Governments that rely on taxation, rather than non-earned revenues such as aid or oil, are believed to attain better outcomes across a range of governance measures. Yet this positive tax effect may fail to result from all forms of taxes. In particular, indirect taxes such as VAT or sales tax are less visible than direct taxes and, further, indirect taxes may not “bite” like direct taxes because individuals typically receive a valued good at the moment of paying them. Thus, the accountability gains from taxation may hold more strongly for direct than indirect taxes. Yet we lack compelling evidence regarding differential effects of tax mode and on the mechanisms through which different forms might operate. To fill this lacuna, we first report lab-in-the-field experiments, conducted in Uganda, showing that less visible indirect taxes have smaller effects on citizens’ accountability demands. We then describe survey experiments from Uganda demonstrating that indirect taxes are typically not visible to consumers when purchasing. Finally, cross-national data indicate that, while direct taxes are associated with lower corruption, indirect taxes are not.
Globalization has grown much since 1980s. What political trends have been associated with this growth? This paper examines two aspects of the political consequences of globalization. Economic globalization, according to some economic theories, has adverse consequences for labor, especially less skilled labor, in the rich democracies. If these voters are the median, then we might expect parties to respond to this by turning against globalization and the openness to flows of goods, services, people and capital that it brings. Have parties turned against economic openness? And have parties, especially extreme right-wing ones, that oppose openness advanced in terms of their electoral strength as a result? Furthermore, have these pressures from globalization been mitigated by social welfare policies, as earlier research claimed? First, updating and extending the research of Burgoon (2009), I ask whether political parties in the advanced industrial countries have adopted more anti-internationalist platforms as globalization has advanced. Second, I examine whether parties have been aected deferentially by globalization; in particular, have extreme, right-wing populist parties gained vote share as globalization has proceeded, while mainstream left ones have lost. The evidence suggests that globalization, especially trade, is associated with a political turn to anti-internationalism and to extremist parties.
Do citizens more readily demand accountability from governments for taxes than for non-tax revenue from oil or aid? Identical experiments on large, representative samples of Ghanaians and Ugandans probe the effects of different revenue types on citizens' actions to monitor government spending. A similar experiment on MPs from the two countries examined their beliefs about these revenue sources. Roughly half of all citizens willingly take action to scrutinize all three sources. Neither Ghanaians nor Ugandans are more likely to take action for tax revenues than oil or aid when the money goes to the government. MPs likewise saw no difference. Citizens do differentiate between revenue delivered to the government compared to money given to NGOs. Findings are robust to numerous alternatives and subgroups. Little evidence exists that taxes strengthen citizens' demands for accountability or that MPs perceive differences across revenue sources. However, aid channeled through NGOs motivates more accountability.
A theory of money needs a proper place for financial intermediaries. Intermediaries create money by taking deposits from savers and investing them in productive projects. The money multiplier depends on the size of intermediary balance sheets, and their ability to take risks. In downturns, as lending contracts and the money multiplier shrinks, the value of money rises. This leads to a Fisher deflation that hurts borrowers and amplifies shocks. An accommodative monetary policy in downturns, focused on the assets held by constrained agents, can mitigate these destabilizing adverse feedback effects. We devote particular attention to interest rate cuts, and study the potential for such policies to create moral hazard.
National governments routinely deploy their diplomatic corps to advance their trade policies. While economists have studied this in multilateral negotiations or with na- tional leader visits, scholarship examining the role of more regularized bilateral diplomacy has received less attention. In this paper, we study how the heads of embassies (i.e,. ambassadors) can affect bilateral trade. Focusing on one of the largest diplomatic corps, we compile original monthly level data on US ambassadorial postings over a 50 year period and use the timing of US presidential inaugurations as an instrumental variable to show that periods of ambassadorial vacancies reduce US monthly exports, but do not affect US imports. These findings are driven by the vacancies of career diplomats and are magnified in poorer countries and those with an inferior quality of governance. Our findings suggest that ambassadors can affect export performance, particularly those with more experience and who are posted in weak institutional environments.
According to a widely held intuition, our moral reasons concerning procreation are asymmetric: If a future person would have a life that is so full of uncompensated suffering as to be not worth living, this in itself gives us a strong moral reason to refrain from bringing this person into existence. By contrast, there is no moral reason to create a person whose life would be worth living, just because her life would be worth living. However, paired with a plausible empirical assumption, namely that in in every act of procreation there is some small risk of creating a person whose life is not worth living, this widely held intuition may appear to commit us to the view that procreating is a risk that is rarely morally justifiable. Consider: if we procreate then, in the best case, we bring about an outcome (namely that in which a new happy person is created) which, according to the Asymmetry, we have no moral reason to bring about. But in the worst case, we bring about an outcome that we have strong moral reason to avoid. In this paper, I show how we can avoid this unattractive conclusion. We can embrace the Procreation Asymmetry without committing ourselves to Anti-Natalism.
How effective is the minimum wage at raising nondurable household consumption through the redistribution of income towards poor workers? Using novel data on retail sales by county, I exploit variation in the minimum wage rates across states and over time to answer this question. I find that a 10% increase in the minimum wage increases sales by 1.1%. I argue that such a large effect is explained by positive spillovers benefiting the bottom quarter of the labor income distribution. As expected, the expenditure response to minimum wage hikes is stronger in counties where the policy is more binding.
In 1988, Congress passed a statute granting the justices almost total control of the Supreme Court’s docket through the writ of certiorari. That statute, the Supreme Court Case Selections Act, threatens the separation of powers. The Constitution vests Congress with one clear check over the Supreme Court: exclusive power to control the Court’s appellate jurisdiction. But the Act effectively gives the Court—not Congress—that power. This is akin to Congress giving to the President its power to advise and consent on his own nominees.
In addition to the constitutional concerns, the cert process is effectively lawless. The Act empowers the Court to grant certiorari to review cases or final judgments, but instead the Court grants certiorari to decide questions and does not decide the rest of the case. Further, while the Act requires the Court to take questions certified by lower courts, the justices have unilaterally shut down certification from lower courts to better preserve their own power over the docket. Finally, even when Congress has identified types of cases the Court must hear, the Court treats those cases almost indistinguishably from those over which it has discretion to hear or not hear.
To address these problems, this article suggests that Congress repeal the 1988 Act and pass a new statute delegating its Exceptions Clause power to a First Look Commission. The Commission would set standards for Supreme Court review, evaluate cases to see if they fit those criteria, refer such cases to the Court, monitor how the Court responds to the Commission’s referrals, and report back to Congress. These changes would balance three competing interests: they would place the Court’s appellate jurisdiction on stronger constitutional footing; they would keep the docket at a reasonable size, and they would guard against the Court’s tendency to ignore jurisdictional statutes.
An oft-mentioned but under-studied feature of asset price bubbles is a surge of new entrants, retail investors who never invested, joining the bubble because of their friends or neighbors. We incorporate this viral element into an otherwise standard bubble model with forward-looking agents. Optimism spreads across households as an epidemic process and the participation rate rises as new entrants buy, anticipating trending prices. Insiders or institutions gradually sell their shares, generating trading volume and moderating price growth. Our model rationalizes several patterns in the data, which have been previously difficult to explain, including trending prices and volume peaking months before prices, participation rates, and short-selling in both stock market and housing bubbles.
Are civilian attitudes a useful predictor of patterns of violence in civil wars? A prominent debate has emerged among scholars and practitioners about the importance of winning civilian “hearts and minds” for influencing their wartime behavior. We argue that such efforts may have a dark side: insurgents can use pro-counterinsurgent attitudes as cues to select their targets and tactics. We conduct an original survey experiment in 204 Afghan villages to establish a pos- itive association between pro-International Security Assistance Force attitudes and future Taliban attacks. We extend our analysis to 14,606 non-surveyed villages and demonstrate that our measure of civilian attitudes improves out- of-sample predictive performance by 20–30% over a standard forecasting model. The results are especially strong for Taliban attacks with improvised explosive devices. These improvements in predictive power remain even after adjusting for possible confounders, including past violence, military bases, and develop- ment aid.
Race (or skin color) have been not considered a salient political cleavage in Mexico since the post-revolutionary, nation-making idea of mestizaje (intermingling of races) claimed that there is a Mexican race created by mestizos. However, we argue that voters have heterogenous race-based preferences that are rooted in a latent race identity influenced by their party preferences and self skin color. To test this argument, we implemented an online experiment during the 2018 elections for Governor of Mexico City. The treatment corresponded to photographs of the candidates, in which the relative darkness/lightness of the candidate in the photograph was manipulated to accentuate racial cues. Results show mixed results regarding both the pigmentocracy and the in-group bias hypotheses. Regarding the former, we nd that both the darker and lighter photographs of the candidates decrease the favoring attitudes of voters towards them. On the later, contrary to our expectations, we nd that for darker skin individuals, the treatment of darker photographs consistently decreases their favoring attitudes towards the candidates.
Do asset managers reach for yield because of competitive pressures in a low rate environment? I propose a tournament model of money market funds (MMFs) to study this issue. I show that funds with different costs of default respond differently to changes in interest rates, and that it is important to distinguish the role of risk-free rates from that of risk premia. In an environment in which funds care about relative performance, an increase in the risk premium leads funds with lower default costs to increase risk-taking, while funds with higher default costs reduce risk-taking. Without changes in the risk premium, low risk-free rates reduce risk-taking. I show that these predictions are consistent with the risk-taking of MMFs during the 2006--2008 period: When risk premia increased, funds with low sponsor's reputation concerns increased risk-taking, while funds with high sponsor's reputation concerns decreased risk-taking. Further, I confirm the differential role of risk-free rate and risk premium to explain changes in fund portfolios.
Traditional economics argues that financial derivatives, like CDOs and CDSs, ameliorate the negative costs imposed by asymmetric information. This is because securitization via derivatives allows the informed party to find buyers for less information-sensitive part of the cash flow stream of an asset (e.g., a mortgage) and retain the remainder. In this paper we show that this viewpoint may need to be revised once computational complexity is brought into the picture. Using methods from theoretical computer science this paper shows that derivatives can actually amplify the costs of asymmetric information instead of reducing them. Note that computational complexity is only a small departure from full rationality since even highly sophisticated investors are boundedly rational due to a lack of requisite computational resources.
In May 2016, the Chinese Ministry of Environmental Protection (MEP) released a proposal, “Limits and Measurement Methods for Emissions from Light-Duty Vehicles (LDVs),” also known as the China 6 emission standard for new LDVs (referred to hereafter as the proposed standard or China 6 standard proposal; China MEP, 2016). The proposed standard is a major upgrade to previous standards in China, with integration of best practices from the latest emission regulations in the United States, the State of California, and the European Union.
This paper estimates health benefits and technology upgrade costs of the proposed standard and implementation timetable. The research focuses mainly on nationwide impacts but also separately analyzes China’s three key regions: the so-called Jing-Jin-Ji (or JJJ) region (agglomeration surrounding the capital, including Beijing, Tianjin, and Hebei province); the Yangtze River delta (or YRD) region (including Shanghai, Jiangsu, and Zhejiang provinces); and Guangdong province.
The proposed standard is among the world’s most stringent and combines best practices from both European and U.S. regulations including tightened emission limits of regulated ambient air pollutants, as well as provisions that enable better emission compliance of vehicles in real-world driving conditions. It is expected to help reduce emissions from four major ambient air pollutants—CO, HC, NOX, and PM—by approximately 3,396, 4,184, 1,001, and 26 thousand metric tons, respectively, in 2030. These emission reductions would help decrease the national annual average PM2.5 and ground- level ozone pollution concentrations by 1.1 μg/m3 and 2.1 ppb, respectively, in 2030. The improved air quality would curtail the incidence of premature mortality caused by PM2.5 and ground-level ozone exposure in urban areas. As a result, a total of 21,754 premature deaths and 28,559 hospital admissions would be avoided in 2030. The total health benefits from implementing the proposed standard are valued at USD 42.4 billion (CNY 284.3 billion) at a technology upgrade cost of USD 4.8 billion (CNY 31.8 billion) in 2030, with a benefit-to-cost ratio of 8.9:1 and annual net benefit of USD 37.7 billion (CNY 252.4 billion), indicating that it is a very cost-effective standard.
Can a partial approach to economic globalization comprise a strategy to maintain elite cohesion in nondemocracies? We investigate this question for a group of predominantly nondemocratic Muslim-majority countries across Africa, the Middle East, and Asia. To draw causal inferences, we leverage the timing of the World Trade’s Organization es- tablishment in 1995 as a plausibly exogenous (global) shock to trade liberalization to show that many Muslim-majority societies have systematically lagged behind in rela- tive terms (to non-Muslim countries) on measures of de jure globalization capturing policies associated with tariffs, hidden import barriers, investment and capital account restrictions. We attribute this “globalization deficit” to policy choices that protect politically connected commercial interests (political cronies). We corroborate the rel- evance of political connections at the micro-level by compiling new sector-level data from Egypt and Tunisia which ties slower tariff liberalization in sectors penetrated by political cronies.
I show that the effectiveness of fiscal stimulus as a tool for counter-cyclical stabilization depends not only on how much of changes in income households spend, but also on the composition of that expenditure. By combining expenditure and production data I measure the extent to which households cut back expenditure on labor-intensive goods upon unemployment. The result is quantitatively relevant because the labor share with which different final consumption goods are produced varies widely across the economy. I find that upon unemployment, a household reduces demand for other workers' labor by 6.5%, 15% more than what is implied when heterogeneity in production and expenditure is ignored. In the context of the Great Recession, the expenditure response to unemployment accounts for a fifth of the drop in labor compensation. Using a multi-good, multi-sector New-Keynesian model with heterogeneous agents, I show that my findings have significant implications for the targeting and evaluation of fiscal stimulus. First, the fiscal multiplier of government purchases of labor-intensive goods is almost five times larger than for purchases of capital-intensive goods. Second, the heterogeneity I document explains the lower effectiveness to stimulate the economy of capital-intensive military spending, as compared to highly labor-intensive general government spending. Third, I show that the decline of the labor share in the last decades has reduced the effectiveness of fiscal policy.
What explains the variation in trade policy among democracies in developing countries? Why have some liberalized trade more than others? We analyze the impact of political particularism – defined as the degree of party discipline and the incentives for politicians to cultivate a personal vote – on trade protection. We present theoretical results from a model of particularism and its effects on tariffs; we present quantitative evidence to test the model; and then we develop a case study of India to illuminate it. Our model analyzes how an increase in particularism (that is, a shift from a party-centered to a more candidate-centered system) interacts with the degree of inter-industry occupational mobility of labor and the asset-specificity of industries to influence trade policies in developing democracies. Our model suggests that an increase in particularism induces leaders from the ruling and opposition parties to shift trade policy in equilibrium to the median voter's optimal preference, who in a developing society is a worker; and this means a reduction in trade barriers when labor mobility is high. Our data strongly support this conclusion. Our case study of India shows how the dynamics of a party-centered system operate to maintain higher trade barriers.
Existing research suggests that democracy fosters economic globalization by promoting trade liberalization in the developing world. We argue that democracy in developing countries generates a “skill bias” in trade protection where democratic incumbents have incentives to increase tariffs on high skilled goods but reduce trade barriers on low skilled goods. Our model analyzes how electoral competition and interest group politics in the Heckscher-Ohlin economy of a democratic developing country affects trade protection on low and high skilled goods. It predicts that electoral competition induces the government to reduce trade barriers for low skilled goods to appeal to the abundant factor, namely the low skilled median voter, who optimally prefers a reduction in tariffs for low skilled goods. Yet electoral politics also engenders lobbying pressure and campaign contributions from the scarce factor in the polity – the owners of skill-intensive industries (the interest group) – who prefers more trade protection for high skilled goods. The government rationally responds to these contributions by protecting skill-intensive industries from import competition. Empirical tests conducted on a disaggregated industry-level dataset of trade protection supports our theoretical predictions.
The ongoing digital revolution may lead to a radical departure from the traditional model of monetary exchange. We may see an unbundling of the separate roles of money, creating fiercer competition among specialized currencies. On the other hand, digital currencies associated with large platform ecosystems may lead to a re-bundling of money in which payment services are packaged with an array of data services, encouraging differentiation but discouraging interoperability between platforms. Digital currencies may also cause an upheaval of the international monetary system: countries that are socially or digitally integrated with their neighbors may face digital dollarization, and the prevalence of systemically important platforms could lead to the emergence of digital currency areas that transcend national borders. Central bank digital currency (CBDC) ensures that public money remains a relevant unit of account.
Much is known about how political institutions arrive at one decision, but less is known about how the institution's larger agenda is formed or how decisions made early in a session affect decisions made later. We take up these questions by constructing a model of committee decision-making in a dynamic context. A committee encounters a series of draws and may take or reject each until a fixed number of slots are filled or the draws are exhausted. Players decide whether to use a slot on the current option or to wait in hopes of a better draw. We show three things: First, players sometimes follow a sacrifice strategy and take an immediate loss even when it is not necessary. Second, some reject positive outcomes even when there are slots remaining creating gridlock. Third, they may treat the same option differently depending on how many draws and slots remain.
What factors shape attitudes toward economic globalization? Theories in international and comparative political economy emphasize the importance of economic variables, like factor endowments, as determining preferences toward international trade. Other literature emphasizes the importance of non‐economic factors, including nationalism and cultural values, like tolerance, that might explain citizens’ predispositions toward globalization. This paper attempts to adjudicate between these two competing arguments by focusing on the factors correlated with public support for increasing trade in Egypt. On the one hand, Egypt might benefit from economic globalization. On the other, it has a rich and deep socio‐political history of Western colonialism, political Islam, and radicalism. This history might serve as the lens through which the potential benefits of globalization are assessed. In this paper, we investigate these questions, using data from the Pew Global Attitudes 2010 survey of Egyptians. We find that both economic and cultural factors matter, but that cultural ones may be even more influential in this particular developing country setting.
Recent research on political attitudes towards immigration often pits arguments emphasizing economic self-interest against ideological or cultural explanations. Many of these studies conceptualize immigration policy along a single dimension instead of disaggregating it into its distinct policy dimensions. Conditional on the type of immigration policy, different explanations should have more or less explanatory power. We disaggregate immigration policy into six different dimensions and provide theoretical scope conditions for when ideological and economic factors should matter. We test these predictions on votes on immigration policy in the US House of Representatives from 1979-2006. We advance the debate on the determinants of immigration policy by showing that both economic self-interest and ideological explanations can be powerful, depending upon the type of immigration policy under consideration.
Most panel models assume that unobserved unit heterogeneity is constant over time. How- ever, this time-constant assumption may not be justified when the time-series information of the data is long enough to change unobserved unit characteristics. Although existing studies suggest the use of hidden Markov models to take into account the dynamic transitions of hidden regimes, these models often assume that the transition processes are exogenously given and independent of covariates. This paper presents a hidden Markov panel model that takes into account the possibility that the dynamic transitions of hidden regimes may be endogenous to some observed covariates. Using the data on military disputes, the paper demonstrates how the model helps identify the causes of hidden regimes that are relevant to military disputes, and how identifying the causes of hidden regimes significantly improves the performance of predicting the actual outcomes.
This article develops a new method for estimating the ideological preferences of Supreme Court justices based on their agenda-setting votes. While careful attention to agenda-setting is important in its own right, ideological measures from these votes have much to recommend them in general. Compared to the more familiar votes on case dispositions, there are far more agenda-setting votes on a far more stable set of issues. The estimated model takes into account case importance, justices' individual preferences over docket size, and their ideological leanings. The method successfully predicts votes and returns new useful measures for scholars of the Court.
This paper provides a primer for estimating public opinion at the state level using the technique of Multilevel Regression and Postratification (MRP). We provide sample R code for creating estimates and give step-by-step instructions on setting up the data, running models, and collecting estimates.
Promoting public safety is a central mandate of government. But despite decades of dramatic improvements, most Americans believe crime is rising—a mysterious pattern that may pervert the criminal justice policymaking process. What explains this disconnect? We test five plausible explanations: survey mismeasurement, extrapolation from local crime conditions, lack of exposure to facts, partisan cues and the racialization of crime. Cross-referencing over a decade of crime records with geolocated polling data and original survey experiments, we show individuals readily update beliefs when presented with accurate crime statistics, but this effect is attenuated when statistics are embedded in a typical crime news article, and confidence in perceptions is diminished when a copartisan elite undermines official statistics. We conclude Americans misperceive crime because of the frequency and manner of encounters with relevant statistics. Our results suggest widespread misperceptions are likely to persist barring foundational changes in Americans’ information consumption habits, or elite assistance.
This paper argues that workers should be rewarded with "failure bonuses" upon reporting evidence that an innovative project cannot succeed to circumvent the costs of private learning. We consider a moral hazard problem in which a principal hires a wealth-constrained agent to work on a project of unknown feasibility. The agent conducts a sequence of experiments that can reveal conclusive, public success or conclusive, private failure. Evidence for failure is hard but concealable. If an experiment is more likely to yield success than failure, then the lack of either causes belief in project feasibility to fall. Unobservable shirking allows the agent to not only divert funds but also privately halt this decline in beliefs. We assume the agent has a small chance of observing failure even while shirking, making success a superior signal of effort. Even so, the principal should reward failure alongside success to prevent the agent from extracting any information rent from private learning, as shirking suppresses the agent's chances of obtaining failure bonuses from future experimentation. Failure bonuses thereby encourage more innovation by reducing agency costs and allowing projects to be funded for longer. We find conditions for which the unique, optimal, long-term contract takes a simple "balanced" form that always makes the agent indifferent between working and shirking after any sequence of effort choices. After the initial period, bonuses do not depend on beliefs except through the optimal deadline, and strikingly, failure is rewarded more handsomely than success.
This paper presents a model in secessions and nationalism, with a special emphasis on the role of civil war. In my model, a disagreement on secession between the central government and the minority group leads to disastrous military conflicts. As a result, the tremendous potential cost of the war distorts the political choice of the minority group, and helps the central government exploit the minority group both economically and politically. I conduct an empirical test of this model and find that, per capita income and perceived winning chance of the civil war play the most important role in the decision making process of the minority group. In addition, I find that population and cultural difference would also affect the probability of a civil war, but their impact is smaller compared to that of income and winning chance.
By taking advantage of China’s dramatic institutional shifts over time and large variations across communities concerning democracy and social interaction, I analyze the disparity in availability of formal and informal finance by their different mechanisms, including local governance and family network. I find that households’ financial access to both formal and informal finance has a significant impact on family welfare improvement. However, in regions with higher access to formal finance, the influence of informal finance declines. The influence of formal finance is limited to urban non-agricultural households, and informal finance is particularly important for rural areas and agricultural hukou households. This implies that a substitute and complementary relationship between formal and informal finance exists. The results shed light on China’s financial reform.
What factors have promoted and retarded the spread of the internet globally? Much as other technologies, the internet has diffused unevenly across countries. The main proposition is that its spread is neither purely economic nor entirely domestic. International diffusion pressures exert a powerful influence. The adoption of new technology depends on domestic policy, and this in turn depends on the choices that political leaders make about rules governing new technologies. I examine the impact of international diffusion pressures on political leaders, testing the role of five types of such pressures. The distribution of capabilities globally may shape the spread of the internet, as dominant power(s) may directly or indirectly coerce others into adopting. Patterns of adoption may also be shaped by competitive pressures from the world market. Technological change especially may depend on network externalities, involving the number of adopters already in existence. Learning from other countries or from participating in international organizations may stimulate adoption. Finally, countries may simply copy the policies and hence the adoption patterns of other countries with whom they share sociological similarities. Data from about 190 countries since 1990 shows that diffusion pressures matter, even when controlling for domestic factors. Economic competition and sociological emulation play consistently important roles in affecting the spread of the internet.
In the aftermath of the Great Recession, understanding how households’ consumption responds to a credit crunch has been a central goal of macroeconomics. Most of the recent research has explored this question using a “hard constraint” modeling device, where households can borrow at the risk-free rate only up to an exogenous amount. An alternative, and more realistic, way to model financial frictions is to allow households to borrow as much as they want but at an interest rate that depends on the level of debt. I refer to the latter as the “soft constraint” model. In a Standard Incomplete Markets framework with heterogeneous agents, I calibrate two economies differing only in the type of financial constraint that households face and I show that a credit crunch in the hard constraint economy (i.e. decrease in the exogenous borrowing limit) produces a drop in consumption significantly more severe than an equivalent crunch in the soft constraint version (i.e. increase in the borrowing interest rate). I conclude that the quantitative consequences of a credit crunch largely depend on the modeling approach.
A timeless question about the Supreme Court is how much of its work is based on legal norms and how much is driven by the justices' personal ideologies. This article addresses that question by looking for upper and lower bounds on the effects of ideology on the justices' agenda-setting decisions. It finds that ideology is sufficient to predict more than two-thirds of the justices' agenda-setting votes and necessary to predict almost twenty percent of the votes. To recover these boundaries, this article presents and estimates a structural model of voting at the certiorari (agenda-setting) stage. Compared to similar ideal point models of the subsequent decision to reverse or affirm on the merits, the certiorari stage has more data with less of a threat from selection bias. Ideal point estimates from cert are more stable than the traditional measures, and the model returns other substantively interesting quantities such as justices' individual preferences for taking lots of cases, measures of case importance, and whether the Court expects the law to move right or left if it takes the case. The result is not just better ideal points but also tools to measure the relative importance of ideology on the Supreme Court.
Foreign direct investment (FDI) has come to be seen as a promising avenue for boosting economic development. As a consequence, most developing countries now seek to attract FDI, often by making ex ante promises to foreign investors not to pass laws or regulations — or refrain from other actions — that would diminish the value of the investment ex post. But how credible are such promises? A number of recent studies have examined the effect of domestic institutions (veto players, democracy, etc.) on the credibility of commitments by developing country governments toward foreign private economic actors, such as foreign investors. In addition, a few studies have examined the effect of international institutions on the credibility of such commitments. We examine the interaction of domestic and international institutions in promoting FDI. We show theoretically and empirically that democratic domestic institutions help attract more FDI into developing countries only in the context of economically liberal international institutions.
Recent empirical work has produced evidence that the forced removal (arrest or killing) of high-ranked members of criminal organizations in Mexico influences subsequent violence, generally finding that it leads to more violence within a year or in the longer term. However, those studies have been limited to a period of five years or less and have not tested the mechanisms through which criminal group “decapitation” is theorized to cause violence. This paper addresses both limitations. I scrutinize theorized mechanisms and test them using panel data regression analysis at both the state and municipal level, with the state level analysis expanding to eight years (2007–2014). I find no evidence for one of the key theorized channels through which kingpin strikes were thought to exacerbate violence—induced violent competition between enemy organizations—or for other testable mechanisms. In line with these findings, I find no relationship between kingpin strikes and subsequent violence in affected areas. The dynamics of leadership removal and subsequent violence are not yet fully understood, and likely evolved.
We conduct a simulation study of Local Projection (LP) and Vector Autoregression (VAR) estimators of structural impulse responses across thousands of data generating processes, designed to mimic the properties of the universe of U.S. macroeconomic data. Our analysis considers various identification schemes and several variants of LP and VAR estimators. A clear bias-variance trade-off emerges: LP estimators have lower bias than VAR estimators but substantially higher variance at intermediate and long horizons. Consequently, unless researchers are overwhelmingly concerned with bias, shrinkage via Bayesian VARs or penalized LPs is attractive.
The presence and activities of armed criminal groups has shaped governance and state capacity at the subnational level in many territories of contemporary Latin America. In turn, criminal group behavior and competition are driven by subnational government performance. Yet empirical studies of organized crime and criminal violence have been limited by a dearth of high-quality, systematic data on key attributes of violent criminal organizations including their structure, where they operate, what activities they engage in, and how they relate to one another. We present the first results of Mapping Criminal Organizations, a project that combines sources and methods, from hand-coding data to scraping and processing entire archives, to identify where armed criminal groups have operated and how they have related to each other, starting with Mexican states, cities, and municipalities. We also discuss three ways in which thedata can be used to advance research on the presence and control of armed criminal groups: micro-dynamics of violence, variations on property rights protection, and provision of security. And we illustrate two of these avenues with examples from Mexico’s northern states.
We study how campaign contributions aect the voting strategies and effectiveness of justices in the Supreme Court of eight US states. A judge's voting strategy leans more heavily towards an interest group the larger are its contributions to the judge, and the smaller are its contributions to other members of the court. This panel effect is consistent with an equilibrium response to contributions to other members of the court. Observed contributions have a large effect on the decisions and effectiveness of individual judges, but tend to counterbalance each other, producing a small effect on the decisions and effectiveness of the Court.
What are the political effects of high-scale natural disasters? In this paper, we argue that such events result in crises that: (1) reveal information to voters about the performance of incumbents and (2) incentivize the formation of organized groups of citizens in response to the shock. We predict that damages from natural disasters are associated with electoral losses for the incumbents. Moreover, this political effect should be stronger in the presence of organized groups of citizens, which point out to government failures that exacerbated the event, politicize the disaster, and pressure politicians to effectively invest in recovery and reconstruction.
The theories of military conflict often focus on the choice between different coercive strategies such as the threat or use of force, paying little attention to the possibility that a non-coercive instrument, such as the provision of benefits, may be used as a substitute. This paper develops a theory of military conflict by taking into account the substitution between coercive and non-coercive diplomacy. In particular, the theory explores a commitment problem for stronger states: a stronger state’s ability to use non-coercive diplomacy may prevent it from making a credible commitment to using force. The empirical analysis shows that stronger states are in fact unlikely to employ any kind of military coercion, including the threat to use force, against weaker states. To verify that the finding was not driven by the mere absence of conflicting interests between them, it also develops a hidden Markov model that estimates conflicts of interests as precisely as possible.
Existing literature shows that it is possible for rational players to establish one-sided and two-sided reputation in a bilateral bargaining environment by mimicking irrational, r-insistent players, and that this reputation build-up can drastically change the Rubinstein (1982) outcome, by causing delay in reaching agreement. Furthermore, the literature on outside options in bilateral bargaining suggests that unless outside options are very large, they do not affect these bargaining outcomes. We are interested in the impact on the bargaining outcome from endogenizing outside options|namely, bargaining in markets. In the presence of competition in decentralized search markets, can rational agents mimic irrationality to build reputation, when can irrational types on both sides of the market trade in equilibrium, and what are the consequences for delay and efficiency? We develop discrete, hybrid and continuous-time models of bargaining in markets with and without irrational types by combining reputational bargaining of Abreu and Gul (2000) with a continuous-time version of the Rubinstein and Wolinsky (1985) model of bargaining in markets. Applications include decentralized search markets for labor, exotic assets, over-the-counter securities, venture capital funding, and repurchase agreements.
We analyze continuous time optimal contracting in principal multi-agent moral hazard settings; particularly, what the implications are as the number of agents increases in the model. Using tools from game theory and stochastic optimal control, we derive the optimal, history-contingent contract for the generalized principal n-agent dynamic problem; in the process showing how continuous time framework makes dynamic contracting and analysis tractable. Efficiency gain from specialization and rising disincentives from increased moral hazard counteract one another as we increase the number of agents in our model, thus, we derive the optimal size of a firm/team (microeconomics application) or of a fiscal union (political economy application). Furthermore, our model suggests that development of strong political and economic institutions goes hand-in-hand with greater delegation of responsibility, decentralization, and federalism.
Health care payment models that reduce costs by changing physician behavior are the current trend in US health care reform. The uneven implementation of these reforms, however, leaves scope for strategic behavior on behalf of doctors. Is paying doctors to reduce costs an effective cost control strategy when only implemented in some hospitals and for certain patients? I look at a cost reduction policy where hospitals gave doctors bonuses to reduce costs for admitted Medicare patients. My model of physician decision-making generates three predictions: (1) for admitted patients, healthier patients will be sent to the hospitals offering cost reduction bonuses; (2) admission will go up in participating hospitals, as only admitted patients are eligible for the bonuses; (3) the bonus program will cause doctors to perform fewer services. I look at doctors who practice in both participating and non-participating hospitals and examine whether they change their behavior in the participating hospitals after the program is introduced. I find strong empirical support for the first two predictions but not the third; doctors sorted patients and increased admission, but did not lower costs. These results have important implications for health care reform. Previous research has shown that doctors respond as expected to financial incentives when looking at the narrow choice between competing procedures. This paper takes looks at the effect of financial incentives on each link of the decision-making chain, and finds that all are important. Furthermore, I show that losses from strategic behavior may outweigh gains from reduced costs down the line.
Are children with public insurance treated differently than those with more generous private health insurance? Using a unique, longitudinal data set of New Jersey hospital records, we exploit a discontinuity in guidelines for pediatric asthma treatment which calls for special care for infants.We show that disparities in admission rates between children with public and private insurance widen sharply at one year, when the guidelines are relaxed and physicians have more discretion. After children turn one year old, there is a 7 percentage point drop in the probability of admission for publicly insured children with known asthma, and no change in admission among the privately insured. Furthermore, we show that this drop in admissions for publicly insured patients has adverse health consequences. In a regression discontinuity framework, we find that being admitted is associated with a lower likelihood of returning to the ER, as well as decreases in future costs and hospital days. These results are robust to changes in specification, and suggest that the strong treatment protocols that exist for infants are protective of the publicly insured.
Compensation structure impacts a doctor’s decision to perform a Cesarean section. Using Medicaid reimbursement and vital statistics data, I find that fee-for-service doctors respond to an increase in the relative reimbursement for C-sections by increasing their use of the procedure. These incentives are not passed through to salaried doctors – their C-section use remains constant at the same lower rate as fee-for-service doctors who are paid the same for both procedures. For fee-for-service doctors who face pay differentials, however, the increase in C-section use due to increases in the pay difference is associated with fewer infant deaths. This paper demonstrates the difficulty in lowering procedure use while holding patient health constant. Reforms that alter financial incentives indiscriminately may have unintended negative consequences.
Digital money requires a ledger. By integrating this ledger with its other ledgers, a platform can enforce repayment of uncollateralized credit, beyond the ability of the banking sector. However, by controlling interoperability to other platforms' ledgers, an incumbent platform can ``lock-in'' customers and increase its market power. Open banking, which gives users control of interoperability, limits uncollateralized credit. Introducing CBDC as digital legal tender (on an isolated ledger) hurts credit extension, but enhances it when combined with an open architecture public ledger as a ``smart CBDC''.
We try to understand how the signalling by waiting mechanism functions in a multi-period model to overcome adverse selection in markets, and then, we evaluate both the relative costs and the efficacy of various government intervention policies: changing interest rates, quantitative easing, bailouts, and TARP. We find that the optimal government intervention to a market freeze depends on the degree of adverse selection in the market.
Do mixed member electoral systems provide the ``best of both worlds''? We examine whether candidates in the proportional representation (PR) tier of these systems take policy stances closer to their party's position while candidates in the single member district (SMD) tier adopt policy positions to appeal to their districts preferences. We exploit a comprehensive panel survey of all candidates for the Japanese Upper and Lower House elections between 2003 and 2010 and estimate the policy positions of each candidate over time using Bayesian item response theory model. Our analysis suggests that candidates' policy positions vary substantially within parties. In addition, the two major parties appear to converge in the economic policy dimension during this period. In general, we find limited evidence consistent with the ``best of both worlds'' hypothesis. In the economic policy dimension, there is tentative evidence that Lower House SMD candidates are responding to their districts' preferences while PR candidates are closer to the position of the median party member. In the main foreign/security policy dimension, however, SMD candidates are not particularly responsive to their districts' preferences.
