A BUREAUCRAT'S PROCUREMENT STRATEGY: BUDGET CONSTRAINTS AND RATIONING

ABSTRACT ** :  We investigate a bureaucratic principal responsible for the procurement of goods and services from private agents. The bureaucrat is evaluated on output and controlled by a limited budget. The agents maximize profit, have private information about variable production costs, and have positive outside options which are lost upon acceptance of a procurement contract. The setting is relevant for, e.g. governmental agencies. We show how this setup makes probabilistic rationing and overproduction for low-cost agents a useful tool for the bureaucrat.     

Local Conditions and Debt in Collections

Using credit reporting firm records on 7 million individuals in the United States, we first demonstrate that debt in collections varies significantly across the country; specifically, the South and West regions have higher shares of individuals with debt in collections than other regions. Second, we identify local factors that are strongly related to debt in collections. Results from our regression models show that neighborhoods with higher rates of debt in collections are more likely to have (1) lower health insurance coverage; (2) lower home values and homeownership rates, (3) a higher share of delinquent and underwater mortgages, (4) lower household incomes, and (5) a higher share of African Americans and Latinos. While our analysis does not identify the causal mechanisms that determine financial distress, the analyses developed here can facilitate research on such mechanisms.     

Monetary Policy Accommodation at the Lower Bound

Monetary policy was too tight in many countries following the financial crisis, due to the lower bound on interest rates. This is likely to have prolonged the recession that followed. This point is illustrated with an assessment of monetary accommodation in the US since the financial crisis, and the accommodation achieved through negative interest rates in countries that have adopted these. The lower bound will likely give rise to considerable economic costs in the future, as it has in the recent past. There is an urgent need to consider how policy tools and frameworks should be adapted.     

A common pool theory of supranational deficit ceilings

The budget deficit bias is modeled as the result of a domestic common pool problem and of an international externality. Deficits can be used to finance both unproductive and productive public spending. An optimally set supranational deficit ceiling is examined and welfare is compared to the unconstrained outcome and to the case of nationally set deficit ceilings. The supranational deficit ceiling is found to be welfare improving relative to similar national arrangements, but does not fully eliminate the deficit bias unless combined with a domestic fiscal institution allowing for precommitment to productive public spending.     

Enforcement and Information Strategies

In this paper we show that, if the relation between the actual monitoring probability and the extent of compliance in the regulated population is concave to the actual probability axis, providing perfect information raises compliance rates, relative to what might be called the “keep-them-ignorant” option. We also illustrate that a quite simple method is available for checking whether, in a particular setting with a particular class of regulated parties, the full information or the keep-them-ignorant policy ought to be pursued.     

Incentive Contracts for Natura 2000 Implementation in Forest Areas

The implementation of nature conservation policy is often based on contracts between public authorities and landowners. In this article, we model incentive contracts in forest areas in the presence of adverse selection and moral hazard when the conservation outcome is uncertain ex ante but observable ex post. The results show that agents who are likely to achieve a higher level of conservation should be offered a contract where transfers depend on the final outcome, with a bonus for a high ecological level of the forest. When conservation measures are correlated with forest management, we show that the contractual measures involve distorted transfers. We analyse the payment mechanisms used in France and Denmark in the context of the Natura 2000 policy. These mechanisms result in overcompensation and under-performance since they do not take the problem of moral hazard and natural variability into account.     

Lessons Learnt from the Nordics: How to Fight Long-term Unemployment

This study examines policies that can successfully address long-term unemployment. It focuses on Denmark and Sweden, where, despite sizeable job losses during the crisis, labour market indicators are at present better than in any other EU country. By looking at the interaction between labour market flexibility (especially in hiring and firing regulations) and passive and active policies, we argue that well-designed active policies matter more than labour market flexibility for employment.     

First‐Year Impacts on Savings and Economic Well‐Being from the Assets for Independence Program Randomized Evaluation

Individual development accounts (IDAs) help low‐income families save by providing a savings account and a potential match toward personal savings for specific investments, such as a first home, business capitalization, or postsecondary education and training. The Assets for Independence (AFI) program uses AFI IDAs—commonly coupled with financial education—with the goal of helping low‐income households achieve greater self‐sufficiency. Using a randomized controlled trial, we evaluate the impact of AFI after one year and find that the median level of liquid assets was $657 higher for the treatment group than the control group (before matching funds). We also find that the treatment (vs control) group experienced less material hardship (by 34%) and was less likely to use nonbank check‐cashing services (by 39%).     

Decision-Making Strategies for the Choice of Energy-friendly Products

Although energy efficiency of many products has been improving constantly, residential energy consumption is not decreasing as much as desired. Therefore, the goal of the European Union (EU) and many other countries is to promote energy-friendly product choices (i.e., choice of products with low energy consumption). In a purchase situation, consumers are confronted with a wide range of energy-related information that can influence the decision-making process. Understanding how consumers reach a decision based on the information provided and identifying decision-making strategies that are beneficial or destructive in terms of energy friendliness is crucial for the improvement of existing energy-policy measures and, consequently, for the successful achievement of target energy saving goals. This paper provides insights from an exploratory eye-tracking study (N?=?59) investigating consumers’ decision-making process. Participants were required to identify the most energy-friendly television (i.e., the television with lowest energy consumption). Cluster analysis revealed three consumer segments with different decision-making strategies: the energy-directed lexicographic, unsystematic lexicographic, and unsystematic exhaustive strategies. The energy-directed lexicographic strategy resulted in 60% optimal choices in terms of energy friendliness, unsystematic lexicographic in 33%, and unsystematic exhaustive in 38%. No decision-making strategy resulted in 100% optimal choices in terms of energy friendliness. Findings emphasize that lexicographic strategies can successfully identify energy-friendly products when the correct information (i.e., actual energy consumption) is used. However, a lexicographic strategy can be very misleading and result in non-optimal choices in terms of energy friendliness when it is based on ambiguous information (i.e., energy efficiency information) that does not enable a conclusive decision. Further, this paper discusses implications for policy-makers and marketers for the promotion of energy-friendly consumer behaviour.     

Women and Budget Deficits*

If women have different economic preferences than men, then female economic and political empowerment is likely to change economic policy, and in turn perhaps macroeconomic outcomes. In this paper, we narrow the focus to fiscal policy, and we investigate whether female enfranchisement affects government budget deficits. In a difference‐in‐differences regression for Swiss cantonal panel data, we find that the inclusion of women in the electorate has reduced deficits by a statistically significant amount.