Strategic compromise,policy bundling and interest group power: Theory and evidence on education policy

Policy reforms are often multifaceted. In the rent-seeking literature policies are usually taken as one-dimensional. This paper models policy formation using a political contest with endogenous policy proposals containing two dimensions, e.g. access and quality of education. The two dimensions provide an opportunity to trade off one policy over another to make the lobbying opposition less aggressive. In a first stage, the government proposes a reform over the two policies, and in a second stage engages in a contest with an interest group over the enactment of the proposed reform. As a result, the government makes a compromise, under-proposing in the policy the interest group opposes and over-proposing in the policy the interest group desires. Effectively, there will be strategic bundling of desired policies with undesired ones in an attempt to increase enactment probability and overall utility. We study this prediction empirically using a newly complied dataset on education legislation in the states of California, Illinois and Texas. Results suggest that stronger opposition is associated with less quality reforms. Moreover, as predicted by the model, when bundling access reforms together with quality, the negative effect is counteracted.     

“Core” and “Periphery” in a Monetary Union: A Macroeconomic Policy Game

We develop a dynamic game model of a two-country monetary union to study strategic interactions between macroeconomic policy makers, namely the central bank and governments. In this union, the governments of participating countries pursue national goals when deciding on fiscal policies, whereas the common central bank’s monetary policy aims at union-wide objective variables. The union considered is asymmetric, consisting of a core, with lower initial public debt, and a periphery, with higher initial public debt. For a symmetric demand shock, we derive numerical solutions of the dynamic game between the governments and the central bank using the OPTGAME algorithm. We show that mildly active cooperative countercyclical policies dominate noncooperative solutions and a scenario of no policy intervention. Optimal policies call for a brief expansionary action to bolster the effects on output and a return to a small fiscal primary surplus as soon as the crisis is over until the targeted level of public debt is reached.     

Endogenous Public Policy, Politicization and Welfare

In the two–stage political–economic game that we study public policy is the outcome of the interaction between interest groups and a two–tier government. Implementation of a policy proposed by a bureaucrat requires approval by an elected politician. The objective function of the bureaucrat hinges on the weight assigned to social welfare relative to the rent–seeking outlays of the interest groups. This weight represents the degree of politicization of the government. Our main result is that, in contrast to common belief, increased politicization need not adversely affect the public well–being.     

碳排放配额政策的环境效应和贸易效应研究

基于不完全市场竞争理论,构建了两个对称国家碳排放配额政策选择与企业碳减排选择的两阶段博弈模型,运用逆向求解法求得了均衡解,并通过进一步分析碳排放许可证政策、碳排放配额许可交易政策和许可交易碳排放权合作政策的福利效应,得出了两国政府碳排放配额政策选择的激励相容条件和参与约束条件,确定了全局稳定均衡最优解及其条件;此外,还分析了两国政府碳排放许可证政策、碳排放配额许可交易政策和许可交易碳排放权合作政策的环境效应和贸易效应。结果表明：从福利效应来看,许可交易碳排放权合作政策是全局稳定最优解,可以资源的有效配置,实现Pareto改进;从环境效应来看,许可交易碳排放权合作政策也是严格占优的,有助于减少各国和全球净污染排放量;从贸易效应来看,碳排放配额许可交易政策好于许可交易碳排放权合作政策。因此,北-北型对称国家会优先选择许可交易碳排放权合作政策,南一南型对称国家在一定时期内仍然会优先选择碳排放配额许可交易政策,南-南或北-北型对称国家之间容易实现碳排放政策合作,实现全球环境合作还有待时日。     

政策组合能否促进民参军企业协同创新——基于演化博弈的数值仿真视角

军民科技协同创新是构建军民一体化国家战略体系和能力的重要内容,营造良好的政策环境是推进军民科技协同创新的重要方式。以民参军企业、科研院所和政府为博弈主体构建三方博弈演化模型,通过系统分析政策支持对博弈主体策略选择的影响过程,利用Matlab数值仿真分析不同政策及政策组合支持对民参军企业与科研院所协同创新的影响。结果表明,政府对不同创新主体应采用不同组合政策支持,直接政策与间接政策对鼓励民参军企业开展协同创新更加有效,营造良好的创新环境有利于科研院所选择协同创新策略;政府需要采用合理的政策组合支持军民协同创新,中强度的直接与间接政策以及低强度的创新环境政策组合相较单一政策支持对民参军企业与科研院所协同创新更有效。     

A BARGAINING THEORY OF INEFFICIENT REDISTRIBUTION POLICIES*

When two policies are available to achieve the same goal why is the relatively inefficient one often observed? We address this question in the context of policies used to redistribute income towards special interest groups (SIGs) where in the first stage the constraints on policy instruments are chosen and in the second the government bargains with SIGs over the level of the available policies. Restrictions on the use of efficient policies and the use of inefficient ones reduce the surplus over which SIGs and governments can bargain but it also improves the government's bargaining position thus increasing its share of the surplus. The positive effect for the government dominates under plausible conditions. Inefficient policies are the equilibrium outcome under alternative policy selection mechanisms, e.g., election of policymakers and bargaining between SIGs and the government. The model also explains the coexistence of transfer policies. Moreover, we show why a weak government is more likely to choose the inefficient transfer and discuss how this result may be tested.     

The Trojan-Horse Principle in Development Assistance: A Reading of Uganda's Experience with Aid

The World Bank recommends “ideas, not money” as a guiding principle to donors for dealing with badly governed countries. This paper challenges that principle on the basis of a study of the evolution in Uganda of pro‐growth policies in the early to mid 1990s and pro‐poor policies in the late 1990s. The analysis of Uganda’s experience with aid is accommodated within the theoretical framework of a principal–agent conditionality game, in which policy objectives of the recipient (the agent) evolve over time. The key finding of the paper is that the apparent conditionality failure of the period 1987–91 has paved the way for later reform. Financial aid given during this period suspended the necessity of reforms and bought donor proximity to recipient policy deliberations, as a result of both of which the policy learning could take place that led to later successful reform measures.     

Further evidence on monetary and fiscal policy coordination

The extent to which fiscal and monetary policies respond to inflation and unemployment and the degree to which policy makers coordinate their policies have important implications for their usefulness as instruments of economic stabilization. Using a framework of minimizing a policy maker's loss function, subject to the state of the economy, this paper tests for the joint determination of monetary and fiscal policies. Our results show that the pre-Reagan/Bush and pre-Volcker/Greenspan eras can be characterized by a noncooperative game between the two policies. For the Reagan/Bush and Volcker/Greenspan regimes, our results are consistent with a cooperative game in which fiscal policy dominates and monetary policy accommodates. Our results also have implications for the possibility of future cooperation by policy makers.Financial support from Southwest Texas State University and DePaul University is gratefully acknowledged.     

Multilateral institutions for international economic policy coordination: bargaining vs voting

We study a world economy where worldwide policy coordination is essential to optimally stabilize unfavorable common supply shocks. We develop a two-stage game to investigate how to implement the first-best response to these shocks via a multilateral institution, whose board of directors is composed of a representative per each member country. In a first stage, national governments nominate their representatives on the board. In a second stage, the board collectively chooses stabilization policies. We compare the relative merits of two collective choice mechanisms – bargaining and majority voting – in avoiding manipulation of the cooperative agreement through the strategic nomination of national representatives.     

International R&D Rivalry with Spillovers and Policy Cooperation in R&D Subsidies and Taxes

Abstract

We have investigated non-cooperative and jointly optimal R&D policies in the framework of Spencer & Brander (1983) in the presence of R&D spillovers. When R&D activities are strategic substitutes and the R&D game exhibits a positive externality, the result of Spencer & Brander (1983) reverses: the non-cooperative policy is a tax while the jointly optimal policy is a subsidy. Moreover, when R&D activities are strategic complements, the usual result of the prisoners' dilemma in the strategic subsidy game does not hold, implying that a welfare intervention is preferable over laissez-faire. When spillovers are sufficiently large, the joint welfare increases with subsidies being higher than those under non-cooperation.     

COMMITTEES AS SUBSTITUTES FOR COMMITMENT*

In this article, policies are negotiated in a committee by playing a dynamic voting game with an endogenous default (or status quo) policy. I show that joining a committee by maintaining a strong agenda setting power is a way for a decision maker to commit to a policy that in absence of committees is not time consistent. The disciplinary role of the endogenous status quo and the heterogeneity of preferences within the committee are two crucial ingredients to obtain this result. As a motivating example, this article focuses on the time consistency of monetary policy.     

Dynamic legislative policy making

We prove existence of stationary Markov perfect equilibria in an infinite-horizon model of legislative policy making in which the policy outcome in one period determines the status quo for the next. We allow for a multidimensional policy space and arbitrary smooth stage utilities, and we assume preferences and the status quo are subject to arbitrarily small shocks. We prove that equilibrium continuation values are differentiable and that proposal strategies are continuous almost everywhere. We establish upper hemicontinuity of the equilibrium correspondence, and we provide weak conditions under which each equilibrium of our model determines an aperiodic transition probability over policies. We establish a convergence theorem giving conditions under which the invariant distributions generated by stationary equilibria must be close to the core in a canonical spatial model. Finally, we extend the analysis to sequential move stochastic games and to a version of the model in which the proposer and voting rule are determined by play of a finite, perfect information game.     

地方政府与污染企业动态博弈分析

近年来,中央和地方政府相继出台了一系列保护环境的激励政策和相关措施,但效果并不理想。人口的压力,资源的短缺,环境的胁迫,生态的危机,这一系列的世界性问题,已经成为21世纪中国乃至世界急需考虑并解决的问题。为了实现经济与环境的可持续发展,近年来,中央和地方政府相继出台了一系列保护环境的激励政策和相关措施,但由于外部性和公共产品属性等因素的存在,环境治理过程中存在市场失灵。为了探求这一现象背后的原因,本文利用博弈论的分析方法进一步考虑财政补贴、税收、罚金等系数对企业支付函效的影响,在更为一般的条件下分别建立政府监管部门和企业的完全信息条件下静态博弈模型和无限阶段重复博弈模型,并且讨论了多种因素对局中人的影响,并导出企业的最优策略和纳什均衡解,以揭示环境治理政策设计的经济机理和提出优化我国节能减排政府政策设计的一系列政策建议,旨在为提高我国节能减排政府政策设计的效果提供理论论证和现实见解。     

Research joint ventures in an international economy

D'Aspremont and Jacquemin's model is extended to study alternative configurations of research agreements in a two-country integrated world economy. Under unambiguous conditions on spillovers, we show that: (1) allowing national firms to cooperate in research and development (R&D) confers them an advantage over foreign rivals, an effect similar to R&D subsidies. (2) In a policy game, each government would allow national cooperative agreements. (3) Contrary to other trade policies which lead to a “prisoners' dilemma” result, welfare in both countries increases when they both allow R&D cooperation. (4) Welfare is even higher if a generalized (international) coalition is formed.     

Independence Before Conservatism: Transparency, Politics and Central Bank Design

Abstract. The problem of monetary policy delegation is formulated as a two‐stage game between the government and the central bank. In the first stage the government chooses the institutional design of the central bank. Monetary and fiscal policy are implemented in the second stage. When fiscal policy is taken into account, there is a continuum of combinations of central bank independence and conservatism that produce optimal outcomes. This indeterminacy is resolved by appealing to practical considerations. In particular, it is argued that full central bank independence facilitates the greatest degree of policy transparency and political coherence.     

城市户籍改革的经济学考量——基于博弈论框架的分析

我国户籍制度改革的进程表现为由中央政府、地方政府、外来流动人口和城市市民多个利益集团组成的多方博弈过程,而最终的政策趋向取决于博弈各方对各种权利、资源、政策干预力量等因素的掌握,而各利益相关方支持还是反对改革的主张取决于各方对成本收益的考量。     

THE NON‐TRADED SECTOR,LOBBYING, AND THE CHOICE BETWEEN THE CUSTOMS UNION AND THE COMMON MARKET

This paper models immigration policy as the outcome of political competition between interest groups representing individuals employed in different sectors. In standard positive theory, restrictive immigration policy results from a low‐skilled median voter voting against predominantly low‐skilled immigration. In the present paper, in contrast, once trade policies are liberalized, restrictive immigration policy results from anti‐immigration lobbying by interest groups representing the non‐traded sectors. It is shown that this is in line with empirical regularities from recent episodes of restrictive immigration legislation in the European Union. It is further shown that if governments negotiate bilaterally over trade and migration policy regimes, the equilibrium regime depends (i) on the sequencing of the international negotiation process and (ii) on the set of available trade and migration policy regimes. In particular, the most comprehensive and most welfare‐beneficial type of liberalization may be rejected only because a less comprehensive type of liberalization is available.     

The Nonequivalence of Import and Export Quotas in Strategic Equilibrium

The authors use a standard general‐equilibrium trade model to show that export and import policies are not symmetric in the equilibrium of a strategic game with quotas. It is assumed that N (identical) large countries, without cooperation, set their import (or export) quotas to maximize domestic welfare. It is shown that the equilibrium in which all countries use import quotas differs from, and is superior to, the equilibrium in which countries use export quotas. The difference arises because the elasticity of the residual foreign export supply schedule differs between the two equilibria. The authors also study the properties of the sequential equilibrium of the game. In a simultaneous‐move game, each country is indifferent as to whether it uses an import or export quota, given the policy of the other country. However, in a sequential‐move game, the first mover will prefer to use an import quota rather than an export quota.     

应对新冠疫情冲击的货币政策国际协调

新冠疫情冲击了世界经济增长和金融市场稳定。很多国家推出极度宽松货币政策应对危机。从经典货币政策国际协调的博弈理论来看,应对本次疫情冲击的各国货币政策协调性不足,“以邻为壑”的非合作均衡效果明显。为数不多的货币政策协调也存在执行力不足、深度与广度不够、新兴市场国家话语权低等问题。在世界经济紧密联系、货币政策溢出效应加强的背景下,为了应对疫情冲击,国际组织需要创设协议和合作剩余分配机制,寻找货币政策刺激效果和防止国际资产泡沫之间的平衡,加强政策沟通和信息共享,提高新兴市场国家话语权,建设有效的应对危机的货币政策国际协调机制。中国应在“一带一路”倡议的框架下建立长期货币政策协调机制,在现有的IMF和G20等平台上发挥发达国家与新兴市场国家之间的协调桥梁作用,通过持续开展央行间技术性合作等措施参与和推进协调进程。     

A note on trade liberalization and common pool resources

Abstract.  When countries share access to a common resource stock, optimal management is based on strategic considerations. We develop a general equilibrium model and show that regulatory policies are strategic substitutes under autarky. Trade liberalization not only changes relative prices, but may change the qualitative nature of the game between jurisdictions. In the small country case with exogenous prices, regulatory policies become strategic complements. In the context of a two‐country model, policies remain strategic substitutes but the factors that drive policy changes differ from those under autarky and the small country case. The implications for conservation and resource management are discussed.