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

state english only policies and english language investments many states in the us have considered adopting english only legislation since the early 1980s this paper argues that this legislation has a variety of expected and unexpected outcomes using the 1980 and 1990 integrated public use microdata series ipums this study finds that asian immigrants in general and hispanic immigrants who arrived to the us prior to 1970 acquired more english fluency on average during the 1980s when residing in states that passed english only eo legislation compared to their similar peers the passage of such legislation also appears to have distorted residence decisions as well as the relative quality of immigrants between eo and non eo states

the u s and u k great depressions through the lens of neoclassical growth theory neoclassical growth theory is increasingly being used to study great depressions see e g mario j crucini and james kahn 1996 cole and ohanian 1999 2001a b 2002 michael bordo et al 2000 see also the january 2002 issue of the review of economic dynamics this paper extends our recent work that focuses on why the u s and u k great depressions lasted so long one of the key messages from our work is that the standard neoclassical growth model fails to account for the long duration of these depressions this paper extends our work by diagnosing the specific failures of the model we do this by measuring the deviations in the model s first order conditions we then use these deviations to identify particular factors that might account for these long durations we find very large deviations in the model s household labor efficiency condition in both countries and in the firm s labor efficiency condition in the united states these deviations provide new support for our recent conclusions that distorting labor market policies are key factors behind the long durations of both depressions cole and ohanian 2001a b

how efficient is the voting market it is by now well established that good macroeconomic conditions benefit the incumbent president and his congressional party confreres at the polls this result is not unanimous see for example stigler or arcelus and meltzer2 and may not be universal 3 however the basic results in kramer 4 the progenitor of the modern literature on the effect of economic conditions on elections seem to have stood the test of time the broad consensus of this literature is that voters in presidential and congressional elections 1 reward income growth and punish unemployment and inflation 2 probably give greater weight to income growth than to unemployment and inflation and 3 myopically ignore any information beyond the recent past say prior to the election year 5 so far however the data have outrun interpretation while economic conditions seem to matter we do not know why they matter or how plausibly to characterize the process by which voters translate information about economic conditions into voting decisions this article tries to fill that gap though it extends the empirical literature to gubernatorial elections its main con

the institutional causes of china s great famine 1959 1961 this paper studies the causes of china s great famine during which 16 5 to 45 million individuals perished in rural areas we document that average rural food retention during the famine was too high to generate a severe famine without rural inequality in food availability that there was significant variance in famine mortality rates across rural regions and that rural mortality rates were positively correlated with per capita food production a surprising pattern that is unique to the famine years we provide evidence that an inflexible and progressive government procurement policy where procurement could not adjust to contemporaneous production and larger shares of expected production were procured from more productive regions was necessary for generating this pattern and that this policy was a quantitatively important contributor to overall famine mortality

macroeconomic policy in a two party system as a repeated game this paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward looking wage setters if discretionary policies are followed an economic cycle related to the political cycle results in equilibrium this cycle is significantly different from the traditional political business cycle reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations

property rights land liquidity and internal migration in the early twentieth century a large number of households resettled from the european to the asian part of the russian empire we propose that this dramatic migration was rooted in institutional changes initiated by the 1906 stolypin land titling reform one might expect better property rights to decrease the propensity to migrate by improving economic conditions in the reform area however this titling reform increased land liquidity and actually promoted migration by easing financial constraints and decreasing opportunity costs treating the reform as a quasi natural experiment we employ difference in differences analysis on a panel of province level data that describe migration and economic conditions we find that the reform had a sizeable effect on migration to verify the land liquidity effect we exploit variation in the number of households participating in the reform this direct measure of the reform mechanism estimates that land liquidity explains approximately 18 of migration during this period

voters as fiscal conservatives voters penalize federal and state spending growth this is the central result of my analysis of voting behavior in presidential senatorial and gubernatorial elections from 1950 1988 the composition of federal spending growth seems irrelevant the vote loss to the president s party from an extra dollar of defense or nondefense spending is the same however in gubernatorial elections expansion of state welfare spending exacts a disproportionate political price deficit financing of federal or state spending does not appear to matter politically i conclude by discussing the obvious question of why government budgets have grown in the face of this voter hostility

the effect of fiscal performance on local government election results in israel 1989 1998 abstract we discuss the circumstances under which voters in local elections will reward fiscal responsibility and suggest that such circumstances evolved in israel in the mid 1990s we present empirical evidence that indeed fiscal performance of mayors substantially affected their reelection probability in the 1998 campaign but not in the 1989 and 1993 campaigns changes in the political environment enforcement of audit and financial reporting requirements tougher imposition of hard budget constraints and the development of local media are proposed as explanations the hypotheses that the fiscal variables reflect the income level at the locality or the mayor s success in extracting resources from the central government are tested and rejected

the economics of career concerns part i comparing information structures many incentives in organizations arise not through explicit formal incentive contracts but rather implicitly through career concerns this paper models career concerns through agents trying to manipulate the market assessment of their future productivity the information flow from current actions to market assessment is therefore crucial in determining the nature of these incentives improved information may either increase or reduce incentives the impact of information provides a major distinction between the explicit and implicit incentives model the paper derives general results on comparisons of information structures which serve as counterparts to the standard results on information structures in the principal agent model sufficient statistic impact of a blackwell garbling comparison of inclusive information structures 1999 the review of economic studies limited

labor market effects of language enclaves hispanic men in the united states in a model of a labor market with enclaves of spanish speakers a large enclave provides better jobs for persons lacking skills in english consequently the larger enclave lowers earnings returns to english returns to english also vary with the distribution of english skills among spanish speaking workers returns to english rise if the distribution becomes skewed toward less proficiency in english and fall if it becomes skewed toward more proficiency in english the model has broad implications for the consequences of enclaves the model is tested with an application to hispanic men in the united states using the 1980 census of population empirical results are consistent with theoretical predictions enclaves do reduce the earnings losses associated with limited english skills for hispanic men and increasing the fraction of hispanic men who speak english only does lower the returns to english

fiscal policy cycles and public expenditure in developing countries the paper studies empirically the fiscal policy instruments by which governments try to influence election outcomes in 24 developing countries for the 1973 1992 period the study finds that the main vehicle for expansionary fiscal policies around elections is increasing public expenditure rather than lowering taxes and public investment cycles seem particularly prominent institutional mechanisms which constrain discretionary expenditure policies and which strengthen fiscal control are therefore worthwhile considering to prevent opportunistic policy making around elections

middleman minorities and ethnic violence anti jewish pogroms in the russian empire using detailed panel data from the pale of settlement area between 1800 and 1927 we document that anti jewish pogroms mob violence against the jewish minority broke out when economic shocks coincided with political turmoil when this happened pogroms primarily occurred in places where jews dominated middleman occupations i e moneylending and grain trading this evidence is inconsistent with the scapegoating hypothesis according to which jews were blamed for all misfortunes of the majority instead the evidence is consistent with the politico economic mechanism in which jewish middlemen served as providers of insurance against economic shocks to peasants and urban grain buyers in a relationship based on repeated interactions when economic shocks occurred in times of political stability rolling over or forgiving debts was an equilibrium outcome because both sides valued their future relationship in contrast during political turmoil debtors could not commit to paying in the future and consequently moneylenders and grain traders had to demand immediate re payment this led to ethnic violence in which the break in the relationship between the majority and jewish middlemen was the igniting factor

allocation under dictatorship research in stalin s archives we survey recent research on the soviet economy in the state party and military archives of the stalin era the archives have provided rich new evidence on the economic arrangements of a command system under a powerful dictator including stalin s role in the making of the economic system and economic policy stalin s accumulation objectives and the constraints that limited his power to achieve them the limits to administrative allocation the information flows and incentives that governed the behavior of economic managers the scope and significance of corruption and market oriented behavior and the prospects for economic reform

the industrialization and economic development of russia through the lens of a neoclassical growth model this article studies the structural transformation of russia in 1885 1940 from an agrarian to an industrial economy through the lens of a two sector neoclassical growth model we construct a data set that covers tsarist russia during 1885 1913 and soviet union during 1928 1940 we develop a methodology that allows us to identify the types of frictions and economic mechanisms that had the largest quantitative impact on russian economic development we find that entry barriers and monopoly power in the non agricultural sector were the most important reason for tsarist russia s failure to industrialize before world war i soviet industrial transformation after 1928 was achieved primarily by reducing such frictions albeit coinciding with a significantly lower performance of productivity in both agricultural and non agricultural sectors we find no evidence that tsarist agricultural institutions were a significant barrier to labour reallocation to manufacturing or that big push mechanisms were a major driver of soviet growth

the endogeneity between language and earnings international analyses this study is concerned with the determinants of dominant language fluency its effects on earnings and its endogeneity with earnings among immigrants dominant language fluency is hypothesized to

a theory of political cycles abstract we study how the proximity of elections affects policy choices in a model in which policymakers want to improve their reputation to increase their reelection chances policymakers equilibrium decisions depend on both their reputation and the proximity of the next election typically incentives to influence election results are stronger closer to the election for a given reputation level as argued in the political cycles literature and these political cycles are less important when the policymaker s reputation is better our analysis sheds light on other agency relationships in which part of the compensation is decided upon infrequently

the depressing effect of agricultural institutions on the prewar japanese economy why didn t the japanese miracle take place before world war ii the culprit we identify is a barrier that kept prewar agricultural employment constant using a standard neoclassical two sector growth model we show that the barrier induced sectoral distortion and an ensuring lack of capital accumulation account well for the depressed output level without the barrier japan s prewar gnp per worker would have been at least about a half of that of the united states not about a third as in the data the labor barrier existed because we argue the prewar patriarchy forced the son designated as heir to stay in agriculture

war politics an economic rational voter framework the frequency of foreign conflict initiations in the united states is found to be significantly greater following the onset of recessions during a president s first term than in other periods the authors develop an economic theory of the political use of wars which links the election cycle war decisions and economic performance consistent with the observed relationships among these events an incumbent leader with an unfavorable economic performance record may initiate a war to force the learning of his war leadership abilities and thus salvage with some probability his reelection this obtains despite voter rationality and informational symmetry copyright 1995 by american economic association

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

structural change in a multisector model of growth we study a multi sector model of growth with differences in tfp growth rates across sectors and derive sufficient conditions for the coexistence of structural change characterized by sectoral labour reallocation and constant aggregate growth path the conditions are weak restrictions on the utility and production functions commonly applied by macroeconomists we present evidence from us two digit industries that is consistent with our predictions about structural change and successfully calibrate the historical shift from agriculture to manufacturing and services we show quantitatively that reasonable deviations from our conditions do not have a big impact on the properties of the model

the economics of career concerns part ii application to missions and accountability of government agencies the paper uses a simple multitask career concern model in order to analyse the incentives of government agencies officials incentives are impaired by the agency pursuing multiple missions a lack of focus is even more problematic in the case of fuzzy missions that is when outsiders are uncertain about the exact nature of the missions actually pursued by the agency consequently agencies pursuing multiple missions receive less autonomy the paper further shows that professionalization creates a sense of mission for the agency and that the specialization of officials raises their incentives last the paper compares its predictions with the stylized facts on government bureaucracies 1999 the review of economic studies limited

econometrics and presidential elections this paper discusses an econometric equation that explains votes for president as a function of economic events and incumbency information the history of the equation is reviewed the update after the 1992 election is discussed and a prediction for the 1996 election is made conditional on an economic forecast

political business cycles democratization and economic reform the case of africa abstract this paper presents cross country evidence that political business cycles are alive and well in the nascent democracies of the developing world africa provides fertile ground for the study of political business cycles this paper uncovers systematic electorally timed interventions in five monetary and four fiscal policy variables in a panel of african countries these findings are consistent with the predictions of rational opportunistic political business cycle theory if africa s increasingly frequent elections are associated with reversals of fiscal and monetary policy reform there is a potential conflict between political and economic reform

beyond balanced growth balanced growth models are commonly used in macroeconomics because they are consistent with the well known kaldor facts regarding economic growth these models however are inconsistent with one of the most striking regularities of the growth process the massive reallocation of labour from agriculture into manufacturing and services this paper presents a simple model consistent with both the kaldor facts and the dynamics of sectoral labour reallocation

incentives wages and promotions theory and evidence i study an incentive problem that has been largely ignored in the agency literature incentives for repeated human capital investment the optimal contract is very simple but still provides rich implications for incentive and wage structures in large organizations the empirical evidence is presented using personnel records of health insurance claim processors in a large u s insurance company these processors are white collar nonmanagerial female service industry workers a rapidly growing but rarely studied labor group the empirical findings are consistent with the main features of the optimal contract

endogenous elections electoral budget cycles and canadian provincial governments the existence of manipulative electoral budget cycles and opportunistic election setting is examined in the framework of a parliamentary democracy empirical tests are conducted using a pooled time series cross section data set derived from canadian provincial governments over the 1962 1992 period evidence in support of the electoral budget cycle hypothesis but not the opportunistic election timing hypothesis is obtained

the political legislation cycle the economic theory of legislation holds that laws even when they do not involve financial resources redistribute property rights politicians supply legislation to groups with the highest political return by the same logic politicians should supply legislation when doing so has the highest political return the dynamics of the supply of legislation should follow the pattern suggested by the political business cycle theory we develop a model of government s and voters behavior where a legislation cycle is the strategy to hold the government coalition together under certain assumptions the model predicts that the approbation of laws should be concentrated at the end of the legislature and be positively related to the fragmentation of the government coalition we test these restrictions on data about the supply of legislation by the italian parliament during legislatures from i to xiii 1948 to 2001 the empirical analysis provides strong support to the theory a legislation cycle occurs when the conditioning phenomena that the model indicates are satisfied

career concerns of mutual fund managers we examine the labor market for mutual fund managers using data from 1992 1994 we find that termination is more performance sensitive for younger managers we identify possible implicit incentives created by the termination performance relationship the shape of the termination performance relationship may give younger managers an incentive to avoid unsystematic risk direct effects of portfolio composition may also give younger managers an incentive to herd into popular sectors consistent with these incentives we find that younger managers hold less unsystematic risk and have more conventional portfolios promotion incentives and market responses to managerial turnover are also studied

a theory of sales quotas with limited liability and rent sharing sales quotas are a fixture of sales compensation plans and are often associated with a significant discrete bonus this article shows that under certain assumptions about salesperson utility and the distribution of sales outcomes the optimal compensation is a discrete bonus for meeting a sales quota the results are similar when the assumption of agent risk neutrality is relaxed the model has implications for many moral hazard problems where the agent has a liability limitation and job specific skill

can traditional theories of structural change fit the data two traditional explanations for structural changes are sector biased technological progress and non homothetic preferences this paper integrates both into an otherwise standard growth model and quantitatively evaluates them vis a vis time series the exercise identifies a set of puzzles for standard theories i the model cannot account for the steep decline in manufacturing and rise in services in the later data ii the standard model requires implausibly low elasticity of substitution across goods to match the consumption and output data and iii the behavior of consumption and output shares differs significantly from that of employment shares we argue that models that incorporate home production sector specific factor distortions and differences across sectors in the accumulation of human capital are promising avenues to amend the standard models jel o11 o14 o41

gender earnings and the english skill acquisition of hispanic workers in the united states i introduction recently the number of english deficient residents has escalated in the united states according to the 1980 and 1990 decennial censuses individuals aged five years and older whose reported english verbal skills are not well or not at all rose from 4 22 million 2 of the population to 6 67 million 3 this percentage is more pronounced in the public schools according to han et al 1997 over 2 12 million students 5 1 of the 41 62 million public school students in grades k 12 were identified as being limited english proficient lep in the 1993 1994 school year other estimates such as those made by henderson abbott and strang 1993 put the public school lep share at over 6 increases in the lep numbers mirror the growth in the immigrant population as well as the relatively high fertility rates of language minority americans the hispanic and asian pacific islander ethnic groups account for much of this growth as shown by the national research council 1997 hispanics in fact are projected by the u s census bureau 1996 to become this nation s largest racial ethnic minority group in less than a decade policywise the growing lep population raises economic and social questions concerning for example the best schooling programs for children in this group as well as the impact of english proficiency in labor markets answers to some of these questions clearly require detailed and inclusive analyses 1 indeed many social scientists have linked the ability to communicate in english to labor market value and occupational selection 2 the bulk of this research however primarily focuses on men less is known on whether gender differently affects the english proficiency outcomes of language minorities researchers in other social science fields such as stevens 1985 1986 1992 cameron 1992 and ellis 1994 have considered gender disparities with respect to the acquisition of english skills 3 however these investigations have not fully implemented some of the empirical advances made by economists to analyze english proficiency moreover this extant work tends to focus solely on gender related english skill differentials at a single point in time in this study we use recent empirical strategies in the economics field to analyze labor market facets associated with the english skill acquisition of hispanic men and women we also employ a two period analysis that allows us to observe whether gender differences in the accumulation of english skills exist with respect to our previous discussion such knowledge facilitates the design of programs aimed at improving the english fluency of the lep population in particular we first track synthetic cohorts to investigate if the english proficiency acquisition made by hispanic workers during the 1980s varies with respect to gender we then test whether poor english skills differently affect the earnings and occupational sorting of hispanic men and women the 1 1980 and 1990 public use microdata samples pums are utilized in these labor market analyses our findings suggest that english skill procurement varies between hispanic men and women depending on age and schooling location we also find that women face a lower english deficiency earnings penalty that rises more rapidly with education than the penalty obtained by their otherwise similar male peers our occupational selection results parallel this penalty difference where english skills serve as a stronger sorting mechanism for hispanic women than men policy prescriptions from such analyses suggest that male oriented studies overestimate the earnings gains and understate the occupational sorting associated with acquiring english fluency ii english skill acquisition in the labor market our first objective tests whether women acquire english proficiency at a different rate than their male peers all of our empirical work relies on the 1 pums of the 1980 and 1990 u

the economics of immigration this literature review concerns the impact of immigration on the economy of the host country focusing on the experience of the united states the emphasis is on the period from the 1970s to the 1990s the author shows that research earlier in this period generally concluded that the economic effects of immigration were positive but that more recent research on later migrations have generally concluded that immigration may be having an adverse effect on the earnings of native unskilled workers and be placing an increased burden on welfare programs the importance of such economic analysis for the formulation of appropriate migration policies is stressed

corporate performance and managerial remuneration an empirical analysis abstract economic theories of efficient compensation predict a positive relationship between executive pay and corporate performance and yet efforts to document this relationship have been largely unsuccessful in this paper we argue that previous cross sectional studies have omitted important variables which seriously bias their results using data that focus on individual executives over time we find that executive compensation is strongly positively related to corporate performance as measured by shareholder return and growth in firm sales the results are robust to the stock market performance measure utilized

the role of economic issues in elections the case of the 1988 chilean presidential referendum in this paper we tested the hypothesis that the performance of the economy is a determinant factor in the voter s preferences the results obtained enable us to corroborate this notion since the model has a high predictive value and the behavior of the economy both in terms of level of activity as well as in its changes comes up consistently as a determinant factor of voting behavior these results are also consistent with those obtained through chilean polls in which it has been ascertained that economic events particularly in the case of those who favored the anti pinochet option no were of utmost importance in the voters decisions the results also confirm the idea that in chile women tend to give economic issues a lesser weight in their political preferences

heterogeneous borrowers in quantitative models of sovereign default we extend the model used in recent quantitative studies of sovereign default allowing policymakers of different types to stochastically alternate in power we show that a default episode may be triggered by a change in the type of policymaker in office and that such a default is likely to occur only if there is enough political stability and if policymakers encounter poor economic conditions under high political stability political turnover enables the model to generate a weaker correlation between economic conditions and default decisions a higher and more volatile spread and lower borrowing levels after a default episode

when to fire a ceo optimal termination in dynamic contracts abstract existing models of dynamic contracts impose that it is both optimal and feasible for the contracting parties to bind themselves together forever this paper introduces optimal termination in dynamic contracts we modify the standard dynamic agency model to include an external labor market which upon the dissolution of the contract allows the firm to return to the labor market to seek a new match under this simple closure of the model two types of terminations emerge under one scenario the agent is fired after a bad output and he becomes too poor to be punished effectively under the second scenario the agent is forced out after a good output and he becomes too expensive to motivate

economic conditions elections and the magnitude of foreign conflicts abstract this paper investigates the relationship between the business cycle the election cycle and the timing and magnitude of foreign conflict we propose a theoretical model which suggests that in the presence of a reelection motive the frequency of war will be greater following recessions than otherwise however if partially benevolent leaders can influence the size of conflicts then the consequences may be limited to conflicts of relatively small magnitude we test the predictions of the theory using data for the united states for the cold war period and obtain results consistent with the theory when leaders are partially benevolent

strategic promotion and compensation within a hierarchical firm structure this paper details how the composition of a worker s skills and the non observability of a worker s ability affect wage and promotion paths promotionbased compensation schemes derive naturally from the worker s asymmetrically observed ability promotion takes place over time and is inefficient since employers strategically exploit their knowledge of an able worker s ability conversely employers may be unable to efficiently demote and retain bad managers without paying bonuses employers are led to promote educated employees before their equally or more able but uneducated counterparts explanations for fast track promotions plans and other empirical regularities are provided