keep on fighting the dynamics of head starts in all pay auctions abstract we investigate a model of a series of contests in which a contestant s past and present success gives a head start over a rival in the future how this advantage from winning affects contestants efforts whether the laggard gives up or keeps on fighting and how the head start develops over time are key issues we find that the expected effort of the laggard will always be higher than the rival at some stage in the series of contests and this is most likely to happen when at a large disadvantage or at a late stage in the series

electoral politics and the executive veto a predictive theory we argue that winner take all voting in states and the unequal distribution of electoral votes across states in presidential elections makes incumbent presidents rationally place more weight on the preferences of voters in closely contested larger states when making policy decisions this hypothesis is tested by examining whether presidential veto decisions are influenced by the floor votes of senators from these electorally crucial states in a pooled sample of 325 individual bills from 1970 through 1988 we find significant evidence of this behavior by incumbent presidents

implications of ethnic diversity ethnically differentiated societies are often regarded as dysfunctional with poor economic performance and a high risk of violent civil conflict the author distinguishes between dominance in which one group constitutes a majority and fractionalization in which there are many small groups in terms of overall economic performance the research shows that both theoretically and empirically fractionalization is normally unproblematic in democracies although it can be damaging in dictatorships in terms of the risk of civil war the author shows that both theoretically and empirically fractionalization actually makes societies safer while dominance increases the risk of conflict a policy implication is that fractionalized societies are viable and secession should be discouraged

proprietary public finance and economic welfare abstract we develop a positive theory of public finance in which the objective of tax and spending policy is to extract rents for the incumbent ruler the analysis shows how dependence of the incumbent ruler s survival probability on his tax and spending policy can lower the equilibrium tax rate and increase the equilibrium amount of spending on productive public services but only until the minimum credible tax rate which depends on the ruler s endogenous survival probability becomes a binding constraint the central result of the analysis is that if a relatively benevolent tax and spending policy is both necessary and sufficient for a high survival probability then the ruler s equilibrium policy is relatively benevolent

does direct democracy reduce public debt evidence from swiss municipalities although some countries have managed toobtain balanced budgets or even budgetsurpluses in recent times public debts ofmany oecd countries remain at high levels since structural reforms of public spendinghave only infrequently taken place in mostcountries fiscal pressure will increaseagain in the future due to society s ageingand the accompanying increases in socialtransfer spending constitutionalrestrictions on debt levels and legal rulesof the budgetary process such as a strongrole of the minister of finance aresupposed to be helping against the debtbias inherent in political decision makingprocedures in addition to such top downbudgetary procedures this paperinvestigates the impact of referendumapproval of budget deficits by the voterson the level of public debt in a crosssection of the 134 largest swissmunicipalities in 1990

caps on political lobbying the cost of political campaigns in the u s has risen substantially in recent years for example real spending on congressional election campaigns doubled between 1976 and 1992 steven d levitt 1995 there are many reasons why increased campaign spending might be socially harmful first increased spending means increased fund raising which may keep politicians from their legislative duties 1 second a lobbyist who makes a large campaign contribution may have undue influence on electoral outcomes on the shaping of legislation or on the outcome of regulatory proceedings 2 that is the socially preferred candidate or legislation may not prevail likewise a lobbyist involved in a regulatory matter or a competition for a government contract may benefit unduly from a legislator s intervention 3 third a perception that campaign contributions purchase influence may lead to increased tolerance of corruption in the private sector a desire to control campaign spending has spawned many initiatives to limit both campaign contributions and spending beginning with the passage of the federal election campaign act feca political action committees pacs can contribute at most 5 000 per election to a candidate while individuals can contribute at most 1 000 restrictions have also been put on in kind contributions making it more difficult to circumvent these limits 4 while direct restrictions on campaign spending have proven difficult to implement recent initiatives aim to impose voluntary spending limits and stricter limits on contributions 5 despite the existing legislation and the proposals to limit contributions little is known about the impact of contribution limits on aggregate expenditures while it is intuitively appealing that aggregate expenditures would drop we challenge that intuition here we study a lobbying game and show that a cap on individual lobbyists expenditures may have the perverse effect of increasing aggregate expenditures and loweri this abstract was borrowed from another version of this item

separation of powers and political accountability political constitutions are incomplete contracts and therefore leave room for abuse of power in democracies elections are the primary mechanism for disciplining public officials but they are not sufficient separation of powers between executive and legislative bodies also helps to prevent the abuse of power but only with appropriate checks and balances checks and balances work by creating a conflict of interest between the executive and the legislature yet requiring both bodies to agree on public policy in this way the two bodies discipline each other to the voters advantage under appropriate checks and balances separation of powers also helps the voters elicit information

how successful was the new deal the microeconomic impact of new deal spending and lending policies in the 1930s the new deal during the 1930s was arguably the largest peace time expansion in federal government activity in american history until recently there had been very little quantitative testing of the microeconomic impact of the wide variety of new deal programs over the past decade scholars have developed new panel databases for counties cities and states and then used panel data methods on them to examine the impact of new deal spending and lending policies for the major new deal programs in most cases the identification of the effect comes from changes across time within the same geographic location after controlling for national shocks to the economy many of the studies also use instrumental variable methods to control for endogeneity the studies find that public works and relief spending had state income multipliers of around one increased consumption activity attracted internal migration reduced crime rates and lowered several types of mortality the farm programs typically aided large farm owners but eliminated opportunities for share croppers tenants and farm workers the home owners loan corporation s purchases and refinancing of troubled mortgages staved off drops in housing prices and home ownership rates at relatively low ex post cost to taxpayers the reconstruction finance corporation s loans to banks and railroads appear to have had little positive impact although the banks were aided when the rfc took ownership stakes

inequality democracy and the protection of property rights motivated by the observed relevance of institutional quality such as strong property rights for economic performance this research considers the emergence of property rights protection as a political outcome it argues that the support for such protection is greater the more equal income distribution and the smaller political bias when these conditions initially hold the politically influential rich elite may prefer to relinquish its power through democratisation in order to commit future policy makers to the enforcement of property rights thus ensuring larger investment and faster growth along the transition path in a very unequal economy however such democratisation will not take place

efficiency wages and x inefficiencies within most organizations agents may spend time on a variety of tasks productive and redistributive in this paper i derive an optimal multi task incentive scheme under the assumption that agents have limited liability the wage level is shown to increase with an agent s discretion and the organization s profits with multiple agents it is generally not optimal for the principal to fully eliminate distributional conflict within the organization the resulting influence costs constitute a measure of x inefficiency the analysis illuminates the relationship between competition and influence costs emphasizing the role of the organization s production technology

contests with small noise and the robustness of the all pay auction this paper considers all pay contests in which the relationship between bids and allocations reflects a small amount of noise prior work had focused on one particular equilibrium however there may be other equilibria to address this issue we introduce a new and intuitive measure for the proximity to the all pay auction this allows in particular to provide simple conditions under which actually any equilibrium of the contest is both payoff equivalent and revenue equivalent to the unique equilibrium of the corresponding all pay auction the results are shown to have powerful implications for monopoly licensing political lobbying electoral competition optimally biased contests the empirical analysis of rent seeking and dynamic contests

the control of politicians within a constitutional framework the case of state level recall provisions as previously recognized the structure of representative democracy is endogenous and the choice of constitutional provisions selected by such organizations is important the present paper focuses on constitutional choices that work to control the behaviour of elected officials by examining the constitutional ease of recalling elected officials across the 50 states after developing a numerical measure of the ease with which registered voters can recall officials ordinary logistic ordered logistic and tobit models are employed to examine the factors of such an endogenous choice across states the results are quite consistent with the theoretical models developed previously by public choice and constitutional scholars

efficiency out of disorder contested ownership in incomplete contracts in many situations irreconcilable disagreements between players lead to costly ownership disputes over assets for example in case of joint ownership this article studies the role of such disputes in a situation where two players have to make a transaction specific investment and when contracts are incomplete i show that potentially contested ownership may mitigate the inefficiency of investments due to the incompleteness of contracts generating an exchange surplus that comes closer to the first best surplus as compared to any other ex ante distribution of ownership typically discussed in the literature following the influential work by grossman hart and moore if the contest is an all pay auction each player makes a transaction specific investment as if he or she owns the asset this article can explain why shared ownership as for example in equity joint ventures family firms start up partnerships and so on is an important part of today s corporate landscape

job independence as an incentive device a firm can either subject its workers to strict rules and regulations or grant them independence if independent they can make entrenchment investments which will not only raise their productivity but also make the firm depend on their cooperation however in contrast to a standard holdup problem the firm can afterwards take over control thus stripping such workers of a part of their bargaining assets this leads to structural distortions and may aggravate the holdup problem however the threat of partial expropriation may also alleviate the holdup problem and even induce overinvestment

a patchwork safety net a survey of cliometric studies of income maintenance programs in the united states in the first half of the twentieth century social welfare programs in the usa are designed to serve as safety nets for people in hard times in contrast with the universal approach found in many other developed western nations in a survey of cliometric studies of social welfare programs in the usa we examine the variation in the safety net in the usa across states in the 20th century the determinants of the variation and its impact on socioeconomic outcomes the usa has always displayed substantial variation in the extent of the safety net because the features of most public social welfare programs have been and currently are determined by local and state governments even after the federal government became involved in the 1930s differences across states persist strongly for typically a decade although the persistence weakens with time and there are some periods when federal intervention led to a re ordering the rankings of state benefits differ from program to program and economic and political factors have different weights in determining benefit levels in panel data estimation of their effects variation in benefits across programs during the early 1900s had significant impact on labour markets economic activity family formation death rates and crime copyright 2010 blackwell publishing ltd

budget referendums and government spending evidence from swiss cantons vortrag im forschungsseminar der wirtschaftswissenschaftlichen fakultat der universitat basel schweiz am 20 november 2000

favoritism in asymmetric contests head starts and handicaps abstract i examine a contest with identity dependent rules in which contestants are privately informed and ex ante heterogeneous a contestant may suffer from a handicap or benefit from a head start the former reduces the contestant s score by a fixed percentage the latter is an additive bonus although total effort increases if the weak contestant is favored with a head start the optimal use of handicaps is not as clear cut depending on the nature of the asymmetry it may or may not be optimal to handicap the strong contestant moreover it is generally optimal to combine the two instruments for instance when contestants are sufficiently heterogeneous the weak contestant should be given both a head start and a handicap it may also be possible to induce higher effort and at the same time make both contestants better off ex ante

the value of the vote a model and test of the effects of turnout on distributive policy the most plausible assumption is that if certain groups or classes of citizens habitually do not vote their interest will be neglected in the actions and policies of governments key 1950 506 i introduction this article investigates the effects of voter participation on the distribution of government funds a simple model shows why for some types of distributive policy incumbents will have a greater probability of reelection if high turnout regions receive more funds than do low turnout regions the model predicts therefore that politicians who seek reelection and similarly politicians including the ideologically driven selected into office because they set popular policy will tend to allocate more funds to regions with higher turnout i test the model s predicted relationship between turnout and spending for the south in the 1930s spending data are county level allocations by the federal emergency relief administration fera which was the early new deal s main program to provide relief to the unemployed the evidence suggests that turnout had a substantial effect on fera spending if an individual was a voter rather than a nonvoter it typically led to an increase on the order of 30 in the expected fera allocation for the individual s county the findings shed light both on the role of voting in representative democracies and on the historical role of voting rights in the southern political system elections voter participation and policy representative democracy creates a tendency for government to set policy that improves politicians prospects for reelection this may occur because politicians design policy for the purpose of winning reelection or it may occur because elections sort into office those politicians who for ideological or other reasons tend to set policy that wins votes 1 the type of policy that improves the prospects for reelection depends upon how voters respond to policy to illustrate this point consider the distribution of a fixed sum between different regions e g counties one key consideration is the extent to which voting behavior responds to distributive policy allocating funds to groups that do not respond will be less likely to lead to reelection groups that do not respond include those who will always vote in support of the incumbent those who will always vote in opposition to the incumbent and those who do not vote previous work on distributive politics has examined how distribution is influenced by constituents voting behavior with respect to whom they support when they do vote for example wright 1974 wallis 1984 1987 1991 kiewiet and mccubbins 1985 cox and mccubbins 1986 and fleck 1999 examine favoritism of swing and loyal voters 2 this article takes a different but complementary approach by focusing on the distributive effects of whether people vote quite simply winning the approval of a group of citizens has a larger effect on reelection if those citizens vote in large numbers than if they do not this provides a reason to expect that politicians will tend to allocate relatively little to those who do not vote this is consistent with the long recognized point that nonvoters have little influence on policy a point that key 1950 made clear and that follows naturally from economic models of voting such as that of downs 1957 bennett and mayberry 1979 show a similar effect of legislative representation on interstate redistribution states with more representatives per capita in congress tend to have lower ratios of taxes paid into the federal treasury relative to federal grants in aid received by modeling and estimating the effects of voter participation this article contributes to the general understanding of how voting influences the allocation of resources furthermore the substantial size of the estimated effects underscores the critical role that voting rights played in the southern political system

the political economy of new deal fiscal federalism in 1930 the average american received somewhat more than 50 percent of his government services from local government 20 percent from state government and the remainder from the federal government by 1940 this pattern had been reversed with the federal government supplying roughly 50 percent state government 20 percent and local government 30 percent figure 1 shows how shares of non military expenditures by the three levels of government shifted dramatically away from local governments toward the national government during the decade the same was true of revenues this transition in the relative importance of state federal and local government was dramatic and from the perspective of the 1990s permanent figure 1 omitted the most important cause of the shift in fiscal terms was the implementation of national relief programs under the new deal the federal emergency relief administration fera the works progress administration wpa the social security programs and others between 1932 and 1940 direct relief expenditures account for roughly 45 percent of the growth in national expenditures 60 percent of the growth in state expenditures and 20 percent of the growth in local expenditures almost all of which came from federal and state grants for relief purposes even more revealing are the figures for the period between 1932 and 1935 in those three years national government expenditures rose by slightly less than 2 billion while expenditures for relief alone reached 2 2 billion in 1935 from zero in 1932 1 the increase in federal expenditures was significant but an important reason why state and national governments grew but local governments did not lay in the fiscal structure of the relief programs the extensive use of matching grants to finance relief expenditures created incentives for states to expand their fiscal effort while local governments were effectively able to substitute national and state relief grants for their own funds matching grants also allowed the states to control the amount spent in each program the national government was and is still today unable to control expenditures on these programs or to equalize welfare standards across states open ended matching grants entitled the states to unencumbered access to the federal treasury 2 the programs also permanently altered the american welfare system the categorical assistance programs of the social security act brought about a basic realignment of financial and administrative responsibilities between the federal state and local governments old age assistance aid to dependent children and aid to the blind were independently administered by state governments the act contained strong restrictions on the ability of the social security board to influence the administration of programs within the states explicitly forbidding the board to set personnel policies 3 why were open ended matching grants and a decentralized administrative structure adopted rather than some other institutional form public finance theory suggests that it may have been the best way for the federal government to support relief expenditures without discouraging continued state and local participation matching grants are usually proposed as a remedy to problems of externalities in this case the spillover is the movement of persons seeking relief from low benefit to high benefit states they solve the externality problem through the use of fiscal incentives as gramlich 1977 276 notes for matching grants the central government is expressly trying to stimulate spending in a certain area as we will see below matching grants did have this effect federal grants expanded rapidly but the state and local sector did not substitute federal grant moneys for state and local tax dollars on a large scale recent empirical studies of matching grants indicate that they result in somewhat less spending than the size of the grant indicating that state and local governments reduce their own expenditures on grant programs slightly in the presence of matching grants in contrast to lump sum grants where state and local governments are able to substitute significant amounts of federal grants for their own tax dollars

the political determinants of federal expenditure at the state level it has been shown that states with higher per capita senate representation have higher federal spending per capita atlas c m gilligan t a hendershott r j and zupan m a 1995 american economic review 85 624 629 with a more recent data sample more highly disaggregated data and a different set of political control variables we are able to confirm the main result of atlas et al that per capita senate representation is positively related to federal expenditure this effect is strongest for procurement expenditures by contrast we do not find support for their result that spending increases with per capita representation in the house of representatives several other political variables are found to be significant in a subset of the expenditure equations

incumbency advantage and political campaign spending limits abstract this paper presents a model which captures the three main arguments for and against campaign spending limits campaign spending limits are purported to restrict the incumbent s ability to exploit his fundraising advantage in contrast to conventional wisdom a ceiling increases the incumbent s probability of victory regardless of the candidates relative fundraising abilities as long as the challenger is not more effective in campaign spending if the challenger is more effective in campaign spending ceilings have a non monotonic effect when the incumbent enjoys a mild initial voter disposition advantage a moderate ceiling decreases the incumbent s probability of victory but further restricting the limit favors the incumbent irrespective of incumbency status the marginal benefit to quality decreases with a more restrictive cap in an open seat contest a more restrictive limit improves the electoral prospects of the superior quality candidate stricter ceilings may lead to the unintended consequence of increased expected spending

optimal favoritism in all pay auctions and lottery contests abstract we analyze the revenue enhancing potential of favoring specific contestants in complete information all pay auctions and lottery contests with several heterogeneous contestants two instruments of favoritism are considered head starts that are added to the bids of specific contestants and multiplicative biases that give idiosyncratic weights to the bids in the all pay auction head starts are more effective than biases while optimally combining both instruments even yields first best revenue in the lottery contest head starts are less effective than biases and combining both instruments cannot further increase revenue as all pay auctions revenue dominate lottery contests under optimal biases we thus obtain an unambiguous revenue ranking of all six combinations of contest formats and instruments

the voracity effect abstract we analyze an economy that lacks a strong legal political institutional infrastructure and is populated by multiple powerful groups powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock in equilibrium this leads to slow economic growth and a voracity effect by which a shock such as a terms of trade windfall perversely generates a more than proportionate increase in fiscal redistribution and reduces growth we also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks jel f43 o10 o23 o40

on equilibrium player ordering in dynamic team contests we study equilibrium player ordering in a dynamic all pay contest between two teams the contest lasts two periods and each team consists of two players who perform in different periods on behalf of their teams the team with the higher aggregate output wins the prize which is a public good to its players each team has one stronger player and one weaker player and the two teams can differ in their values of the prize the teams maximize their winning odds by strategically assigning their players to different periods we find that when the intrateam heterogeneity in player ability is not excessive the teams would allocate their stronger players to the late positions as the anchormen when both the intrateam ability gap and interteam heterogeneity in teams values become excessively large the team with high value always places its stronger player in the early position who will place a large bid to preempt late competition jel c7 d7 d8

internal rent seeking works councils and optimal establishment size abstract using a microeconomic model and data from the establishment panel of the german institute for employment research we analyze the optimal establishment size against the background of rent seeking workers and the influence of works councils the theoretical part shows that establishment size has not only a discouragement effect on the level of individual rent seeking but also a quantity effect as the number of rent seekers increases the interplay of both effects together with technological considerations determines whether the employer chooses an inefficiently small or large establishment size introduction of a works council restores efficient establishment size although it is purely used as rent seeking device whether the employer benefits from a works council or not depends on the degree of contract incompleteness and the degree of worker coordination via a works council the empirical part indicates dominance of the discouragement effect over the quantity effect in establishments without works council as theoretically predicted works councils are beneficial by disentangling rent seeking and production issues thus eliminating the influence of the two rent seeking effects

fiscal effects of reforming local constitutions recent german experiences most german states amended their local constitutions during the 1990s and now allow for the direct election of mayors initiatives and referendums and vote aggregation as well as vote splitting in this paper it is asked whether these reforms had any effects on local fiscal policies it is shown that the direct election of mayors led to lower government spending whereas the introduction of direct democratic elements led to higher expenditures the empirical results concerning direct democracy are substantially different from findings in relation to both switzerland and the us it is argued that this difference may be due to a lack of fiscal referendums in germany

does restricting choice in referenda enable governments to spend more if school boards represent the preferences of the median voter referendums to approve school expenditures should not constrain school expenditures if school boards would choose expenditures larger than the median voter s preference referendums that restrict voters to approving or disapproving a school board s recommended expenditure level will result in expenditures larger than the median voter would prefer however florida used a unique referendum system which guaranteed the median voter s most preferred outcome using florida education expenditures as a benchmark the evidence suggests that spending was slightly higher in restricted choice referendum states than in florida

tests of institutional versus non institutional models of local public expenditure determination are institutional or non institutional factors more important determinants of local public expenditure decisions employing data that allows us to directly identify the entire distribution of voter expenditure demands we estimate models of deviations of actual expenditures from the expenditure demand of defensible benchmarks namely the median voter s expenditure demand and the mean of voters expenditure demands three competing paradigms are employed to specify these models namely a non institutional model the reform government movement s explanation of how institutions affect local government decisions and a transactions cost model of this same phenomenon predictions from these three competing models differ in many respects comparisons of results from estimating models of expenditure deviations are found to be generally more consistent with the non institutional model than with either of the two institutional models these results suggest that a competitive local public service market helps limit the ability of governments to tax and spend in excess of the demands of the median or mean voter

biased contests for symmetric players in a biased contest one of the players has an advantage in the winner determination process we characterize a novel class of biased contest success functions pertaining to such contests and provide necessary and sufficient conditions for zero bias to be a critical point of arbitrary objectives satisfying certain symmetry restrictions we however challenge the common wisdom that unbiased contests are always optimal when contestants are symmetric ex ante or even ex post we show that contests with arbitrary favorites i e biased contests of symmetric players can be optimal in terms of various objectives such as expected aggregate effort the probability to reveal the stronger player as the winner or expected effort of the winner

prosperity without conflict abstract social conflict and slow growth are features of many developing economies this paper considers the role institutions of property rights and conflict management can play in both achieving prosperity and mitigating conflict in these economies we study how introducing conflict over economic distribution into an otherwise standard model of growth can shape optimal second best taxation policy when diversionary activities cannot be taxed in this context we find that the maximization of economic efficiency may call for a reduction in growth in order to mitigate the problem of diversion even though the economy s growth is inefficiently slow in the absence of taxation this is so when institutional quality is sufficiently poor but not otherwise the paper warns against the conventional justification of growth promoting policies on efficiency grounds independently of institutions

lessons from the political economy of the new deal the new deal produced a fundamental change in the structure of american government the national government came to play a much larger role in the financing of social welfare programmes while administration of the programmes was largely located at the states both the purely national and the shared federal parts of the welfare system were characterized by impersonal rules the political economy of how the rules came about and how the new deal experience may have contributed to americans changing their views on the danger of dealing with the national government is the primary focus the paper closes with speculations about the possible effect of changing views on american participation in the second world war after 1939

employment and unemployment in the 1930s the great depression is to economics what the big bang is to physics as an event the depression is largely synonymous with the birth of modern macroeconomics and it continues to haunt successive generations of economists with respect to labor and labor markets these facts evidently include wage rigidity persistently high unemployment rates and long term joblessness traditionally aggregate time series have provided the econometric grist for distinguishing explanations of the great depression recent research on labor markets in the 1930s however has shifted attention from aggregate to disaggregate time series and towards microeconomic evidence this shift in focus is motivated by two factors first disaggregated data provide many more degrees of freedom than the decade or so of annual observations associated with the depression and thus may prove helpful in distinguishin g macroeconomic explanations second disaggregation has revealed aspects of economic behavior hidden in the time series that may be essential to their proper interpretation and in any case are worthy of study in their own right although the substantive findings of recent research are too new to judge their permanent significance i believe that the shift towards disaggregated analysis is an important contribution the paper begins by reviewing the conventional statistics of the united states labor market during the great depression and the paradigms to explain them it then turns to recent studies of employment and unemployment using disaggregated data of various types the paper concludes with discussions of

a tug of war team contest this paper analyzes a tug of war contest between two teams in each round of the tug of war a pair of agents from the opposing teams competes in a private value all pay auction with asymmetric value distributions and effort effectiveness whichever team arrives first at a given lead in terms of battle victories over the opponent wins the tug of war there exists a unique markov perfect equilibrium in bidding strategies which depend on the respective player s valuation and the current state of the tug of war we derive rich comparative statics for this equilibrium by using the fact that the state of the tug of war evolves according to a time homogeneous absorbing markov chain

on the formation of alliances in conflict and contests this paper examines the problem of the formation of alliances in conflict and more generally in contests with three players each player possesses an exogenous strategic endowment e g arms efforts rent seeking activity the outcome of contests including those between any alliances of players is governed by a contest success function csf in the three person one cake problem an alliance between two players against the third one will form if and only if the csf has an increasing returns characteristic when an alliance forms there is a tendency to be formed by the weaker players against the strongest player similar tendencies exist in other three person problems that i examine

the choice of municipal government structure and public expenditures numerous empirical studies have attempted to measure the effect of varying government structures on public expenditures i argue that these prior may have produced biased estimates as they are predicated on the assumption that government structures are exogenous

social composition social conflict and economic development this article investigates how the existence of non cooperative social groups that appropriate resources either peacefully or through contest affects economic growth when property rights are unenforceable for symmetric groups it shows that economic growth is generated only in peaceful societies for the case of asymmetric groups rebel equilibria are investigated in which a large majority behaves peacefully although challenged by an aggressive minority the article explains how conflict intensity and the rate of economic growth depend on social fractionalisation general productivity of the economy power of social elites and the ease at which resources are appropriated

resource extraction and the threat of possible expropriation the role of swiss bank accounts this paper examines the consequences of resource owners being threatened with possible nationalization expropriation if shows that long s j econom theory10 42 53 1975 overextraction result critically depends on availability of a relatively safer investment alternative if all investment alternatives are similiarly uncertain then resource extraction is efficient but the overall savings consumption decision is distorted toward consumption

the political economy of growth a critical survey of the recent literature this article reviews the recent literature on the political economy of growth focusing on the research that has developed at the intersection of the endogenous growth literature and the new political economy it explores the relationship among four key variables economic growth and capital accumulation political instability political freedom and democratic institutions and income inequality

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

guns butter and openness on the relationship between security and trade sovereign states arm to defend real or hypothetical interests presumably because they cannot engage in complete long term contracting that would prevent such arming international trade therefore takes place within an essentially anarchic context and we can expect trade regimes and security policies to be related indeed many embargoes sanctions and various other forms of trade restrictions that have been used throughout history and continue to be used today can be considered extensions of security policies whereas some security policies can be attributed to trade policy the relationship between trade and security however has been barely explored within economics we could fairly characterize the prevailing view within the discipline as the classical liberal view according to which the expansion of international trade does not just increase the welfare of the trading partners but can also patch up any differences they might have over other contentious issues solomon polachek 1980 represents a rare articulation of this widely held perspective more boldly it could be argued that the expansion of trade always alleviates conflict by forcing the adoption of measures that manage conflict nevertheless one does not need to dig much into history to show that while trade and economic interdependence can contribute to the peaceful resolution of disputes they are not sufficient by themselves to guarantee the absence of war and the reduction of arming many observers before world war i for example considered that the hitherto unprecedented expansion of trade and interdependence between britain and germany made war unthinkable and impossible yet war occurred and with much ferocity and destruction furthermore as donald kagan 1995 pp 373 80 has argued the british policy of appeasement toward germany during the 1930 s was based on similar arguments about the use of economic caltots to avoid war what can inter

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

city level analysis of the effect of political regimes on public good provision this paper uses u s city level data on five public expenditure categories to test empirically whether the form of local government affects the amount of public good provision this also serves as an empirical test of a theory of national politics that predicts higher provision of public good in parliamentary than in presidential regimes the robust results indicate that at the city level the mayor council form of government provides significantly more public good than the council manager form of government for two of the public expenditure categories and at the national level presidential regimes provide more public good than do parliamentary regimes

gambling in contests with heterogeneous loss constraints i study the impact of asymmetric loss constraints on risk taking behavior in the contest model of seel and strack 2013 i derive the unique nash equilibrium outcome the equilibrium payoffs and comparative statics about the bankruptcy risk

the determination of local public expenditures and the principal and agent relation a case study the principal and agent relationship is important in the public sector there elected or appointed representatives act on behalf of the citizens of their jurisdictions this paper examines the importance of the budget referendum which allows the principals to approve or disapprove the proposal of a set of agents in the context of local public expenditure decisions we test the null hypothesis that the institution of referendum when compared to a nonreferendum institution does not lead to significantly different expenditure behavior

caps in sequential contests i introduction in many competitions we can often observe situations where severe constraints are imposed on contestants for example in the u s electoral campaign there is a specific maximum campaign contribution that a single agent can make to a candidate 1 in sports where equipment plays a major role e g sailing motor races etc explicit or implicit technological constraints are imposed on the allowed equipment also several sports leagues e g the national basketball association nba implement a salary cap which places a limit on the total amount of money a team can spend on players salaries salary caps are clearly binding and teams are sometimes forced to trade expensive players in order to make place for other needed team members the usual reason for applying salary caps is that they facilitate even competition between small and large city teams otherwise large city teams could pay more buy the best talent and ultimately destroy any semblance of competition in the league the goal of caps imposed by designers of competitions is to create what we call a competitive balance so that many players have a chance to win and not necessarily the strongest ones in addition if the contest is more competitively balanced the uncertainty of the outcome is higher and therefore the contest is more attractive furthermore competitive balance may lead to an improvement of the expected total performance of all the players rather than just the performance of the top player several other ways have been suggested to enhance the competitive balance in contests for example baye kovenock and de vries 1993 showed that in all pay auctions contests by excluding the strongest player the player with the highest value of winning the contest becomes more competitively balanced and then the players expected total bid may increase moldovanu and sela 2001 found that in all pay auctions under incomplete information when cost functions are convex several positive prizes may be optimal for a designer who wishes to maximize the expected total bid in other words by increasing the number of the prizes the chances of the players with relatively low values of winning to win one of the prizes increase and therefore these players will increase their efforts accordingly cohen kaplan and sela 2008 studied all pay auctions with effort dependent rewards under incomplete information and demonstrated that when the designer maximizes the total bid effort and when there is a sufficiently large number of contestants the optimal reward decreases in the contestants bid this means that a designer will offer higher prizes to the players with relatively low values of winning those who exert lower efforts than to the players with relatively high values of winning those who exert higher efforts such a distribution of prizes balances the bids submitted by the players with high and low values of winning we focus here on the role of bid caps to enhance the competitive balance in contests relatively weak players players with low abilities or low values of winning usually exert low efforts which are lower than the level of the bid cap imposed by a designer in a contest with a bid cap if these players exert an effort that is equal to the bid cap they will have a higher chance to win since no one can exert a higher effort than the bid cap thus the weak players exert more effort than they would in a contest without a bid cap however relatively strong players players with high abilities or high values of winning usually exert higher efforts than the level of the bid cap thus the strong players exert less effort than they would in a contest without a bid cap hence the effect of the bid cap on the players total effort depends on the trade off between the increase of the weaker players efforts and the decrease of the stronger players efforts to be fully effective the bid cap system must guarantee that as many players as possible raise their efforts to the level of the bid cap and as less as possible reduce their efforts to this level

investment in the absence of property rights the role of incumbency advantages in many situations the individuals who can generate some output must enter a contest for appropriating this output this paper analyses the investment incentives of such agents and the role of incumbency advantages in the contest depending on the advantages an increase in the productivity of the investment can decrease or increase the amount of investment the results are applied to autocrats investment behavior and job specific investment in organizations

party cues in elections under multilevel governance theory and evidence from us states this is the authors accepted refereed and final manuscript to the article the final publication is available at www elsevier com

contests with endogenous discrimination abstract this paper builds a complete information contest model with endogenous discrimination we show that a revenue maximizing contest designer will optimally set a bias towards a weaker contestant against a stronger contestant and completely eliminate the asymmetry between the two moreover in contrast to fair contest models where the revenue maximizing contest designer is better off if the weaker contestant becomes stronger or the stronger contestant becomes weaker our model shows that the opposite result may arise

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

a model of local demand for education abstract a careful modeling of the spending behavior of local school districts in new jersey is presented the theoretical model relies on the common hypothesis of political competition leading to a median outcome as well as the assumption that school superintendents act as budget maximizers the model is estimated for a sample of 177 school districts under three different aid formulas pooling of the cross sections suggests that the response of school expenditures to changes in variables other than those associated with school aid parameters has remained constant over time the results are discussed in the context of recent theories regarding the effect of intergovernmental aid on the level of public expenditure

inefficient redistribution and inefficient redistributive politics this paper examines the effect of inefficient redistribution in myerson s american political science review 87 856 869 1993 model of redistributive politics regardless of the absolute levels of the efficiency of political parties transfers to different voter segments parties have incentive to stochastically shift resources away from voter segments with large relative efficiency gaps between the two parties transfers towards voter segments with smaller relative efficiency gaps because of this dependence on relative and not absolute levels of efficiency the parties optimal strategies may lead to large discrepancies between the sum of the budgetary transfers and the sum of the effective transfers

moral hazard in repeated procurement of services this paper analyzes repeated procurement of services as a two period model with a potential repeated agency relationship in the first period there is an incumbent who provides a service in the second period there is a contest stage in which the principal selects the next service provider the agents effort is non contractible and the contest stage is the mechanism to mitigate potential moral hazard problems the principal takes account of the past service effort in the contest stage by choosing the weight of past effort and the degree of substitutability between past and current efforts the results show that when the principal does not value contest effort considering past effort as the relevant effort in the contest is optimal when the principal values contest effort and effort cost increases decreasing substitutability between efforts is optimal

inter party competition intra party competition and distributive policy a model and test using new deal data this paper presents a theoreticalmodel examining the influence of two stylized types ofvoters loyal voters and swing voters the model showswhy both types of voters will influence thedistribution of benefits by a reelection seekingincumbent and it predicts how their influence willvary with the importance of the general electionrelative to that of the primary closer competitionbetween parties in the general election ceterisparibus increases the influence of swing votersrelative to that of loyal voters county level dataon the allocation of money and jobs by new deal reliefprograms confirm the model s predictions

bidding in hierarchies this paper reconsiders the comparison between hierarchical contests and single stage contests a condition is given that characterizes whether and when the aggregate equilibrium payoff of contestants is higher in the single stage contest and when the single stage contest is more likely to award the prize to the contestant who values it most highly the outcome depends on inter and intra group heterogeneity and is not driven by free rider incentives

employment politics and economic recovery during the great depression in earlier studies economic historians found that political goals rather than social or humanitarian objectives motivated much of new deal spending using new information on annual state level employment for the 1930s this paper shows that while politics are still important responding to the needs of the unemployed was an important determinant of new deal spending

to deter or to moderate alliance formation in contests with incomplete information we consider two players choice about the formation of an alliance ahead of conflict in a framework with incomplete information about the strength of the potential ally when deciding on alliance formation players anticipate the self selection of other players and the informational value of own and other players choices in the absence of these signaling effects strong players have an incentive to stand alone which leads to a separating equilibrium this separating equilibrium can be destabilized by deception incentives if beliefs are updated on the basis of endogenous alliance formation choices weak players may find it attractive to appear strong in order to deter competitors from positive effort choices strong players may find it attractive to appear weak in order to give their competitors a false sense of security and then beat them with little effort moreover appearing weak allows players to free ride when alliances are formed jel d72 d74

endogenous timing in general rent seeking and conflict models we examine simultaneous versus sequential choice of effort in a two player contest the timing of moves determined in a preplay stage prior to the contest subgame as well as the value of the prize is allowed to be endogenous contrary to endogenous timing models with an exogenously fixed prize the present paper finds the following 1 players may decide to choose their effort simultaneously in the subgame perfect equilibrium spe of the extended game 2 the spe does not need to be unique in particular there is no unique spe with sequential moves if the direct costs of effort are zero 3 symmetry among players does not rule out incentives for precommitment to effort locally away from the cournot nash level 4 finally there may be no correlation between win probability and strategic incentives in our framework a finding most central in the analysis of fixed prize contests

soft money and campaign finance reform we analyze special interest influence on policy when political contributions are capped but the regulation contains soft money loopholes the politician chooses between two policy options we define special interest influence as the probability the politician chooses the policy he would not have chosen in the absence of contributions any binding cap reduces special interest influence but the effect may be nonmonotonic a ban on contributions can result in greater special interest influence than a binding but nonzero cap the results may also have implications for the policy response to the 2010 supreme court ruling on citizens united v fec

electoral incentives public policy and the new deal realignment this paper develops a model of the effects of electoral incentives on policy then applies the model to the new deal realignment in the model policy is the outcome of an agenda setter game between the president and legislators specifically the president sets policy subject to legislative approval the president s ability to concentrate benefits in states with high electoral payoffs depends in part on his or her power to influence legislators prospects for reelection regression analysis shows that new deal spending and roll call voting patterns in the house of representatives support the model historical accounts of other aspects of new deal policy including labor and civil rights issues are consistent with the model together the theoretical results and the empirical evidence help to explain several striking features of the policy and politics of the 1930s including i why a government dominated by the democratic party would provide high benefits to swing states and much lower benefits to the traditionally democratic south ii why favoritism of swing states increased from the 1933 1934 period to the 19371938 period iii why favoritism of swing states decreased from 1938 to 1939 and iv why with the rise of the conservative coalition in congress in the late 1930s it was the representatives from traditionally loyal democratic districts that created the strongest democratic opposition to roosevelt and the new deal this paper develops a model of the effects of electoral incentives on policy then applies the model to the new deal realignment in the model policy is the outcome of an agenda setter game between the president and legislators specifically the president sets policy subject to legislative approval the president s ability to concentrate benefits in states with high electoral payoffs depends in part on his or her power to influence legislators prospects for reelection regression analysis shows that new deal spending and roll call voting patterns in the house of representatives strongly support the model historical accounts of other aspects of new deal policy including positions on labor and civil rights issues are also consistent with the model together the theoretical results and the empirical evidence contribute to the understanding of several striking features of the policy and politics of the 1930s