Evaluating the median voter model’s explanatory power

We match individual senators’ voting behavior on legislative proposals with 24 real referendum decisions on exactly the same issues with identical wording. This setting allows us to evaluate the median voter model’s quality with revealed constituents’ preferences. Results indicate a limited explanatory power of the median voter model: It explains 17.6% points more than random voting and that a senator’s probability to accept a proposal in parliament increases on average by 8.4% points when the district median voter accepts the proposal.     

Sequential voting with abstention

Dekel and Piccione [2000. Sequential voting procedures in symmetric binary elections. J. Polit. Economy 108, 34–55] 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.     

A note on comparative downside risk aversion

We provide comparative global conditions for downside risk aversion, which are similar to the ones studied by Ross for risk aversion. We define a coefficient of downside risk aversion, and study its local properties.     

ON THE EMERGENCE OF TOYBOYS: THE TIMING OF MARRIAGE WITH AGING AND UNCERTAIN CAREERS*

We explore how gender bias in career opportunities affects matching in a marriage market with search frictions and where an individual’s fitness decays with age. We document a “being left on the shelf” effect where young singles, who find the marriage market rapidly thins with age, rush into early partnership. Singles with stronger career opportunities, however, have a greater option value to defer marriage. More equal career opportunities for women (captured by greater schooling and better occupations) potentially explain the recent emergence of toyboy unions, in which the woman is at least 5 years older than her partner.     

Shaping buyer–supplier relationships in manufacturing contexts: Design and test of a contingency model

Although the idea that buyer–supplier partnerships can yield considerable benefits to firms is largely diffused among researchers and practitioners, the approach adopted in this paper is that no “one best way” exists in buyer–supplier relationships, but rather a “best way” for each specific exchange context. Hence, this paper proposes a contingency model for shaping and managing buyer–supplier relationships in manufacturing contexts. In order to test the model, an empirical study was performed on a sample of 45 buyer–supplier relationships within the Italian white goods industry. A three-dimensional performance indicator was computed to compare supplier performance achieved within relations matching the model's suggestions with those set differently. The results strongly suggest that suppliers involved in relationships set accordingly to the contingency model are likely to enjoy superior performance.     

Economic Openness and Fiscal Multipliers*

Recent empirical findings attribute a central role to the degree of economic openness to determine the size of the fiscal multiplier. See, for instance, Ilzetzki et al. (2013) [How big (small?) are fiscal multipliers? Journal of Monetary Economics, 60(2), 239–254]. However, traditional macroeconomic models have difficulties to account for this evidence. By introducing ‘deep-habit’ formation into a New Keynesian small open economy model, this paper provides a theoretical framework which is able to attest for the new empirical evidence. Deep habits give rise to counter-cyclical firm markups, which are crucial to generate effects of openness on the fiscal multiplier as found in the data. We study three dimensions of economic openness: exchange rate flexibility, trade openness, and capital mobility. In line with the empirical findings, we report a negative relationship between measures of economic openness and the fiscal multiplier.     

Equalizing tax bases or tax revenues under tax competition? The role of formula apportionment

This paper contributes to the literature on fiscal equalization and corporate tax competition. The innovation is that we explicitly model multinational enterprises and a corporate tax system that is designed according to formula apportionment. Two main results are obtained. First, in contrast to previous studies we identify cases where tax revenue equalization is better in mitigating detrimental tax competition than tax base equalization. Second, tax base equalization nevertheless has the advantage that it may render tax rates efficient, depending on the shape of the apportionment formula. A pure payroll formula does not ensure efficiency, but a back‐of‐the‐envelope calibration of our model to Canadian provinces suggests that a pure sales formula may be optimal.     

Business investment in euro area countries: the role of institutions and debt overhang

The recovery of business investment in the euro area has been sluggish, thereby hampering aggregate demand in the short term and potential growth in the long run. While we show that business investment can be associated to cost and supply of credit, cyclical demand conditions and economic uncertainty. But we also find evidence of additional factors. We suggest that there exists a link between excess leverage and weak economic institutions on the one hand and subdued investment growth on the other hand. Moreover, in euro area countries with both larger excess leverage and weaker economic institutions, the link with business investment is found to be stronger. The link between investment and weak institutions or excess leverage highlights the importance of structural reforms aimed at easing business regulations, reducing administrative burdens and increasing the efficiency of insolvency frameworks. These reforms are thus expected to reduce distortions in the allocation of resources and be supportive of a smoother deleveraging process, hence fostering business investment.     

The Impact of Unionization Structures with Heterogeneous Firms and Rent‐Sharing Motives

How are unemployment and output affected if wages are set on the sector level rather than firm level? We take a new look at this question, allowing for heterogeneous firms and rent‐sharing motives. Without these motives, employment and output are lower under sector‐level wage‐setting due to higher wage markups. With rent‐sharing motives, however, firm selection is higher under sector‐level wage‐setting, which tends to increase employment and output, thus counteracting the markup effect. Simulations show that the firm‐selection effect decreases the difference between the two unionization structures substantially but it does not change the signs of the effects on output and employment.     

Network formation models with costs for establishing links

Abstract. In this paper we study endogenous formation of communication networks in situations where the economic possibilities of groups of players can be described by a cooperative game. We concentrate on the influence that the existence of costs for establishing communication links has on the communication networks that are formed. The starting points in this paper are two game-theoretic models of the formation of communication links that were studied in the literature fairly recently, the extensive-form model by Aumann and Myerson (1988) and the strategic-form model that was studied by Dutta et al. (1998). We follow their analyses as closely as possible and use an extension of the Myerson value to determine the payoffs to the players in communication situations when forming links is not costless. We find that it is possible that as the costs of establishing links increase, more links are formed.