the economic organization of legislatures and how it affects congressional voting congress confronts two major organizational problems that affect the behavior of legislators party leaders and groups doing business with congressional committees the costly nature of monitoring and the absence of explicit mechanisms for upholding agreements the problem of monitoring implies that party leaders will have a difficult time influencing decisions made in decision making arenas where the actions of legislators are less visible as in congressional committees while legislators can evade leadership monitoring of their actions within committees once an issue leaves a committee the costs of monitoring decline and leadership influence increases the absence of mechanisms for assuring that legislators keep their bargains means that groups will place an emphasis on dealing with reliable legislators those who can be counted upon to uphold their end of a bargain thus party leaders are more effective in influencing floor voting because of their better ability to monitor legislator behavior however obligations to important interest groups will be more immune to leadership influence because of the incentives for committee members to adhere to their bargains

campaign contributions and congressional voting a simultaneous probit tobit model m any citizens and scholars have been troubled by the influence that special interest groups appear to exert over policymaking as a result of their roles in the financing of political campaigns these concerns inspired the enactment of a number of election law reforms in the 1970s and have led to increasing popular support for public financing of electoral campaigns despite the public attention these issues have attracted few social scientists have attempted to analyze the financial relationships between interest groups and policymakers empirically 1 one such study was reported by durden and silberman 1976 who included contributions from the afl cio political action committee as an independent variable in an equation explaining congressional voting on minimum wage legislation their results indicated that campaign contributions significantly affected voting on that issue the work i have done differs substantially from that of durden and silberman in two ways first i have chosen to examine issues which were of considerably narrower concern than the minimum wage issue in the interest of simplicity i examine issues of concern to just one or a few groups i have also used a different econometric technique if campaign contributions are actually endogenous as seems plausible the single equation estimation technique employed by durden and silberman is subject to a possible simultaneous equations bias for each issue studied i have therefore jointly estimated a two equation system explaining both votes on the bill and contributions from an associated interest group the simultaneous probit tobit model which i use takes into account the dichotomous nature of the variable indicating a congressman s vote the non negativity constraint imposed on the contribution variable and the possibility of correlation between the error terms for the equations explaining these two variables 2 full information maximum likelihood fiml estimates for the model are consistent and asymptotically efficient

out of step out of office electoral accountability and house members voting does a typical house member need to worry about the electoral ramifications of his roll call decisions we investigate the relationship between incumbents electoral performance and roll call support for their party controlling for district ideology challenger quality and campaign spending among other factors through a series of tests of the 1956 1996 elections the tests produce three key findings indicating that members are indeed accountable for their legislative voting first in each election an incumbent receives a lower vote share the more he supports his party second this effect is comparable in size to that of other widely recognized electoral determinants third a member s probability of retaining office decreases as he offers increased support for his party and this relationship holds for not only marginal but also safe members

the electoral impact of economic conditions who is held responsible a variety of recent research has dealt with the impact of economic conditions on congressional elections the underlying assumption of this research has been that the effects of economic fluctuations are distributed evenly across members of the president s party by focusing on subgroups of congressional candidates we demonstrate that the importance of economic conditions varies widely specifically we show that the aggregate electoral margins of incumbents are far more responsive to economic conditions than are those for nonincumbents and that among in party incumbents the relationship is stronger among those with higher levels of tenure further we demonstrate that the previous lack of individual level confirmation of the aggregate relationship has been due to a failure to control for the contextual effects implied by our conditional aggregate analysis with controls for district incumbency we find a relationship between retrospective personal financial condition and vote choice that mirrors the aggregate relationship between retrospective performance of the national economy and congressional vote totals

the impact of monetary policy on inequality in the uk an empirical analysis the uk has experienced a dramatic increase in earnings and income inequality over the past four decades we use detailed micro level information to construct quarterly historical measures of inequality from 1969 to 2012 we investigate whether monetary policy shocks played a role in explaining this increase in inequality we find that contractionary monetary policy shocks lead to an increase in earnings income and consumption inequality and contribute to their fluctuation the response of income and consumption at different quantiles suggests that contractionary policy has a larger negative effect on low income households and those that consume the least when compared to those at the top of the distribution our evidence also suggests that the policy of quantitative easing may have contributed to the increase in inequality over the great recession

patterns of political action committee contributions to the 1980 campaigns for the united states house of representatives our most robust findings can be summarized as follows u the spatial location of candidates is important in determining the pattern of campaign contributions many pacs and all pac types except agricultural cooperatives contribute in a manner highly consistent with a simple spatial model there is little giving by an individual pac to candidates at opposite ends of the dimension there is no instance of a pac contributing to incumbents located at each end of the dimension and only to challengers of incumbents in the middle or vice versa contributions against incumbents i e to challengers of incumbents are often spatial mirror images of a pac s giving in favor of incumbents though this statement must be tempered by the fact that the large majority of pacs give relatively little money to challengers few pacs give money to both challenger and incumbent in the same race giving in open seat races is if anything even more spatially consistent than in races where an incumbent is running while many individual pacs exhibit patterns of contributions consistent with the ideological dimension the data for 1980 suggest that there was no particular bias toward one end of the spectrum or the other taking all pacs together essentially eliminates the effect of the location variable in the regressions giving in races with an incumbent on the ballot was overall balanced across the dimension there are however ideological distinctions even among groups as broadly defined as the fec categories for the corporate labor and trade membership health groups the incumbent s location on the ideological dimension is an important explanatory variable even when other factors specific to the incumbent are considered of course ideology matters to nonconnected groups too they just tend to balance each other off in positive money though not in negative on average corporate and trade groups favor conservative incumbents and opponents of liberal incumbents labor pacs do the opposite except for labor pacs party is not an important variable in explaining positive contributions once the incumbent s voting record is taken into account for contributions to challengers however party is significant corporate nonconnected and trade pacs gave to opponents of democrats labor pacs did the opposite the expected closeness of the election is always an important variable both positive money and contributions to challengers increase as the probability of a strong challenge increases this suggests that pacs are sensitive to the potential impact of contributions on electoral outcomes although committee assignments have some importance in explaining campaign contributions by pac categories their net effect is never strong except in the case of cooperatives this is almost certainly because of the diversity of interests represented by pacs in every category except coops which are essentially one giant pac of milk producers we would surmise that competitive forces in the house result in most members having a portfolio of committee assignments that provides maximum advantage vis a vis each member s constituency it would therefore be surprising if overall committee assignments by themselves pointed to significant differences in generating campaign resources being chairman or ranking minority member of a committee has no impact on campaign contributions other things equal seniority as measured by number of consecutive years in office has a complicated role for positive contributions seniority has a nonmonotonic effect with contributions being higher for the most junior and most senior members ceteris paribus than for incumbents with average seniority negative contributions however are not significantly related to seniority

savings and loan and finance industry pac contributions to incumbent members of the house banking committee this paper examines the relationship between campaign contributions from savings and loan and finance industry pacs and membership on the house banking committee the distinguishing features of this paper are that we focus on campaign contributions at an industry level and we use regression analysis to determine whether membership on the house banking committee the committee with oversight responsibility for the savings and loan industry influences the level of contributions received by an individual legislator we find that members of the house banking committee do receive significantly greater contributions from the savings and loan and finance pacs than do other members of congress and that being chairman of the house banking committee also pays a dividend

the effect of macroeconomic fluctuations on the electoral fortunes of house incumbents the effect of macroeconomic fluctuations on house elections is a long debated but still unresolved issue we argue that return rates are theoretically superior to vote shares as measures of electoral acountability and that incumbents not candidates of the president s party are the legislators voters hold responsible we develop and test an incumbent accountability model using incumbent return rates in the u s house from 1916 to 1994 finding a strongly significant effect of both income growth and the misery index however the data reject both our pure incumbency model and the traditional presidential party model indicating that both factors are relevant to voters

lobbying as legislative subsidy professional lobbyists are among the most experienced knowledgeable and strategic actors one can find in the everyday practice of politics nonetheless their behavioral patterns often appear anomalous when viewed in the light of existing theories we revisit these anomalies in search of an alternative theory we model lobbying not as exchange vote buying or persuasion informative signaling but as a form of legislative subsidy a matching grant of policy information political intelligence and legislative labor to the enterprises of strategically selected legislators the proximate political objective of this strategy is not to change legislators minds but to assist natural allies in achieving their own coincident objectives the theory is simple in form realistic in its principal assumptions and counterintuitive in its main implications empirically the model renders otherwise anomalous regularities comprehensible and predictable in a later section we briefly bring preferences back in examining the important but relatively uncommon conditions under which preference centered lobbying should occur

corporate campaign contributions repeat giving and the rewards to legislator reputation abstract are politicians who follow a strategy of reputational development rewarded with high levels of corporate campaign contributions reputational clarity could help to reduce uncertainty about a candidate and lead to greater campaign contributions from favored interests alternatively such clarity could alienate those who disagree and prevent the politician from obtaining contributions from groups on both sides of an issue we outline an approach that considers conditions under which a politician would or would not prefer reputational development and policy stance clarity and consistency in the context of repeat dealing with special interests our proxy for reputational development is the percentage of repeat givers to a legislator using data on corporate political action committee pac contributions to members of the u s house during the seven electoral cycles from 1983 84 to 1995 96 we explore a variety of alternative hypotheses and find that greater reputational development is rewarded with g

final voting in legislatures in representative democracies such as the united states legislatures provide the transmission mechanism through which pressure from private interests becomes public policy considerable attention has been given in the literature to explanations of the relevant forces that appear to be driving the legislative process for example much research has focused on the relative impact of economic vs ideological influences on congressional voting behavior in this approach the way that legislators vote on proposed legislation is modeled as a function of the preferences of various economic and ideological interests groups including the legislator s own preferences for wealth and ideology james kau and paul rubin 1979 joseph kalt and mark zupan 1984 sam peltzman 1985 missing from this approach is the idea that when legislatures are the transmission mechanism they are costly and imperfect organizations for generating political influence gary becker 1983 as such rules and institutions will emerge that are related to problems of internal control within the organization of a legislature in this paper we focus on the role of floor voting from the standpoint of legislator organization and control we seek to expand the interpretation of the meaning of floor voting activity by examining the timing sequence and outcomes of such votes specifically we look at final floor voting in the u s congress the patterns described in the analysis below suggest that a broader analytical perspective on the economic function of floor voting is required the findings also suggest that to identify more precisely the forces that are driving legislator voting behavior it is important to recognize the role of legislative transactional costs and institutional constraints in section i the conceptual framework for the empirical results is discussed in more detail the purpose is not to develop a fullblown theory of legislative organization rather it is to focus the reader s attention on several hypotheses about the function of final floor voting as a device for controlling legislator behavior within the legislature empirical results including an explanation of the timing and sequence of final votes on bills are reported in section ii the data for these tests are drawn from legislative activities in the u s house of representatives during the 96th and 98th congresses some concluding remarks are offered in section iii

some talk money in politics a partial review of the literature the financing of political campaigns is an area of active scholarly study i review some of the recent literature and discuss important methodological issues that arise in empir ical research on campaign expenditures and campaign contributions the effects of campaign expenditures and advertising on candidate and ballot measure elections are summarized as are the impacts of contributions on contributors welfare many states have changed their campaign finance laws in the past few years and i describe work that exploits variations in these laws a discussion of the strategies used by interest groups to allocate their campaign contributions provides insights into contributors motives

constituency opinion and pac contributions a case of the national abortion and reproductive rights action league to test whether interest group politics doharm to a representative democracy thispaper simulates congressionaldistrict level constituency opinion onabortion analyzing the relationshipbetween the constituency opinion andnaral s contributions in the 102nd and103rd congresses this paper presentsempirical evidence that naral scontribution decision is influenced byconstituency opinion the evidence however is mixed constituency opinioninfluences naral s decision on who will getits money constituency opinion however does not influence naral s decision on whowill get more money according to theseresults financial representation byinterest groups does not seriously causeharm to a representative democracy but itcan still bias the representativeness tosome extent an interest group may selectlegislators whose districts support itsposition less strongly and contribute agreater amount of money to the legislators

constituent interest vs legislator ideology the role of political opportunity cost this paper applies the economic model of legislative voting to the automobile industry domestic content vote in the u s house of representatives in 1982 we consider constituent interests for and against the ml and compare the predictive powers of alternative indicators of ideological preferences we also examine the role of political opportunity cost and find that lame ducks were significantly less likely to vote for the bill than were returnees to congress given the political advantages of voting for the bill this is consistent with the view that legislators were influenced by the case for freer trade

committee assignments constituent preferences and campaign contributions committee assignments constituent preferences and campaign constributions the familiar economic model of regulation as developed by stigler 1971 peltzman 1976 and becker 1983 posits an essentially frictionless market process for regulatory policy formation in which a single regulator legislator chooses policy to maximize net support from competing groups in this paper we extend the supply side of this model by considering the effect of legislative institutions and unorganized constituent preferences on the ability of incumbents in the house of representatives to serve specific interest groups we then test this formulation by examining the recent history of interest group campaign contributions to these legislators our theoretical model concentrates on how a legislator allocates time between serving specific interest groups outside his district and serving his constituency we do not model interest group decisions directly assuming simply that they purchase their desired amount of service from the lowest cost suppliers our model sorts legislators by the supply price at which they can serve a particular group this price depends on the preferences of the voters in the legislators district and the productivity of the legislator in producing policy service for each group 1 the empirical section tests the model by examining the pattern of interest group campaign contributions to house incumbents from 1978 through 1984 our regression analysis tends to confirm both implications of the theory first the pattern of campaign contributions from specific interest groups to legislators is shaped by the division of substantive legislative and regulatory jurisdictions represented by the system of house standing committees second voter preferences influence the pattern of contributions by affecting the supply price at which a legislator can offer policy to interest groups legislators with sympathetic or indifferent constituencies are able to offer a lower price and are therefore able to attract larger sums than those with hostile constituencies these results are important for two reasons first the influence of congressional institutions such as committees on policy is not widely accepted while several studies faith levins and tollison 1982 weingast and moran 1983 weingast 1984 grier 1989 and robert 1990 have documented the effects of changes in a particular committee on policies under its jurisdiction this work considers the jurisdiction of only a single committee in each case 2 by examining the linkages between congressional committees and political action committees pacs we investigate whether interest groups act as if committees have power second while the chicago model of regulation emphasizes correctly in our view that policy is the result of vote maximizing calculations and the incremental balancing nature of any equilibrium the model is imprecise about which sets of preferences are most important in determining the levels of policy or the size of changes in policies focusing on committees promotes a parsimonious specification of both the political players members of the relevant committee rather than the entire congress and the pivotal voters committee members constituencies more than the nation determining specific policy outcomes the paper is organized as follows section i reviews some issues on the nature and sources of committee influence in the u s congress the second section incorporates committee assignments into a theory of decision making by interest group investors sections iii and iv describe our data and estimation technique and present the empirical results the fifth and final section discusses some implications and conclusions of this research i committee power in congress legislators differ substantively by virtue of their committee assignments committees in congress and particularly in the house of representatives possess disproportionate power over the policy areas in their respective jurisdictions have the right to hold hearings and recommend budget allocations for the bureaus in their jurisdiction goodwin 1970

an examination of the market for favors and votes in congress this paper examines the strategies that horse traders and power brokers adopt in trading favors to pass legislation although the favors that they trade are generally impossible to observe the paper develops a model that allows tests of favor trading with data from the senate vote on the byrd amendment to the 1990 clean air act i conduct such a test the test provides evidence that on this vote i favor trading occurred ii the coalition leaders practiced price discrimination and iii the coalition leaders did not collude with each another

incorporating policymaker costs and political competition into rent seeking games 1 introductionrent seeking in politics involves agents who lobby policymakers for potential benefits in a seminal contribution tullock 1980 modeled rent seeking as a lottery game a major weakness of tullock s game was that it lacked verisimilitude to actual rent seeking because it omitted politics the absence of politics meant that the game essentially assumed that there are no costs to the policymakers of supplying rents but as tollison 1997 and others have pointed out these costs are not zero and the politics surrounding the policy decision influence the pattern of lobbying and the rent seeking outcome in this paper we address two aspects of those politics the costs to policymakers of supplying rents and the variable intensity of political competition among a given number of rent seekers including these aspects increases the similarity of the game to actual rent seeking situations and makes clearer the incentives to rent seekers costs to supplying rents arise due to various constraints legislators must build coalitions acquire parliamentary rights maintain a positive image and service constituent interests policymakers in agencies must follow procedural rules submit to congressional oversight and budgeting pass omb reviews and so forth lower policymaker costs should increase the effectiveness of lobbying and this should attract greater lobbying efforts among rent seekers 1 increasing policymaker costs makes lobbying less effective indeed because of these costs policymakers often turn away lobbies empty handed in short policymakers have constraints that affect the policies they design and this affects lobbying expenditures dougan and snyder 1993 this paper introduces policymaker costs in monetary units such that they are comparable to the value of the rent and rent seeking expenditures political competition among rent seekers also influences the rent seeking outcome competition traditionally has been modeled by varying the number of rent seeking agents actual or potential or their relative lobbying expenditures e g posner 1975 rogerson 1982 sun and ng 1999 competition can vary however even among a given number of rent seekers and for a given profile of expenditures for example two agents may lobby a policymaker for the same unique and exclusive political good then one agent directly opposes the other and only one agent can win the good alternatively the same two agents may lobby a policymaker for two separate political goods in that case the agents oppose each other only indirectly this situation is frequent in politics as rent seeking agents compete for space on the political agenda for policymakers time and for portions of a particular government budget in this situation success by one agent does not necessarily result in failure by the other but it does lower the probability that the other agent will succeed competition is more intense in the first example even though the examples involve the same number of firms industrial organization economists have shown that a single parameter can determine incumbent firms competition in price and quantity regardless of the number of firms present 2 this paper introduces rent seeking competition analogously allowing a parameter to alter the competitiveness of the rent seeking game among a fixed number of firms we incorporate monetized policymaker costs and the political competition parameter into the success probabilities of the standard rent seeking game the resulting model is a game in which the agents simultaneous maximization of expected net returns or profits determines a nash equilibrium in their expenditures incorporating politics into the standard game makes the game more accurate because equilibrium and comparative statics depend in part on the politics of the rent seeking contest more specifically increasing political competition decreases rent seeking expenditures unless the value of the rent is sufficiently large relative to policymaker costs and dissipation rates are lower than in previous research because of policymaker costs

value maximizing price and advertising with stochastic demand two inescapable characteristics of the monopoly firm s decision problem are imperfect information and the interdependence of its price advertising and output choices in the large modern corporation imperfect information concerning the final product demand that will materialize within the firm s planning period is perhaps the most common source of uncertainty or risk previous work in the theory of the firm under risk has demonstrated two avenues by which stochastic demand may influence the firm s pricing and advertising decisions edwin mills 21 22 argued that if both price and output must be chosen before random demand is known then firms will attempt to avoid incurring surplus production costs or foregoing potential sales by setting ex ante prices and outputs that depend upon capacity costs the costs of carrying inventory the price cost differential for the marginal sale and all the moments of the probability distribution of demand 22 88 mills demonstrated that with constant marginal cost and a demand distribution independent of the price level even the expected profit maximizing epm firm would respond to risk by lowering ex ante price as demand variance increased nevertheless without capacity constraints or production lags i e with output set ex post mills concluded uncertainty plays no essential role in the epm decision process 22 85 later research into alternative objectives that might motivate managerial decisions has shown that even a firm that can with ex post output clear its market at a previously quoted price will alter its pricing behavior as the variance of stochastic demand increases indeed precisely mills s result that ex ante price falls with increased risk has emerged from ex post output models in which risk averse managers maximize the expected utility of stochastic profits 15 16 378 400 18 20 similar results have been derived for advertising as well as price in a two variable model of such managerial utility maximizing mum choices 16 9 7 26 yet all these mum models have focused too little attention on the representative in

the marginals never vanished incumbency and competition in elections to the u s house of representatives 1952 82 the average vote margin enjoyed by incumbent candidates for the u s house of representatives increased sharply during the 1 960s despite this and contrary to assumptions common in the literature on recent congressional elections electoral data show that house incumbents are no safer now than they were in the 1950s the marginals properly defined have not vanished the swing ratio has diminished little if at all and competition for house seats held by incumbents has not declined vote margins increased without adding to incumbent security diminishing competition or dampening swings because the heterogeneity of interelection vote swings increased at the same time

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

careerism committee assignments and the electoral connection most scholars agree that members of congress are strongly motivated by their desire for reelection this assumption implies that members of congress adopt institutions rules and norms of behavior in part to serve their electoral interests direct tests of the electoral connection are rare however because significant exogenous changes in the electoral environment are difficult to identify we develop and test an electoral rationale for the norm of committee assignment property rights we examine committee tenure patterns before and after a major exogenous change in the electoral system the states rapid adoption of australian ballot laws in the early 1890s the ballot changes we argue induced new personal vote electoral incentives which contributed to the adoption of modern congressional institutions such as property rights to committee assignments we demonstrate a marked increase in assignment stability after 1892 by which time a majority of states had put the new ballot laws into force and earlier than previous studies have suggested

bureaucratic discretion or congressional control regulatory policymaking by the federal trade commission this paper extends stigler and peltzman s approach to regulation by incorporating a legislature the model yields comparative statics results and hence testable implications the paper then tests between two opposing approaches about regulatory agency behavior the first assumes agencies operate independently of the legislature and hence exercise discretion the second assumes that congress controls agency decisions the recent behavior of the federal trade commission provides the empirical setting substantial evidence is found for the specific predictions of the model including the hypothesis of systematic congressional influence over ftc decisions

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

the industrial structure of the california assembly committee assignments economic interests and campaign contributions this paper examines the provision of campaign contributions made by economic interests to incumbents seeking reelection in the 1984 1986 and 1988 california assembly elections the study tests whether the distribution of campaign contributions by specific industrial sectors corresponds to legislator possession of the policy property rights associated with membership on relevant assembly standing committees a non parametric statistical model compares the distribution of campaign contributions from groups within a given industrial sector to members of relevant policy committees with the distribution of contributions from all other contributor classes the empirical analysis confirms that committee assignments significantly affect the allocation of special interest resources in assembly elections substantiating the importance of institutional considerations in influencing special interest activity

the committee assignment process as an optimal contracting problem this paper adapts a simple model from the optimal contracting literature to explain the relationship between political parties and non incumbent candidates the model predicts that legislators with a higher opportunity cost of government service will receive better committee assignments using data that spans 12 congresses 97th to 108th i find that when the opportunity cost of senate service is measured by previous occupation freshmen senators with a high opportunity cost for serving those who were lawyers were given good committee assignments while freshmen senators with a low opportunity cost for serving professors and those with relatives already in politics were given worse committee assignments

congressional influence on u s monetary policy abstract congressional influence is generally discounted or ignored in political models of federal reserve behavior here i show that changes in the leadership of the senate banking committee are significantly correlated with monetary base growth more liberal committee leaders are associated with significantly higher base growth other factors held constant the result is shown to hold across several econometric specifications and different definitions of the congressional preference variable

equilibrium political budget cycles political business cycle theories generally rely on nominal rigidities and voter myopia this paper offers an equilibrium theory that preserves some basic insights from earlier models though with significant refinements the political budget cycle emphasized here is in fiscal policy rather than output and inflation it arises via a multidimensional signal process one can consider the welfare implications of proposals to mitigate the cycle and the effects of altering the electoral structure copyright 1990 by american economic association

a model of the political economy of the united states we develop and test a model of joint determination of economic growth and national election results in the united states the formal model which combines developments in the rational choice analysis of the behavior of economic agents and voters leads to a system of equations in which the dependent variables are the growth rate and the vote shares in presidential and congressional elections our estimates support the theoretical claims that growth responds to unanticipated policy shifts and that voters use both on year and midterm elections to balance the two parties on the other hand we find no support for rational retrospective voting we do reconfirm in a fully simultaneous framework the naive retrospective voting literature s finding that the economy has a strong effect on presidential voting we find congressional elections unaffected by the economy except as transmitted by presidential coattails

taxes torts and the toxics release inventory congressional voting on instruments to control pollution i introduction governments can choose from a wide variety of policy instruments to control pollution including tax and subsidy schemes marketable permits information provision programs liability systems with well defined property rights and command and control selection of emission standards or technologies economists throughout the 1980s devoted significant effort to modeling the relative merits of these instruments the question of why politicians would prefer one manner of controlling pollution over another also attracted attention starting with buchanan and tullock s 1975 positive theory of externality control in which polluters find direct regulatory controls on emissions more profitable than pollution taxes theories of instrument selection have been developed in which politicians choose policies based on the relative costs and benefits to shareholders workers and environmentalists are affected by the constraints imposed by political institutions and are driven to select the most efficient policy instrument to achieve a given level of redistribution 1 to date however there have been few empirical tests of what drives instrument selection in environmental policy there is a large empirical literature devoted to explaining the level of support for environmental programs in congress most articles focus on the degree to which a legislator s stand on a given environmental bill can be explained by narrow district interests generally the material interests of constituents or by ideology either constituents or the member s own policy preferences studies of voting on environmental legislation by ackerman and hassler 1981 crandall 1983 pashigian 1985 and yandle 1989 offer evidence that legislators actions are in part explained by the district or state level impacts of proposed legislation on their constituents kalt and zupan 1984 find that after controlling for constituents material self interest in proposed strip mining legislation the ideology of constituents and the personal ideologies of their representatives influence voting on this aspect of environmental preservation as grier 1993 demonstrates debate over the general role of the legislator s specific ideology in voting continues in studying votes in the house and senate on the proposed size of the superfund during debate over the program s renewal hird 1993 concludes that congressional voting on superfund is found to represent legislator s environmental and liberal ideologies as much as if not more than narrowly defined self interest he links the importance of ideology to voting on superfund in part to the bill s symbolic environmental appeal in environmental legislation the final impact of a bill on industry and the environment often depends on issues resolved through technical amendments downs s theory of rational ignorance and arnold s theory of the degree to which constituents will link congressional actions with real world outcomes predict that members of congress may be less constrained by general constituent interests on amendment votes since these votes are less likely to be covered in the media than are final legislative votes as denzau and munger 1986 and grier and munger 1991 note groups with specific interests such as affected industries may find it less costly to persuade a member of congress to vote their way on a measure if the representative s constituents are supportive of or indifferent to the measure in the case of technical amendments affected parties may be more influential than on highly visible votes because the lack of media coverage translates into a lower probability that the vote will become a major campaign issue in future elections this implies that voting on the instruments to control pollution will be driven in part by the specific district level costs and benefits of these measures while voting on the final passage of a bill will be more driven by general constituent interests

determinants of automobile pac contributions to house incumbents own versus rival effects this paper examines pac contributions by the big threeu s automakers and japanese auto dealers to houseincumbents a regression model is estimated where paccontributions are a function of a firm s own ties toan incumbent s district as measured by firmemployment and those of rivals for the big three own and u s rival effects are positive further theresults do not indicate the presence of a free ridereffect employment by a foreign subsidiary has no neteffect on u s contributions for the japanesedealers japanese plant employment has a positiveimpact on contributions and that of the big three anegative

should central banks respond to movements in asset prices in recent decades asset booms and busts have been important factors in macroeconomic fluctuations in both industrial and developing countries in light of this experience how if at all should central bankers respond to asset price volatility we have addressed this issue in previous work bernanke and gertler 1999 the context of our earlier study was the relatively new but increasingly popular monetary policy framework known as inflation targeting see e g bernanke and frederic mishkin 1997 in an inflation targeting framework publicly announced medium term inflation targets provide a nominal anchor for monetary policy while allowing the central bank some flexibility to help stabilize the real economy in the short run the inflation targeting approach gives a specific answer to the question of how central bankers should respond to asset prices changes in asset prices should affect monetary policy only to the extent that they affect the central bank s forecast of inflation to a first approximation once the predictive content of asset prices for inflation has been accounted for there should be no additional response of monetary policy to assetprice fluctuations in use now for about a decade inflationtargeting has generally performed well in practice however so far this approach has not often been stress tested by large swings in asset prices our earlier research employed simulations of a small calibrated macroeconomic model to examine how an inflation targeting policy defined as one in which the central bank s instrument interest rate responds primarily to changes in expected inflation might fare in the face of a boom and bust cycle in asset prices we found that an aggressive inflationtargeting policy rule in our simulations one in which the coefficient relating the instrument interest rate to expected inflation is 2 0 substantially stabilizes both output and inflation in scenarios in which a bubble in stock prices develops and then collapses as well as in scenarios in which technology shocks drive stock prices intuitively inflation targeting central banks automatically accommodate productivity gains that lift stock prices while offsetting purely speculative increases or decreases in stock values whose primary effects are through aggregate demand conditional on a strong policy response to expected inflation we found little if any additional gains from allowing an independent response of central bank policy to the level of asset prices in our view there are good reasons outside of our formal model to worry about attempts by central banks to influence asset prices including the fact that as history has shown the effects of such attempts on market psychology are dangerously unpredictable hence we concluded that inflationtargeting central banks need not respond to asset prices except insofar as they affect the inflation forecast in the spirit of recent work on robust control the exercises in our earlier paper analyzed the performance of policy rules in worst case discussants robert shiller yale university glenn rudebusch federal reserve bank of san francisco kenneth rogoff harvard university

unconventional monetary policy and the credit channel in the euro area abstract we disentangle credit supply and demand and we then embed this information into a bayesian threshold var model to investigate the importance of the demand channel and the broad credit channel in the transmission of unconventional monetary policy on the macroeconomy during financial stress periods we find that during such periods ump shocks boost aggregate demand for loans increase agents net worth and revitalize credit to firms and households in addition counterfactual analysis suggests that non standard policy measures aiming at stimulating loan demand and relaxing banks balance sheet constraints would provide a significant support to economic activity prices and the financial sector

pacs and the congressional supermarket the currency is complex although pacs attempt to influence the legislative process with contributions this research finds little evidence that the contributions of 120 pacs affiliated with 10 organizations affected the voting patterns of the house members who served continuously from 1975 to 1982 in the few cases in which a relationship between contributions and a member s votes is established the analysis indicates that contributions are a surrogate measure of a more important and larger package of support for the member from the interest groups two stage least squares regression models are used to test the relationship between pac contributions and a member s votes controlling for the incumbent s ideology and party and the political leaning of the district interviews with pac officials supplement the statistical analysis

party politics and the price of payola the literature contains two competing views of the role of political parties parties are treated either as associations of interest groups supported to the degree that they offer electoral support in the lawmaker s district or as expressions of the personal ideologies of the lawmakers in this paper parties are treated as bargaining agents for groups of lawmakers in their dealings with interest groups interest groups are depicted buying votes on proposals where those votes are cheapest parties are combinations of consistently low price vote suppliers the theory has empirical power that discriminates between it and the two competing models

a probit analysis of the senate vote on gramm rudman the leviathan theory of government was seemingly contradicted when the u s congress passed the gramm rudman deficit reduction law this study analyzes the senate vote on gramm rudman to try to determine whether legislators acted in their own self interest a prisoner s dilemma argument explains how senators made themselves better off by limiting their own spending abilities a probit analysis shows how voting for deficit reduction was consistent with the personal incentives faced by individual legislators the eventual failure of gramm rudman to eliminate the deficit reveals a need to consider institutional as well as constitutional means of controlling government

the housing and credit bubbles in the united states and europe a comparison a house price boom occurred simultaneously in the united states and in a number of european countries from 2003 to 2007 accompanied in each case by an expansion in housing finance this article considers the role of financial innovation along with incomplete markets in these cycles

the congressional bureaucratic system a principal agent perspective with applications to the sec this paper provides the theoretical perspective and empirical support for congressional dominance of agency decisions my thesis is twofold first because much of the previous evidence on this question is not evidence at all many scholars intuition and conclusions are based on a logically flawed foundation second i have provided here and in previous work a look at a variety of different agencies and in each case have shown how the events can plausibly be interpreted as involving congress agency problems within the congressional bureaucratic system are real and substantial just as they are within corporations however as in the latter institutional forms develop within the congressional system to partially if not wholly mitigate these problems the logical perspective together with the evidence provide a strong case against the agency dominance hypothesis as typified by the early sections of niskanen 1971 and wilson 1980

macroeconomic conditions and committee re election rates the traditional literature on the link between the macro economy and house elections follows kramer 1971 and assumes all members of the president s party are equally vulnerable to voter wrath caused by economic changes using presidential party return rates from 10 house committees over the time period 1916 1996 i find the impact of economic conditions at the polls varies by committee generally committees that manage money or provide a public good are the most sensitive to economic fluctuations contrastingly members of the public works committee and the rules committee are more insulated from electoral culpability due to economic fluctuations

congressional oversight committee influence on u s monetary policy revisited abstract grier 1991 shows that monetary policy is influenced by congress in that increases in the liberality of the senate banking committee leadership are significantly positively correlated with monetary base growth chopin cole and ellis 1996 claim that the house leadership statistically dominates the senate leadership for predicting money growth but that the direction of the effect is perverse a more liberal house leadership is associated with a lower rate of base growth in this paper i show that chopin cole and ellis s claims are unfounded properly measured both house and senate leadership have a significant positive effect on base growth over grier s 1991 original sample in later periods money growth regressions are not sufficiently stable to support hypothesis tests

monetary policy and rational asset price bubbles i examine the impact of alternative monetary policy rules on a rational asset price bubble through the lens of an olg model with nominal rigidities a systematic increase in interest rates in response to a growing bubble is shown to enhance the uctuations in the latter

congressional politics of financing the international monetary fund we address the question of how international public goods are financed by analyzing voting in the u s congress on legislation to increase the u s contri bution to the international monetary fund imf we argue that legislators are more likely to vote in favor of an increase 1 the more campaign contributions they obtain from banks that specialize in international lending and 2 the greater the share of high skilled proglobalization workers in their districts the first argu ment supports the inference that a financially strong imf mitigates the risks of international lending to the benefit of the lending banks the second reflects our claim that voters view the imf as a positive force for global economic integration that following stolper samuelson reasoning benefits high skilled workers lastly we analyze imf loan decisions and find modest support for the claim that imf policy reflects the interests of major international banks overall our results sug gest that private actors within the united states have individual stakes in funding the imf the primary mandate of the international monetary fund imf or fund is to safeguard the stability of the global financial system an international public good the imf obtains the resources it needs for its stabilization operations from mem ber governments with large members contributing most of the funds in this arti cle we analyze the politics of funding the imf from the perspective of its largest contributor the united states rather than treating the united states as a single entity with a unified national interest at the fund we consider the preferences of political actors within the united states who exert power over financing the

interest groups campaign contributions and probabilistic voting this essay develops a simple model to analyze the impact of campaign contributions on electoral policy decisions of candidates for office interest groups here are firms that select contributions under the assumption that candidates policies and opposing groups donations remain unaltered candidates however recognize that their policy choices affect contributions campaign contributions are used by candidates to affect policy oriented voters perceptions of candidates positions in this framework the introduction of campaign contributions may affect candidates electoral policies and if they do then they benefit surely exactly one of the two interest groups

legislator voting and shirking a critical review of the literature we set out to critically review the progress in answering two related questions what determines how legislators vote and how can shirking by legislators be measured in the first category the hypothesis that legislators shirk in order to indulge their personal ideological preferences has led researchers astray the theoretical underpinning is shaky on two counts first legislators who indulge their preferences at the expense of their constituents preferences put themselves at a competitive electoral disadvantage second the original two stage procedure used to measure ideological shirking is severely flawed among many other problems the residual measure of shirking implicitly assumes that the median voter is the relevant constituent principal for the legislator agent

the political economy of trade liberalization and environmental policy a pressure group model where environmental and industry lobby groups offer political support in return for favorable pollution tax policies is used to explain and predict the equilibrium pollution tax in sectors protected by tariffs the political economy effects of trade liberalization are investigated the pollution tax is shown to decrease if the lobbying effort by the environmental lobby decreases more rapidly than by the industry lobby ceteris paribus the level of political conflict falls with trade liberalization pollution may increase because of a reduction of the pollution tax and tax revenues may fall simultaneously as pollution increases the global trading system is currently undergoing another round of multilateral trade liberalization and regional economic integration is occurring in several parts of the world the trade environment link has become an important part of trade liberalization talks it is commonplace for industry representatives to argue that less stringent environmental regulations give less developed countries ldcs a comparative advantage in pollution intensive goods and that industries with high abatement costs will migrate to ldcs environmentalists argue that international differences in environmental laws and regulations may be reduced to their lowest common denominator through political pressure this is not a fear of trade liberalization itself but of the effects of lower trade barriers on the political determination of environmental regulation

politician preferences law abiding lobbyists and caps on political contributions the effect of a contribution cap is analyzed in a political lobbying game where the politician has a policy preference in contrast to the previous literature without politician policy preferences more restrictive binding caps always reduce expected aggregate contributions however the initial imposition of a cap increases contributions if the politician mildly favors the low valuation lobbyist s policy the introduction of policy preferences permits analysis of monied interests policy influence a more restrictive cap makes it more likely that the politician enacts the policy he would have enacted in the absence of lobbying even in cases where expected aggregate contributions increase

committee characteristics and re election margins an empirical investigation of the us house models of legislative organization frequently begin with the premise that the committee system serves the re election interests of incumbent legislators attempts to substantiate this notion empirically have been unsuccessful nevertheless the notion lives on nourished by a stylized characterization of the committee system in the standard model committees have jurisdictional monopolies over specialized policy areas and legislators gravitate toward those committees that deal most closely with the policy concerns of their constituents contrary to this simplifying characterization the degree of monopoly control and policy specialization varies across standing committees in the us congress some committees have wide jurisdictions and attract members with diverse policy preferences jurisdictional overlap and resulting turf battles are common aspects of congressional sessions we suggest here that these realities warrant a re opening of the empirical investigation into the link between electoral success and committee characteristics our findings indicate that assignment to a committee with a relatively high degree of monopoly control increases a member s vote share and that assignment to a narrowly focused specialized committee does not

monetary policy and the u s stock market does the federal reserve system consider the level of the stock market when setting monetary policy this paper examines empirically if monetary policy since the october 19 1987 stock market crash has been influenced by the stock market we conclude that the fed considers the stock market only to the extent that it influences inflation and the output gap as a consequence the federal reserve policy accommodated the high valuations in the 1990s of the stock market as measured by the s p500 p e ratio

corporate political strategy an examination of the relation between political expenditures environmental performance and environmental disclosure two fundamental business ethics issues that repeatedly surface in the academic literature relate to business s role in the development of public policy suarez s l 2000 does business learn the university of michigan press ann arbor mi roberts r w and d d bobek 2004 accounting organizations and society 29 5 6 565 590 and its role in responsibly managing the natural environment newton l 2005 business ethics and the natural environment blackwell publishing oxford when studied together researchers often examine if and how corporations influence environmental policy decisions drawing from literatures on corporate political activity corporate social and environmental performance and corporate environmental disclosure we develop and empirically examine two research questions concerning the relations between corporate political expenditures environmental performance and environmental disclosure the questions are 1 do corporations that are poorer environmental performers spend more on political activities than their better performing counterparts 2 is there an association between corporations spending on political activities and the extent of their financial report environmental disclosures we investigated these questions through analyses of data we gathered on a sample consisting of 119 u s environmentally sensitive firms for the 2001 2002 election cycle after controlling for firm size and specific industry effects our tests reveal a significant inverse relationship between firm environmental performance and political spending this is consistent with the notion that u s firms with relatively poorer environmental performance records engage more intensely in corporate political activities as part of their overall strategic management of their relationship with the state in addition a significant and positive association between the amount of political spending and the extent of environmental disclosure suggests that environmental disclosure and political spending are both proactive complementary tactics to strategically manage public policy pressure if corporations strategies are intentionally designed to unreasonably limit their environmental responsibilities or to misrepresent firm environmental performance then we argue that these activities reflect a significant lapse in ethical conduct

congressional committees and the political economy of federal outlays the literature on the organization of the united states congress has been dominated by distributive and informational theory one important source of disagreement between these two theories is their characterization of whether individual legislators can engage in pork barrel activities here we provide evidence which indicates that the pork barrel is alive and well in the contemporary united states congress we focus on whether members of power and constituency committees can direct disproportionate federal expenditures to their districts finding strong and systematic evidence of pork barrel activities by committee members provides empirical support for distributive theories of legislative organization

the committee assignment process and the conditional nature of committee bias the view that congressional committees tend to be biased subsets of their parent chambers provides the foundations for a substantial body of theoretical literature on distributive politics and legislative structure more recent revisionist work suggests that committees composed of preference outliers are in fact rare we reject the categorical account of preference outliers a priori and elaborate conditions under which committees should be unrepresentative of their parent chambers we argue that the most widely available and frequently used data floor roll call votes are inappropriate to the task of assessing outlier predictions in any form finally we conduct a differentiated set of hypothesis tests within one policy jurisdiction to illustrate the characteristics of evidence and analysis necessary to evaluate alternative theoretical accounts of legislative organization the appearance of policy relevant biases in congressional work groups we conclude is not so much rare as it is conditional and we suggest several conditions on which future models of legislative organization should build

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

measuring the reaction of monetary policy to the stock market movements in the stock market can have a significant impact on the macroeconomy and are therefore likely to be an important factor in the determination of monetary policy however little is known about the magnitude of the federal reserve s reaction to the stock market in part because the simultaneous response of equity prices to interest rates makes it difficult to estimate this paper uses an identification technique based on the heteroskedasticity of stock market returns to measure the reaction of monetary policy to the stock market we find a significant policy response with a 5 percent rise fall in the s p 500 index increasing the likelihood of a 25 basis point tightening easing by about a half

legislators and interest groups how unorganized interests get represented this paper derives a supply price for public policy using a constrained maximization model in the model three sets of agents each have preferences over outcomes organized interest groups offer campaign contributions to improve their own wealth voters offer votes to obtain outcomes closer to their most preferred outcomes and legislators seek both campaign contributions and votes to obtain reelection a given legislator s supply price for policy is shown to depend on the productivity of his effort as determined by committee assignments priority and ability and by the preferences of his unorganized constituency in the home district two extreme assumptions about the effectiveness of campaign spending in eliciting votes are used to illustrate the comparative statics properties of the model the prediction of the model is that interest groups will in general seek out legislators whose voters are indifferent to the policy the interest group seeks thus voters who do have preferences over policy are in effect represented even though they are not organized

are contributors rational untangling strategies of political action committees empirical public choice literature and casual observation suggest that the behavior of political action committees is remarkably unsophisticated meaning that pacs give to those legislators who would support their interests anyway thus it is suggested that contributor behavior deviates from rational behavior which is a cornerstone of economic analysis in this paper a switching regression model is estimated that allows for strategies of pacs to vary for different contribution recipients i analyze the behavior of farm pacs over three election cycles in contrast to previous findings i find that contributor behavior is not inconsistent with rational behavior contributors who attempt to influence the voting behavior of members of congress give the most money to legislators whose constituency interest suggests that they are likely to be undecided on how to vote and pacs give less money to legislators who represent districts with larger farm populations because those legislators are likely to vote in con

the political economy of the us mortgage default crisis we examine the effects of constituents special interests and ideology on congressional voting on two of the most significant pieces of legislation in us economic history representatives whose constituents experience a sharp increase in mortgage defaults are more likely to support the foreclosure prevention act especially in competitive districts interestingly representatives are more sensitive to defaults of their own party constituents special interests in the form ofhigher campaign contributions from the financial industry increase the likelihood of supporting the emergency economic stabilization act however ideologically conservative representatives are less responsive to both constituent and special interests jel d72 g21 g28

the determinants of industry political activity 1978 1986 c ampaign contributions made by corporate political action committees pacs are increasingly important and controversial in u s elections influence purchasing is often alleged by pundits and campaign finance reform is continually debated in congress in the academy social scientists have analyzed the allocation of interest group monies and have looked for possible impacts on legislation few however have tried to explain the total contributions of economic interest groups we shall analyze variations in contributions across industries and over time with an empirical model based on organizationally constrained profit maximizing behavior we assume that corporate pac contributions in an industry are raised to enhance industry profits subject to the constraints of organization costs and freeriding incentives our empirical work covers 124 industries over five election cycles from 1978 through 1986 both the costs and benefits of political activity vary across industries we argue that the benefits of political action are determined by direct contact with the government as a regulator or purchaser of industry output by government s ability to ameliorate adverse market conditions and by the industry s ability to solve collective action problems without government assistance the costs of industry political action arise mainly from collective action problems because effective political activity often requires concerted action by the constituent firms in each industry we also make a methodological contribution previous studies use statistical techniques that suffer from sample selectivity bias or else force the probability of acting politically to be explained by the same set of coefficients as is the amount of action taken we explain and employ a technique that accounts for both problems the results are consistent with the theses that industries follow investment oriented goals in deciding the amount of political action to undertake and that collective action problems are important constraints on industry political activity we can explain between 60 and 80 of the variation in contributions in our sample first we review existing work on corporate political activity particularly papers examining patterns of aggregate pac spending by industry then we present an organization cost constrained industryprofit maximizing model based on a comparison between an idealized zero organization cost industry and the more realistic case where organizing collective action is difficult the independent variables used in the analysis are also discussed and defined next we discuss the dependent variable and total industry contributions and explain our statistical method then the results are presented followed by a discussion of industry structure and political activity to make clear how our results can explain different contribution patterns we give examples using five actual industries

predation and cross subsidization in the value maximizing multiproduct firm predation occurs when a firm engages in the temporary strategy of setting prices below production costs to damage or destroy existing competitors one form of predation occurs when a multiproduct or conglomerate firm obtains revenues in excess of production costs on goods sold in monopolized markets and uses these rents to subsidize the production of goods sold in competitive markets indeed the fact that cross subsidization is precluded in long run competitive equilibrium and is thus synonymous with predation has frequently been demonstrated in the literature previous analyses of the relationship between cross subsidization as defined by the difference in the additional or incremental costs and revenues of producing a specific group of commodities and predation have been conducted under the behavioral postulate of profit maximization the purpose of this paper is to reexamine this relationship given the alternative assumption of value maximization the assumption of value maximization leads to different results 2 specifically it is shown that for a multiproduct firm producing goods with different risk characteristics e g cyclical and counter cyclical stochastic demand cross subsidization can be both a value maximizing strategy and a characteristic of long run competitive equilibrium thus a multiproduct firm may give the appearance of engaging in cross subsidization for the purpose of predatory pricing without ever having considered the effects of its decisions on actual or potential competition the remainder of this paper is organized as follows section ii presents the assumptions and model of the analysis the main features of this model are the assumption of

a simple test of the thesis that committee jurisdictions shape corporate pac contributions the results presented in the previous section tend to confirm the hypothesis that committee assignments shape the pattern of corporate pac contributions this note corroborates existing research on corporate pacs at a significantly lower level of aggregation than the samples on which existing research has been conducted further because a nonparametric test was used rather than the more standard regressional analysis these results should increase our confidence that the essential institutions of government affect and engender responses by economic agents

presidential party incumbency and the effects of economic fluctuations on house elections 1916 1996 there is little professional consensusregarding the effect of economic conditionson house elections we argue that recentwork still uses the paradigm of party toorganize their data and tests given thatrecent developments in the theory ofcongress emphasize the paradigm ofincumbency we investigate the empiricalrelevance of that competing paradigm weshow that 1 incumbency matters in a purepresidential party model of houseelections 2 presidential party mattersin a pure incumbency model 3 once bothparty and incumbency are accounted for economic conditions exert a highlysignificant and temporally stable influenceon house elections 4 return rates aremore affected by economic fluctuations thanare vote shares and 5 not allpresidential party incumbents face the samedegree of electoral accountability foreconomic fluctuations

sovereign wealth fund investments and the us political process we examine us firm level campaign finance contributions preceding and subsequent to equity investment by a sovereign wealth fund swf our empirical results suggest that swfs are attracted to firms engaged in us campaign finance and that firm campaign finance contributions increase after swf investment swf attraction to campaign finance firms increases 1 after an exogenous legal shock that liberalized corporate campaign finance activities and 2 in a subset of industries vulnerable to recent legislation capable of inhibiting or expunging foreign investment we provide some of the first evidence consistent with political motives for swf investment in the united states

political action committee spending and senate roll call voting this paper addresses how pac spending affects the roll call voting behavior of u s senators using a theoretical framework which draws broadly on the voting literature we develop models that explain senatorial voting behavior in a pre pac and post pac world testing both models we find weak support for a downs black view of voting participation in the first model the second model supports the alteration of voting incentives resulting from pac spending we find that pacs have a positive effect on voting participation the conjecture remains whether pacs change voting outcomes but it is clear that they buy voting participation

on the political economy of state highway expenditures some evidence of the relative performance of alternative public choice models this paper explores the extent to which the public demand for roads and or power of special interest groups determines road expenditures at the state level using an extension of the methodology developed in congleton and shughart 1990 reduced form models of median voter demand special interest group equilibria and a combined model are estimated using cross sectional state data from the united states we generally find support for the hypothesis that voting matters the pure median voter models have a better fit than the pure special interest group models moreover in our combined model we find that variables from the median voter model can not be dropped without significantly reducing the combined model s fit

assessing the economy wide effects of quantitative easing this article examines the macroeconomic impact of the first round of quantitative easing qe by the bank of england we attempt to quantify the effects of these purchases by focusing on the impact of lower long term interest rates on the wider economy we use three different models to estimate the impact of qe on output and inflation a large bayesian vector autoregression var a change point structural var and a time varying parameter var our estimates suggest that qe may have had a peak effect on the level of real gdp of around and a peak effect on annual cpi inflation of about points