Testing Social Preferences for an Economic “Bad”: An Artefactual Field Experiment*

We test for social preferences over a commodity in an artefactual field experiment using the random price voting mechanism. Subjects are university staff members, and the commodity is water “contaminated” by a sterilized cockroach. Our results suggest that social preferences exist with respect to commodities and “bads”, supporting a more general utility framework for social preferences. Our empirical test allows for the coexistence of three social‐preference models; our results support the models of Fehr and Schmidt (1999) and Charness and Rabin (2002), but not the model of Bolton and Ockenfels (2000). Also, we find that incorporating social preferences improves the efficiency of majority‐rules voting.     

Protectionism under Trump: The China Shock,Deplorables, and the First White President

This paper uses USA county‐level electoral data to examine the 2016 turn to protectionism. The hypothesis that support for protectionism was purely a response to globalization is rejected. Exposure to trade competition encouraged a shift to the Republican candidate, but this effect is mediated by race, diversity, education, and age. If the turn toward protectionism is due to economic dislocation, then public policy interventions could mitigate the impact and support the re‐establishment of a political consensus for open trade. If, however, the drivers are identity or cultural values, then the scope for constructive policy intervention is unclear.     

An investigation of the short-term performance of the Canadian IPO market.

This article explores the short-term return performance of the Canadian initial public offering (IPO) market. Historically, the Canadian IPO market has shown to be one of the least underpriced markets in the world. This paper uses recent IPOs from 2010 to 2017, and the results confirm that the Canadian IPO market remains one of the least underpriced IPO markets in the world. The mean (median) first-day returns show that Canadian IPOs are marginally underpricing at only 1.45% (0.24%) during the sample period. Additional short-run return measures indicate that Canadian IPOs underperform the market in their 1-month, 6-month, and 12-month holding periods. This research also contributes to the existing IPO literature by showing that restricted voting share offerings tend to be more underpriced and perform poorly over the short-term.     

A tale of two unions: divergent platforms and their constituencies

ABSTRACT

The median voter theorem has regularly been used in economics to represent the behaviour of teachers unions. Little empirical work, however, tests whether this framework is a good fit for teachers unions. We examine voting behaviour in union representative elections between the National Education Association and the American Federation of Teachers and find evidence of divergent constituencies. We investigate whether the median voter explains the outcomes of elections in 1977–1979. If both teachers unions select the platform desired by the median voter, there should be no systematic differences in voter preferences for unions. We find that these unions were fundamentally different and attracted distinct voting coalitions. The main implication of this study is that researchers should consider these two unions, and their effect on districts, as distinct.     

Climate change: a rational choice politics view*

Reduction in carbon dioxide emissions constitutes a global public good; and hence there will be strong incentives for countries to free ride in the provision of CO₂ emission reductions. In the absence of more or less binding international agreements, we would expect carbon emissions to be seriously excessive, and climate change problems to be unsolvable. Against this obvious general point, we observe many countries acting unilaterally to introduce carbon emission policies. That is itself an explanatory puzzle, and a source of possible hope. Both aspects are matters of ‘how politics works’– i.e. ‘public choice’ problems are central. The object of this paper is to explain the phenomenon of unilateral policy action and to evaluate the grounds for ‘hope’. One aspect of the explanation lies in the construction of policy instruments that redistribute strategically in favour of relevant interests. Another is the ‘expressive’ nature of voting and the expressive value of environmental concerns. Both elements – elite interests and popular (expressive) opinion – are quasi‐constraints on politically viable policy. However, the nature of expressive concerns is such that significant reductions in real GDP are probably not sustainable in the long term – which suggests that much of the CO₂ reduction action will be limited to modest reductions of a largely token character. In that sense, the grounds for hope are, although not non‐existent, decidedly thin.     

The dissent voting behaviour of central bankers: what do we really know?

We examine the determinants of the dissent in central bank boards voting records about monetary policy rates in the Czech Republic, Hungary, Sweden, the UK and the US. In contrast to previous studies, we consider 25 different macroeconomic, financial, institutional, psychological or preference-related factors jointly and use Bayesian model averaging (BMA) to formally assess the attendant model uncertainty. We find that the rate of dissent is between 5% and 20% for the examined central banks. Our results suggest that most of the examined regressors, including factors that capture the effects of inflation and output, are not robust determinants of voting dissent. This result suggests that unobserved characteristics of central bankers and different communication strategies drive the dissent, rather than the level of macroeconomic uncertainty.     

Voter turnout in US presidential elections: does Carville’s law explain the time series?

We estimate a time series model of voter turnout for 34 US presidential elections, 1880–2012. Employing a variety of econometric techniques, our major results are as follows. (1) A negative and significant structural shift in voter turnout occurs in 1972 and is too large to be explained by the lowering of the voting age. (2) The 1972 shift is the only statistically significant structural shift to occur since the first decade of the twentieth century. (3) Short-term macroeconomic conditions significantly impact turnout, with unemployment having a positive effect. (4) Turnout in recent presidential elections has not deviated significantly from the post-1972 norm. (5) Turnout is positively related to the expected closeness of the election outcome, but contrary to some theoretical predictions, closeness exhibits no trend over time.     

The welfare consequences of strategic behaviour under approval and plurality voting

This paper studies the welfare consequences of strategic behaviour under approval and plurality voting by comparing the utilitarian efficiencies obtained in simulated voting under two behavioural assumptions: expected utility-maximising behaviour and sincere behaviour. Under approval voting utilitarian efficiency is relatively high irrespective of the behavioural assumption, and under the plurality rule strategic voting significantly increases utilitarian efficiency.     

Welfare Reducing Polls

We study costly majority voting when voters rationally anticipate others have similar preferences. The correlation in preferences lowers expected turnout because votes have a positive externality on those who abstain. We study the effects of the public release of information (polls) on participation levels. Polls raise expected turnout but reduce expected welfare because they stimulate the “wrong” group to participate resulting in a “toss-up” election. Our novel results highlight the adverse effects of providing information about the electorate’s preferences and may explain why some countries bar opinion polls close to an election date.     

Public Versus Private Insurance with Dual Theory: A Political Economy Argument

This paper analyzes the political support for public insurance in the presence of a private insurance alternative. The public insurance is compulsory and offers a uniform insurance policy. The private insurance is voluntary and can offer different insurance policies. Adopting Yaari's [Econometrica, 55, 95–115, 1987] dual theory to expected utility (i.e., risk aversion without diminishing marginal utility of income), we show that adverse selection on the private insurance market may lead a majority of individuals to prefer public insurance over private insurance, even if the median risk is below the average risk (so that the median actually subsidizes high-risk individuals). We also show that risk aversion makes public insurance more attractive and that the dual theory is less favourable to a mixed insurance system than the expected utility framework. Lastly, we demonstrate how the use of genetic tests may threaten the political viability of public insurance.