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

electoral outcomes with probabilistic voting and nash social welfare maxima abstract this paper provides unexpected support to nash s view of how bargaining determines the social choice we first present a spatial model of electoral competition with probabilistic voting and a very close relation between voters preferences and their choice probabilities the outcome of the electoral competition game is then shown to be precisely the social alternative that maximizes a nash type social welfare function theorem 1 this electoral outcome is also interpreted as a unanimity likelihood maximum corollary 1 within our framework existence and uniqueness of such an outcome are guaranteed corollaries 2 and 3

political parties campaign contributions and discrimination political parties can enhance their clout in congress by adding to the seats under their control or by increasing party loyalty interestingly the latter option seems to play a very small role in the two elections studied the democratic party altered their funding decisions based on loyalty during the 1980 election cycle but not in 1982 republicans did not base party contributions on party loyalty in either election although there is less reason to expect them to do so because of their minority status on the other hand both parties reacted to the possibility of additional seats by funneling funds into close races aggregate party contributions table 1 and the party specific models table 2 consistently suggest that money flows into these volatile races

intergenerational mobility under private vs public education intergenerational earnings mobility is analyzed in a model where human capital is produced using schooling and parental time in steady states more mobile societies have less inequality but in the short run higher mobility may result from an increase in inequality starting from the same inequality mobility is higher under public than under private education a rise in income shocks for example due to increased returns to ability or a switch from public to private schooling both increase inequality however increased shocks raise mobility in the short run and do not affect it in the long run whereas an increased role for private schooling reduces mobility in both the short and long run that these differences may help to identify the source of changes in inequality and other real world implications are illustrated in a brief discussion of time trends and cross country differences

public versus private investment in human capital endogenous growth and income inequality in this paper we present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth we use simple functional forms for preferences technologies and income distribution to highlight the distinction between economies with public education and those with private education we find that income inequality declines more quickly under public education on the other hand private education yields greater per capita incomes unless the initial income inequality is sufficiently high we also find that societies will choose public education if a majority of agents have incomes below average

a general equilibrium model of congressional voting in this paper we specify a model in which congressmen constituents and campaign contributors simultaneously decide on behavior constituents and contributors desire to influence the voting behavior of congressmen congressmen on the other hand want to be elected and vote accordingly we empirically test this model using roll call voting on eight bills dealing with economic regulation and find support for the model our results indicate that part of the voting behavior of congressmen may be explained by noneconomic factors we also find that unions and businesses as campaign contributors are sometimes influential unions are more often influential than is business ideological factors are also important in explaining voting

local fiscal policies default risk and municipal borrowing costs abstract this paper provides an empirical study of the effects that a local government s fiscal decisions exert on its cost of borrowing using a sample of new jersey municipalities the results are consistent with the view that current period fiscal decisions do impact the cost of borrowing a one standard deviation increase in the amount borrowed is associated with a 66 basis point increase in the annual yield furthermore that the standard approach of treating current period policy variables as exogenous regressors leads to a downward bias in the effect of additional borrowing on the interest rate

systematic variation in yield spreads for tax exempt general obligation bonds in recent years much research has centered upon whether yield differentials between bonds which differ in default risk vary systematically over the business cycle theory suggests that during a cyclical upswing the yield differential or risk premium narrows while during a downswing the differential widens the cyclical behavior of yield spreads is well documented in the corporate bond market 4 8 12 16 this effect has only recently been given attention in the tax exempt bond market 1 11 in addition the municipal bond market may be segmented if tax exempt borrowers and investors are unable to substitute between tax exempt securities of varying default risk changes in the relative supply of and demand for these classes of securities could produce systematic fluctuations in tax exempt yield differentials these effects could be produced by regulatory statutes which require that banks purchase high grade securities and the fixed nature of bond ratings

the nature and nurture of economic outcomes this paper uses data on adopted children to examine the relative importance of biology and environment in determining educational and labor market outcomes i employ three long term panel data sets which contain information on adopted children their adoptive parents and their biological parents in at least two of the three data sets the mechanism for assigning children to adoptive parents is fairly random and does not match children to adoptive parents based on health race or ability i find that adoptive parents education and income have a modest impact on child test scores but a large impact on college attendance marital status and earnings in contrast with existing work on iq scores i do not find that the influence of adoptive parents declines with child age this abstract was borrowed from another version of this item

intelligence social mobility and growth this study develops a model where the allocation of human resources intergenerational social mobility and technological growth are jointly determined high growth endogenously increases the equilibrium return to innate cognitive ability and makes the allocation of individuals depend more on innate ability and less on social background a social allocation based on innate ability and high growth will thus reinforce each other implying the possibility of multiple endogenous growth equilibria

political uncertainty and public financing costs evidence from u s gubernatorial elections and municipal bond markets this research investigates how political uncertainty around u s gubernatorial elections in uences the borrowing costs of public debt measured by yields of municipal bonds our evidence from both the new issuance market and the secondary market shows that yields of municipal bonds increase sharply by 6 to 8 basis points before elections and then reverse afterward elections have more pronounced impact during economic downturns when outcomes are less predictable and when states have more outstanding debt several state institutions such as gaap budgeting spending limits and tax increase limits help to mitigate the adverse impact of political uncertainty

inequality in landownership the emergence of human capital promoting institutions and the great divergence this paper suggests that inequality in the distribution of landownership adversely affected the emergence of human capital promoting institutions e g public schooling and thus the pace and the nature of the transition from an agricultural to an industrial economy contributing to the emergence of the great divergence in income per capita across countries the prediction of the theory regarding the adverse effect of the concentration of landownership on education expenditure is established empirically based on evidence from the beginning of the 20th century in the u s

educational opportunity and income inequality affordable higher education is and has been a key element of social policy in the united states with broad bipartisan support financial aid has substantially increased the number of people who complete university generally thought to be a good thing we show however that making education more affordable can increase income inequality the mechanism that drives our results is a combination of credit constraints and the signaling role of education first explored by spence 1973 when borrowing for education is difficult lack of a college education could mean that one is either of low ability or of high ability but with low financial resources when government programs make borrowing easier or tuition more affordable high ability persons become educated and leave the uneducated pool driving down the wage for unskilled workers and raising the skill premium

unequal societies income distribution and the social contract this paper develops a theory of inequality and the social contract aiming to explain how countries with similar economic and political fundamentals can sustain such different systems of social insurance fiscal redistribution and education finance as those of the united states and western europe with imperfect credit and insurance markets some redistributive policies can improve ex ante welfare and this implies that their political support tends to decrease with inequality conversely with credit constraints lower redistribution translates into more persistent inequality hence the potential for multiple steady states with mutually reinforcing high inequality and low redistribution or vice versa

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

das human kapital a theory of the demise of the class structure this paper suggests that the demise of the capitalists workers class structure was a socio economic transformation orchestrated by the capitalists in reaction to the increasing importance of human capital in sustaining their profit rates physical capital accumulation in the process of industrialization enhanced the importance of human capital in production and generated incentives for capitalists to support the provision of public education for the masses triggering the demise of the existing class structure the implications of the theory are consistent with the voting patterns on england s education reform of 1902

education redistributive taxation and confidence we consider redistributional taxation between people with and without human capital if education is endogenous and if individuals differ in their perceptions about own ability those who see their ability as low like redistributive taxation because of the transfers it generates those who see their ability as high may also like redistributive taxation because it stops other people receiving education and increases the quasi rents on their own human capital it is surprising that this rather indirect effect can overcompensate them for the income loss from taxation and make the highly confident want higher taxes than the less confident do the results however turn out to be in line with empirical evidence on the desired amount of redistribution among young individuals

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

the politics of public provision of education public provision of education is usually viewed as a form of redistribution in kind however does it arise when income redistribution is feasible as well i analyze a two dimensional model of political decision making with endogenous political parties society chooses both the tax rate and the allocation of the revenues between income redistribution and public education agents differ in their income and in their age where young agents prefer public education and the old prefer income redistribution i find that when the cohort size of the young is not too large then public education arises as a political compromise between the rich and the young segment of the poor they collude in order to reduce the size of government which benefits the rich and target some of its resources to education which benefits the young poor when the cohort size of the young is too large however income redistribution crowds out public provision of education in the political equilibrium

social mobility and redistributive politics just like economists voters have conflicting views about redistributive taxation because they estimate its incentive costs differently we model rational agents as trying to learn from their dynastic income mobility experience the relative importance of effort and predetermined factors in the generation of income inequality and therefore the magnitude of these incentive costs in the long run left wing dynasties believing less in individual effort and voting for more redistribution coexist with right wing dynasties this allows us to explain why individual mobility experience and not only current income matters for political attiitudes and how persistent differences in perceptions about social mobility can generate persistent differences in redistribution across countries

the effects of compulsory schooling on growth income distribution and welfare abstract in this paper we consider an olg model with productive capital and human capital affecting the quality of labor in each generation parents invest in their children s education but disregard its external effect on the aggregate production function government intervention in providing compulsory schooling increases economic growth along the equilibrium path while the intragenerational income distribution becomes more equal also in the long run the majority of individuals in each generation are better off due to compulsory schooling

the design of optimal education policies this paper studies the education policy chosen by a utilitarian government in the model households differ in their income and in their children s ability income is observed by the government but ability is private information households can use private education but cannot borrow to finance it the government can finance education with income tax but at the cost of blunting the individuals incentive to exert labour market effort the optimal education policy we derive is elitist it increases the spread between the educational achievement of the bright and the less bright individuals compared to private provision it is also such that the education received by less bright individuals depends positively on their parental income finally the optimal education policy is input regressive in the sense of arrow 1971 quarterly journal of economics 38 175 208 households with higher income and brighter children contribute less in tuition fees towards the cost of the education system than households with lower income and less bright children

education democracy and growth abstract this note presents a model of endogenous growth where redistribution determined by a political equilibrium is in the form of public education it is shown that there need not be a negative relationship between growth and redistribution as public education increases the level of human capital in the conomy and at the same time tends to produce a more even income distribution

pricing municipal debt pricing municipal debt is a process substantially different from the valuation of corporate liabilities municipalities are not seized upon default therefore they might own additional assets that could he made available to retire debt even when the value of pledged revenues is insufficient to do so however if the value of the municipality s additional assets is only observable privately moral hazard can deter payments from these alterna tive revenue sources a second consequence of lack of seizure is that the municipality survives and might return to the capital markets to raise additional funds in the future this opens an opportunity to induce extraordinary payments from the value of the ad ditional assets through multiperiod pricing controls e g by following defaults with poor pricing for subsequent securities issues

sovereign risk premiums in the european government bond market this paper provides a study of bond yield differentials among eu government bonds issued between 1993 and 2005 on the basis of a unique dataset of issue spreads in the us and dm euro bond market interest differentials between bonds issued by eu countries and germany or the usa contain risk premiums which increase with fiscal imbalances and depend negatively on the issuer s relative bond market size the start of the european monetary union has shifted market attention to debt service payments as the key measure of indebtedness and eliminated liquidity premiums in the euro area

intergenerational persistence of earnings the role of early and college education recent empirical evidence from the united states indicates a high degree of persistence in earnings across generations designing effective public policies to increase social mobility requires identifying and measuring the major sources of persistence and inequality in earnings we provide a quantitative model of intergenerational human capital transmission that focuses on three sources innate ability early education and college education we find that approximately one half of the intergenerational correlation in earnings is accounted for by parental investment in education in particular early education we show that these results have important implications for education policy

interest yields credit ratings and economic characteristics of state bonds an empirical analysis note carosio giovanni and ignazio visco nota sulla costruzione di un tasso di interesse reale estratto dal bollettino della banca d italia 32 ottobre dicembre 1977 797 811 fama eugene f short term interest rates as predictors of inflation american economic review 65 june 1975 269 82 fama eugene f and andre farber money bonds and foreign exchange american economic review 69 september 1979 639 49 fischer stanley the demand for index bonds journal of political economy 83 june 1975 509 34 hartman richard and john h makin inflation uncertainty and interest rates theory and empirical tests national bureau of economic research working paper no 906 june 1982 hess patrick j and james l bicksler capital asset prices vs time series models as predictors of inflation journal of financial economics 2 december 1975 341 60 mundell robert a inflation and real interest journal of political economy 71 june 1963 280 83 nelson charles r and william g schwert short term interest rates as predictors of inflation on testing the hypothesis that the real rate of interest is constant american economic review 67 june 1977 478 86 papadia francesco forward exchange rates as predictors of future spot rates and the efficiency of the foreign exchange market journal of banking and finance s june 1981 217 40 papadia francesco and vittorio basano eec dg ii inflationary expectations surveybased inflationary expectations for the eec countries economic papers of the commission of the european communities directorate general for economic and firlancial affairs no 1 may 1981 pearce douglas k comparing survey and rational measures of expected inflation forecast performance and interest rate effects journal of money credit and banking 11 november 1979 447 56 visco ignazio the measurement and analysis of inflation expectations the case of italy economic papers barik of italy research department june 1979 149 242

money and votes a simultaneous equation model this paper has specified and estimated a model of the interaction between money and voting in american politics convincingly establishing the identification of a system of equations can be difficult even when theory provides a guide in the study of money in politics however no theoretical perspective has been established in the literature to make the case for identification as unambiguous as possible this paper has done two things first the specification was based in part on theory which has formally been developed elsewhere and which satisfactorily describes data at the economic interest group level welch 1980 second part of the question of identification revolves around the relationship between party strength and socioeconomic variables because there are questions as to the best measurement of party strength results based on two measures were presented for a number of reasons the presidential vote was the preferred measure this study draws four conclusions first money influenced voting in u s house elections in 1972 although its effect was small second patterns of total contributions to a u s house candidate are consistent with the hypothesis that a majority of dollars come from contributors who prefer to support likely winners third the total contributions made to a candidate are a positive function of the district s median years of schooling completed and the gini coefficient total contributions made to a democratic candidate are also a positive function of the median income finally had house campaigns been financed in the early 1970s even to the point of giving each major party candidate 150 000 in 1978 dollars few elections would have been changed it is also worth mentioning some of the things about the financing of political campaigns that we still do not know the above conclusions involve only elections to the u s house there are good reasons for suspecting that money is more influential in u s senate elections ols statistics support this belief and the greater visibility of those races help justify it although money has little effect on house elections we do not know whether contributions affect legislative voting in the house representatives apparently believe that expenditure influences their reelection chances given the complexity of the process it should be no surprise that this belief conflicts with our findings acting on this belief a representative s vote may very well be influenced by the sources of his contributions either directly or indirectly through the giving of access to contributors finally we should be reminded that the above model is static while the electoral process is dynamic the amount contributed to a candidate is affected by his probability of winning in the previous time period e g week month and in turn affects that probability in the following time period as usual what we know is overshadowed by what we do not know the above questions are both interesting in their own right and of interest to policy making

do credit markets discipline sovereign borrowers evidence from u s states the degree to which credit markets discipline sovereign borrowers is investigated by estimating the supply curve for debt faced by u s states the results generally support an optimistic view of the market discipline hypothesis with credit markets providing incentives for sovereign borrowers to restrain borrowing while the risk premium on bond yields is estimated to increase only gradually at low levels of debt this effect appears to become much larger as debt rises there is also some evidence that credit markets may withhold access to credit at very high levels of debt copyright 1995 by ohio state university press

more equal but less mobile education financing and intergenerational mobility in italy and in the us a centralised and egalitarian school system reduces the cost of education for poor families and so it should reduce income inequality and make intergenerational mobility easier in this paper we provide evidence that italy compared to the usa displays less income inequality as expected given the type of school system but also less intergenera tional upward mobility between occupations and between education levels we explore some of the reasons which can explain this puzzling result and conclude that in a world in which family background is important for labor market success a centralised and egalitarian tertiary education does not necessarily help poor children and may take away from them a fundamental tool to prove their talent and to compete with rich children 1999 elsevier science s a all rights reserved

public education and redistribution when talents are mismatched in democratic countries elected policymakers determine public spending the level of public spending depends on taxes that are decided by a voting mechanism policymakers also decide how to allocate funds among different policies such as public education and pure redistributive transfers how are the levels of funding for public education and redistribution determined in the political process what impacts do votes on these two policies have on inequality growth and social mobility we develop a politico economic model that highlights a novel mechanism public education provides opportunities for the children of the poor to be recognized for their talent this reduces the probability of a mismatch which takes place when individuals with low talent who come from rich families find jobs that should go to people with high talent and vice versa hence the poor may prefer public spending on education to direct redistribution while the rich prefer redistribution as education implies more competition for good jobs from the poor

why did the west extend the franchise democracy inequality and growth in historical perspective during the nineteenth century most western societies extended voting rights a decision that led to unprecedented redistributive programs we argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution political transition rather than redistribution under existing political institutions occurs because current transfers do not ensure future transfers while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution our theory also offers a novel explanation for the kuznets curve in many western economies during this period with the fall in inequality following redistribution due to democratization i introduction the nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution britain for example was transformed from an oligarchy run by an elite to a democracy the franchise was extended in 1832 and then again in 1867 and 1884 transferring voting rights to portions of the society with no previous political representation the decades after the political reforms witnessed radical social reforms increased taxation and the extension of education to the masses moreover as noted by kuznets inequality which was previously increasing started to decline during this period the gini coefficient for income inequality in england and wales had risen from 0 400 in 1823 to 0 627 in 1871 but fell to 0 443 in 1901 two key factors in the reduction in inequality were the increase in the proportion of skilled workers williamson 1985 and the redistribution of income toward the poorer segments of the society for example taxes rose from 8 12 percent of national product in 1867 to 18 8 percent by 1927 and the progressivity of the tax system increased substantially see lindert 1989

preferences for redistribution in the land of opportunities this paper explores how individual preferences for redistribution depend on future income prospects in addition to estimating the impact of individuals socioeconomic background and of their subjective perceptions of future mobility we employ panel data to construct dobjectivet measures of expected gains and losses from redistribution for different categories of individuals we find that such measures have considerable explanatory power and perform better than dgeneral mobilityt indexes we also find that preferences for redistribution respond to individual beliefs on what determines one s position in the social ladder ceteris paribus people who believe that the american society offers equal opportunities are more averse to redistribution d 2004 published by elsevier b v

fiscal decentralization and intergovernmental fiscal relations a cross country analysis abstract fiscal decentralization consists primarily of devolving revenue sources and expenditure functions to lower tiers of government by bringing the government closer to the people fiscal decentralization is expected to boost public sector efficiency as well as accountability and transparency in service delivery and policy making decentralization also entails greater complexity in intergovernmental fiscal relations and coordination failures in fiscal relations are likely to have a bearing on fiscal positions nationally and subnationally evidence provided in this paper for a sample of 30 countries suggests that coordination failures in intergovernmental fiscal relations are likely to result in a deficit bias in decentralized policy making particularly in the case of developing countries which may not meet important requirements for successful decentralization

technological progress mobility and economic growth this paper analyzes the relationship between technological progress wage inequality intergenerational earnings mobility and economic growth in periods of major technological inventions a decline in the relative importance of initial conditions raises inequality enhances mobility and generates a larger concentration of high ability individuals in technologically advanced sectors stimulating future technological progress and growth however once technologies become more accessible mobility is diminished and inequality decreases but becomes more persistent the reduction in the concentration of ability in technologically advanced sectors diminishes the likelihood of technological breakthroughs and slows future growth user friendliness therefore becomes unfriendly to future economic growth copyright 1997 by american economic association

social preferences self interest and the demand for redistribution preferences for redistribution may be influenced by values and beliefs about distributive justice as well as by self interest people may prefer more redistribution to the poor if they believe that poverty is caused by circumstances beyond individual control therefore beliefs about the causes of income may affect demand for redistribution alternatively the effect of these beliefs on redistributive preferences may be spurious if they are correlated with income and self interest is not properly controlled for they may also measure incentive cost concerns using social survey data i find that self interest cannot explain the effect of these beliefs on redistributive preferences 2001 elsevier science b v all rights reserved

the inheritance of inequality how level is the intergenerational playing field what are the causal mechanisms that underlie the intergenerational transmission of economic status are these mechanisms amenable to public policies in a way that would make the attainment of economic success more fair these are the questions we will try to answer

intergenerational mobility and the process of development this paper offers an explanation for some evidence that intergenerational earnings mobility is higher in more developed economies and that mobility is positively correlated with wage equality in the model mobility promotes economic growth via its effect on the accumulation and allocation of human capital growth influences mobility via its effect on incentives to acquire education and its effect on liquidity constraints upon such acquisition in the process of development mobility increases and the distribution of education becomes better correlated with ability redistributive policy has a negative effect on growth in developed economies and a positive effect in developing economies

heterogeneity stratification and growth macroeconomic implications of community structure and school finance this paper examines how socioeconomic stratification and alternative systems of education finance affect inequality and growth agents interact through local public goods or externalities school funding neighborhood effects and economywide linkages complementary skills knowledge spillovers sorting families into homogeneous communities often minimizes the costs of existing heterogeneity but mixing reduces heterogeneity faster integration therefore tends to slow down growth in the short run yet raise it in the long run a move to state funding of education presents society with a similar intertemporal trade off local and global complementarities play major roles in determining the efficient social and educational structures copyright 1996 by american economic association

the political economy of intergenerational income mobility the intergenerational elasticity of income is considered one of the best measures of the degree to which a society gives equal opportunity to its members while much research has been devoted to measuring this reduced form parameter less is known about its underlying structural determinants using a model with exogenous talent endowments endogenous parental investment in children and endogenous redistributive institutions we identify the structural parameters that govern the intergenerational elasticity of income the model clarifies how the interaction between private and collective decisions determines the equilibrium level of social mobility two societies with similar economic and biological fundamentals may have vastly different degrees of intergenerational mobility depending on their political institutions we offer empirical evidence in line with the predictions of the model we conclude that international comparisons of intergenerational elasticity of income are not particularly informative about fairness without taking into account differences in politico economic institutions jel e24 j62 j68 p16