sealed bid auctions under which no information is released or similar auction formats that reveal less information to pot ential buyers according to perry and reny 1999 the linkage principle has come to be considered one of the fundamental lessons provided by auction theory well known exceptions to the linkage principle exist for example within independent private values environments the celebrated revenue equivalence theorem first outlined by vickrey 1961 1962 and then proven by riley and samuelson 1981 as well as myerson 1981 states that any auction format that has the same probability of assigning a winning bidder generates the same expected revenue to the seller in particular the revenue equivalence theorem predicts that the expected revenues earned by the seller at sealed bid auctions will be the same as those earned at english auctions at least when the distribution from which the values are drawn is the same for all potential buyers who are also risk neutral thus the presence of some degree of dependence or a common value component in the signals of potential buyers is critical to the validity of the linkage princi ple the affiliated values model is a generalization of the common value model developed by wilson 1977 under affiliation the conditional expectation of any monotonic function of the signals of all bidders is an increasing function of any individual bidder s own signal when the signals of bidders are dependent in this manner information released by the seller or information the seller provides concerning the bids made by other participants by virtue of the seller s choice of auction format helps bidders refine their beliefs concer ning the true value of the object for sale which in turn induces them to bid more aggressively than they would in the absence of such information while one can imagine circumstances under which the release of information could adversely affect the outcome at an auction for example if the seller released information concerning problems with the object for sale or when low bids by some bidders convince other bidders that the item is worth less than they originally thought the remarkable feature of the linkage principle i s that ex ante providing more information raises the expected revenues to the seller milgrom and weber 1982 have summarized the implications of the linkage principle succinctly honesty is the best policy

keeping the public purse an experiment in windfalls taxes and the incentives to restrain government it is widely believed that natural resource wealth foreign aid and other types of windfall revenue increase corruption and undermine accountability a predominant claim in political science is that windfalls free politicians from the need to tax resulting in a more politically quiescent population yet there is surprisingly little evidence to substantiate not only whether taxation has this eect but also why i use novel experiments to provide the rst micro level causal test of claims that 1 taxes motivate citizens more than windfalls to hold politicians accountable and 2 citizens care more about wasted revenue when they pay taxes the experiments were embedded in a public awareness campaign conducted with 1 863 citizens in a resource rich district in indonesia the results measured through a survey and a postcard campaign show that taxes made participants more willing to monitor government and hold politicians accountable than windfalls primarily because of a stronger sense of ownership over public funds yet when better information on government spending is made available the windfall group proved just as intolerant of misspent revenue these ndings have important implications for understanding not only how taxation motivates political action but also how revenue shapes the ways in which citizens acquire and process information on government spending

auctions actions and the failure of information aggregation we study a market where k identical and indivisible objects are allocated using a uniform price auction where n k bidders each demand one object before the auction each bidder receives an informative but imperfect signal about the state of the world the good that is auctioned is a common value object for the bidders and a bidder s valuation for the object is determined jointly by the state of the world and an action that he chooses after winning the object but before he observes the state we show that there are equilibria where the auction price is completely uninformative about the state of the world and aggregates no information even in an arbitrarily large auction in the equilibrium that we construct because prices do not aggregate information agents have strict incentives to acquire costly information before they participate in the market also market statistics other than price such as the amount of rationing and bid distributions contain extra information about the state our findings sharply contrast with past work which shows that large auctions aggregate information when there is no ex post action

the incentive effects of levelling the playing field an empirical analysis of amateur golf tournaments levelling the playing field is an important policy instrument to guarantee an equitable competition among heterogeneous individuals however the incentive effects of those policies are usually not explicitly addressed in empirical studies in this article the performance in amateur golf tournaments is analysed to gain insights into the incentive effects of those types of policies the empirical analysis takes advantage of the fact that tournaments in amateur golf are of two distinctive types that apply different scoring rules while one scoring rule is based on gross scores i e the total number of strokes of a player the second scoring rule is based on net scores where the total number of strokes is normalized with respect to the respective player s handicap performance comparisons of players who participated in both types of tournaments suggest that levelling the playing field as in tournaments based on net score has positive and significant performance effects

can vouchers reduce elite capture of local development projects experimental evidence from the solomon islands abstract external financing of local public goods can potentially create political resource curses by reducing citizen oversight exacerbating elite capture and producing policy outcomes that are sub optimal for the general population this paper experimentally tests a novel mechanism that seeks to mitigate elite capture of local development projects control communities are provided with block grants to fund local public goods while households in treatment communities are provided with vouchers that they may either contribute to a public good or redeem at a discount for a private capital good we find that the use of vouchers as a mechanism for aid delivery increases community participation in local public decision making changes the nature of allocation outcomes and improves community satisfaction with allocation outcomes

competitive rational expectations equilibria without apology abstract consider a financial market with n risk averse asymmetrically informed traders when n grows at the same rate as noise trading prices in competitive and in strategic rational expectations equilibrium converge to each other at a rate of 1 n equilibria in the two scenarios are close when noise trading volume per informed trader is large in relation to risk bearing capacity both equilibria converge to the competitive equilibrium of a limit continuum economy as the market becomes large at a slower rate of 1 n the results extend to endogenous information acquisition and the connections with the grossman stiglitz paradox are highlighted

from curse to blessing institutional reform and resource booms in colombia abstract is it possible to reverse the resource curse through institutional reform evidence suggests that there is a negative relationship between abundance of natural resources and economic growth political stability democracy and peace however evidence illustrating how institutional reform can reverse this situation is scarce in this paper we exploit a component of an institutional reform that modified the allocation rule of oil royalties in colombia and evaluate a set of effects of this reform on the living standards of colombian households using international variations in the price of oil for identification we find that the reform had important effects on several household welfare indicators we find positive impacts on important dimensions such as reductions in multidimensional poverty and improvements on income employment housing conditions health and education among others results are mixed or null in other outcomes such as formality or employment in the service sector importantly we find no effects on monetary poverty but larger income effects for rich and urban households we test for the different channels boosting these effects and provide tentative evidence that supports the role of fiscal and administrative capacity mechanisms

do natural disasters open a window of opportunity for corruption this study explores the link between natural disasters and corruption at the local government level we examine whether a natural disaster affects official households more favourably than non official households we find that natural disasters decrease nonofficial household expenditures significantly however they have negligible effect on official household expenditures meanwhile both kinds of households experience similar reduction in incomes and have much the same disaster coping strategies together the results imply that local officials may receive unobserved monetary compensation we define as corruption in the aftermath of natural disasters

strategic public policy around population thresholds abstract political economists have long maintained that politicians respond to both re election and financial incentives this article contributes to the latter literature by analysing whether when and how local office holders respond to the economic incentives embedded in exogenously imposed population thresholds leading to an increased number and remuneration of local politicians building on insights from the urban economics and public finance literatures we argue that local politicians may strategically adjust fiscal and housing policies to stimulate in migration when approaching a population threshold where their remuneration increases using data from all 589 belgian municipalities over the period 1977 2016 our results confirm that approaching important population thresholds causes lower local tax rates and the granting of additional building permits particularly for apartments these policy changes occur early in the election cycle and at least for housing policy are restricted to incumbent mayors themselves expecting to benefit from crossing the population threshold

do land revenue windfalls create a political resource curse evidence from china abstract by analyzing a panel on the political turnovers of 4390 county leaders in china during 1999 2008 we find that the revenue windfalls accrued to these officials from land sales have undermined the effectiveness of the promotion system for government officials instead of rewarding efforts made to boost gdp growth promotion is positively correlated with signaling efforts and with corruption the robust positive relationship between land revenue windfalls and political turnover or specifically promotion suggests that those who are politically connected to their superiors and those beyond the prime age for promotion are the primary beneficiaries the case for corruption is substantiated by the evidence inferred from anti corruption crackdowns which reveals that the additional effect of land revenue on political turnover and size of bureaucracy a proxy for corruption decreases significantly in crackdowns but that land revenue has no effect on city construction expenditure a proxy for signaling

do tournaments have incentive effects much attention has been devoted to studying models of tournaments or situations in which an individual s payment depends only on his or her output or rank relative to that of other competitors academic interest derives from the fact that under certain sets of assumptions tournaments have desirable normative properties because of the incentive structures they provide our paper uses nonexperimental data to test whether tournaments actually elicit effort responses we focus on professional golf tournaments because information on the incentive structure prize distribution and measures of individual output players scores are both available we find strong support for the proposition that the level and structure of prizes in pga tournaments influence players performance

cash transfers clientelism and political enfranchisement evidence from brazil abstract this paper uses brazil s bolsa familia to show that redistributive policies that are shielded from the influence of political intermediaries can reduce incumbency advantage for mayors increase both electoral competition and candidate quality reduce support for clientelistic parties and lead incumbents to increase redistributive spending the paper exploits a nonparametric multivariate regression discontinuity design and employs a novel identification strategy for the variation in program coverage the theory proposes that cash transfers by reducing the vulnerability of poor voters make clientelism a less attractive strategy to incumbent mayors consequently incumbents reallocate effort away from the practice into public good distribution

the loser s curse and information aggregation in common value auctions we consider an auction in which k identical objects of unknown value are auctioned off to n bidders the k highest bidders get an object and pay the k 1st bid bidders receive a signal that provides information about the value of the object we characterize the unique symmetric equilibrium of this auction we then consider a sequence of auctions a r with n r bidders and k r objects we show that price converges in probability to the true value of the object if and only if both k r and n r k r i e both the number of objects and the number of bidders who do not receive an object go to infinity

a new look at incentive effects and golf tournaments abstract this paper uses data from the 1992 professional golf association tour to analyze the incentive effects offered by tournaments the results suggest that the level of the total prize money has an insignificant effect on the total score output of the players workers this conclusion contradicts the findings of an earlier paper by ehrenberg and bognanno journal of political economy 1990 98 1307 1324

quitters never win the adverse incentive effects of competing with superstars internal competition may motivate worker effort yet the benefits of competition may depend critically on workers relative abilities large skill differences may reduce efforts i use panel data from professional golf tournaments and find that the presence of a superstar is associated with lower performance on average golfers first round scores are approximately 0 2 strokes worse when tiger woods participates relative to when woods is absent the overall tournament effect is 0 8 strokes the adverse superstar effect varies with the quality of woods s play there is no evidence that reduced performance is attributable to media attention intensity or risky strategy adoption

organized crime and business subsidies where does the money go abstract business support policies are widespread in advanced countries to foster employment and productivity this paper analyses the role of organized crime in the allocation of public subsidies to businesses we assemble an innovative data set on the italian mafia at municipality level and test whether mafia ridden municipalities receive a disproportionally higher amount of funds we exploit exogenous variation at municipality level to instrument mafia activity and show that the presence of organized crime positively affects the probability of obtaining funding and the amount of public funds organized crime is also found to lead to episodes of corruption in the public administration sector a series of robustness checks confirms the above findings

the incentive effects of tournaments revisited evidence from the european pga tour this analysis of data from the 1987 european men s professional golf association pga tour strongly supports the hypothesis that the level and structure of prizes in pga tournaments influence players performance specifically players performance appears to vary positively with both the total money prizes awarded in a tournament and the marginal return to effort in the final round of play a value that varies among players largely depending on how the prize money is allocated among finishers of different ranks the authors suggest that these results together with the similar results of their earlier study of the 1984 u s men s pga tour may have implications for the design of compensation systems for certain groups of workers such as corporate executives college professors and salespeople

natural resource access and local economic growth abstract we explore the existence of a local resource curse related to brazil s oil using oil price annual changes interacted with measures of local proximity to oil reserves we find that oil royalty receiving locations in brazil that are closer to an oil field are characterized by a higher level of income per capita when controlling for a range of potentially confounding factors furthermore in a panel setting we find that better geographical access to oil fields generates a greater positive effect of oil prices on local income per capita moreover this positive impact of oilfield proximity on the effect of oil prices is enhanced in oil rich states importantly these effects appear to be independent of the amount of oil royalties suggesting the role of an indirect linkage effect

common value auctions with discrete private information abstract a first price sealed bid common value auction with finite valued conditionally independent private information is studied we show that the equilibrium in this auction game is characterized by all bidders using a symmetric mixed strategy in which bids are randomized over intervals that are successive and non overlapping for consecutively indexed signals we also show that as the number of bidders grows the winning bid conditional on the true value of the object converges to a non degenerate random variable that is affiliated with the true value therefore only partial information revelation is achieved in the limit

housing booms and local spending abstract this paper examines how local governments adjust their spending in response to a temporary revenue windfall generated by a housing boom we focus on spanish local governments because of the intensity of the last housing boom bust experienced there and the large share of construction related revenues they obtain we find that windfall revenues were mostly used to increase expenditures above all current we seek to determine whether this behaviour was due to political myopia incumbents in contested elections increasing expenditures to convince uninformed voters about their competence or to extrapolation bias leading to the overstatement of the persistence of revenue shocks we find evidence for both mechanisms the propensity to spend is higher where local incumbents were elected by a narrow vote margin and lower in places with past volatility experience finally we also examine what happens during the bust and find that governments enjoying large windfalls during the boom had to cut their spending abruptly above all capital and raise taxes the adjustment during the bust was actually greater in those places that overspent more during the crisis

tournament incentives and match outcomes in women s professional tennis our research examines the effect of prize money differentials in women s professional tennis tournaments on the probability that the favoured player wins the match this study adds to the existing literature on tournament theory through its focus on rosen s 1986 elimination style match play tournament model we estimate a standard probit model using a unique data set containing detailed information on prize money player specific characteristics and match play outcomes for all tournaments played during the 2004 tour sponsored by the women s tennis association wta our results support predictions by rosen s tournament model larger prize money differentials have a positive statistically significant effect on the favoured player s probability of winning the match in addition the number of stages remaining has a significant negative effect on winning consistent with tournament theory predictions associated with the number of contestants in a tournament

paying politicians theory and evidence this paper looks at the theory behind the idea that paying politicians better will improve their performance the paper lays out a political agency model with adverse selection and moral hazard where politicians are subject to two period term limits this model provides a number of predictions about how the pay of politicians affects agency problems we also consider what happens when the pool of politicians is endogenous the main ideas in the model are confronted with data on u s governors jel d72 j33

the voracity effect abstract we analyze an economy that lacks a strong legal political institutional infrastructure and is populated by multiple powerful groups powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock in equilibrium this leads to slow economic growth and a voracity effect by which a shock such as a terms of trade windfall perversely generates a more than proportionate increase in fiscal redistribution and reduces growth we also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks jel f43 o10 o23 o40

exposing corrupt politicians the effects of brazil s publicly released audits on electoral outcomes author s finan frederico ferraz claudio abstract this paper examines the extent to which access to information enhances political accountability based upon the results of brazil s recent anti corruption program that randomly audits municipal expenditures of federally transferred funds it estimates the effect of the disclosure of local government corruption practices upon the re election success of incumbent mayors in municipal elections comparing municipalities which were randomly audited before the elections with those audited after the analysis shows that the disclosure of audit results had a significant impact on the re election rates of mayors found to be corrupt for a one standard deviation increase in reported corruption the audit policy reduced the incumbent s likelihood of re election by 25 percent this effect is more pronounced in municipalities where radio stations are present and higher levels of corruption are identified these findings highlight the value of information and the role of the media in reducing informational asymmetries in the political process thus enabling voters to not only hold corrupt politicians accountable but also to reward non corrupt politicians

fiscal restraints and voter welfare this paper explores the logic of fiscal restraints in a political agency model with both moral hazard and adverse selection the role of the political process is both to discipline incumbents who may act against the public interest and to sort in those politicians who are most likely act in voters interests we use the model to examine the optimality of inefficient taxation limits on the size of government increasing transparency and yardstick competition some conclusions are surprising for example we show that some forms of fiscal restraint can only be desirable when incumbents are sufficiently likely to be benevolent

re election incentives and deforestation cycles in the brazilian amazon abstract despite expansive research on amazonian deforestation and its drivers the role of local politics is not well understood using a panel data set that combines municipal level deforestation and election data from 2002 to 2012 i estimate the effect of an incumbent mayor running for re election on deforestation rates in election periods i find that deforestation rates increase 8 10 in election years when an incumbent mayor runs for re election an amount equivalent to four percent of the total forest lost since the 2004 elections electoral deforestation cycles do not appear to be driven by changes in agricultural policy implementation and activity but are linked to corruption and campaign finance suggesting that weak institutional constraints facilitate electoral manipulation of forest resources this phenomenon is not likely limited to amazonian forests re election incentives could very well lead to misallocation of other natural resources in alternate geographies

the economic design of sporting contests what is the optimal number of entrants in a race or the optimal number of teams in a baseball league what is the optimal structure of prizes for a golf tournament or degree of revenue sharing for a football championship how evenly balanced should the competing teams be in the nascar or formula one championships what is the maximum number of entrants per nation to the olympic games that should be permitted what quota of qualifying teams to the soccer world cup should be allocated to the developing nations

rational expectations information acquisition and competitive bidding most rational expectations market equilibrium models are not models of price formation and naive mechanisms leading to such equilibria can be severely manipulable in this paper a bidding model is developed which has the market like features that bidders act as price takers and that prices convey information higher equilibrium prices convey more favorable information about the quality of the objects being sold than do lower prices bidders can benefit from trading only if they have a transactions motive or if they have access to inside information apart from exceptional cases prices are not fully revealing a two stage model is developed in which bidders may acquire information at a cost before bidding and for which the equilibrium price is fully revealing resolving a well known paradox

on the asymptotic distribution of the transaction price in a clock model of a multi unit oral ascending price auction within the common value paradigm using a clock model of a multi unit oral ascending price auction within the common value paradigm we analyze the behavior of the transaction price as the numbers of bidders and units gets large in a particular way we find that even though the transaction price is determined by a fraction of losing drop out bids that price converges in probability to the true but ex ante unknown value subsequently we demonstrate that the asymptotic distribution of the transaction price is gaussian finally we apply our methods to data from an auction of taxi license plates held in shenzhen china

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

friends with benefits patronage networks and distributive politics in china abstract existing research on distributive politics mainly focuses on the influence of electoral competition between political parties but less is known about non electoral mechanisms of resource allocation inside a dominant party this study examines how informal patron client networks within the ruling communist party shape the distribution of intergovernmental transfers in china a major one party regime using a new dataset on city level fiscal transfers and a novel method to infer informal political connections through past promotions we show that provincial leaders allocate significantly more transfers to localities governed by officials who are part of their networks this bias persists even when we use a specification that only exploits variations in connection caused by exogenous turnovers of higher level leadership we evaluate two plausible motivations behind this bias network based policy coordination and collective corruption and find evidence in stronger support of the former our findings suggest that private networks may function as an important albeit costly tool of mobilization in one party systems

the local impact of mining on poverty and inequality evidence from the commodity boom in peru summary this paper studies the impact of mining activity on socioeconomic outcomes in local communities in peru in the 1990s and 2000s the value of peruvian mining exports grew by 15 times and since the early 2000s one half of fiscal revenues from mining have been devolved to local governments has this boom benefitted people in local communities using the district level poverty map of 2007 the latest available with accurate data on consumption poverty and inequality together with district level data on mining production and fiscal transfers to local governments we present some evidence to answer this question we find that mining districts have larger average consumption per capita and lower poverty rates than otherwise similar districts these positive impacts however decrease drastically with administrative and geographic distance from mining centers moreover consumption inequality within mining districts is higher than in comparable nonproducing districts this dual effect of mining is accounted for by first the better educated immigrants required and attracted by mining activity and second the jobs that some community natives obtain in industries and services related to mining the inequalizing impact of mining both across and within districts may help explain the social discontent with mining in peru despite its enormous revenues an area for future research highlighted in the paper regards the usefulness of fiscal transfers to local governments the mining canon a key component of the fiscal decentralization reform of 2002 we find neither a detrimental nor a beneficial effect from the mining canon in peru whether this is explained by our early measurement of results 5 years into the decentralization program or by the lack of implementation capacity of local governments remains to be answered

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

the sports business as a labor market laboratory with superior data on compensation and productivity as well as the occurrence of abrupt dramatic market structure and player allocation rules changes sports labor markets offer an excellent setting in which to test economic hypotheses this paper reviews evidence from sports in four areas employer monopsony discrimination the coase theorem and incentive contracts supervision and performance there is considerable evidence of monopsony as well as for the existence of some forms of discrimination against minority athletes incentive contracts have strong effects on player performance and behavior and there is mixed evidence on the predictions of the coase theorem

political careers or career politicians two main career paths are prevalent among politicians in modern democracies there are career politicians i e politicians who work in the political sector until retirement and political careers i e there are politicians who leave politics before retirement and work in the private sector in this paper we propose a dynamic equilibrium model of the careers of politicians in a political economy with a private sector and a political sector where individuals are heterogeneous with respect to their market ability as well as their political skills we characterize the conditions under which the two career paths emerge in equilibrium and establish a number of comparative statics results with respect to the quality of politicians and their careers

natural disasters growth and institutions a tale of two earthquakes abstract we examine the impact of natural disasters on gdp per capita by applying the synthetic control approach and using a within country perspective our analysis encompasses two large scale earthquakes that occurred in two different italian regions in 1976 and 1980 we show that the short term effects are negligible in both regions though they become negative if we simulate the gdp that would have been observed in absence of financial aid in the long term our findings indicate a positive effect in one case and a negative effect in the other largely reflecting divergent patterns of the tfp consistent with these findings we offer further evidence suggesting that a quake and related financial aid might either increase technical efficiency via a disruptive creation mechanism or reduce it by stimulating corruption distorting the markets and deteriorating social capital finally we show that the bad outcome is more likely to occur in regions with lower pre quake institutional quality as a result our evidence suggests that unanticipated local shocks are likely to change long run growth rates exacerbating territorial disparities

the effort effects of prizes in the second half of tournaments abstract the theory of tournaments predicts that a worker s effort depends on the difference between the winning and losing prizes as well as the degree that increases in effort affect the probability of winning this paper tests these predictions using a data set from arabian horse racing jockeys increase their efforts lower their times in the second half of races when the amount of prize money lost by dropping a place is greater and when there is less distance between them and their closest competitors these findings are consistent with the theory

preschool education in brazil does public supply crowd out private enrollment this paper examines whether an expansion in the supply of public preschool crowds out private enrollment the paper uses rich data for municipalities in brazil from 2000 to 2006 where federal transfers to local governments change discontinuously with given population thresholds the results from a regression discontinuity design reveal that larger federal transfers lead to a significant expansion of local public preschool services but show no evidence of crowding out of private enrollment this finding is consistent with a theory in which households differ in their willingness to pay for preschool services and private suppliers optimally adjust prices in response to an expansion of lower quality free of charge public supply

poverty and the political economy of public education spending evidence from brazil a large body of literature has emphasized the elite capture of democratic institutions as the explanation for the low levels of spending on public education in many low income democracies this paper provides an alternative to that longstanding hypothesis motivated by new cross country facts and evidence from brazilian municipalities we hypothesize that many democratic developing countries might invest less in public education spending because poor decisive voters prefer the government to allocate resources elsewhere one possible explanation is that low income voters could instead favor redistributive programs that increase their incomes in the short run such as cash transfers to test for this possibility we design and implement an experimental survey and an incentivized choice experiment in brazil the findings from both interventions support our hypothesis

performance responses to competition across skill levels in rank order tournaments field evidence and implications for tournament design tournaments are widely used in the economy to organize production and innovation we study individual data on 2775 contestants in 755 software algorithm development contests with random assignment the performance response to added contestants varies nonmonotonically across contestants of different abilities precisely conforming to theoretical predictions most participants respond negatively whereas the highest skilled contestants respond positively in counterfactual simulations we interpret a number of tournament design policies number of competitors prize allocation and structure number of divisions open entry and assess their effectiveness in shaping optimal tournament outcomes for a designer

do better paid politicians perform better disentangling incentives from selection the wage paid to politicians affects both the choice of citizens to run for office and the performance of those who are appointed first if skilled individuals shy away from politics because of higher opportunities in the private sector an increase in politicians pay may change their mind second if the re election prospects of incumbents depend on their in office deeds a higher wage may foster performance we use data on all italian municipal governments from 1993 to 2001 and test these hypotheses in a quasi experimental setup in italy the wage of mayors depends on population size and sharply rises at different thresholds we apply a regression discontinuity design to the only threshold that uniquely identifies a wage increase 5 000 inhabitants exploiting the existence of a two term limit we further disentangle the composition from the incentive component of the effect of the wage on performance our results show that a higher wage attracts more educated candidates and that better paid politicians size down the government machinery by improving efficiency importantly most of this effect is driven by the selection of competent politicians rather than by the incentive to be re elected

political foundations of the resource curse in this paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse we show 1 politicians tend to over extract natural resources relative to the efficient extraction path because they discount the future too much and 2 resource booms improve the efficiency of the extraction path however 3 resource booms by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections increase resource misallocation in the rest of the economy 4 the overall impact of resource booms on the economy depends critically on institutions since these determine the extent to which political incentives map into policy outcomes countries with institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create countries without such institutions however may suffer from a resource curse

applying regression discontinuity designs to american political development students of american political development apd have long been interested in questions related to the development of state capacity in the united states the apparent macro level nature of those questions may appear to discourage the pursuit of micro level causal inferences yet attention to causal inference is not necessarily incompatible with inquiry into macro level phenomena this article explores the application of a specific causal inference strategy namely regression discontinuity design rdd to three questions of interest to apd scholars of state capacity first the article illustrates the use of a geographic rdd to estimate the causal impacts of a reconstruction era federal civil rights statute during the period prior to the development of significant federal state capacity second it explores the possible causes of the late 19th century decline in the use of monetary rewards to motivate civil servants by using a population based rdd to estimate the causal impacts of financial incentives on law enforcement effort and civilian compliance third it illustrates an opportunity to test claims about the impacts of the growth of the carceral state by applying a resource constraint rdd to estimate the causal impacts of law enforcement effort on a variety of outcomes

the political resource curse this paper studies the effect of additional government revenues on political corruption and on the quality of politicians both with theory and data the theory is based on a political agency model with career concerns and endogenous entry of candidates the data refer to brazil where federal transfers to municipal governments change exogenously at given population thresholds allowing us to implement a regression discontinuity design the empirical evidence shows that larger transfers increase observed corruption and reduce the average education of candidates for mayor these and other more specific empirical results are in line with the predictions of the theory jel d72 d73 h77 o17 o18

electoral accountability and corruption evidence from the audits of local governments we show that political institutions affect corruption levels we use audit reports in brazil to construct new measures of political cor ruption in local governments and test whether electoral account ability affects the corruption practices of incumbent politicians we find significantly less corruption in municipalities where mayors can get reelected mayors with reelection incentives misappropriate 27 percent fewer resources than mayors without reelection incentives these effects are more pronounced among municipalities with less access to information and where the likelihood of judicial punish ment is lower overall our findings suggest that electoral rules that enhance political accountability play a crucial role in constraining politician s corrupt behavior jel d72 k42 017

popularity shocks and political selection abstract we observe that popularity shocks are crucial for electoral accountability beyond their effects on voters behaviors by focusing on brazilian politics we show that the disclosure of audit reports on the mis use of federal funds by local administrators affects the type of candidates who stand for election when the audit finds low levels of corruption the parties supporting the incumbent select less educated candidates on the contrary parties pick more educated candidates when the audit reveals a high level of corruption these effects are stronger in municipalities that have easier access to local media

incentives versus sorting in tournaments evidence from a field experiment existing field evidence on rank order tournaments typically does not allow disentangling incentive and sorting effects we conduct a field experiment illustrating the confounding effect students in an introductory microeconomics course selected themselves into tournaments with low medium or high prizes for the best score at the final exam nonexperimental analysis of the results would suggest that higher rewards induce higher productivity but a comparison between treatment and control groups reveals that there is no such effect this stresses the importance of nonrandom sorting into tournaments

mining matters natural resource extraction and firm level constraints abstract we estimate the impact of local mining activity on the business constraints experienced by 25 777 firms across nine large and resource rich countries we find that the presence of active mines in firms immediate vicinity

federal tax policies congressional voting and natural resources can abundance of natural resources affect legislators voting behavior over federal tax policies we construct a political economy model of a federalized economy with district heterogeneity in natural resource abundance the model shows that representatives of natural resource rich districts are more less willing to vote in favor of federal tax increases decreases this occurs because resource rich districts are less responsive to federal tax changes due to the immobile nature of their natural resources we test the model s predictions using data on roll call votes in the u s house of representatives over the major federal tax bills initiated during the period of 1945 2003 in conjunction with the presence of active giant oil fields in u s congressional districts our identification strategy rests on plausibly exogenous giant oil field discoveries and exploitation and narrative based aggregate federal tax shocks that are exogenous to individual congressional districts and legislators we find that i resource rich congressional districts are less responsive to changes in federal taxes ii representatives of resource rich congressional districts are more less supportive of federal tax increases decreases controlling for legislator congressional district and state indicators our results indicate that resource richness is approximately half as dominant as the main determinant namely party afiliation in driving legislators voting behavior over federal tax policies

rates of information aggregation in common value auctions we study the rates at which transaction prices aggregate information in common value auctions under the different information structures in wilson rev econ stud 44 1977 511 and pesendorfer and swinkels econometrica 65 1997 1247 we consider uniform price auctions in which k identical objects of unknown value are auctioned to n bidders where both n and k are allowed to diverge to infinity and k n converges to a number in 0 1 the wilson assumptions lead to information aggregation at a rate proportional to n k but the price aggregates information at a rate proportional to n k in the ps setting we also consider english auctions and investigate whether the extra information revealed in equilibrium improves convergence rates in these auctions

regression discontinuity designs based on population thresholds pitfalls and solutions in many countries important features of municipal government such as the electoral system mayors salaries and the number of councillors depend on whether the municipality is above or below arbitrary population thresholds several papers have used a regression discontinuity design rdd to measure the effects of these threshold based policies on political and economic outcomes using evidence from france germany and italy we highlight two common pitfalls that arise in exploiting population based policies compound treatment and sorting and we provide guidance for detecting and addressing these pitfalls even when these problems are present population threshold rdd may be the best available research design for studying the effects of certain policies and political institutions

does oil corrupt evidence from a natural experiment in west africa abstract this paper explores the oil discovery announcements in sao tome and principe 1997 1999 to assess the role of natural resources in determining corruption for this purpose we use a natural experiment framework which contrasts sao tome and principe to cape verde a control west african country sharing the same colonial past and important recent economic and political shocks our measurement is based on tailored household surveys we conducted in both island countries the unique survey instrument was retrospective and used personal histories to elicit memories from the respondents we analyze changes in perceived corruption across a wide range of public services and allocations we find clearest increases on vote buying education namely in the allocation of scholarships and customs ranging from 31 to 40 of the subjective scale we interpret these findings as symptoms of increased competition for core state resources