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| 10-21-2009 |
The Foundations of Limited Authoritarian Government: Institutions and Power-sharing in Dictatorships
by Carles Boix and Milan Svolik
| Why do some dictatorships establish institutions that are typically associated with
democracy, such as legislatures or political parties? We propose a new theoretical model
of institutions and power-sharing in dictatorships. We argue that by facilitating power sharing,
political institutions promote the survival of dictatorships. However, authoritarian
power-sharing through institutions is feasible only when it is backed by the crude but
credible threat of a rebellion by the dictator’s allies. Whereas the allies’ political opportunities
determine the credibility of the threat of a rebellion, institutions alleviate the
commitment and monitoring problems that stem from the secrecy in authoritarian governance.
We use both historical and large-N data to assess these new predictions about
the relationship between political institutions, dictator tenure, and the concentration of
power in dictatorships. | | | | | | 10-21-2009 |
Development and Democratization
by Carles Boix
| Current studies, mainly focused on the postwar period, are split on the impact of development on democracy. Examining panel data that run from early nineteenth century (a time where hardly any democracy was in place) to the end of the twentieth century, I show income matters positively for democratization – both after controlling for country and time effects and instrumenting for income. Since the effect of time partly varies over time, with some historical periods that are more favorable to democracy than others, I investigate the domestic variables (a decreasing marginal effect of growth in already developed economies) and international factors (the strategies of great powers toward small countries) generating that result. I finally probe the underlying processes through which income shapes political institutions, showing that development produces key changes in the distribution and nature of wealth that, in turn, make democracy a stable political outcome. | | | | | | 09-06-2009 |
Persistence of Civil Wars
by Daron Acemoglu, Davide Ticchi, and Andrea Vindigni
| A notable feature of post-World War II civil wars is their very long average duration. We provide a theory of the persistence of civil wars. The civilian government can successfully defeat
rebellious factions only by creating a relatively strong army. In weakly-institutionalized polities
this opens the way for excessive in‡fluence or coups by the military. Civilian governments whose
rents are largely unaffected by civil wars then choose small and weak armies that are incapable
of ending insurrections. Our framework also shows that when civilian governments need to take more decisive action against rebels, they may be forced to build over-sized armies, beyond the size necessary for fighting the insurrection, as a commitment to not reforming the military in the future. | | | | | | 05-27-2008 |
Uncertainty and the Politics of Employment Protection
by Andrea Vindigni
| This paper investigates the role that idiosyncratic uncertainty plays in shaping social preferences over the degree of labor market flexibility, in a general equilibrium model of dynamic
labor demand where the productivity of firms evolves over time as a Geometric Brownian mo-
tion. A key result demonstrated is that how the economy responds to shocks, i.e. unexpected
changes in the drift and standard deviation of the stochastic process describing the dynamics
of productivity, depends on the power of labor to extract rents and on the status quo level
of firing costs. In particular, we show that when firing costs are relatively low to begin with,
a transition to a rigid labor market is favored by all and only the employed workers with
idiosyncratic productivity below some threshold value. A more volatile environment, and a
lower rate of productivity growth, i.e. "bad times", increase the political support for more
labor market rigidity only where labor appropriates relatively large rents. Moreover, we
demonstrate that when the status quo level of firing costs is relatively high, the preservation
of a rigid labor market is favored by the employed with intermediate productivity, whereas all
other workers favor more flexibility. The coming of better economic conditions need not favor
the demise of high firing costs in rigid high-rent economies, because "good times" cut down
the support for flexibility among the least productive employed workers. The model provides some new insights on the comparative dynamics of labor market institutions in the
U.S. and in Europe over the last few decades, shedding some new light both on the reasons for
the original build-up of "Eurosclerosis", and for its the persistence up to the present day. | | | | | | 03-10-2008 |
War and Endogenous Democracy
by Davide Ticchi and Andrea Vindigni
| Many episodes of extension of franchise in the 19th and especially in the 20th century occurred during or in the aftermath of major wars. Motivated by this fact, we offer a theory of
political transitions which focuses on the impact of international conflicts on domestic political
institutions. We argue that mass-armies, which appeared in Europe after the French Revolution, are an effective military organization only if the conscripted citizens are willing to put
effort into fighting wars, which in turn depends on the economic incentives that are provided to
them. The need to provide such incentives implies that an oligarchy adopting a mass-army
may voluntarily decide to promise some amount of income redistribution to its citizens, conditionally on satisfactory performance as soldiers. When the elite cannot credibly commit to
provide an incentive-compatible redistribution, they may cope with the moral hazard problem
of the citizen-soldiers only by relinquishing political power to them through the extension of
franchise. This is because democracy always implements a highly redistributive fiscal policy,
which makes fighting hard incentive-compatible for the citizen-soldiers. We show that a transition to democracy is more likely to occur when the external threat faced by an incumbent
oligarchy is in some sense intermediate. A very high external threat allows the elite to make
credible commitments of future income redistribution in favor of the citizens, while a limited
external threat makes it optimal for the elite not to make any (economic or political) concession
to the masses. Some historical evidence consistent with our theory is also provided. | | | | | | 03-10-2008 |
A Theory of Military Dictatorships
by Daron Acemoglu, Davide Ticchi, and Andrea Vindigni
| We investigate how nondemocratic regimes use the military and how this can lead to the
emergence of military dictatorships. Nondemocratic regimes need the use of force in order to
remain in power, but this creates a political moral hazard problem; a strong military may not
simply work as an agent of the elite but may turn against them in order to create a regime
more in line with their own objectives. The political moral hazard problem increases the cost
of using repression in nondemocratic regimes and in particular, necessitates high wages and
policy concessions to the military. When these concessions are not sufficient, the military
can take action against a nondemocratic regime in order to create its own dictatorship. A
more important consequence of the presence of a strong military is that once transition to
democracy takes place, the military poses a coup threat against the nascent democratic regime
until it is reformed. The anticipation that the military will be reformed in the future acts as
an additional motivation for the military to undertake coups against democratic governments.
We show that greater inequality makes the use of the military in nondemocratic regimes more
likely and also makes it more difficult for democracies to prevent military coups. In addition,
greater inequality also makes it more likely that nondemocratic regimes are unable to solve
the political moral hazard problem and thus creates another channel for the emergence of
military dictatorships. We also show that greater natural resource rents make military coups
against democracies more likely, but have ambiguous effects on the political equilibrium in
nondemocracies (because with abundant natural resources, repression becomes more valuable
to the elite, but also more expensive to maintain because of the more severe political moral
hazard problem that natural resources induce). Finally, we discuss how the national defense
role of the military interacts with its involvement in domestic politics. | | | | | | 06-21-2007 |
Electoral Contests
by Adam Meirowitz
| Most campaigns do not revolve around policy commitments; instead, we think of campaigns as contests in which candidates spend time, energy and money to win. This paper develops models of electoral competition in which candidates select levels of effort. The analysis offers insights into which possible causes of the incumbency advantage are consistent with the empirical record. Marginal asymmetries in costs or technology can explain the advantage; asymmetries in voter preferences cannot. The analysis also speaks to the consequences of campaign finance reform.
Reforms can be interpreted as shocks to the cost of influencing voter's perceptions; limits generally increase the likelihood that advantaged incumbents win, and even limits that target incumbents do not actually improve the welfare of disadvantaged challengers. Alternativel,y caps on the amount of effort can either increase or decrease the probability that the disadvantaged candidate wins. Either type of reform lowers voter welfare. Finally, while extant models with fixed valence typically do not generate Fiorina's long-studied marginality hypothesis (that stronger candidates would locate at less centrist polices) extensions to the model with endogenous policy platforms and effort offer more refined and conditional versions of the hypothesis. | | | | | | 12-02-2006 |
Emergence and Persistence of Inefficient States
by D. Acemoglu, D. Ticchi, and A. Vindigni
| Inefficiencies in the bureaucratic organization of the state are often viewed as important factors in retarding economic development. Why certain societies choose or end up with such inefficient organizations has received very little attention, however. In this paper, we present a simple theory of the emergence and persistence of
inefficient states. The society consists of rich and poor individuals. The rich are initially in power, but expect to transition to democracy, which will choose redistributive policies. Taxation requires the employment of bureaucrats. We show that, under certain circumstances, by choosing an inefficient state structure,
the rich may be able to use patronage and capture democratic politics. This enables them to reduce the amount of redistribution and public good provision in democracy. Moreover, the inefficient state creates its own constituency and tends to persist over time. The model shows that an equilibrium with an inefficient state is more likely to arise when there is greater inequality between the rich and the poor, when bureaucratic rents take intermediate values and when individuals are sufficiently forward-looking. | | | | | | 10-04-2006 |
Predatory States and Failing States: An Agency Perspective
by Avinash Dixit
| In any non-trivial state, policies decided at the top levels of government are administered by middle-level bureaucrats. I examine whether this agency problem can contribute to explaining state failure in matters of provision of public goods. I find some theoretical arguments to support the view that failure is more likely in states whose top rulers have predatory motives. When the bureaucrats' cost of providing the public good is their private information, rulers must give them incentive rents to achieve truthful revelation. Predatory rulers are less willing to part with such rents; therefore they tolerate more downward distortion in the provision of public goods to reduce the required rent-sharing. When the bureaucrats' actions are also unobservable, there is a synergistic interaction between more benevolent rulers and more caring or professional bureaucrats. However, these effects manifest themselves differently and to different degrees under different conditions of information. Therefore precise explanations or predictions in individual instances require context-specific analyses.
| | | | | | 10-04-2006 |
Voting as a Credible Threat.
by John Londregan and Andrea Vindigni
| We offer a rationale for elections that take place in the shadow of power. Factions unhappy with policy can threaten violence. But when they lack common knowledge about (i) one another's rationality, and(ii) their chances of victory at arms, then mutual overconfidence can precipitate civil war. We argue that elections can clarify the likely consequences of violence, and so facilitate peaceful resolution. Our theory is based on the recognition that both voting and fighting are intrinsically correlated actions: individuals who undertake the individually irrational act of voting are unusually prone the individually irrational act of voluntary combat.
| | | | | | 03-31-2006 |
Secrecy and War: The Origins of Private Information
by Adam Meirowitz and Anne Sartori
| This paper shows why states, acting in their own self-interest, may create informational asymmetries that lead to war.
In our model, two actors with no private information invest in military capacity before engaging in crisis bargaining.
If bargaining fails, the states go to war, and the payoffs of a war depend on the two states' military capacities. We
show that the states have incentives to keep each other guessing about their exact levels of capacity -- even though
doing so creates the risk of war. Thus, self interest and strategy are to blame for war. Our paper explains two stylized
facts: States devote considerable resources to secrecy in the national-security realm, and often disagree about the
balance of capabilities. | | | | | | 03-13-2006 |
The Swing Voter’s Curse in the Laboratory
by Marco Battaglini, Rebbeca Morton, and Thomas Palfrey
| This paper reports the first laboratory study of the swing voter’s curse and provides
insights on the larger theoretical and empirical literature on "pivotal voter" models. Our
experiment controls for different information levels of voters, as well as the size of the
electorate, the distribution of preferences, and other theoretically relevant parameters.
The design varies the share of partisan voters and the prior belief about a payoff relevant
state of the world. Our results support the equilibrium predictions of the Feddersen-
Pesendorfer model, and clearly reject the notion that voters in the laboratory use naive
decision-theoretic strategies. The voters act as if they are aware of the swing voter’s curse
and adjust their behavior to compensate. While the compensation is not complete and
there is some heterogeneity in individual behavior, we find that aggregate outcomes, such
as efficiency, turnout, and margin of victory, closely track the theoretical predictions. | | | | | | 10-04-2005 |
Local Public Goods Provision: Voting, Peer Effects, and Mobility
by Stephen Calabrese, Dennis Epple, Thomas Romer, and Holger Sieg
| Few empirical strategies have been developed that investigate public provision under majority
rule while taking explicit account of the constraints implied by mobility of households.
The goal of this paper is to improve our understanding of voting in local communities when
neighborhood quality depends on peer or neighborhood effects. We develop a new empirical
approach which allows us to impose all restrictions that arise from locational equilibrium
models with myopic voting simultaneously on the data generating process. We can then
analyze how close myopic models come in replicating the main regularities about expenditures,
taxes, sorting by income and housing observed in the data. We find that a myopic
voting model that incorporates peer effects fits all dimensions of the data reasonably well. | | | | | | 09-20-2005 |
Communication and Bargaining in the Spatial Model
by Adam Meirowitz
| This paper studies collective choice by participants possessing private information about the consequences of policy decisions in policymaking institutions that involve cheap-talk communication and bargaining. The main result establishes a connection between the extent to which problems of this type posses fully-revealing equilibria that select policies in the full information majority rule core (when it is well-defined) and the extent to which a fictitious sender-receiver game possesses a fully revealing equilibria. This result allows us to extend Banks and Duggan's (2000) core equivalence results to the case of noisy policymaking environments with private information when some combination of nonexclusivity and preference alignment conditions are satisfied. | | | | | | 09-19-2005 |
Efficiency, Equity, and Timing in Voting Mechanisms
by Marco Battaglini, Rebecca Morton, and Thomas Palfrey
| We compare the behavior of voters, depending on whether they operate under
sequential and simultaneous voting rules, when voting is costly and
information is incomplete. In many real political institutions, ranging
from small committees to mass elections, voting is sequential, which allows
some voters to know the choices of earlier voters. For a stylized model,
we characterize the equilibria for this rule, and compare it to simultaneous
voting, and show how these equilibria vary for different voting costs.
This generates a variety of predictions about the relative efficiency and
equity of these two systems, which we test using controlled laboratory
experiments. Most of the qualitative predictions are supported by the
data, but there are significant departures from the predicted equilibrium
strategies, in both the sequential and simultanous voting games. We find a
tradeoff between information aggregation, efficiency, and equity in
sequential voting: a sequential voting rule aggregates information
better, and produces more efficient outcomes on average, compared to
simultaneous voting, but sequential voting leads to significant inequities,
with later voters benfitting at the expense of early voters.
| | | | | | 09-19-2005 |
Minorities and Storable Votes
by Alessandra Casella, Thomas Palfrey, and Raymond Riezman
| The paper studies a simple voting system that has the potential to increase
the power of minorities without sacrificing aggregate efficiency. The storable votes mechanism grants each voter a stock of votes to spend as desired over a
series of binary decisions. By accumulating votes on issues that it deems
most important, the minority can win occasionally. But because the majority
typically can outvote it, the minority wins only if its strength of
preference is high and the majority's strength of preference is low. The
result is that with storable votes, aggregate efficiency either falls little
or in fact rises. The theoretical predictions of our model are confirmed by
a series of experiments: the frequency of minority victories, the relative
payoff of the minority versus the majority, and the aggregate payoffs all
match the theory.
| | | | | | 09-19-2005 |
The Paradox of Voter Participation? A Laboratory Study
by David Levine and Thomas Palfrey
| It is widely believed that rational choice theory is grossly inconsistent
with empirical observations about voter turnout. We report the results
of an experiment designed to test the voter turnout predictions of
the rational choice Palfrey-Rosenthal model of participation with
asymmetric information. We find that the three main comparative statics
predictions are observed in the data: the size effect, whereby turnout
goes down in larger electorates; the competition effect, whereby turnout
is higher in elections that are expected to be close; and the underdog
effect, whereby voters supporting the less popular alternative have
higher turnout rates. We also compare the quantitative magnitudes
of turnout to the predictions of Nash equilibrium. We find that there
is under-voting for small electorates and overvoting for large electorates,
relative to Nash equilibrium. These deviations from Nash equilibrium
are consistent with the logit equilibrium, which provides a good fit
to the data.
| | | | | | 09-03-2005 |
Time Consistency of Fiscal and Monetary Policy: A Solution
by Mats Persson, Torsten Persson, and Lars Svensson
| This paper demonstrates how time consistency of the Ramsey policy -- the optimal fiscal and monetary policy under commitment -- can be achieved. Each government should leave its successor with a unique maturity structure for the nominal and indexed debt, such that the marginal benefit of a surprise inflation exactly balances the marginal cost. Unlike in earlier papers on the topic, the result holds for quite a general Ramsey policy, including timevarying polices with positive inflation and positive nominal interest rates. We compare our results with those in Persson, Persson, and Svensson (1987), Calvo and Obstfeld (1990), and Alvarez, Kehoe, and Neumeyer (2004). | | | | | | 08-15-2005 |
Inequality, Technology, and the Social Contract
by Roland Bénabou
| The distribution of human capital and income lies at the center of a nexus of forces that shape a country’s
economic, institutional and technological structure. I develop a unified model to analyze these interactions
and their growth consequences. First, I identify the key factors
that make both European-style “welfare state” and US-style “laissez-faire” social contracts sustainable. I also compare the growth rates of these two politico-economic steady states, which are not Pareto-rankable.
Second, I examine how technological evolutions affect the set of redistributive institutions that can be
durably sustained, showing how skill-biased technical change may cause the welfare state to
unravel. Third, I model the endogenous determination of technology or organizational form that results
from firms’ tailoring the flexibility of their production processes to the distribution of workers’ skills. Fourth, I examine how institutions also shape the course of
technology; thus, a world-wide shift in the technology frontier results in different evolutions of production
processes and skill premia across countries with different social contracts. Finally, I ask what joint configurations
of technology, inequality and redistributive policy are feasible in the long run, when all three
are endogenous. I show how the diffusion of technology leads to the “exporting” of inequality
across borders; and how this, in turn, generates spillovers between social contracts that make it more
difficult for nations to maintain distinct institutions and social structures.
| | | | | | 08-15-2005 |
Belief in a Just World and Redistributive Politics
by Roland Bénabou and Jean Tirole
| International surveys reveal wide differences between the views held in different countries
concerning the causes of wealth or poverty and the extent to which people are responsible for
their own fate. At the same time, social ethnographies and experiments by psychologists demonstrate
individuals’ recurrent struggle with cognitive dissonance as they seek to maintain, and
pass on to their children, a view of the world where effort ultimately pays off and everyone
gets their just deserts. This paper offers a model that helps explain: i) why most people feel
such a need to believe in a “just world”; ii) why this need, and therefore the prevalence of the
belief, varies considerably across countries; iii) the implications of this phenomenon for international
differences in political ideology, levels of redistribution, labor supply, aggregate income,
and popular perceptions of the poor. The model shows in particular how complementarities
arise endogenously between individuals’ desired beliefs or ideological choices, resulting in two
equilibria. A first, “American” equilibrium is characterized by a high prevalence of just-world
beliefs among the population and relatively laissez-faire policies. The other, “European” equilibrium
is characterized by more pessimism about the role of effort in economic outcomes and
a more extensive welfare state. More generally, the paper develops a theory of collective beliefs
and motivated cognitions, including those concerning “money” (consumption) and happiness,
as well as religion. | | | | | | 08-11-2005 |
Economic Inequality and Political Representation
by Larry Bartels
| I examine the differential responsiveness of U.S. senators to the preferences of wealthy, middle-class, and poor constituents. My analysis includes broad summary measures of senators’ voting behavior as well as specific votes on the minimum wage, civil rights, government spending, and abortion. In almost every instance, senators appear to be considerably more responsive to the opinions of affluent constituents than to the opinions of middle-class constituents, while the opinions of constituents in the bottom third of the income distribution have no apparent statistical effect on their senators’ roll call votes. Disparities in representation are especially pronounced for Republican senators, who were more than twice as responsive as Democratic senators to the ideological views of affluent constituents. These income-based disparities in representation appear to be unrelated to disparities in turnout and political knowledge and only weakly related to disparities in the extent of constituents’ contact with senators and their staffs. | | | | | | 08-10-2005 |
Party Discipline and Pork-Barrel Politics
by Gene Grossman and Elhanan Helpman
| Polities differ in the extent to which political parties can pre-commit to carry out promised policy actions if they take power. Commitment problems may arise due to a divergence between the ex ante incentives facing national parties that seek to capture control of the legislature and the ex post incentives facing individual legislators, whose interests may be more parochial. We study how differences in "party discipline" shape fiscal policy choices. In particular, we examine the determinants of national spending on local public goods in a three-stage game of campaign rhetoric, voting, and legislative decision-making. We find that the rhetoric and reality of pork-barrel spending, and also the efficiency of the spending regime, bear a non-monotonic relationship to the degree of party discipline. | | | | | | 08-09-2005 |
Inefficiency in Legislative Policy-Making: A Dynamic Analysis
by Marco Battaglini and Stephen Coate
| This paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining.
The policy space incorporates both productive and distributive public spending and distortionary taxation. The productive spending is investing in a public good that benefits all citizens (e.g., national defense or air
quality) and the distributive spending is district-specific transfers (e.g., pork barrel spending). Investment in the public good creates a dynamic linkage across policy-making periods. The analysis explores the dynamics of legislative policy choices, focusing on the efficiency of the steady state level of taxation and allocation of tax revenues. The model sheds new light on the efficiency of legislative policy-making and has a number of novel positive implications. | | | | | | 03-28-2005 |
Deliberative Democracy or Market Democracy: Designing Institutions to Aggregate Preferences and Information
by Adam Meirowitz
| I consider the design of policy making institutions to aggregate preferences and information. The mechanism design approach makes it possible to consider a large set of institutions or game forms in which participants take observable actions prior to voting. A pervasive incentive problem is found; participants that expect to have the minority preference type will have an incentive to misrepresent their information. Consequentially, if some policy relevant information is observed by fewer than three individual participants and ideological types are not highly correlated no institution can fully aggregate the information and preferences without distributing transfers. Contrary to conventional wisdom, diversity may hurt deliberation as the incentives for information transmission are worse in groups with heterogenous sources of information or low levels of ideological correlation. Institutions that distribute transfers conditional on either the validity of agent reports of facts (like information markets), or the frequency of each type of report (like clubs) can truthfully implement the full information majority rule core policy. Overall, expectations of full information and preference aggregation with strategic participants require either strong correlation of preferences, the presence of external interests to structure incentives or information structures in which each piece of information is observed by several participants. | | | | | | 12-21-2004 |
A Protectionist Bias in Majoritarian Politics
by Gene Grossman and Elhanan Helpman
| We develop a novel model of campaigns, elections, and policymaking in which the
ex ante objectives of national party leaders differ from the ex post objectives of elected
legislators. This generates a distinction between “policy rhetoric” and “policy reality”
and introduces an important role for “party discipline” in the policymaking process. We
identify a protectionist bias in majoritarian politics. When trade policy is chosen by the
majority delegation and legislators in the minority have limited means to influence choices,
the parties announce trade policies that favor specific factors, and the expected tariff or
export subsidy is positive. Positions and expected outcomes monotonically approach free
trade as party discipline strengthens. | | | | | | 05-19-2004 |
Sequential Voting with Abstention
by Marco Battaglini
| Dekel and Piccione (2000) have proven that information cascades do not
necessarily affect the properties of information aggregation in sequential
elections: under standard conditions, any symmetric equilibrium of a
simultaneous voting mechanism is also an equilibrium of the correspondent
sequential mechanism. We show that when voters can abstain, these results
are sensitive to the introduction of an arbitrarily small cost of voting:
the set of equilibria in the two mechanisms are generally disjoint; and the
informative properties of the equilibrium sets can be ranked. If an
appropriate q-rule is chosen, when the cost of voting is small the unique
symmetric equilibrium of the simultaneous voting mechanism dominates all
equilibria of the sequential mechanism. | | | | | | 04-06-2004 |
In Defense of Exclusionary Deliberation: Communication and Voting with Private Beliefs and Values
by Adam Meirowitz
| Fundamentally, deliberative democracy is an institution in which participants communicate and then vote. We analyze strategic behavior in this type of institution when agents do not necessarily have common beliefs and values. The potential for some pairs of participants to have diametrically opposed preferences makes it difficult to support equilibria in which participants truthfully reveal their private information. Nonetheless, truthful equilibria are shown to exits for some (but not all) parameterizations in which non-common values are likely. Truthful equilibria exist if and only if participants of all possible preference types believe that it is likely that a majority of the others share their preference type. Even when truthful equilibria fail to exist, the probability that the collective choice corresponds to that which a majority would choose, with full-information, approaches one as population size tends to infinity. Despite this limiting efficiency, larger groups need not outperform smaller groups as truthful equilibria are easier to support with small deliberative bodies. The design of deliberative institutions to aggregate information involves a trade-off between the statistical benefit of more participants and the strategic problems associated with information transmission in larger settings without common values. For many reasonable parameterizations, the latter effect is dominant and excluding randomly chosen participants is desirable. | | | | |
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