Green Polities: Urban Environmental Performance and Government Popularity

Ascertaining whether local election results are driven by incumbents' performance while in office or mechanically reflect constituencies' ideological affiliation and macroeconomic conditions is crucial for evaluating the alleged accountability‐enhancing property of decentralization. On the basis of a unique score of urban environmental performance and the results of all elections held in the major Italian cities over a decade, we investigate the role of local (fiscal and environmental) vs. national issues in municipal elections. Although the empirical evidence points to a strong ideological attachment and a somewhat weaker “fiscal conservatism,” it reveals that media reported environmental rankings have an impact on the popularity of city governments.     

Estimating global bank network connectedness

We use LASSO methods to shrink, select, and estimate the high‐dimensional network linking the publicly traded subset of the world's top 150 banks, 2003–2014. We characterize static network connectedness using full‐sample estimation and dynamic network connectedness using rolling‐window estimation. Statically, we find that global bank equity connectedness has a strong geographic component, whereas country sovereign bond connectedness does not. Dynamically, we find that equity connectedness increases during crises, with clear peaks during the Great Financial Crisis and each wave of the subsequent European Debt Crisis, and with movements coming mostly from changes in cross‐country as opposed to within‐country bank linkages.     

A piecewise linear model of credit traps and credit cycles: a complete characterization

We reconsider a regime-switching model of credit frictions which has been proposed in a general framework by Matsuyama for the case of Cobb–Douglas production functions. This results in a piecewise linear map with two discontinuity points and all three branches having the same slope. We offer a complete characterization of the bifurcation structure in the parameter space, as well as of the attracting sets and related basins of attraction in the phase space. We also discuss parameter regions associated with overshooting, leapfrogging, poverty traps, reversal of fortune and growth miracle, as well as cycles with any kind of switching between the expansionary and contractionary phases.     

Environmental liability and the capital structure of firms

This paper analyses the impact of environmental liability regimes on the capital structure of firms. We show that imposing environmental liability only on polluting firms, with limited liability, increases use of bank debt. Extending environmental liability to banks lowers bank borrowing relative to liability only on firms, with an ambiguous effect relative to no liability. Using US industry-level data we estimate a reduced-form model of bank borrowing by firms and show that the introduction of environmental liability only on firms increased bank borrowing by 15–20%, but when liability was extended to banks, borrowing returned to a level slightly higher than with no liability.     

Do we now collect any revenue from taxing capital income?

The U.S. income tax system has long been recognized as a hybrid of an income and consumption tax system, with elements that do not fit naturally into either pure system. What it actually is has important policy implications for, among other things, understanding the impact of moving closer to a pure consumption tax regime. In this paper, we examine the nature of the U.S. income tax system by calculating the revenue and distributional implications of switching from the current system to one form of consumption tax, a modified cash flow tax.     

The structure of bias in peer voting systems: lessons from the Eurovision Song Contest

This paper assesses whether and how common characteristics of jury members or peer voters affect the outcomes of voting systems. In particular, we analyze to what extent these common features result in voting bias. We take as a case study the Eurovision Song Contest for which an extensive amount of historical data is available. In contrast to earlier studies we analyze the impact of common factors on the bias individually for each country, which is necessary to substantiate the publicly debated accusations of regional block voting by certain groups of countries. We establish strong evidence for voting bias in the song contest on the basis of geography, even after correction for culture, language, religion and ethnicity. However, these effects do generally not correspond to the usual accusations. We believe that our findings extend to all instances where groups of jury members or peer voters share certain common factors, which may cause voting bias. It is important to identify such structures explicitly, as it can help avoiding bias in the first place. The authors are grateful to Marieke van Dijk for excellent research assistance and to Laurens Swinkels, Ieva Pudane, Gijsbert van Lomwel, Jelena Stefanovic, and Bas van den Heuvel for useful comments. The usual disclaimer applies.     

Motives for sharing in social networks

What motivates people in rural villages to share? We first elicit a baseline level of sharing using a standard, anonymous dictator game. Then using variants of the dictator game that allow for either revealing the dictator's identity or allowing the dictator to choose the recipient, we attribute variation in sharing to three different motives. The first of these, directed altruism, is related to preferences, while the remaining two are incentive-related (sanctions and reciprocity). We observe high average levels of sharing in our baseline treatment, while variation across individuals depends importantly on the incentive-related motives. Finally, variation in measured reciprocity within the experiment predicts observed ‘real-world’ gift-giving, while other motives measured in the experiment do not predict behavior outside the experiment.     

IMF concern for reputation and conditional lending failure: Theory and empirics

In this paper we suggest that the dual role played by the IMF, as a creditor and as a monitor of economic reforms, might explain the lack of credibility of the Fund threat of sanctioning non-compliance with conditionality. Specifically, we show that the IMF's desire to preserve its reputation as a good monitor may distort its lending decisions towards some laxity. Moreover, such distortionary incentives may be exacerbated by the length of the relationship between a country and the Fund. Estimating a dynamic panel of 53 middle-income countries, for the period 1982–2001, we find that a longer relationship does increase IMF disbursements.