Political Competition and Mirrleesian Income Taxation: A First Pass

We study Downsian competition in a Mirrleesian model of income taxation. The competing politicians may differ in competence. If politicians engage in vote-share maximization, the less competent politician’s policy proposals are attractive to the minority of rich agents, whereas those of the competent politician are attractive to the majority of poor agents. The less competent politician wins with positive probability, which gives rise to a political failure in the sense of Besley and Coate (1998). Political failures are avoided if politicians maximize winning probabilities. Nevertheless, the two equilibria cannot be Pareto-ranked, the minority may be better off under vote-share maximization.electoral competition, non-linear income taxation, candidate quality

Political competition and Mirrleesian income taxation: A first pass

We study Downsian competition in a Mirrleesian model of income taxation. The competing politicians may differ in competence. If politicians engage in vote-share maximization, the less competent politician's policy proposals are attractive to the minority of rich agents, whereas those of the competent politician are attractive to the majority of poor agents. The less competent politician wins with positive probability, which gives rise to a political failure in the sense of Besley and Coate (1998). Political failures are avoided if politicians maximize winning probabilities. Nevertheless, the two equilibria cannot be Pareto-ranked, the minority may be better o under vote-share maximization

Essays in Political Economy: Ambiguous parties and Conformist voters

This thesis studies the strategic behavior of two key components of democracy: political parties and voters. Three scenarios regarding political competition are presented, coauthored with Socorro Puy (Universidad de Málaga). The first scenario presents a model of political competition between a traditional party (office-seeking), and an assembly party. An assembly party takes decisions according to what the affiliate members vote in an assembly prior to an election. Results show that the location of the assembly induces the traditional party to locate at different platforms. When the assembly is centrist, the traditional party moves away from the median voter location. However, when the assembly is extremist, the traditional party locates at a moderate position. As a result, the assembly party generates divergence between the platforms of the parties, in contrast to the Downsian model (Downs, 1957). The second scenario considers a party composed of two internal factions: an ideological and an opportunist. Following Roemer (1999), the ideological faction is in charge of keeping the ideological principles of the founders of the party (i.e., the "party label"), whilst the opportunistic faction is in charge of maximizing the number of votes achieved by the party. Under a sequential setting, results show that a party that gives equal weights to its two factions needs considerable valence advantage to win the elections, even with a first mover advantage. Interestingly, despite the multiplicity of equilibria, the Downsian equilibrium does not hold since parties have incentives to offer divergent platforms. The third scenario studies a theoretical setting characterized by two parties with a two-fold objective: representing the electorate and winning the elections. Political competition is held considering several cases. If office-seeking incentives are very rewarding, parties sacrifice ambiguity and converge to the ideal policy of the median voter. If ambiguity is very rewarding, no equilibrium exists since parties have incentives to deviate to more ambiguous platforms even when this means losing the elections. We conclude that with risk-neutral voters when the distribution of voters is known, parties cannot choose ambiguous platforms if they want to win the elections. Second, two scenarios are analyzed regarding voters. The fourth scenario is a joint work with Bernardo Moreno (Universidad de Málaga) that focuses on how the presence of conformity may alter decisions taken by agents under a complete information setting. When all agents are conformist and vote simultaneously, there are equilibria in which the decision adopted does not coincide with the option obtained if all agents vote truthfully. A solution to deal with this problem is replacing conformists by agents who vote truthfully (independents). In this case, the effect of conformity disappears with a sufficient number of conformists replaced by independents. Under sequential voting, conformity does not affect the results. The final scenario is a joint work with Ismael Rodríguez-Lara (Middesex University) and Bernardo Moreno, in which conformity is induced in a laboratory experiment. A theoretical model is developed considering groups of five agents. Three cases are studied: when agents vote without inducing conformity in their preferences; when conformity is induced by an extra payoff if conforming to some other agent; and when conformity is induced and agents vote knowing the vote of two agents in advance. Results show that inducing conformity reduces the likelihood of voting truthfully. Besides, when agents vote knowing others' agents vote, this leads them to vote more truthfully. Results also show the effect of the voting rule on agents' decisions, being less sincere the less pivotal they are

Political competition and Mirrleesian income taxation: A first pass

We study Downsian competition in a Mirrleesian model of income taxation. The competing politicians may differ in competence. If politicians engage in vote-share maximization, the less competent politician's policy proposals are attractive to the minority of rich agents, whereas those of the competent politician are attractive to the majority of poor agents. The less competent politician wins with positive probability, which gives rise to a political failure in the sense of Besley and Coate (1998). Political failures are avoided if politicians maximize winning probabilities. Nevertheless, the two equilibria cannot be Pareto-ranked, the minority may be better o under vote-share maximization

Beyond "position" and "valence". A unified framework for the analysis of political issues

Starting from a review of models of positional and valence issues, the paper – by tapping into the original definition of valence issue – introduces a classification of issues based on their level of overall, dychotomic agreement. This allows the placement of both positional and valence issues on a same continuum. A second dimension is then introduced, which identifies how much specific issues are over- or undersupported within a specific party. A visual classification of issues based on these two dimensions (the AP diagram) is then introduced, highlighting risks and opportunities for a party in campaigning on specific issues. Specific indicators (namely, issue yield) and hypotheses derived from the AP model are tested on survey data from the EU Profiler project, which collected issue profiles of Internet users from the 27 EU Countries before the EP 2009 Elections. The results show that the suggested dimensions and indicators identify a wide cross-country and cross-issue variance. Also, indicators generated by the AP model are powerful predictors of issue saliency, even subsuming traditional Downsean indicators.political issues; valence; position; party competition; European elections

Public institutions under idiosyncratic uncertainty

Analysis of public institutions must be robust to the uncertainties facing agents within them, and the varying ways in which individuals cope with these uncertainties. This dissertation uses formal theoretical models to analyze the subjective and idiosyncratic nature with which most citizens face risk and uncertainty. This dissertation focuses on how different public institutions perform in specific settings based on the possibilities that agents may err in either their assessment of possible outcomes or the relevant choices and payoffs that are available. In the first chapter, I show that allowing for voter beliefs to feature ex-post error changes the incentives for candidates to set policy platforms, reducing the incentives for candidate convergence even with purely electorally-motivated candidates. Therefore, even if voters are on-average correct about political platforms and behavior, the distribution of imprecision will still change the incentives of political actors competing for their votes. This reopens consideration of how American political polarization may be driven by changes in the ways in which voters form beliefs about politicians, even as the distribution of political preferences may have remained unchanged. In the second chapter, co-authored with Keith N. Hylton, we determine that the incentives for potential litigants depend fundamentally upon the specific setting in which courts make determinations. We show that courts, facing only the facts concerning this particular decision, and not all the facts necessary to determine the global optimum, will be more likely to create incentives for socially excessive (i.e., defensive) care. In the final chapter, I modify a model of strategic communication to consider situations under which groups may be able to manipulate legislators who are uncertain which topics are most salient to said groups. Such uncertainty changes the incentives of interest groups, providing a new avenue of exploration for why different ideological groups take on different issues. I find that they must weigh the ability to “hide” their salient issue within a bundle of others with the possibility that taking on too many will cause the receiver to ignore their advice entirely

ELECTION TIMING IN CONSENSUAL SYSTEMS. LINKING COALITION BARGAINING AND VALENCE THEORY OF PARTY COMPETITION

The purpose of this thesis is to investigate the determinants of cabinet termination in parliamentary systems. A preliminary study will raise a fundamental question: do voters punish incumbents for calling anticipated elections? The scarce evidence available reached contradictory conclusions. For the first time in the literature I will link cabinet termination with valence theories of party competition, and I will individuate the determinants of this popularity cost. My valece theory will provide a solution to the existing debate, showing that all the findings provided up to now represent specific cases of a more general phenomenon. The core of my thesis is represented by a coalition bargaining model. In each stage of the game, incumbents observe their electoral expectations and choose between negotiating on public policies, forming a new cabinet with the opposition, and calling elections. My game will show a series of improvements: first, it will introduce time and account for its effects on the outcome of the negotiation; second, it will introduce spatial considerations, such as the ideological location of the players and their coalition opportunities; third, it will encompass a theoretical account of the popularity cost of opportunistic election calling. Its fundamental assumptions will then be tested. Its asumptions will be tested using voting intention trends from four European democracies, covering more than fifty years of parliamentary politics. Results will show that variations in the exit option for the governing parties efficiently explain the likelihood of cabinet termination. On consensual democracies, this kind of test had never been conducted before. A corollary research concludes the dissertation: if voting intention data can be used to explain cabinet termination, then the same data can be used to account for ministerial tenure. The dismissal of ministers, or alterations in their prerogatives, can be described as a currency in the power game among coalition partners. Such an hypothesis had never been tested before. Using duration analysis I will show how imbalances in incumbent parties' popularity are associated with more frequent redistributions of power withing the goverment coalition. Even in this case, my empirical models will include time-varying covariates, producing an empirical contribution to the literature

Essays on thresholds and on relative thinking

The first paper is “Handicapping Politicians: the optimal majority rule in incumbency elections.” The paper examines the incentives of politicians whose position of incumbency allows them to signal their quality through costly effort. Because an election has such a discrete outcome (to win or to lose), politicians will exert the most effort when they expect the election to be close, giving rise to a cluster of signals just above the threshold required to win. Two propositions follow: first, this clustering causes a skew distribution of signals, such that the median expected quality will be above the mean, so more candidates will be re-elected than would be re-elected under full information, i.e. an incumbency advantage. Second, because information is lost when politicians cluster, voters would prefer to handicap the incumbents to make their signals more revealing. In practice this can take the form of a supermajority rule for re-election. The second paper, “Comparisons and Choice”, shows that many apparently unrelated anomolies of choice can be explained as due to relative thinking. I conjecture that observing larger magnitudes of some goods tends to lower sensitivity to that good. This predicts contrast effects, anchoring effects, scope neglect, and common difference effects. We also introduce a technical novelty, evidence from joint choice, allowing us to map out a utility function. The third paper, “Relative Thinking and Markups,” applies the model of relative thinking to choice among retailers, when purchasing a single good. We show that demand curves will tend to be less sensitive for higher price goods, so that in the case of unit demand (where markups, price dispersion, and entry are normally independent of cost) markups will be increasing in cost, price dispersion will be increasing in cost, and entry will be increasing in cost. We show that evidence from the IO literature, especially evidence on price dispersion, is consistent with these predictions. We also introduce a novel dataset of costs and prices from a drugstore in which there is a very tight positive relationship between cost and markup