what drives deregulation economics and politics of the relaxation of bank branching restrictions this paper investigates private interest public interest and political institutional theories of regulatory change to analyze state level deregulation of bank branching restrictions using a hazard model we find that interest group factors related to the relative strength of potential winners large banks and small bank dependent firms and losers small banks and the rival insurance firms can explain the timing of branching deregulation across states during the last quarter century the same factors also explain congressional voting on interstate branching deregulation while we find some support for each theory the private interest approach provides the most compelling overall explanation of our results

long live the doge death as a term limit on venetian chief executives can an electorate use the projected life expectancy of a lifetime appointed chief executive to enforce binding informal term limits informal term limits based on the life expectancy of a chief executive candidate at election would enable an electorate to exercise discretion in adjusting tenure lengths to minimize expected turnover and tenure length costs while also providing a strictly binding term limit death we provide a detailed historical case study of venice from 1172 to 1797 when the ruling patricians utilized informal term limits on their chief executive the doge relying on the projected life expectancy of ducal candidates

term limits and pork barrel politics abstract we develop a dynamic model of democratic politics in which both potential office holders and the electorate have heterogeneous ideologies voters have incomplete information about candidate ideologies so they must use information from previous positions taken in office to make informed re election decisions we characterize the effects of term limits on the evolution over time of the ideological positions taken by office holders and derive the implications for voter choice and welfare contributions of our paper include we detail how pork provision by more senior incumbents interacts with term limits to affect electoral outcomes pork provision transfers of resources from districts with junior legislators to districts with more senior legislators induces voters to be more forgiving of extreme location by incumbents especially incumbents in small or poor districts pork provision can explain why re election probabilities in congress exceed those for governors term limits reduce voter welfare when all that matters are the ideological positions taken by the office holder term limits may be advantageous when senior incumbents can extract benefits for their constituencies at the expense of districts with more junior representatives large or rich districts especially value term limits when there is substantial pork provision we characterize the welfare of all voters not just the median voter

marriage market divorce legislation and household labor supply this paper provides a theoretical framework for analyzing the impact of the marriage market and divorce legislation on household labor supply in our approach the sex ratio in the marriage market and the rules governing divorce are examples of distribution factors these factors are defined as variables that affect the household members bargaining position but not preferences or the joint budget set we extend the collective labor supply model developed by chiappori to allow for distribution factors we show that our model imposes new restrictions on the labor supply functions and eases the identification of individual preferences and the intrahousehold decision process the model is estimated using psid data for the year 1988 our results do not reject the restrictions imposed by the model also the sex ratio and divorce laws deemed favorable to women are found to affect labor supply behavior and the decision process in the directions predicted by the theory and to have sizable effects

banking panics information and rational expectations equilibrium this paper shows that bank runs can be modeled as an equilibrium phenomenon we demonstrate that some aspects of the intuitive story that bank runs start with fears of insolvency of banks can be rigorously modeled if individuals observe long lines at the bank they correctly infer that there is a possibility that the bank is about to fail and precipitate a bank run however bank runs occur even when no one has any adverse information extra market constraints such as suspension of convertibility can prevent bank runs and result in superior allocations banking panics were a recurrent phenomenon in the united states until the 1930s they have re emerged as a source of public concern and much theoretical research recently in this paper we provide an information theoretic rationale for bank runs the traditional story is that contagion is an important aspect of bank runs the idea seems to be that when the general public observes large withdrawals from the banking system fears of insolvency grow resulting in even larger withdrawals of deposits in our model some individuals withdraw because they get information that future returns are likely to be low uninformed individuals observing this also have an incentive to liquidate their investments in addition some individuals need to withdraw deposits for other than informationally based reasons thus if the random realization of such a group of individuals is unusually large then the uninformed individuals will be misled and will precipitate a run on the bank the technology is such that a large volume of withdrawals involves liquidation costs consequently runs on the bank do impose social costs a mechanism that may reduce these costs in our model is to suspend convertibility if withdrawals are high however those individuals who need to withdraw their assets for liquidity reasons are worse off ex post our model provides a rationalization for restrictions in demand deposits that were widespread prior to 1929 friedman and schwartz 7 suggest that restrictions of payments ensured

financial intermediary coalitions abstract in this article an environment in which the investment opportunities of agents are private information is studied and it is shown that financial intermediaries arise endogenously within that environment it is established that financial intermediaries are part of an efficient arrangement in the sense that they are needed to support the authors private information core allocations these intermediaries which are coalitions of agents exhibit the following characteristics in equilibrium they borrow from and lend to large groups of agents they produce information about investment projects and they issue claims that have different state contingent payoffs than claims issued by ultimate borrowers

entry barriers in politics and uncontested elections abstract lott 1986 1987a argues that brand names can be barriers to entry in political markets because political brand names cannot be sold our empirical model examines the effect of inalienability of political capital on entry into nineteenth century british political markets we test the hypothesis that since county races were more expensive than borough races owing to greater costs of information the level of non transferable investment produced by a given number of past campaigns was greater in the rural districts and produced more significant entry barriers

term limits and electoral accountability abstract periodic elections are the main instrument through which voters can hold politicians accountable from this perspective term limits which restrict voters ability to reward politicians with re election appear counterproductive we show that despite the disciplining effect of elections term limits can be ex ante welfare improving from the perspective of voters by reducing the value of holding office term limits can induce politicians to implement policies that are closer to their private preferences such truthful behavior by incumbents in turn results in better screening of incumbents we characterize under which circumstances two term or even longer term limits are the optimal institution for voters

policy variability and economic growth this paper explores the effect of policy variability or frequency of regime switching on economic growth and welfare we study a one sector growth model where investment can be subsidized at either a positive rate or not subsidized at all we find that the lack of persistence in policies per se need not be welfare reducing and that it is likely to decrease growth higher variability implies more frequent changes in consumption and investment but by creating a stronger intertemporal link across regimes variability reduces the fluctuation in investment rates thus decreasing the magnitude of changes in consumption and increasing welfare

shirking and sorting in a political market with finite lived politicians this paper analyzes principal agent slack in the context of a political market composed of voters challengers and incumbents the introduction of a last period via finite livedness in combination with voters imperfect information about politicians preferences causes time varying shirking behavior on the part of politicians political markets eventually sort out those politicians with significantly deviant policy preferences potentially providing a solution to the last period problem and enabling politicians to make credible commitments in the extreme sorting can insure that it is not worthwhile for potential shirkers to run for office a systematic relationship between political shirking and number of terms in office may exist and depends on how quickly sorting takes place we show that evidence of little if any shirking is quite consistent with politicians having diverse and strongly held policy preferences in addition if sorting is a significant feature of political markets cross sectional studies will tend to oversample little and non shirking politicians compared to longitudinal studies reinterpretations of existing empirical work are also discussed

policymakers horizon and the sustainability of international cooperation abstract this paper examines the impact of policymakers horizon on the sustainability of international cooperation we describe a prisoners dilemma game between two infinitely lived countries run by policymakers we show that re election incentives can act as a discipline device making it easier to sustain cooperation between policymakers with finite but potentially renewable mandates than between infinitely lived policymakers we also show that when voting suffers from a recency bias policymakers may have incentives to collude to get re elected and term limits may help international cooperation

campaign finance reform and electoral competition using state senate data from 1984 through the beginning of 2002 this paper finds that campaign donation regulations clearly reduce the competitiveness in political races this is reflected in several dimensions conservative estimates indicate that different donation limits are associated with anywhere from a 4 to over a 23 percentage point increase in win margins the regulations increase the probability that only one candidate will run for office and they increase the probability that incumbents win re election campaign finance regulations also tend to reduce the number of candidates who run for office by an average of about 20 percent

is the glass steagall act justified a study of the u s experience with universal banking before the glass steagall act of 1933 removed commercial banks from the securities underwriting business we evaluate the argument for the separation of commercial and investment banking that conflicts of interest induce commercial banks to fool the public into investing in securities which turn out to be of low quality a comparison of the performance of securities underwritten by commercial and investment banks prior to the act shows no evidence of this instead the public appears to have rationally accounted for the possibility of conflicts of interest and this appears to have constrained the banks to underwrite high quality securities jel g21 g24 n22

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

branch banking bank competition and financial stability it is often argued that branching stabilizes banking systems by facilitating diversification of bank portfolios however previous empirical research on the great depression offers mixed support for this view using data on national banks from the 1920s and 1930s we show that branch banking raises the level of competition and increases exit from the banking system this consolidation strengthens the system as a whole without necessarily strengthening the branch banks themselves our empirical results suggest that the effects that branching had on competition were quantitatively more important than geographical diversification for bank stability in the 1920s and 1930s

the strategic bequest motive although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation our understanding of bequest motives remains incomplete we develop a simple model of strategic bequests in which a testator influences the decisions of his beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries actions the model generates falsifiable empirical predictions that are inconsistent with other theories of intergenerational transfers we present econometric and other evidence that strongly suggests that bequests are often used as compensation for services rendered by beneficiaries

an explanation for why senators from the same state vote differently so frequently abstract this paper explains why rational well informed voters elect politicians with divergent platforms given well defined constituencies and the costliness of any individual politician creating transfers across all interest groups we show that different politicians from the same district can successfully represent vastly different constituencies and still have each politician producing the support maximizing level of transfers our explanation focuses on how obtaining wealth transfers reduces successful constituencies returns to obtaining additional transfers the evidence strongly rejects alternative explanations based upon the median voter and polarized policy preference approaches

an analysis of welfare effects of legislative term limits this paper analyzes the welfare effects of term limits forstate legislators legislators tend to pursue their ownobjectives and deviate from the interests of voters as theystay longer in office however such long term incumbentsbecome more productive in transferring wealth to theirconstituents due to seniority they gain and voters re electthe incumbent term limits reduce the maximum seniority of adistrict s legislator and of other districts legislators aswell affecting the relative seniority of the legislator thus the legislator gains relative seniority sometimes andloses other times under term limits as a consequence votersof a district may or may not benefit from term limits thewelfare effects of term limits depend crucially on the shapeof the voters utility function

public debt stabilization the relevance of policymakers time horizons policymakers are stuck in time political short termism policy myopia policy short sightedness and similar words have been coined to emphasize the present centric policy thinking politics tends to produce short time horizons and as a result policymakers often fail to use present opportunities to mitigate future harms focusing on fiscal and monetary strategic interactions given different separate decision makers our paper aims to explore the effects of policymakers time horizons on debt stabilization to formalize our ideas we use the novel concept of nonlinear model predictive control feedback nash equilibrium nfne and find that present centric policy thinking and decision horizons matters under several dimensions

why voters vote for incumbents but against incumbency a rational choice explanation in recent elections voters supported initiatives to limit the number of terms that their representatives may serve yet at the same time overwhelmingly re elected their incumbents we provide a theoretical explanation for this and other puzzles associated with voting on term limitations the pattern of voting on term limits can be explained by the desire to redistribute power from one party to another from one branch of government to another and from districts with long term incumbents to districts whose representatives have served only for a short time span we test these hypotheses by looking at voting patters on california proposition 140 and the vote on the 22nd amendment with generally positive results

an analysis of the impact of congressional term limits we examine the impact of a six term tenure limit on members of the u s house of representatives the first part of this study develops a methodological framework for simulating the quantitative impact of term limits the second part of this study uses this framework to estimate the effects of term limits on i the value of holding office ii turnover and iii the size of the democratic majority in the house both steady state and transition period effects are explored i introduction the widespread support for term limitations seems to have caught both popular commentators and academic researchers by surprise 1 why do voters want them and what is the likely impact of such legislation a small but growing literature concentrates on the first of these two questions adams and kenny 1986 dick and loft 1993 in contrast this paper addresses the second in particular it investigates the empirical consequences of imposing a twelve year six term tenure limit on the members of the u s house of representatives both the degree and timing of the impact of the alternative regimes are investigated here the issue of timing arises because term limits can have very different effects depending upon how they treat currently serving congressmen we focus our investigation on the two legislative regimes that we believe have the greatest chance of being implemented limited grandfathering and complete grandfathering 2 assuming term limit legislation is passed in 1992 we trace out the time paths of the effects associated with each of these regimes as we shall see there are important transitional differences between the two the paper proceeds as follows section ii addresses the methodology used in this analysis section iii considers the impact of term limits on i the value of holding office ii turnover and iii the democratic majority in the house section iv concludes ii methodology the first concern of this paper is to model the seniority structure of the house in the absence of congressional term limits let n t identify the number of congressmen in their nth term at time t let r define the proportion of congressmen that successfully move from term n to term n l note that there are a number of reasons for not continuing to an additional term besides electoral defeats there are voluntary departures to seek other elective office or private sector employment retirements and deaths given any set of continuation rates r sub 1 r sub 2 and an initial distribution of representatives across terms n sub 1 t n sub 2 t one can construct what the seniority structure of congress will look like any number of periods into the future for instance the number of congressmen in their jth term at time t m is given by mathematical expression omitted where n sub 1 t 1 m j identifies the number of representatives who enter congress in time period t 1 m j t 1 and j and m o ifj m 1 one simply takes the number of congressmen currently serving their j m th term and multiplies this by the appropriate product of continuation rates if j m 1 one needs to identify the number of congressmen who will enter congress in time period t l m since congress always has 435 members the number of arrivals must always equal the number of departures the number of first term congressmen who leave office at the end of time period t is given by 1 r sub 1 n sub 1 t similarly the number of second term congressmen who leave office at the end of time period t is given by 1 r sub 2 n sub 2 t thus the number of representatives who will enter congress in time period t l is given by mathematical expression omitted equations 1 and 2 allow one to recursively solve for n sub 1 t 1 m j for all m j 1 i

time inconsistency and fiscal policy empirical analysis of u s states 1969 89 abstract we offer an extensive and robust test of the time inconsistency theory of fiscal politics we employ data of u s states from 1969 to 1989 and the results of our tests indicate the variables such as legislative stability and executive term limits have strongly predictable impacts on the volatility of various measures of fiscal policy

information reliability and a theory of financial intermediation this paper is an analysis of when it will be beneficial for agents engaged in the production of information to form coalitions the model is cast in a financial market framework thus leading to an identification of conditions sufficient for the existence of financial intermediaries intermediation is shown to improve welfare if informational asymmetries are present and the information generated to rectify these asymmetries is potentially unreliable the usual appeal to transactions costs to explain intermediation is not needed

does electoral accountability affect economic policy choices evidence from gubernatorial term limits this paper analyzes the behavior of u s governors from 1950 to 1986 to investigate a reputation building model of political behavior we argue that differences in the behavior of governors who face a binding term limit and those who are able to run again provides a source of variation in discount rates that can be used to test a political agency model we find evidence that taxes spending and other policy instruments respond to a binding term limit if a democrat is in office the result is a fiscal cycle in term limit states which lowers state income when the term limit binds

property rights and intra household bargaining abstract this paper examines whether an individual level transfer of property rights increases the individual s bargaining power within the household the question is analyzed in the context of a housing reform that occurred in china that gave existing tenants the opportunity to purchase the homes that they had been renting from their state employers the rights to each housing unit were granted to a particular employee so property rights were defined at the individual level rather than the household level the results indicate that transferring ownership rights to men increased household consumption of some male favored goods and women s time spent on chores transferring ownership rights to women decreased household consumption of some male favored goods

what s different about banks abstract negotiable certificates of deposit cd s trade in the capital market in competition with other securities like commercial paper and bankers acceptances if cd s must pay lenders competitive monetary interest the reserve tax on cd s is borne by bank borrowers viability of the tax means there must be something special about bank loans that makes some borrowers willing to pay higher interest rates than those on other securities of equivalent risk moreover there must be something special about banks that prevents other intermediaries from competing to assure that it never pays to finance loans with cd s

bargaining in the shadow of the law divorce laws and family distress this paper exploits the variation occurring from the different timing of divorce law reforms across the united states to evaluate how unilateral divorce changed family violence and whether the option provided by unilateral divorce reduced suicide and spousal homicide unilateral divorce both potentially increases the likelihood that a domestic violence relationship ends and acts to transfer bargaining power toward the abused thereby potentially stopping the abuse in extant relationships in states that introduced unilateral divorce we find a 8 16 percent decline in female suicide roughly a 30 percent decline in domestic violence for both men and women and a 10 percent decline in females murdered by their partners

distinguishing panics and information based bank runs welfare and policy implications in this paper we contrast panics and information based bank runs in an effort to provide a robust and empirically plausible model of how bank runs are triggered the model of information based runs is characterized by two sided asymmetric information the bank cannot observe the true liquidity needs of the depositors while depositors are asymmetrically informed about bank asset quality we also examine the relative degrees of risk sharing provided by bank deposit contracts and traded equity contracts we show that the choice of deposit or equity depends on the attributes of and information about the underlying investment returns

bank runs as an equilibrium phenomenon a standard demand deposit contract in which individuals are entitled to their full deposit at any time provided the bank is solvent is analyzed in a context in which there are no exogenous events on which agents condition their behavior and a unique equilibrium involving a bank run with positive probability is shown to exist

self imposed term limits in reconciling voters behavior with legislative term limits dick and lott argue that since more senior representatives are better at rent seeking there is an inefficient tendency to re elect incumbents in their model term limits are preferred collectively by constituencies even though no constituency would independently oust its incumbent representative however many term limits are unilaterally self imposed in particular the 22nd amendment limiting presidents terms to two and their model cannot explain these limits in this comment i suggest that term limits may be self imposed by risk averse voters who prefer cycling between left and right wing candidates to a once and for all election that imposes a candidate of a single ideology on the entre electorate the market failure that makes term limits helpful is that out of power minorities cannot bribe the median voter

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

financial development and pathways of growth state branching and deposit insurance laws in the united states 1900 1940 abstract this paper studies the effect of state level banking regulation on financial development and on components of state level growth in the united states from 1900 to 1940 we use these banking laws to assess the findings of a large recent literature that has argued that financial development contributes to economic growth we contend that the institutional mechanism leading to financial development is important in determining its consequences and that some types of financial development can even retard economic growth for the united states from 1900 to 1940 we argue that the financial expansion induced by expanded bank branching accelerated the mechanization of agriculture and spurred growth in manufacturing in contrast financial expansions induced by state deposit insurance had negative consequences for both the agricultural and manufacturing sectors

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

term limits causes and consequences this paper consults multiple literatures to specify andevaluate the economic rationales for term limitation particularly on congress i first consider theories that aroseto explain among related issues why individual states mightunilaterally self impose term limits on their own delegationsto congress next i consider two main lines of argument foruniversal limits both of which begin with the empiricalphenomenon of high and rising congressional tenure first supporters of term limits argue that higher tenure biaseslegislatures toward inefficiency big government highspending second higher tenure creates inefficient anti competitive conditions in the legislative election market term limitation would remedy these inefficiencies by virtue ofdecreasing average tenure these claims are then evaluated inlight of the evidence amassed in the literature based on theliterature reviewed this paper finds that while term limitswill reduce average tenure there is no evidence to suggestthat term limits will affect the underlying causes of theseinefficiencies further research on a more general reform which would strike deeper at these underlying causes isimplied

bank suspension of convertibility abstract a banking panic occurs when depositors at all banks seek a large reduction in their deposit holdings suspension of convertibility of demand deposits into currency was the banking system s response to a banking panic when depositors are incompletely informed about the state of bank investments a panic can occur when depositors expect capital losses conditional on having observed noisy indicators of the state of bank investments banks with superior information about the investments can signal to depositors by suspending convertibility that continuation of the long term investments is mutually beneficial

strategic institutional choice voters states and congressional term limits states choices on term limits are quantified as a multiple categorical variable capturing variation in the type of limits passed measures of relative political influence in congress explain much of this variation using 1992 data on the american states the model controls for unobserved heterogeneity due to voter access to direct democracy in some states at 2002 values for congressional tenure and federal spending the model predicts approximately eight to ten additional states would choose to limit their own members terms but cannot under a supreme court ruling we discuss implications for institutional federalism and the potential passage of similar political institutions across the states

bank runs the deposit currency ratio and the interest rate abstract this paper provides a model of an economy with a banking system which is subject to bank runs the model is then used to explain the rise in short term interest rates during bank runs and the fall in the deposit currency ratio in anticipation of possible runs

the profits of power land rights and agricultural investment in ghana we examine the impact of ambiguous and contested land rights on investment and productivity in agriculture in akwapim ghana we show that individuals who hold powerful positions in a local political hierarchy have more secure tenure rights and that as a consequence they invest more in land fertility and have substantially higher output the intensity of investments on different plots cultivated by a given individual corresponds to that individual s security of tenure over those specific plots and in turn to the individual s position in the political hierarchy relevant to those specific plots

symmetric equilibrium existence and optimality in differentiated product markets abstract equilibrium existence and optimality are analysed in a market for products differentiated by their variety a game of three stages is analysed firms enter in the first stage choose varieties in the second stage and choose prices in the third stage the existence of subgame perfect equilibria is established at equilibrium products are symmetrically located in the space of characteristics and are offered at equal prices the surplus maximizing solution is characterized and it is shown that surplus maximizing product diversity is lower than the equilibrium one

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

campaign contributions as investments the u s house of representatives 1980 1986 this paper treats the market for special interest campaign contributions and political favors as a simple asset market the model yields a simple equilibrium relationship among three variables the total amount of investor contributions a candidate receives the monetary value of the favors he has promised and his probability of winning using data on open seat races for the u s house of representatives i confront the model with a series of tests despite the starkness of the model the results of these tests are highly supportive

reconciling voters behavior with legislative term limits a puzzle exists over why voters continually re elect their congressional and state representatives although these same voters often support initiatives to limit the number of terms that their legislators may serve residents of california colorado and oklahoma voted in 1990 to limit the terms of their state legislators to tenures ranging from six to twelve years 1 in california these same voters however re elected 87 of 91 or 96 percent of all incumbent state representatives and senators whose terms they sought to limit 2 among re elected incumbents 67 or 77 percent had served as long as or longer than the maximum term prescribed under their state s term limit initiative voters defeated only two incumbents who would have been removed under the terms of california s tenure restrictions had they been in effect similar voter behavior characterized recent state elections in colorado and oklahoma 3 more generally these seemingly contradictory voter preferences also are apparent in public opinion polls at the federal level while 62 percent of voters immediately prior to the 1990 general elections indicated their intentions to reelect their congressman that same poll showed that only 24 percent said they approve of the way congress is handling its job gallup and newport 1990 pp 36 37 support for term limit initiatives and the low public esteem of legislators as a group both appear to be inconsistent with voters strong preferences for their own representative and the regular reelection of incumbents

the role of demandable debt in structuring optimal banking arrangements demandable debt finance by banks warrants explanation because it entails costs of bank suspension liquidation and idle reserve holdings an explanation is developed in which demandable debt provides incentive compatible intermediation where the banker has comparative advantage in allocating investment funds but may act against the interests of uninformed depositors demandable debt attracts funds by giving depositors an option to force liquidation its usefulness in transacting follows from information sharing between monitors and nonmonitors copyright 1991 by american economic association

the political economy of benefits and costs a neoclassical approach to distributive politics this essay offers a rational political explanation for the notorious inefficiency of pork barrel projects with an optimization model of legislative behavior and legislative institutions the model emphasizes the economically arbitrary from a welfare point of view importance of the geographic incidence of benefits and costs owing to the geographic basis for political representation we explore the implications of a legislator s objective function and derive conditions under which a representative legislature will select an omnibus of projects each of which exceeds the efficient scale

credit constraints and demand for higher education evidence from financial deregulation abstract we use staggered banking deregulation across states in the united states to examine the impact of the resulting increased credit supply on college enrollment from the 1970s to the early 1990s our research design produces estimates that are not confounded by wealth effects due to changes in income or housing wealth we find that lifting banking restrictions raises college enrollment by about 2 6 percentage points 4 9 we rule out alternative interpretations by examining results for different income groups and bankrupt households we also find similar effects for two year or four year college completion and supporting evidence in household educational borrowing

divided government in the american states a byproduct of legislative professionalism s since world war ii divided government has become increasingly common in the american states a significant component of the increase is the deterioration of republican fortunes in state legislatures after the 1990 and 1992 elections for example only five state legislatures were controlled by the republicans i shall examine the hypothesis that the professionalization of state legislatures makes legislative service more attractive to democratic candidates and less attractive to republican candidates because full time legislative service is incompatible with another career and democrats on average have less lucrative career opportunities than republicans statistical analysis of post world war ii legislative elections outside the south is consistent with the argument other things being equal every ten thousand dollar increase in real biennial legislative compensation is associated with approximately a 1 increase in democratic legislators

optimal tenure of elected public officials constitutional limits on the tenure of elected chief executives are a prominent feature of many governments yet they have received little attention from economists working in the field of political behavior this paper develops an analysis of tenure limits and their incidence the analysis assumes that the limits substitute for more familiar electoral controls such as elections recalls and impeachment proceedings we assume that restrictions are imposed if they cause the constitutionally decisive voter to be better off on average this assumption although not a standard one applied to policy in general is fairly common in the literature on constitutional choice where the memberships of interest groups later to be formed are plausibly unknown at the time of the constitutional convention 1 the decision to restrict is undertaken in an environment of uncertainty and naturally it is not without its costs it is clear for instance that restriction substitutes inexperienced politicians for experienced ones moreover a tenure limit generates an incentive problem during the final term in office since no further electoral test remains 2 this lame duck

land inheritance and schooling in matrilineal societies evidence from sumatra abstract this paper explores statistically the implications of the shift from communal to individualized tenure on the distribution of land and schooling between sons and daughters in matrilineal societies based on a sumatra case study the inheritance system is evolving from a strictly matrilineal system to a more egalitarian system in which sons and daughters inherit the type of land which is more intensive in their respective work effort while gender bias is either non existent or small in land inheritance daughters tend to be disadvantaged with respect to schooling the gender gap in schooling however appears to be closing for the generation of younger children

political influence and declarations of bank insolvency in japan this paper investigates how politics affects bank supervision by examining determinants of bank failures in japan during 1999 2002 a period during which bank regulators were called upon to resolve insolvent banks in preparation for the lifting of a blanket deposit guarantee the empirical results suggest that japan s bank regulators had tendency to delay declarations of insolvency in prefectures that supported senior politicians of the ruling liberal democratic party ldp this result which is robust to a host of bank level and prefecture level controls suggests that bank supervision is prone to political influence that delays efficient resolution of insolvency

accountability and yardstick competition in the public provision of education abstract this paper explores the institutional change introduced by the public disclosure of an education development index ideb basic education development index in 2007 to identify the effect of education accountability on yardstick competition in educational spending among brazilian municipalities an exploratory analysis of the data shows a minor reduction 20 in spatial interaction in public educational spending after ideb disclosure compared with the spatial correlation before disclosure of the index our main results explore a discontinuity around the cutoff of 30 students enrolled in the grade under assessment after ideb disclosure the estimates suggest that the spatial autocorrelation and thus yardstick competition is reduced by 52 falsification and robustness tests were performed and suggest that we can claim causality around small bandwidths of the cutoff this finding suggests that the public release of information may decrease the importance of neighbors information on voters decisions

legislative term limits and state spending supporters of legislative term limits often claim that they will lower state spending levels using fiscal data from 48 states from 1977 to 2001 this paper finds little support for this assertion instead this analysis finds that states with term limits have higher spending levels than states without term limits these results suggest that term limits give legislators greater incentives to deviate from socially optimal fiscal policy by altering the legislative environment in which such policy is formulated

peltzman on regulation and politics there is no question that self interest matters not only in private markets but in the political arena as well see goldberg 1974 1976 1977 peltzman s paper is an extremely clever effort to pose the political problem so that the tools and reasoning from the standard model could be extended to the new area with minimal modification the approach directs attention to technical questions e g the signs of second derivatives peltzman 1976 220 221 of a familiar sort however the environment in the new area is so different from the more mundane environments in which the theory normally thrives that a major adaptive effort will be necessary for the theory to survive if it does survive it will be in a form that is almost unrecognizable

term limitation in a dynamic model of partisan balance in november 1992 voters in fourteen states considered ballot propositions to adopt term limits for members of congress all fourteen propositions passed ten received more than 60 support bringing the total number of states with congressional term limits to fifteen much of the discussion of term limitation has focused on issues of representation the strength of parties and the functioning of congress after the adoption of limits benjamin and malbin 1992 will 1992 this paper explores an important but less discussed consequence of term limitation its impact on the partisan balance of legislatures we inquire how electoral dynamics incumbent advantage and voluntary retirement interact with a term limit to produce a new balance between parties in a two party legislature which party is favored by the introduction of term limits how does the length of the term limit matter are there conditions such that one party will be favored by any limit regardless of how restrictive

the empirical content of nash bargained household behavior in households whose allocation decisions can be represented as nash bargained household decisions extrahousehold environmental parameters eeps serve as pure shifters of the threat points the comparative statics of changes in demands due to changes in these eeps are given these are incorporated into a comprehensive statement of the empirical content of nash bargained household behavior including a nash generalization of barten s 1966 fundamental matrix equation of the theory of consumer demand estimation and data requirements are discussed along with nested testing of the following structure the neoclassical model is nested in the nash bargained model which in turn is nested in an unrestricted model of household demands emphasized throughout is the enriched menu of explanatory variables for demand analysis provided by the nash model as well as the model s ability to jointly analyze i household formation and ii intrahousehold allocation decisions

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

term limits and electoral competitiveness evidence from california s state legislative races california s legislative term limits have dramatically reduced campaign expenditures real expenditures during the three general elections after the term limits initiative passed in 1990 were lower than in even 1976 this drop has occurred at the same time that races have become closer contests and more candidates are running for office by any measure term limits have coincided with large changes in the level of political competition even before term limits have forcibly removed a single politician from office the changes are so large that more incumbents are being defeated races are closer more candidates are running and fewer single candidate races than occur at any other time during our sample period from 1976 to 1994

the political economy of branching restrictions and deposit insurance a model of monopolistic competition among small and large banks this article suggests that the introduction of bank branching restrictions and federal deposit insurance in the united states likely was motivated by political considerations specifically we argue that these restrictions were instituted for the benefit of the small unit banks that were unable to compete effectively with large multiunit banks we analyze this political hypothesis in two steps first we use a model of monopolistic competition between small and large banks to examine gains to the former group from the introduction of branching restrictions and governmentsponsored deposit insurance we then find strong evidence for the political hypothesis by examining the voting record of congress

schooling and labor market consequences of school construction in indonesia evidence from an unusual policy experiment between 1973 and 1978 the indonesian government engaged in one of the largest school construction programs on record combining differences across regions in the number of schools constructed with differences across cohorts induced by the timing of the program suggests that each primary school constructed per 1 000 children led to an average increase of 0 12 to 0 19 years of education as well as a 1 5 to 2 7 percent increase in wages this implies estimates of economic returns to education ranging from 6 8 to 10 6 percent

predicting the institutional effects of term limits in this paper we develop a model to predict the seniority turnover and transition consequences of term limit reforms for any institution with a regularized procedure for rotating membership with this model we can predict the number of members who will be serving in their last term at any given time once an institution reaches a stable state under term limit reforms for example our results show that for the u s senate current term limit proposals will result in a substantial increase in the number of lame duck members and a significant reduction in average seniority we make no claims as to the public policy effects of term limit proposals however our model can be used to design a proposal that will maximize any benefits or minimize any public policy effects found to be associated with term limit reforms

women s inheritance rights and bargaining power evidence from kenya abstractthis paper investigates the human capital effects of a legal reform granting kenyan women equal inheritance rights i employ a difference in differences strategy exploiting variation in pr

intrahousehold bargaining female autonomy and labor supply theory and evidence from india standard models of labor supply predict that unearned income decreases labor supply we propose an alternative noncooperative household model in which a woman s unearned income improves her autonomy within the household which raises her gains from working and can increase her labor supply we find empirical support for this model using women s exposure to the hindu succession act in india as a source of exogenous variation in their unearned income exposure to the hindu succession act increases a woman s labor supply by between 3 8 and 6 1 percentage points particularly into high paying jobs autonomy increased by 0 17 standard deviations suggesting that control of income is a potential channel for these effects thus policies that empower women can have an additional impact on the labor market which can further reinforce autonomy increases

inheritance patterns in migration prone communities of the peruvian highlands abstract on the basis of detailed information on inheritance practices collected in the course of an in depth survey of three andean communities of peru and unlike most empirical studies which rely on remittance functions we have been able to estimate an inheritance function with a view to identifying the main factors associated with particular patterns of land bequests a central result is that the positive relationship between caring and a favourable access to land bequest indeed exists yet is only observed for migrant children whether urban or rural long distance or short distance migrants combined with other findings and observations this result strengthens the case for an interpretation based on an active role of potential heirs in the determination of inheritance outcomes it therefore calls into question the strategic bequest theory which presumes that parents are the ultimate decision makers in this matter in addition our study shows that inheritance patterns are complex besides migration and caring behavior personal characteristics of potential heirs such as gender birth order and family status having children or not do appear to influence division of parental land

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