bargaining over governments in a stochastic environment in this paper i structurally estimate a stochastic bargaining model of government formation in a multiparty parliamentary democracy and i conduct policy experiments to evaluate the effects of changes in the bargaining procedure i show that the model fits well data on the duration of negotiations and government durations in postwar italy also i show that changes in the proposer selection process would not affect either the duration of negotiations or government durations whereas the imposition of a strict deadline would in general reduce the incentives to delay agreement as well as government durations

political and institutional determinants of fiscal policy in the european community in recent theoretical and empirical research the variation in political and institutional arrangements which may affect the process of national policy formation is examined in order to explain cross country differences with respect to fiscal policies pursued in this paper we build upon this literature and examine whether and how cross country differences in debt accumulation and public sector size of member countries of the european community during the 1980s can be explained we conclude that the growth of government debt is positively related to the frequency of government changes and negatively to sound budgetary procedures in countries with left wing governments the growth of the share of government spending in total output generally tends to be higher

inventory and price behaviour the point of this paper is that inventory adjustment attenuates downward pressure on price when realized demand is low because firms accumulate inventory hold overs speculating that demand will be stronger in the succeeding period when realized demand is high the firm draws down its inventories until a stock out occurs and price rises to clear the market

the rationally uninformed electorate some experimental evidence this essay reports on a series of twenty four election experiments in which voters are allowed to decide between voting retrospectively and purchasing contemporaneous information about the candidate challenging the incumbent each experiment consists of a series of election periods in which dummy candidates choose spatial positions which represent either their policy while in office or a promise about policy if elected subjects voters are told the value to them of the incumbent s policy but they must decide prior to voting whether or not to purchase information about the value of the challenger s promise in general our data conform to reasonable expectations voters purchase less information and rely more on retrospective knowledge when the candidates strategies are stable and their likelihood of purchasing information during periods of instability is tempered by the likelihood that their votes matter by the reliability of the information available for purchase and by the degree of instability as measured by changes in each voter s welfare

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

the power of the proposal maker in a model of endogenous agenda formation in a distributive setting this study examines a voting procedure for which agenda formation is endogenous it is found not surprisingly that agenda formation is another avenue for strategic manipulation of the voting process and provides the member to first take the floor an asymmetric advantage what is surprising is the degree of this advantage we find that the initial proposal maker earns a share of the fixed resource exceeding 1 for an majority rule and this is regardless of the number of members the voting rule is found to be an effective instrument in at least partially offsetting the power of the proposal maker while maintaining the stability of the voting process

coffee economic fluctuations and stabilisation an intertemporal disequilibrium model with capital market imperfections abstract this paper develops a two period disequilibrium model of a small open economy under keynesian unemployment to analyse the effects of temporary anticipated and permanent coffee price shocks the model includes a government sector that administers a commodity price stabilisation fund and allows for capital market imperfections the type of capital market imperfection makes an important difference to the results of the model in particular when the government borrows on more favourable terms than individuals the coffee price stabilisation fund reduces the multiplier effects of temporary and permanent shocks not only in the first but also in the second period by contrast when individuals face an upward sloping supply of capital curve the stabilisation fund shifts some of these effects from the first to the second period

the theoretical developments initiated by haberler but named for pigou do not provide sufficient grounds for rejecting keynes s key theoretical proposition this paper examines a claim made in the introduction to milton friedman s presidential address to the american economic association and that is now taken for granted in orthodox economics according to friedman the theoretical developments initiated by haberler but named for pigou provide sufficient grounds for rejecting keynes s key theoretical proposition and the economics of keynes in its entirety the problem with this claim is that it turns out given the scrutiny that it clearly deserves to be false the theoretical developments initiated by haberler but named for pigou do not provide sufficient grounds for rejecting keynes s key theoretical proposition and thus the economics of keynes as a whole there is no legitimate rationale for believing in other words even in a world of flexible prices that the system will tend naturally toward a position of equilibrium at full employment

government strength power dispersion in governments and budget deficits in oecd countries a voting power approach we test for the influenceof government strength and dispersion ofpower among the parties of coalitiongovernments on the size of annual debtaccumulation through budget deficits inoecd countries from 1970 to 1999 government strength and power dispersion incoalition governments are measured by thebanzhaf index of voting power respectivelythe standard deviation of banzhaf indicesof coalition parties we believe that theseare better suited proxies than most of whathas been applied so far governmentstrength turns out to be insignificant however coalitions with equally strongpartners run significantly higher deficitsthan coalitions with one dominating party

government turnover in parliamentary democracies in this paper we consider a dynamic model of government formation and termination in parliamentary democracies that accounts for the following phenomena 1 cabinet terminations due to replacement or early election 2 cabinet reshuf es 3 minority and surplus governments 4 the relative instability of minority governments

government deficits private investment and the current account an intertemporal disequilibrium analysis this paper uses a model with full intertemporal optimization and fischer gray type short run real wage rigidities to demonstrate effects of deficit spending in different employment regimes this study attempts to bring the two strands of short run aggregate demand effects and certain intertemporal aspects together it analyses fiscal policy in the context of a model with full intertemporal optimization underlying private behavior which allows the paper to deal with the intertemporal aspects but it also explicitly incorporates the possibility of short run labour and goods market disequilibrium caused by fischer 1977 gray 1978 type contract based real wage rigidities and within period downward price inflexibility prices are however assumed to be flexible upward in a departure of the standard disequilibrium literature in section 2 the basic model is presented the paper uses a two period full optimization set up where wages and prices are set at the beginning of each period using all available information fiscal policy effects under keynesian unemployment are analyzed in section 3 while section 4 looks at the case of classical unemployment section 5 concludes

indirect tax evasion and product efficiency though a number of papers have considered the issues of income tax evasion few have considered indirect tax evasion one of the exceptions is a paper which considers the very special case of a risk averse monopolist producer the present paper addresses the issue of indirect tax evasion in competitive markets evasion in such a market is shown to be associated with production inefficiency the results also suggest that laffer type curves could arise due to evasion

fragmented government effects on fiscal policy new evidence most industrialized countries entered the 1980s with their public finances in disarray at the time persistent deficits pushed up public debt to gdpratios despite such similarities deficit spending varies substantially between countries and within countries over time recent theoretical and empirical research has considered how differences in political arrangements affecting national policy formation might explain variation in fiscal policies pursued using a panel of 22 oecd countries over the 1971 1996 period this paper extends previous literature on the effects of fragmented government on fiscal policy outcomes in various directions first we focus on data relating to central government instead of general government as all theories refer to central government second not only do we analyze the effect of size fragmentation of government we also examine government s position vis a vis parliament and government s political fragmentation we find evidence that more fragmented government defined in terms of the number of political parties in a coalition or the number of spending ministers have higher deficits there is also some evidence that governments that dispose of excess seats in parliament have lower deficits right wing governments appear to have been fiscally more responsible in the seventies political fragmentation does not affect government s budget deficit

stable governments and the allocation of policy portfolios different members of coalition governments typically have responsibility for different aspects or dimensions of policy such responsibilities are allocated as portfolios to government members given a distribution of such portfolios final government policy is derived as the accumulation of individual members decisions in regard to their respective responsibilities we develop a portfolio allocation model of government formation and policy decision in multiparty legislatures in particular we focus on stable portfolio allocations where a stable allocation is one that yields a policy that no legislative coalition is willing or able to overturn several notions of stability are considered and related to the usual concept of the core among the results are that although stable allocations are not guaranteed such allocations can exist with minority governments and that final policy outcomes associated with stable governments need not be centrist

monetary fiscal and exchange intervention policy in a two country intertemporal disequilibrium model abstract a symmetric two country two period model with flexible exchange rates and rigid first period money wages is constructed there is a single world output and perfect capital mobility agents have perfect foresight and optimise intertemporally aoki s method of sums and differences is used to analyse the model and to relate it to closed and small open versions a key structural feature is that the intertemporal budget contraint not the lm equation determines a country s output international shocks are transmitted through the real interest rate anticipated future spending increases are contractionary abroad so a permanent increase may be too this modifies mundell s findings

political determinants of budget deficits coalition effects versus minority effects this paper reexamines some recent empirical evidence on the hypothesis that institutional arrangements in the political process affect budget deficits the results of roubini and sachs 1989b are replicated and sensitivity analysis indicate that their results are robust however the main conclusion of roubini and sachs that coalition governments are less capable of budgetary discipline needs to be modified a reformulation of their variable representing political cohesion reveals that it captures the effects of minority governments rather than majority coalition governments the data support the hypothesis that it is harder to negotiate in parliament than within a government

intertemporal optimizing models of trade and current account balance a survey abstract this study surveys the intertemporal optimizing models of trade and current account balance that were developed calibrated and empirically tested since they came into vogue in the 1980s the implications of these models often differ from those of static and dynamic conventional non optimizing models the literature on optimizing models has not only grown reasonably fast but has also witnessed significant advances in methodology and these models have culminated into a distinct strand of new open economy macroeconomics the studies conducted until the late 1980s have used deterministic perfect foresight models while several studies conducted since the 1990s relax the perfect foresight and certainty equivalence assumptions and develop stochastic dynamic general equilibrium models to account for uncertainty confronting the optimizing agents the future research needs to explore the possibility of tracing any preferred specification of household preferences model the effect of time varying discount factor on household utility function and intertemporal budget constraint examine the role of costs in international trade place a parallel emphasis on the empirical verifications of theoretical propositions examine the relative performance of optimizing vis a vis non optimizing models and rationalize the extreme propositions of perfect and imperfect capital mobility in the wake of moderately open capital accounts

technology policy for a world of skew distributed outcomes abstract this paper draws implications for technology policy from evidence on the size distribution of returns from eight sets of data on inventions and innovations attributable to private sector firms and universities the distributions are all highly skew the top 10 of sample members captured from 48 to 93 percent of total sample returns it follows that programs seeking to advance technology should not be judged negatively if they lead to numerous economic failures rather emphasis should be placed on the relatively few big successes to achieve noteworthy success with appreciable confidence a sizeable array of projects must often be supported the outcome distributions are sufficiently skewed that even with large numbers of projects it is not possible to diversify away substantial residual variability through portfolio strategies

the weak government thesis some new evidence this paper presents new evidence on the hypothesis that coalition governments will find it more difficult to keep their budgets in line after an adverse economic shock than do one party majoritarian governments the estimates are based on a broad sample of oecd countries for the period 1979 1995 using various specifications as suggested in the literature we do not find evidence that the type of government affects cross country variation in fiscal policy however the number of political parties in government affects central government debt growth

inventories in the open economy macro model a disequilibrium analysis this study examines a disequilibrium model of a small open economy with explicit links between periods due to inventory accumulation as well as the more conventional channels through current account imbalances and the government budget constraint the key features of the model are that agents have perfect foresight with neutral public debt and that inventories adjust to smooth production intertemporarily the paper explores the extent to which fiscal policy can be used selectively for coping with an export slump without running into a balance of payments constraint

fragmented fiscal policy abstract this paper explores on a panel of 19 oecd countries the role of fragmentation in determining fiscal outcomes over the 1970 95 period we first define the notion of fragmentation of fiscal policy making as the degree to which the costs of a dollar of aggregate expenditure are internalized by individual decision makers empirically this notion has two key logical components the number of decision makers and the rules of the game or the budget process in turn the number of decision makers can refer to the number of parties in a coalition or the number of ministers in the cabinet we test all these determinants against each other and against perhaps the oldest explanation of all ideology we show that cabinet size and to a lesser degree coalition size and ideology are significant and robust determinants of fiscal outcomes in particular transfers are the budget items most affected by these factors

dual exchange rates capital controls and sticky prices abstract it is often argued that capital controls are an appropriate policy response to the exchange rate overshooting which occurs when asset markets adjust more rapidly than goods markets in this paper an intertemporal disequilibrium model of an open economy is developed in which the effect of capital controls is examined the results are contrasted with recent studies by adams and greenwood 1985 and obstfeld 1986 in which capital controls are evaluated within a purely equilibrium framework and thus inevitably take the form of a welfare reducing distortion

the political economy of deficit spending in nine industrialized parliamentary democracies the role of fiscal institutions this article analyzes the influence of four sets of factors on deficit spending in 9 industrialized parliamentary democracies during 1958 1990 this article analyzes the influence of these factors and introduces and tests the importance of an additional potential influence on the size of a country s fiscal deficit the strength of fiscal bureaucracy it is argued that the stronger a country s fiscal bureaucracy the lower its deficit ceteris paribus empirically the authors find that the state of a nation s economy heavily affects its deficit little systematic relationship is found between the ideology of the ruling political party and a nation s deficit or between the political strength of the ruling party and deficits in contrast to the findings of roubini and sachs finally it is found that the strength of a country s fiscal bureaucracy is an important influence on the deficit in these 9 industrialized parliamentary democracies

coalition governments versus minority governments bargaining power cohesion and budgeting outcomes recent empirical work investigating the role of minoritygovernments in the selection of fiscal policies has shown thatthe majority status does not affect the budget size thispaper presents an analytical framework which accounts for thisresult it combines a government formation game and a budgetgame involving cabinet and parliament a general indifferenceresult applies an exogenous shock to the bargaininigenvironment which absorbes the cohesion of the governmentincreases the demand for expenditures at the same time theconditions for the formation of a minority government arefulfilled if the formateur is strong a minority governmentcan be a device for cutting expenditures