does additional campaign spending really hurt incumbents the theoretical importance of past investments in political brand name the existing literature ignores the fact that the marginal return to current campaign expenditures depends on the candidate s stock of brand name this simple observation is then used to provide a possible explanation for the negative empirical relationship observed between an incumbent s campaign spending and how well he does

the impact of campaign expenditures on political competition in the french legislative elections of 1993 we use regression analysis to estimate the effect that campaign money had on the votes of challengers and incumbents in the 1993 elections to the french legislative assembly incumbent candidates can at best expect to win 1 01 of the popular vote for each extra franc they spend per registered voter in their district challengers can expect to win at least twice as much as this simulations show that if campaign spending ceilings were halved incumbents would have gained an extra ten percent of the popular vote over their closest challenging rivals the regression analysis also suggests that voters react negatively to candidates who rely heavily on their own money for their outlays and reward candidates who rely on contributions from private individuals these results suggest that campaign spending ceilings may inhibit political competition and that voters may resist a candidate who relies on narrow sources of funding

production function regressions returns to scale and externalities a number of recent papers have used simple linear regressions in an attempt to identify market structure the extent of returns to scale and possible external effects in u s manufacturing industries the results obtained from these regressions have important implications for several branches of modern macroeconomics as a result the macro literature frequently cites specific numerical evidence from caballero and lyons 1992 and hall 1990 which suggests that there are quantitatively significant increasing returns to scale or external effects in u s manufacturing in contrast it is the argument of this paper that this evidence is not convincing the most robust evidence suggests that the typical u s manufacturing industry displays constant returns with no external effects on the other hand there is significant heterogeneity across industries

estimating the effect of campaign spending on senate election outcomes using instrumental variables o examine the traditional view that challenger spending is more effective than incumbent spending 7 i reestimate the effects of spending using instrumental variables that affect a candidate s ability to raise campaign funds such as candidate wealth levels hhen the endogeneity of candidate spending levels is properly taken into account the marginal effects of incumbent and challenger spending are roughly equal in contrast to previous research showing that because of higher marginal returns to challenger spending the incumbent s spending advantage cannot explain high incumbent reelection rates this article shows that in an average senate election the incumbent s spending advantage yields a 6 increase in the incumbent s vote share that incumbent spending wins elections has direct implications regarding the consequences of campaign finance reform my findings imply that equalizing spending levels may significantly increase incumbent defeat rates and caps on candidate spending may improve the chances of challengers in american congressional elections incumbents routinely win reelection even in the 1994 republican landslide change in the partisan makeup of congress occurred mainly through open seats switching from the democrats to the republicans a common explanation for high congressional reelection rates is the large campaign spending advantage enjoyed by incumbents it is widely believed that challenger spending is very important but there is surprisingly little evidence in the academic literature that incumbent campaign spending has an important effect on congressional election outcomes in light of the substantial effort incumbents devote to fundraising as well as some nagging methodological questions about existing academic studies the effect of incumbent spending on election outcomes remains an unresolved issue accurately measuring how incumbent spending leads to votes is of obvious importance politicians want to win elections and so if money matters then this will influence their behavior if campaign spending effects are trivial then concerns about politicians being

uncertainty and risk in financial markets this paper considers a general equilibrium model in which the distinction between uncertainty and risk is formalized by assuming agents have incomplete preferences over statecontingent consumption bundles as in bewley 1986 without completeness individual decision making depends on a set of probability distributions over the state space a bundle is preferred to another if and only if it has larger expected utility for all probabilities in this set when preferences are complete this set is a singleton and the model reduces to standard expected utility in this setting we characterize pareto optima and equilibria and show that the presence of uncertainty generates robust indeterminacies in equilibrium prices and allocations for any specification of initial endowments we derive comparative statics results linking the degree of uncertainty with changes in equilibria despite the presence of robust indeterminacies we show that equilibrium prices and allocations vary continuously with underlying fundamentals equilibria in a standard risk economy are thus robust to adding small degrees of uncertainty finally we give conditions under which some assets are not traded due to uncertainty aversion

indeterminacy and sunspots in a monetary economy with limited participation abstract this paper shows that in a monetary real business cycle model with limited participation the region of indeterminacy depends crucially on i the coefficient of relative risk aversion ii the labor supply elasticity and iii the degree of increasing return to scale however the quantitative impact of the money growth rate is very small

a comparison of var and cvar constraints on portfolio selection with the mean variance model in this paper we analyze the portfolio selection implications arising from imposing a value at risk var constraint on the mean variance model and compare them with those arising from the imposition of a conditional value at risk cvar constraint we show that for a given confidence level a cvar constraint is tighter than a var constraint if the cvar and var bounds coincide consequently a cvar constraint is more effective than a var constraint as a tool to control slightly risk averse agents but in the absence of a risk free security has a perverse effect in that it is more likely to force highly risk averse agents to select portfolios with larger standard deviations however when the cvar bound is appropriately larger than the var bound or when a risk free security is present a cvar constraint dominates a var constraint as a risk management tool

minimum cost portfolio insurance abstract minimum cost portfolio insurance is an investment strategy that enables an investor to avoid losses while still capturing gains of a payoff of a portfolio at minimum cost if derivative markets are complete then holding a put option in conjunction with the reference portfolio provides minimum cost insurance at arbitrary arbitrage free security prices we derive a characterization of incomplete derivative markets in which the minimum cost portfolio insurance is independent of arbitrage free security prices our characterization relies on the theory of lattice subspaces we establish that a necessary and sufficient condition for price independent minimum cost portfolio insurance is that the asset span is a lattice subspace of the space of contingent claims if the asset span is a lattice subspace then the minimum cost portfolio insurance can be easily calculated as a portfolio that replicates the targeted payoff in a subset of states which is the same for every reference portfolio

portfolio optimization using mixture design of experiments scheduling trades within electricity markets abstract deregulation of the electricity sector has given rise to several approaches to defining optimal portfolios of energy contracts financial tools requiring substantial adjustments are usually used to determine risk and return this article presents a novel approach to adjusting the conditional value at risk cvar metric to the mix of contracts on the energy markets the approach uses mixture design of experiments mde in this kind of experimental strategy the design factors are treated as proportions in a mixture system considered quite adequate for treating portfolios in general instead of using traditional linear programming the concept of desirability function is here used to combine the multi response nonlinear objective functions for mean with the variance of a specific portfolio obtained through mde the maximization of the desirability function is implied in the portfolio optimization generating an efficient recruitment frontier this approach offers three main contributions it includes risk aversion in the optimization routine it assesses interaction between contracts and it lessens the computational effort required to solve the constrained nonlinear optimization problem a case study based on the brazilian energy market is used to illustrate the proposal the numerical results verify the proposal s adequacy

an analysis of congressional voting on legislation limiting congressional campaign expenditures congressional voting on proposed floor amendments concerned solely with setting the level of the election campaign expenditure ceiling provision of the house administration committee s broad campaign finance reform bill of 1974 is analyzed for consistency with either the public interest or economic theories of regulation the benefit or cost to the individual congressman of a given ceiling is defined as the implied increase or decrease in his probability of reelection under the ceiling logit regression analysis provides the preponderant support for the economic theory of regulation by indicating that the likelihood of voting for a given ceiling varies directly with the implied change in reelection probability under the ceiling and is quite sensitive to the implied change

money and votes reconsidered congressional elections 1972 1982 the evolution of congressional campaign finance over the past decade is characterized by steady growth in campaign spending and other notable changes in campaign finance practices the main purpose of the research reported here was to determine whether these changes have altered the effects of campaign spending on election outcomes this required reexamination of auxiliary questions concerning how sending effects operate and can be measured it also required facing the limits of what analysis of aggregate campaign spending data can tell us about money in elections replication of ols and 2sls analyses of campaign spending effects produced solidly consistent results over the six congressional elections held between 1972 and 1982 taken at face value the evidence is overwhelming that the challenger s level of spending has a strong impact on the vote whereas that of the incumbent has virtually no impact at all but the evidence remains open to doubt on two grounds one is the probable inadequacy of the 2sls model or perhaps any possible model leaving the issue of simultaneity bias unsettled if bias remains the estimates exaggerate the electoral effects of the challenger s campaign expenditures the issue cannot be resolved with more of the same data but rather requires data of a different sort surveys taken over the course of a sample of campaigns would do the trick meanwhile i think it would be foolish to make policy on the assumption that bias is in fact substantial the greatest likelihood remains that restrictions on campaign money will have the general effect of hurting challengers jacobson 1979 the other doubtful albeit equally stable finding is that incumbents do not gain votes by spending in campaigns no incumbent seems to believe it and there is at least circumstantial evidence from for example the 1982 elections that their skepticism is quite justified if so the problem lies in the limits of what aggregate data of the kind analyzed here can tell us few incumbents do not spend heavily when they are strongly challenged if both candidates spend beyond the point needed to become thoroughly familiar to voters then the substance of the campaigns the contents of campaign messages become the dominant factors incumbents may need to spend money in order to change the message as new circumstances arise to frame new issues that would help them most or damage them least to win the battle of establishing the real issues like nonincumbents sitting members may sometimes need to spend beyond a certain threshold to remain competitive but nearly all of them do so when the necessity arises so aggregate spending data are largely uninformative how the money is spent rather than how much is what matters the two most notable developments in congressional campaign finance have opposing implications national party organizations particularly the republican have assumed an increasingly important role in financing campaigns greater central control leads to a more efficient distribution of the party s collective campaign resources which among other things promises to raise the overall level of electoral competition it also leads to more coordinated campaigning with greater emphasis on national themes and programs thus it should foster more cooperation and loyalty among fellow partisans in congress but pacs have also grown in numbers and in financial importance because most concentrate on gaining access to incumbents they do little to make elections more competitive because they usually pursue narrowly defined interests their influence fragments the congress and weakens party coalitions in this and other ways parties and pacs are natural rivals the most consequential decisions taken in the next round in campaign finance policy will be those which affect the relative importance of parties and pacs see u s congress 1984 for comments on this and other current campaign finance issues

campaign finance reform a public choice perspective the federal election campaign act as passed in 1971 and amended in 1974represented landmark federal legislation it imposed new restrictions oncampaign contributions and contained path breaking provisions for the useof public funds to partially finance the campaigns of qualifyingpresidential candidates the nominal intent of the legislation was torestrain the skyrocketing campaign costs and the feared abuses thatgrowing dependencies on such money engendered three decades later withthe campaign spending arms race still raging congress sought toimpose further constraints on campaign spending with enactment of thebipartisan campaign reform act of 2002 bcra competing theories ofgovernment regulation are reviewed to better understand the intent andlikely consequences of the 2002 legislation in particular and campaignfinance regulation in general a simple model of the campaign spendingprocess highlights the likely causes of the rapid growth in campaignspending data and evidence are presented to test hypotheses concerningthe timing of and underlying motivations for bcra

the optimal portfolio problem with coherent risk measure constraints one of the basic problems of applied finance is the optimal selection of stocks with the aim of maximizing future returns and constraining risks by an appropriate measure here the problem is formulated by finding the portfolio that maximizes the expected return with risks constrained by the worst conditional expectation this model is a straightforward extension of the classic markovitz mean variance approach where the original risk measure variance is replaced by the worst conditional expectation the worst conditional expectation with a threshold a of a risk x in brief wcea x is a function that belongs to the class of coherent risk measures these are measures that satisfy a set of properties such as subadditivity and monotonicity that are introduced to prevent some of the drawbacks that affect some other common measures this paper shows that the optimal portfolio selection problem can be formulated as a linear programming instance but with an exponential number of constraints it can be solved efficiently by an appropriate generation constraint subroutine so that only a small number of inequalities are actually needed this method is applied to the optimal selection of stocks in the italian financial market and some computational results suggest that the optimal portfolios are better than the market index 2003 elsevier b v all rights reserved

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

portfolio optimization under a minimax rule this paper provides a new portfolio selection rule the objective is to minimize the maximum individual risk and we use an l function as the risk measure we provide an explicit analytical solution for the model and are thus able to plot the entire efficient frontier our selection rule is very conservative one of the features of the solution is that it does not explicitly involve the covariance of the asset returns

a critical review and an extension of the political shirking literature after substituting actual and real changes for proposed and nominal changes in budgetary and employment levels it is clear that the size and scope of the federal leviathon had not been reduced over 1982 83 it is also clear that the agencies which witnessed real budget cuts over this period were of minor importance in terms of the total u s budget future research on why only small agencies receive real budget cuts will provide us with a better understanding of the budgetary process

political power and the market for governors the statistically insignificant results for the budget power and veto power variables suggest that for some reason these power characteristics are not particularly salable to consumers of governmental favors it may simply be the case that political competition pushes governors to adopt median voter public policy outcomes despite the existence of discretionary budget and veto powers which permit them to behave otherwise this suggests that discretionary powers may only be of value in those states where political competition is weak or where deviations from the wishes of the median voter are relatively costless in terms of the value of votes lost to the party or candidate in power however attempts to test this hypothesis using an interaction term between measures of inter party competition and the governors budgetary and veto powers proved unsatisfactory perhaps intra party competition in one party states makes candidates just as responsive to the preferences of the median voter as are candidates in states with strong inter party competition

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

sunspots and the business cycle in a finance constrained economy abstract this paper examines the cyclical properties of a finance constrained economy populated by two classes of households with heterogeneous preferences and featuring social increasing returns to scale the model exhibits indeterminacy for externalities mild enough so that the labor demand curve is downward sloping furthermore simulation results show that endogenous fluctuations driven by expectations are quantitatively relevant in opposition to standard real business cycles and sunspot models with single type of households our finance constrained economy reveals to be able to mimic both an acyclical pattern of the real wage and strong procyclical movements of aggregate consumption journal of economic literature classification numbers e2 e32

presidential campaign expenditures evidence on allocations and effects this paper analyzes the impact of presidential campaign spending on election results analyses of expenditures and voting are often plagued by simultaneity between campaign spending and expected vote share however game theoretic models of resource allocation decisions made by a central actor i e a presidential campaign suggest that candidates will spend more in close races and in races likely to be pivotal we provide empirical support for this theory using federal communications commission data from the 1972 presidential election we find that expenditures were higher in states where the election was expected to be closer and in states likely to be pivotal we use these two factors as instruments in a two stage least squares model to estimate the effect of spending on votes we find that contrary to previous theory and research presidential campaign spending significantly increases a candidate s vote share

indeterminacy and increasing returns abstract we investigate properties of the one sector growth model with increasing returns under two organizational structures capable of reconciling the existence of aggregate increasing returns with competitive behavior by firms the first involves input externalities the second involves monopolistic competition we show for parameters in close accord with recent literature on real business cycles that the model displays an indeterminate steady state that can be exploited to generate a model of business fluctuations driven by self fulfilling beliefs in our first class of models growth is generated by exogenous increases in factor productivity in the second class the marginal product of capital is large enough for endogenous growth journal of economic literature classification numbers e00 e3 o40

managing risk in multi asset class multimarket central counterparties the core approach abstract multi asset class multimarket central counterparties ccps are becoming less uncommon as a result of merges between specialized single asset class single market ccps and market demands for greater capital efficiency yet traditional ccp risk management models often lack the necessary sophistication to estimate potential losses relative to the closeout process of a defaulter s portfolio in a multi asset class multimarket environment as a result multi asset class multimarket ccps usually rely on a simplified silo approach for risk calculation which not only fails to deliver efficiency but may also increase systemic risk the core closeout risk evaluation approach on the other hand provides conceptual and mathematical tools necessary for robust and efficient central counterparty risk evaluation in multi asset class and multimarket environments acknowledging the portfolio dynamics involved in the closeout process as well as important real life market frictions

the determinants of campaign spending the role of the government jackpot a slave has but one master the ambitious man has as many masters as there are persons whose aid may contribute to the advancement of his fortune jean de labruyere des ouvrages de l esprit i introduction this paper builds a model of elections in which contributors give money to candidates in return for promises of government favors each candidate spends to increase his chances of victory the candidate s probability of winning and the value of government resources that would be his to distribute if he won the jackpot determine the amount he can raise the model suggests a way to measure the influence of the jackpot on spending while controlling for other effects such as the probability of winning the search for this result is interesting because we wish to know what influences the resources devoted to courting politicians is the growth of government truly to blame why if government is for sale do contributors give so little relative to the size of government to control so much and why as abrams and settle 1978 found does campaign spending sometimes not grow even though government grows do official limits on public debt reduce the politician s discretionary control over government resources and hinder his ability to sell favors how does ideology interfere with the candidate s demand for contributions empirical models of contributions that can serve as a guide have been of two sorts abrams 1981 following the work of crain and tollison 1977 crain deaton and tollison 1977 and gifford and santoni 1978 regressed campaign spending on several proxies for the jackpot and found a positive effect a more popular approach to explaining campaign outlays pioneered by jacobson 1978 has been to regress spending or contributions on the candidate s probability of victory and to ignore the role of the jackpot the implicit assumption in such models is that the candidate s net worth to contributors determines spending the candidate cares only about winning and raises as much as he can the greater his chances of winning the more he can raise and the more he will spend i call this the supply side view because spending depends only on the supply of contributions this approach goes some way to explaining contributions but neglects the role of the jackpot and cannot explain why some strong candidates who are sought after by contributors accept little or nothing such as former senator william proxmire of wisconsin the present study takes something from both approaches but argues that candidates may not wish to spend all they can raise because contributions do not come free of charge as baron 1989 pointed out the candidate s demand albeit bounded by potential supply determines contributions candidates probably run for election to control government wealth and must ponder how much of the jackpot to auction for contributions the candidate s demand for contributions can be derived from a utility function that rises with his probability of victory but diminishes with the contributions he accepts how much a candidate demands depends on the size of the bernoulli variance of the outcome which i call closeness and the size of the jackpot the greater the closeness and the larger the jackpot the greater the candidate s demand a close race is defined here not by the number of rivals or the margin of victory but as one in which the outcome is very uncertain the typical candidate does not spend all he is able to raise but the effect of closeness fades if the candidate wishes to win greatly the model describes the simultaneous relationship between spending and closeness and imposes identifying restrictions i carry out tests on samples drawn from the 1978 and 1986 contests for u s state governorships and find that jackpots affect election spending but that closeness is less important in addition i find that in states where the legislature is constitutionally required to balance the budget governors sell less of the jackpot

econometrics and presidential elections this paper discusses an econometric equation that explains votes for president as a function of economic events and incumbency information the history of the equation is reviewed the update after the 1992 election is discussed and a prediction for the 1996 election is made conditional on an economic forecast

indeterminacy home production and the business cycle a calibrated analysis abstract in this paper i present a business cycle model with one market sector that produces a standard good and another that produces a non market or home good the model can have multiple equilibria and therefore cycles driven only by self fulfilling expectations with low externalities to market production in particular an upward sloping aggregate labor demand as e g in farmer and guo j economic theory 63 1994 42 72 is not required for indeterminacy the effect of technology shocks is also studied in all cases the time series that are generated have properties that are comparable to the real us postwar series

campaign spending in congressional elections campaign spending in congressional elections i introduction empirical studies of the effects of campaign spending on the outcome of congressional elections have found that campaign spending by incumbents is not as effective as that of their challengers indeed kau and rubin 1982 and jacobson 1985 1987 find that incumbent spending reduces the number of votes they receive and netter 1983 that it increases the challenger s votes incumbents seeking reelection however are very successful winning nine times out of ten in the postwar era if their campaign spending is so inefficient why do incumbents continue to outspend their challengers in a majority of elections we argue that these researchers counterintuitive findings are the result of using models which do not adequately correct for the simultaneous determination of the election outcome and campaign contributions and which do not include an electoral check on incumbent behavior 1 in their studies jacobson and netter as well as lott 1986 and laband and lentz 1985 assume the incumbent s ability to repel challengers is independent of his or her behavior while in office few would agree that the electoral check is so ineffective we develop a simultaneous model to correct these deficiencies it captures the effects of campaign expenditures tenure the consistency of the incumbent s votes with his constituents preferences and the size of the voter turnout on the votes received by incumbents and challengers in four congressional elections between 1978 and 1984 the model is very robust over these four elections the use of primary election data insures model identification ii model and empirical measures we assume that the platforms of any two candidates for a political office can be measured along a single left right spectrum voters know their preferred position on the dimension but cannot observe the positions of the two candidates with certainty because of rational ignorance a theory accepted since downs 1957 following congleton 1986 we assume voters are risk averse and receive more utility from candidates with positions closer to the voters preferred position but lose utility as the candidate s position becomes more uncertain voters compare the candidates and vote for the one that provides them greater expected utility voters can observe the incumbent s performance and are thus less uncertain of his views and credibility uncertainty should decrease with an incumbent s tenure in office tenure provides voters with knowledge of the incumbent s position and the incumbent with political capital this accumulation of political capital may make it more difficult for challengers to mount a successful campaign in this sense tenure acts as a barrier to entry 2 if all incumbents were at the same point on the spectrum as the median voter of their districts all incumbents would win reelection if all potential challengers were aware of this fact they would not challenge since campaigns are costly but one observes many challengers and some defeated incumbents so we proceed from the hypothesis that challengers enter the race when they perceive a gap between the position of the incumbent and that of the median voter and assume this position as their platform a large difference between the incumbent s position and the median voter s position increases the likelihood of a successful challenge if voters were certain of the positions of both candidates and the challenger s assessment was correct the challenger would win but challengers are usually less well known than incumbents and this additional uncertainty gives incumbents an advantage thus the challenger must convince the voters that his or her position is closest to the median voter s position and advertising is the primary means to that end 3 repetition of the message reduces the voters uncertainty over a challenger s position

sticky price and limited participation models of money a comparison abstract we provide new evidence that models of the monetary transmission mechanism should be consistent with at least the following facts after a contractionary monetary policy shock the aggregate price level responds very little aggregate output falls interest rates initially rise real wages decline by a modest amount and profits fall we compare the ability of sticky price and limited participation models with frictionless labor markets to account for these facts the key failing of the sticky price model lies in its counterfactual implications for profits the limited participation model can account for all the above facts but only if one is willing to assume a high labor supply elasticity 2 percent and a high markup 40 percent the shortcomings of both models reflect the absence of labor market frictions such as wage contracts or factor hoarding which dampen movements in the marginal cost of production after a monetary policy shock 1997 elsevier science b v

prospect theory and mean variance analysis the experimental results of prospect theory pt reveal suggest that investors make decisions based on change of wealth rather than total wealth that preferences are s shaped with a risk seeking segment and that probabilities are subjectively distorted this article shows that while pt s findings are in sharp contradiction to the foundations of mean variance mv analysis counterintuitively when diversification between assets is allowed the mv and pt efficient sets almost coincide thus one can employ the mv optimization algorithm to construct ptefficient portfolios the markowitz 1952a tobin 1958 mean variance mv rule is probably the most popular investment decision rule under uncertainty in economics and in finance and it is widely employed by both academics and practitioners the strength of the mv analysis is that in the case of normal return distributions the choice of any expected utility maximizing risk averse individual will be according to the mv rule 1 the mv framework is the foundation of the sharpe 1964 lintner 1965 capital asset pricing model capm which is a cornerstone of modern finance moreover the mv framework provides a very important practical procedure for the construction of efficient portfolios while standard economic theory and in particular mv analysis assume expected utility maximization and risk aversion in a breakthrough article kahneman and tversky 1979 show that the actual behavior of individuals systematically and consistently violates these

sunspot equilibria in a monetary real business cycle model abstract in this paper a modification of the cash in advance real business cycle model is introduced in which the possibility of any credit contract is excluded we show that for some parameter settings the model displays familiar saddle point stability whereas for other constellations the steady state is a sink in those cases sunspot solutions are obtained

risk management strategies via minimax portfolio optimization recent extreme economic developments nearing a worst case scenario motivate further examination of minimax linear programming approaches for portfolio optimization risk measured as the worst case return is employed and a portfolio from maximizing returns subject to a risk threshold is constructed minimax model properties are developed and parametric analysis of the risk threshold connects this model to expected value along a continuum revealing an efficient frontier segmenting investors by risk preference divergence of minimax model results from expected value is quantified and a set of possible prior distributions expressing a degree of knightian uncertainty corresponding to risk preference determined the minimax model will maximize return with respect to one of these prior distributions providing valuable insight regarding an investor s risk attitude and decision behavior linear programming models for financial firms to assist individual investors to hedge against losses by buying insurance and a model for designing variable annuities are proposed

using repeat challengers to estimate the effect of campaign spending on election outcomes in the u s house previous studies of congressional spending have typically found a large positive effect of challenger spending but little evidence for effects of incumbent spending those studies however do not adequately control for inherent differences in vote getting ability across candidates high quality challengers are likely to receive a high fraction of the vote and have high campaign expenditures even if campaign spending has no impact on election outcomes to avoid that bias this paper examines elections in which the same two candidates face one another on more than one occasion differencing eliminates the influence of any fixed candidate or district attributes estimates of the effects of challenger spending are an order of magnitude below those of previous studies campaign spending has an extremely small impact on election outcomes regardless of who does the spending campaign spending limits appear socially desirable but public financing of campaigns does not

a simple explanation for why campaign expenditures are increasing the government is getting bigger abstract this paper shows that most of the large recent increases in campaign spending for federal and state offices can be explained by higher government spending this result holds for both federal and state legislative campaigns and gubernatorial races and across many different specifications the irony is that those who seem most concerned about the level of campaign expenditures are also frequently the ones who most strongly support increasing the size of government evidence is also examined on whether it is the composition and not just the level of expenditures that determines campaign expenditures and whether higher government expenditures similarly results in more candidates competing for office finally by focusing on the symptoms and not the root causes of ever higher campaign expenditures this paper argues that the current public policy debate risks changing the form in which payments are made rather than actually restricting the level of competition

robust and pareto optimality of insurance contracts the optimal insurance problem represents a fast growing topic that explains the most efficient contract that an insurance player may get the classical problem investigates the ideal contract under the assumption that the underlying risk distribution is known i e by ignoring the parameter and model risks taking these sources of risk into account the decision maker aims to identify a robust optimal contract that is not sensitive to the chosen risk distribution we focus on value at risk var and conditional value at risk cvar based decisions but further extensions for other risk measures are easily possible the worst case scenario and worst case regret robust models are discussed in this paper which have been already used in robust optimisation literature related to the investment portfolio problem closed form solutions are obtained for the var worst case scenario case while linear programming lp formulations are provided for all other cases a caveat of robust optimisation is that the optimal solution may not be unique and therefore it may not be economically acceptable i e pareto optimal this issue is numerically addressed and simple numerical methods are found for constructing insurance contracts that are pareto and robust optimal our numerical illustrations show weak evidence in favour of our robust solutions for var decisions while our robust methods are clearly preferred for cvar based decisions

contribution limits and transparency in a campaign finance experiment we experimentally compare electoral outcomes when donor contribution limits are varied the effect of contribution limits is studied under three levels of transparency one where donors preferences and donations are unobserved by the candidate and public one where they are observed by the candidate but not the public and one where they are observed by all we find that a combination of stricter contribution limits and full transparency is most successful at limiting donors influence on policy choice we also find that stricter contribution limits improve social welfare in some treatments we further find that the partial and no anonymity settings lead to centrist bias whereby implemented policies on average are more centrist than the candidate s preferences in most treatments

indeterminacy in a model with sector specific externalities abstract i examine a model with two sectors of production consumption and investment in the model indeterminacy of equilibria results due to the presence of small sector specific externalities in production in fact i find that indeterminacy results with a certain minimum value of the externality in the investment sector even with no externality in the consumption sector i find that the indeterminacy properties of the model vary depending on the form of the utility function for example with utility that is logarithmic in consumption these properties are completely independent of the value of the externality in the consumption sector

real business cycles and the animal spirits hypothesis abstract we calibrate a quantitative equilibrium macroeconomic model with an aggregate technology that is subject to increasing returns and show that this model may display fluctuations at business cycle frequencies even when there are no shocks to the fundamentals of the economy these fluctuations are due to the self fulfilling beliefs of investors which we call animal spirits we compare the impulse response functions predicted by our model and by two other more standard models with a four variable vector autoregression on u s data our animal spirits economy is the most successful of the three at matching broad features of the dynamic responses in the data journal of economic literature classification numbers e00 e3 e32

a median voter model of economic regulation a basic median voter model is developed and extended to analyze issues of economic regulation and public policy outcomes the model is used to generate comparative static results relating changes in public policy outcomes to changes in relative group sizes total population information costs and population heterogeneity the model is also used to explore the issue of optimal group size the size of the special interest group that maximizes the group s per capita public policy gains comparative static analysis reveals how optimal group size and gains per capita are affected by changes in population heterogeneity the size of the total population and relative knowledge levels

time series evidence on shirking in the u s house of representatives this paper presents time series evidence on the voting behavior of members of the u s house of representatives from 1975 to 1990 the empirical results indicate that voting behavior of individual congressmen is remarkably stable over time we find no evidence of economically significant last term effects on voting behavior nor are there important effects of legislative tenure on voting patterns the most significant deviations in voting behavior occur for congressmen who failed to win their reelection bid suggesting that sizable deviations from previous policy positions may result in swift retribution by constituents in the district