public employees as politicians evidence from close elections we analyze the effect of municipal employees political representation in municipal councils on local public spending we use within party as good as random variation in close elections in the finnish open list proportional election system to quantify the effect one more councilor employed by the public sector increases spending by about 1 the effect comes largely through the largest party and is specific to the employment sector of the municipal employee the results are consistent with public employees having an information advantage over other politicians and thus being able to influence policy

discounting and divergence of opinion the objective of this paper is to adopt a general equilibrium model and determine the socially efficient discount factor risk free rate and discount rate when there are heterogeneous anticipations about the growth of the economy as well as heterogeneous time preference rates among others we tackle the following questions is the socially efficient discount factor an arithmetic average of the individual subjectively anticipated discount factors more generally can the arrow debreu prices the risk free rates the subjectively expected socially efficient discount factors and discount rates be obtained as an average of the individual subjectively anticipated ones can beliefs dispersion be analyzed as a sort of additional risk or uncertainty leading to possibly lower discount rates is it socially efficient when diversity of opinion is taken into account to reduce the discount rate per year for more distant horizons if so what is the trajectory of the decline

how general are time preferences eliciting good specific discount rates abstract this paper tests the commonly used assumption that people apply a single discount rate to the utility from different sources of consumption using survey data from uganda with both hypothetical and incentivized choices over different goods we elicit time preferences from about 2400 subjects we reject the null of equal discount rates across goods the average person in our sample is more impatient about sugar meat and starchy plantains than about money and a list of other goods we review the assumptions to recover discount rates from experimental choices for the case of good specific discounting consistently with the theoretical framework we find convergence in discount rates across goods for two groups expected to engage in or think about arbitraging the rewards traders and individuals with large quantities of the good at home as an application we evaluate empirically the conditions under which good specific discounting could predict a low asset poverty trap

decisions under uncertainty in social contexts abstract this paper theoretically and experimentally studies decision making in risky and social environments we explore the interdependence of two decisive behavioral determinants in such environments risk attitudes and social preferences in the form of inequality aversion our model and the data demonstrate that individual risk aversion is attenuated when lagging behind peers whereas it is amplified under favorable income inequality moreover people s choices are not only context dependent but they are sensitive to their degree of inequality aversion the majority of our experimental findings cannot be rationalized by rank dependent utility models or cumulative prospect theory our results contribute to the basic understanding of the underlying motives of social incentives in firms private households saving decisions employees career track choices or charitable giving under uncertainty

individual risk attitudes measurement determinants and behavioral consequences this paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects homes using a question asking people about their willingness to take risks in general we find that gender age height and parental background have an economically significant impact on willingness to take risks the experiment confirms the behavioral validity of this measure using paid lottery choices turning to other questions about risk attitudes in specific contexts we find similar results on the determinants of risk attitudes and also shed light on the deeper question of stability of risk attitudes across contexts we conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks occupational choice and smoking the question about risk taking in general generates the best all round predictor of risky behavior

how groups reach agreement in risky choices an experiment this paper studies how groups resolve disagreement when they must reach unanimity after submitting individual proposals and exchanging text form messages via a chat window in lottery choice experiments we find that the majority proposal does not always prevail the minority proposal prevails sometimes especially when it is closer to risk neutrality about one third of the groups disagrees after communication and would have got zero payoffs if disagreement remains after two more attempts without communication in these groups extrovert subjects are more likely to lead the group outcome than confused or conscientious subjects overall group choices are more coherent and closer to risk neutrality than individuals checking the recorded messages we find that the chat activity is intense growing with the level of disagreement and aims at finding consensus the amount and timing of chat messages help us to predict which choice prevails in the group

competing for endorsements endorsements are a simple language for communication between interest group leaders and group members the members who share policy concerns may not perfectly understand where their interests lie on certain issues if their leaders cannot fully explain the issues they can convey some information by endorsing a candidate or party when interest groups endorse legislative contenders the candidates may compete for backing policies may favor special interests at the expense of the general public the authors examine the conditions under which parties compete for endorsements the extent to which policy outcomes are skewed and the normative properties of the political equilibria

an experiment on risky choice amongst households a host of experiments have examined theories of risky choice using individuals however many important economic decisions are taken within multi adult households this paper reports on the first economic experiment designed to test theories of household choice we use established couples and face them individually and jointly with decisions involving monetary payoffs we find that joint choices typically are more risk averse than those made by individuals meanwhile choices made by couples exhibit the same kinds of departures from expected utility theory e g the common ratio and common consequence effects as are regularly recorded with individuals

the evolution of time preference with aggregate uncertainty we examine the evolutionary foundations of intertemporal preferences when all the risk affecting survival and reproduction is idiosyncratic evolution selects for agents who maximize the discounted sum of expected utility discounting at the sum of the population growth rate and the mortality rate aggregate uncertainty concerning survival rates leads to discount rates that exceed the sum of population growth rate and death rate and can push agents away from exponential discounting

inefficiencies from metropolitan political and fiscal decentralization failures of tiebout competition we examine the welfare effects of provision of local public goods in an empirically relevant setting using a multi community model with mobile and heterogeneous households and with flexible housing supplies we characterize the first best allocation and show efficiency can be implemented with decentralization using head taxes we calibrate the model and compare welfare in property tax equilibria both decentralized and centralized to the efficient allocation inefficiencies with decentralization and property taxation are large dissipating most if not all the potential welfare gains that efficient decentralization could achieve in property tax equilibrium centralization is frequently more efficient an externality in community choice underlies the failure to achieve efficiency with decentralization and property taxes poorer households crowd richer communities and free ride by consuming relatively little housing thereby avoiding taxes copyright oxford university press

media bias and influence evidence from newspaper endorsements this paper investigates the relationship between media bias and the inuence of the media on voting in the context of newspaper endorsements werst develop a simple econometric model in which voters choose candidates under uncertainty and rely on endorsements from better informed sources newspapers are potentially biased in favor of one of the candidates and voters thus rationally ac count for the credibility of any endorsements our primary empiricalnding is that endorsements are inuential in the sense that voters are more likely to support the recommended candidate after publication of the endorsement the degree of this inuence however depends upon the credibility of the endorsement in this way endorsements for the democratic candidate from left leaning news papers are less inuential than are endorsements from neutral or right leaning or newspapers and likewise for endorsements for the republican thesendings suggest that voters do rely on the media for information during campaigns but that the extent of this reliance depends upon the degree and direction of any bias

distributional preferences and the incidence of costs and benefits in climate change policy we explore the relationship between willingness to pay wtp for climate change mitigation and distributional preferences by which we mean individuals opinions about who should be responsible for climate change prevention and whether the share of climate change impacts borne by the poor is a cause for concern we use 1 770 responses to an online stated preference survey the domestic costs in our survey s policy choice scenarios are expressed as a set of randomized shares across four different payment vehicles and the international cost shares are randomized across four groups of countries we also elicit respondents perceptions of the likely regressivity of climate change impacts under a policy of business as usual wtp is higher when larger cost shares are borne by parties deemed to bear a greater responsibility for mitigation and when respondents believe and care that the impacts of climate change may be borne disproportionately by the world s poor that wtp for an environmental policy depends on the distributional consequences of the policy is an unsettling result efficiency assessments are typically assumed to be separate from equity considerations in most benefit cost analyses

sensitivity of willingness to pay estimates to bid design in dichotomous choice contingent valuation models this paper addresses the sensitivity of dichotomous choice contingent valuation method dc cvm based mean willingness to pay wtp estimates to the dc cvm sample design and to alternative measures of wtp this issue is examined both analytically and empirically the analysis of ten different dc cvm data sets revealed a sensitivity in estimated mean wtp to the sample design and to the measure chosen to calculate mean wtp

how teachers unions affect education production this study helps to explain why measured school inputs appear to have little effect on student outcomes particularly for cohorts educated since 1960 teachers unionization can explain how public schools simultaneously can have more generous inputs and worse student performance using panel data on united states school districts i identify the effect of teachers unionization through differences in the timing of collective bargaining especially timing determined by the passage of state laws that facilitate teachers unionization i find that teachers unions increase school inputs but reduce productivity sufficiently to have a negative overall effect on student performance union effects are magnified where schools have market power

teams take the better risk abstract one reason why decision makers are often teams and not individuals may be that team decisions comply more closely with economic rationality we compare individual and team decisions when systematic deviations from the expected utility theory eut and the portfolio selection theory pst are to be expected we find almost no evidence for the greater compliance of team decisions with the principles of eut however there is substantial evidence for the consistency of team decisions with the pst compared to individuals teams accumulate significantly more expected value at a significantly lower total risk measured in standard deviation s d

life expectancy and human capital investments evidence from maternal mortality declines longer life expectancy should encourage human capital accumulation since a longer time horizon increases the value of investments that pay out over time previous work has been unable to determine the empirical importance of this life expectancy effect due to the difficulty of isolating it from other effects of health on education we examine a sudden drop in maternal mortality risk in sri lanka between 1946 and 1953 which creates a sharp increase in life expectancy for school age girls without contemporaneous effects on health and which also allows for the use of boys as a control group using additional geographic variation we find that the 70 reduction in maternal mortality risk over the sample period increased female life expectancy at age 15 by 4 1 female literacy by 2 5 and female years of education by 4 0 authors

risk aversion and incentive effects new data without order effects holt and laury 2002 used a menu of ordered lottery choices to make inferences about risk aversion under various payment conditions the main results of that paper were a subjects are risk averse even for relatively small payments of less than 5 b risk aversion increases sharply with large increases in the scale of cash payoffs and c there is no significant effect from increasing the scale of hypothetical payment with a few exceptions noted in the paper all treatments began with a low payment choice followed by a choice with hypothetical payments that had been scaled up by 20 50 or 90 followed by a real cash decision with the same high payment scale 20 50 or 90 followed by a single final low 1 real payment choice those in the 90 treatment could earn amounts ranging from 9 00 to 346 50 in this task as glenn w harrison et al 2004 correctly note this design confounds order and treatment effects since the high real payment choice was always completed after the low real and high hypothetical payment tasks in a new experiment reported below we first seek to replicate harrison et al s finding that the order effect participating in a low payment choice before making a high payment choice magnifies the scale effect in a second treatment each subject completes the menu of lottery choices under just one payment condition 1 or 20 real or hypothetical thereby eliminating any order effects i new data

using a generalized linear mixed model to analyze dichotomous choice contingent valuation data willingness to pay wtp responses from dichotomous choice contingent valuation studies are often modeled using logistic regression from which estimates of mean or median wtp are calculated however a great many factors influence an individual s wtp some of which may be unobserved hence the regression model may have inadequate explanatory power and parameter estimates may be biased and their significance overestimated the effects of this overdispersion are examined within a generalized linear mixed modeling framework and an example given using published data from cooper and loomis 1992

are you risk averse over other people s money decisions with uncertain outcomes are often made by one party in settings where another party bears the consequences whenever an individual is delegated to make decisions that affect others such as in the typical corporate structure does the individual make decisions that reflect the risk preferences of the party bearing the consequences we examine this question in two simple settings lottery choices and sealed bid auctions using controlled laboratory experiments we find that when an individual makes a decision for an anonymous stranger there is a tendency to exhibit less risk aversion this reduction in risk aversion is relative to his or her own preferences and it is also relative to his or her belief about the preferences of others this result has significant implications for the design of contracts between principals and agents

global warming discounting is not the issue but substitutability is the cost benefit study of nordhaus 1994 is representative for the neoclassical approach towards global warming nordhaus found that no substantial emission cuts are warranted most of his critics have concentrated on the issue of discounting and demanded that a lower discount rate should be applied these criticisms first miss the point and second lead to ethically dubious inconsistent conclusions and inefficient policy choices they miss the point because the real problem of nordhaus s methodology is his implicit underlying assumption of perfect substitutability between natural and other forms of capital given the validity of this assumption lowering the rate of discount is inconsistent with current savings behaviour is ethically dubious because future generations will be much richer than the current one anyway and is inefficient because scarce financial resources are channelled into emissions abatement that exhibits rates of return far inferior to alternative public investments any call for aggressive emission abatement must therefore directly attack the perfect substitutability assumption of neoclassical economics the real disagreement is about whether consumption growth can compensate for environmental degradation caused by global warming discounting is not the issue but substitutability is

do political parties matter evidence from u s cities are cities as politically polarized as states and countries no is the answer from our regression discontinuity design analysis which shows that whether the mayor is a democrat or a republican does not affect the size of city government the allocation of local public spending or crime rates however there is a substantial incumbent effect for mayors we investigate three mechanisms that could account for the striking lack of partisan impact at the local level and find the most support for tiebout competition among localities within metropolitan areas

group and individual risk preferences a lottery choice experiment with self employed and salaried workers abstract this paper focuses on decision making under risk comparing group and individual risk preferences in a lottery choice experiment in the individual treatment subjects make choices individually in the group treatment each subject placed in a group made lottery choice via voting in the choice treatment subjects choose whether to be on their own or in a group the originality of this research lies in the fact that we introduced variability in socio demographic characteristics by recruiting salaried and self employed workers our main findings indicate that groups are more likely than individuals to choose safe lotteries our results also show that individuals risk attitude is correlated with both the type and the sector of employment

interjurisdictional sorting and majority rule an empirical analysis the goal of this paper is to provide a comprehensive empirical analysis of majority rule and tiebout sorting within a system of local jurisdictions the idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice the estimator controls for observed and unobserved heterogeneity among households observed and unobserved characteristics of communities and the potential endogeneity of prices and expenditures as well as the self selection of households into communities of their choice we estimate the structural parameters of the model using data from the boston metropolitan area the empirical findings reject myopic voting models more sophisticated voting models based on utility taking provide a potential explanation of the main empirical regularities

climate policy and the social cost of power generation impacts of the swedish national emissions target the purpose of this paper is to discuss how the design of climate policy in a small open economy may affect the internalization of carbon related external costs and ultimately the social choice between different power generation technologies empirically we focus on the swedish case and analyze three climate policy regimes out of which two represent different national goal formulations and thus compliance strategies the results show that the social choice between power generation technologies in sweden will be significantly influenced by the choice of climate policy regime most notably if sweden would abandon its present national target for carbon dioxide emissions and instead make full use of the country s participation in international emissions trading natural gas fired power would replace onshore wind power as the power generation source with the lowest social cost

does competition among public schools benefit students and taxpayers tiebout choice among districts is the most powerful market force in american public education naive estimates of its effects are biased by endogenous district formation i derive instruments from the natural boundaries in a metropolitan area my results suggest that metropolitan areas with greater tiebout choice have more productive public schools and less private schooling little of the effect of tiebout choice works through its effect on household sorting this finding may be explained by another finding students are equally segregated by school in metropolitan areas with greater and lesser degrees of tiebout choice among districts

social discounting under uncertainty a cross country comparison recent research suggests that social cost benefit analysis should be conducted with a declining discount rate for instance newell and pizer discounting the distant future how much do uncertain rates increase valuations j environ econ manage 46 2003 52 71 show that the us certainty equivalent discount rate declines through time using a simple autoregressive model of us interest rates this paper extends that line of research estimating both autoregressive and regime switching models of real interest rates to determine certainty equivalent discount rates in australia canada germany and the uk it is found that the regime switching model is a better model of past interest rate behavior for all four countries this model tends to produce a more rapid decline in certainty equivalent discount rates the paper provides applications to the economics of climate change and nuclear power

on the form of transfers to special interests an important question in political economy concerns the form of transfers to special interests the chicago view is that political competition leads politicians to make such transfers efficiently the virginia position is that lack of information on the part of voters leads politicians to favor inefficient sneaky methods of redistribution this paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests it shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians inefficient methods of redistribution may be employed

the effect of rising income inequality on taxation and public expenditures evidence from u s municipalities and school districts 1970 2000 the income distribution in many developed countries widened dramatically from 1970 to 2000 some scholars argue that income inequality contributes to a host of social ills by undermining voters will ingness to support public expenditures in contrast we find that growing income inequality is associated with an expansion in government reven ues and expenditures on a wide range of services in u s municipalities and school districts results are robust to a number of model specifica tions including instrumental variables that address the endogeneity of the local income distribution our results are inconsistent with models pre dicting that heterogeneous societies provide lower levels of public goods public sector 3 two types of identification problems com plicate estimation of the empirical relationship between income inequality and public goods provision the cross country variation often used for this exercise suffers from omitted variable bias that is countries with high income inequality may also have other characteristics that could limit the size of the public sector cross state comparisons also suffer from endogenous household sorting if low or high income families migrate to states with high public expenditures the positive association observed in the litera ture between state public expenditures and income inequal ity may be spurious in this paper we examine the relationship between income inequality and government finances in municipali ties and school districts in the united states from 1970 to 2000 local government represents a large segment of the economy in fiscal year 2009 local governments disbursed more than 3 trillion for such important services as educa tion and public safety 4 our study has several advantages over existing empirical work first the large number of local governments in our data exhibit much greater variation in income inequality over time than do the small number of countries or states used in previous studies a large sample size allows us to separately control for changes in the top end or bottom end of the income distribution and for initial levels of inequal ity thus ruling out a mechanical association between tax revenues and rising income for the affluent second we develop an instrumental variable strategy to mitigate con cerns about potential reverse causality from the endogenous

mobility and redistribution the ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake in this paper we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system we ask how much redistribution occurs when only local governments can have tax transfer instruments individuals can move freely among jurisdictions and voters in each jurisdiction are fully aware of the migration effects of redistributive policies local redistribution is shown to induce sorting of the population with the poorest households located in the communities that provide the most redistribution while the threat of out migration affects the potential for redistribution our results suggest that significant local redistribution is nonetheless feasible numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution

general revenue sharing and public sector unions abstract in this paper i find that in the context of a large intergovernmental general revenue sharing program implemented from 1972 to 1986 cities increased expenditures one for one with federal grants which is suggestive of a large flypaper effect furthermore i find that cities in states with pro union collective bargaining laws spent more than half of the transfers on increased wages while cities in states without such laws spent a greater fraction on increased government services these latter findings suggest that public sector unions play an important role in determining the usage and impact of intergovernmental grants

improved estimation of willingness to pay in dichotomous choice contingent valuation studies this paper uses recently developed statistical techniques to achieve improved parameter estimates from models ofdichotomoiis choice contingent valuation data random effects associated with bid amounts presented to respondents are modelled alongside the variance of individual responses to give a nested model which more truly reflects the structure of the data being analyzed quasi likelihood methods for estimating parameters in such hierarchical models are discussed and a simulation method for assessing goodness of fit is demonstrated however estimated parameters may still be biased and hence a parametric bootstrap technique is presented and compared to a delta method approximation jel q26

on linking risk preferences and time preferences when estimating incentive effects this study estimates incentive effects for time preferences while jointly controlling for how incentives alter risk preferences i find traditional time preference incentive effect estimates are substantially biased when incentives also alter risk preferences

monetary rewards and decision cost in experimental economics a survey of thirty one experimental studies which report data on the comparative effects of monetary rewards and opportunity cost shows 1 several studies in which increased rewards shift the central tendency of the data toward the predictions of rational models 2 in virtually all cases rewards reduce the variance of the data around the predicted outcome this is consistent with a model in which rewards are balanced against decision cost in agent behavior and explicates the argument that when rational models fail it can be attributed to low opportunity cost of deviations from the rational prediction

a review of the stern review on the economics of climate change the stern review calls for immediate decisive action to stabilize greenhouse gases because the benefits of strong early action on climate change outweighs the costs the economic analysis supporting this conclusion consists mostly of two basic strands the first strand is a formal aggregative model that relies for its conclusions primari ly upon imposing a very low discount rate concerning this discount rate aspect i am skeptical of the review s formal analysis but this essay points out that we are actual ly a lot less sure about what interest rate should be used for discounting climate change than is commonly acknowledged the review s second basic strand is a more intuitive argument that it might be very important to avoid possibly large uncertain ties that are difficult to quantify concerning this uncertainty aspect i argue that it might be recast into sound analytical reasoning that might justify some of the review s conclusions the basic issue here is that spending money to slow global warming should perhaps not be conceptualized primarily as being about consump tion smoothing as much as being about how much insurance to buy to offset the small change of a ruinous catastrophe that is difficult to compensate by ordinary savings

the emergence of a regional financial architecture in asia this paper provides an assessment of monetary and financial cooperation in asia since the regional financial crisis of 1997 98 with a view to determining whether the emerging regional financial architecture in asia is compatible with the global financial architecture and what are the prospects for possible economic and monetary union monetary and financial cooperation has focused on four architectural pillars economic policy surveillance crisis prevention liquidity support and bond market development which can be consistent with the global architecture however progress toward full integration is likely to be gradual and experimental given the lack of strong regional institutions regional economic disparities and the need to build political commitment to such a goal

how individual preferences are aggregated in groups an experimental study abstract this paper experimentally investigates how individual preferences through unrestricted deliberation are aggregated into a group decision in two contexts reciprocating gifts and choosing between lotteries in both contexts we find that median group members have a significant impact on the group decision but the median is not the only influential group member non median members closer to the median tend to have more influence than other members by investigating the same individual s influence in different groups we find evidence for relative position in the group having a direct effect on influence these results are consistent with predictions from spatial models of dynamic bargaining for members with intermediate levels of patience we also find that group deliberation involves bargaining and compromise as well as persuasion preferences tend to shift towards the choice of the individual s previous group especially for those with extreme individual preferences

numerical analysis of non constant pure rate of time preference a model of climate policy abstract when current decisions affect welfare in the far distant future as with climate change the use of a declining pure rate of time preference prtp provides potentially important modeling flexibility the difficulty of analyzing models with non constant prtp limits their application we describe and provide software available online to implement an algorithm to numerically obtain a markov perfect equilibrium for an optimal control problem with non constant prtp we apply this software to a simplified version of the numerical climate change model used in the stern review for our calibration the policy recommendations are less sensitive to the prtp than widely believed

experimental tests of the endowment effect abstract the endowment effect which predicts undertrading and a willingness to accept greater than willingness to pay is studied using responses that remove all reference to buying or selling and focuses only on choice tasks the results significantly lower the willingness to pay willingness to accept discrepancy but the latter is still significant a high efficiency open display uniform price auction is used to exchange mugs for money since mugs are randomly assigned to half of 2n subjects n 2 mugs are predicted to trade less than n 2 mugs trade on average but more than previously reported the phenomenon exists but is less prominent than reported previously

welfare evaluations in contingent valuation experiments with discrete response data comment in the case of private goods individuals reveal their preferences in the market place no similar market mechanism exists in the case of public goods however one obvious possibility is to ask people about their maximal willingness to pay for public goods or government expenditure johansson 1987 1990 miller in some recent contingent market valuation studies people instead have been asked to accept or reject a specified amount of money for a change in the provision of a public good different subsamples are confronted with different bids the resulting yes and no responses usually are analyzed by logit or probit techniques e g johansson and kristrom this raises the question of how to compute the average willingness to pay when only yes and no responses are available this point was advanced by hanemann in his seminal 1984 paper on welfare evaluations with discrete responses see also hanemann 1987 however we believe a minor imperfection in hanemann s presentation may confuse and mislead practitioners hanemann s approach assumes that negative bids cannot occur but at the same time gives the impression that it also applies to models that allow for negative bids we also extend hanemann s discussion of the choice of money measure in cost benefit analysis

the impact of unions on municipal elections and urban fiscal policies abstract the efficient decentralized provision of public goods requires that special interest groups such as municipal unions do not exercise undue influence on the outcome of municipal elections and local fiscal policies we develop a new political economy model in which a union can endorse one of the candidates in a local election a politician that prefers an inefficiently large public sector can therefore win an election if the union can provide sufficiently strong support during the campaign we have assembled a unique data set that is based on union endorsements that are published in leading local newspapers our empirical analysis focuses on municipal elections in the 150 largest cities in the u s between 1990 and 2012 we find that challengers strongly benefit from endorsements in competitive elections challengers that receive union endorsements and successfully defeat an incumbent also tend to adopt more union friendly fiscal policies

the voting behavior of bureaucrats some empirical evidence this paper has examined the voting behavior of bureaucrats and the consequences for elections the economic theory of the rational voter predicts that bureaucrats would have more to gain by voting than the general public the cost of voting is lower for public employees than for those who work in the private sector as a consequence theory predicts that bureaucrats would participate in elections at a greater rate than other individuals as a test of the validity of the economic theory of voting an empirical analysis of national elections from 1964 to 1978 was presented the evidence is drawn from household survey data published by the u s bureau of the census the data permit a direct observation of voting participation rates of public and private employees the empirical results indicate that bureaucrats consistently participate in elections at significantly greater rates than non bureaucrats as the public sector expands and voter participation rates remain low bureaucrats will exert disproportionate influence on election outcomes

risk preference differentials of small groups and individuals the risk prefer ences of thr ee person group s a nd individuals are compar ed using a non sequential repeated measures lottery exp eriment w ith 20 per player win pe rcentages varying from 10 to 90 analysis based on independent samples of certainty equivalent ratios certainty equivalent expected value elicited using a maximum willingness to pay mechanism for fifty two individuals and sixteen groups reveals that 1 certainty equi valent ratios cers va ry significantly a cross lottery win percentages 2 cer dispersion tends to decline as the lottery win percentage increases and is significantly smaller for groups than individuals in seven of the nine lotteries 3 for the highest risk lotteries the average cers submitted by groups are significantly smaller more risk averse than the average cers submitted by individuals 4 for the lowest risk lotteries the average cers submitted by groups are approximately risk neutral cer 1 and somewhat larger than the average cers submitted by individuals

incumbent behavior vote seeking tax setting and yardstick competition this paper develops a model of the political economy of tax setting in a multijurisdictional world where voters choices and incumbent behavior are determined simultaneously voters are assumed to make comparisons between jurisdictions to overcome political agency problems this forces incumbents into a yardstick competition in which they care about what other incumbents are doing we provide a theoretical framework and empirical evidence using u s state data from 1960 to 1988 the results are encouraging to the view that vote seeking and tax setting are tied together through the nexus of yardstick competition

electoral competition and special interest politics have fixed positions on some issues but vary their positions on others in order to attract votes and campaign contributions in this context we examine whether special interest groups are governed by an electoral motive or an influence in their campaign giving and how their contributions affect the equilibrium platforms we show that each party is induced to behave as if it were maximizing a weighted sum of the aggregate welfares of informed voters and members of special interest groups the party that is expected to win a majority of seats caters more to the special interests

a cultural explanation of the foreign bias in international asset allocation abstract this paper examines the foreign bias in international asset allocation following extant literature in behavioral finance we argue that a society s culture and the cultural distance between two markets play an important role in explaining the foreign bias in particular we hypothesize that the degree of a nation s uncertainty avoidance affects the foreign bias more uncertainty avoiding countries allocate less to foreign markets as does the degree of a country s individualism in individualistic countries performance is more directly attributed to a person and less to teams causing these individuals to be more aggressive in their foreign asset allocations we further expect that the degree of cultural distance between two countries affects the amount of money allocated to that market based on extensive robustness analyses we find support for our hypotheses on the role of culture in international asset allocation

social responsibility promotes conservative risk behavior abstract previous studies show that group risk taking can be more conservative than individual risk taking two common but untested reasons for this greater caution are the influence of social responsibility and a tendency to conform to the preferences of others we study changes in risk taking in simple settings where another s risk taking can sometimes be observed and where decisions affect not only one s own payoffs but sometimes also affect those of a passive second party we find that social responsibility leads to more conservative risk behavior in group decision making conformism has a more symmetric effect observing the choice of another tends to lead both individual and social decisions toward whatever the other s expressed risk preference is direct tests fail to link the social behavior we observe to the social preference for distributional fairness common in decision making under certainty

description prescription and the choice of discount rates abstract the choice of discount rates is a key issue in the analysis of long term societal issues in particular environmental issues such as climate change approaches to choosing discount rates are generally placed into two categories the descriptive approach and the prescriptive approach the descriptive approach is often justified on grounds that it uses a description of how society discounts instead of having analysts impose their own discounting views on society this paper analyzes the common forms of the descriptive and prescriptive approaches and finds that in contrast with customary thinking both forms are equally descriptive and prescriptive the prescriptions concern who has standing i e who is included in society how the views of these individuals are measured and how the measurements are aggregated such prescriptions are necessary to choose from among the many possible descriptions of how society discounts the descriptions are the measurements made given a choice of measurement technique thus the labels descriptive approach and prescriptive approach are deeply misleading as analysts cannot avoid imposing their own views on society

on the number and size of nations this paper studies the equilibrium determination of the number of countries in different political regimes and in different economic environments with more or less economic integration we focus on the trade off between the benefits of large jurisdictions and the costs of heterogeneity of large and diverse populations our model implies that i democratization leads to secessions ii in equilibrium one generally observes an inefficiently large number of countries iii the equilibrium number of countries is increasing in the amount of economic integration

examining risk preferences under high monetary incentives experimental evidence from the people s republic of china several experimental sessions were conducted to elicit certainty equivalents for a sequence of lotteries involving real monetary outcomes the opportunity to conduct sessions in the people s republic of china afforded the ability to offer very large monetary incentives relative to subjects living costs in the highest payoff condition subjects earned three times their normal monthly revenue in the course of a two hour experiment results indicate a statistically significant impact of the level of monetary incentives on revealed risk preferences however even under extreme monetary incentives subjects demanded amounts well in excess of expected value for low probability gain prospects copyright 1992 by american economic association

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

a review of the stern review on the economics of climate change how much and how fast should we react to the threat of global warming the stern review argues that the damages from climate change are large and that nations should undertake sharp and immediate reductions in greenhouse gas emissions an examination of the review s radical revision of the economics of climate change finds however that it depends decisively on the assumption of a near zero time discount rate combined with a specific utility function the review s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today s marketplace real interest rates and savings rates

the impact of climate change on the balanced growth equivalent an application of fund the stern review added balanced growth equivalents bge to the economic climate change research agenda we first propose rigorous definitions of the bge for multiple regions and under uncertainty we show that the change in the bge is independent of the assumed scenario of per capita income for comparable welfare economic assumptions as the stern review we calculate lower changes in bge between a business as usual scenario and one without climate impacts with the model fund than the stern review found with the model page we find that mitigation policies give even lower changes in bge and argue that those policy choices should be the focus of the research effort rather than total damage estimates according to our results the current carbon tax should be below 55 tc sensitivity analyses show that the stern review chose parameters that imply high impact estimates however for regionally disaggregated welfare functions we find changes in bge that are significantly higher than the results from the stern review both for total damage as for policy analysis with regional disaggregation and high risk aversion we observe fat tails and with that very high welfare losses

the less you discount the more it shows you really care interpersonal discounting in households abstract household members make monetary tradeoffs across time classical economics treats these decisions as if one rational individual makes them this assumption masks important other regarding concerns between spouses we designed an artefactual field experiment and collected data from 94 pairs of cohabiting couples to capture the complex nature of intra household time preferences estimation results show that 1 the interpersonal discount rate the rate used to tradeoff intertemporal payoffs between one s own payoff and the spouse s payoff is significantly different from the individual discount rate and 2 the interpersonal discount rate may provide an alternative way for people to express their other regarding preferences towards their spouses

a multilevel modelling approach to triple bounded dichotomous choice contingent valuation the use of dichotomous choice dc questions in the elicitation of willingness to pay wtp in contingent valuation studies is common practice at the present time recent research has shown that double bounded dc questions provide statistically superior results to single bounded questions given an appropriate sampling design this paper uses a relatively new multilevel modelling technique to analyze a triple bounded dc design which in addition includes an initial non monetary question on whether an individual accepts in principle a wtp some unspecified amount the theoretical basis of the multilevel model used is described and some of the possibilities of this potentially powerful and versatile technique are discussed the practical operation of the multilevel model is demonstrated using data from a contingent valuation study conducted in the norfolk broads england an internationally important wetland resource

discounting for personal and social payments patience for others impatience for ourselves the market rate of return on private investment is often used as the discount rate when conducting cost benefit analysis cba of public projects i argue that the decision to invest pits current consumption against future consumption both of which accumulate to the private decision maker public projects on the other hand provide benefits that accrue to society in general to examine the appropriateness of discount rates based on returns to private investment this paper considers lab experiments designed to test whether individuals discount personal and social benefits at different rates personal benefits are captured through personal monetary payments while social benefits are captured through anonymous donations to charitable organizations i jointly elicit time and risk preferences and find that subjects discount charitable contributions at significantly lower rates than personal payments