Crowding Out Wasteful Activities by Wasteful Activities

A seller can benefit from information about the valuation a potential buyer places on the good. Under some circumstances, improved information raises social welfare. But under other circumstances, the information has private value but no social value, so that agents may spend too much on collecting information. A government which collects and disseminates some information about valuations can limit spending by private agents on data collection, thereby increasing social welfare. That is, governmental provision of information may be useful not because information is socially useful, but because it limits the amount private agents spend on collecting information.Information; Rent seeking

Strategies of the Political Opposition

I consider the strategies that an opposition party can use against an incumbent party which controls the government. The focus is on strategies when citizens vote retrospectively (so that the incumbent's chance of winning re-election increases with his performance), and when citizens compare the estimated abilities of the candidates. In both cases, the equilibrium may have the opposition vote against all policies the government proposes.Political opposition; Reputation; Retrospective voting; Policy implementation

Predicting Committee Action

Success of a policy often requires both that a good policy be adopted, and that the public or firms correctly anticipate what policy government will adopt. This paper models a relation between committee size and the effectiveness of policy, with a focus on how the accuracy of the public’s expectations varies with the size of the governmental committee setting policy. The paper also argues that the demand for access by special interest groups may arise not from a desire to influence policy, but from a desire to learn about government’s likely actions.

Reducing Current Taxes to Raise Future Revenue

A government which raises taxes in the current period may induce workers to invest in finding ways to reduce their tax payments, and so may reduce the government's ability to raise revenue in the future. Therefore, a government that fears it may have to raise much revenue in the future may set taxes in the current period at a lower level than that which would maximize revenue, or that would maximize social welfare in that period.Tax evasion; Intertemporal taxation

Appropriation, Human Capital, and Mandatory Schooling

Reduced inequality in human capital may reduce appropriationfrom the rich. They may therefore favor policies such as incometransfers and mandatory schooling which equalize human capital.Comparing several such policies, we find that mandatory schooling leads to higher incomes for both the rich and the poor, and increases the welfare of all. Moreover, it is the optimal policyfor the rich, even when they fully pay for the education.

Informational benefits of international environmental agreements.

Given the difficulty of monitoring, and even more so of enforcing, International Environmental Agreements, it is surprising that they are signed and implemented. This paper offers a theoretical model, which addresses this issue. The focus is on informational and coordination problems. A country which is unsure about the benefits of environmental policy may find that the benefits are higher the greater the number of other countries which lean towards taking action. Whereas each country may individually take weak environmental action, in equilibrium several countries may take strong action if they expect others to. An International Environmental Agreement can thus be selfenforcing. Such effects can appear even if international environmental spillovers are absent, and even if monitoring and enforcement are infeasible. Our approach can explain additional phenomena: why a country known to care little about the environment may deeply influence other countries if it takes strong environmental action, why lags may appear between the signing of an agreement and its implementation, and how requirements for approval by several bodies within a country can increase support for environmental action.Environmental policy; International agreements; Signaling; Regulation;

Earmarking: Bundling to Signal Quality

Earmarking is a form of bundling in which government adopts a tax policy while specifying the uses of the revenue. This paper explores how bundling can enhance efficiency: it can inform the public of the quality of a program proposed, or of the quality of the agency that will be responsible for designing and implementing the program.We show that policies that appear inefficient in isolation may become justified when bundled.Earmarking; Asymmetric information; Bureaucracy; Project evaluation

Informational Benefits of International Environmental Agreements

Given that it is difficult to monitor, and even more so to enforce, International Environmental Agreements, it is surprising that they are signed and implemented. This paper offers a theoretical model, which addresses the phenomena. The focus is on informational and coordination problems--a country which is unsure about the benefits of environmental policy may believe that the benefits are higher the greater the number of other countries which lean towards taking action. Whereas each country may individually take no environmental action, in equilibrium several countries may take environmental action if they expect others to. An International Environmental Agreement can thus be self-enforcing. Such effects can appear even if international environmental spillovers are absent, and even if monitoring and enforcement are infeasible. Our approach can explain additional phenomena: why a country that is known to care little about the environment may deeply influence other countries if it takes environmental action, why lags may appear between the signing of an agreement and its implementation, and how requirements for approval by several bodies within a country can increase support for environmental action.Environmental policy; International agreements; Signaling; Regulation

Capital-Intensive projects induce more effort than labor-intensive projects.

Central governments often subsidize capital spending by local governments, instead of subsidizing operating expenses or labor-intensive projects. This paper offers one explanation, focusing on the incentive effects for local officials. a local official can more easily shift the cost of optimizing a project to his successor on a labor-intensive project than on a capital-intensive project.

The Preferences of Voters Over Road Tolls and Road Capacity

We consider a congestible road, where the cost of travel increases with the number of users on the road and decreases with capacity. Those persons who do not use the road favor a toll which would maximize revenue, and they oppose spending on road capacity. Users of the road prefer a low toll and a large capacity financed by general revenues. We describe conditions that make majority voting lead to a toll and capacity level that equals the socially optimal toll and capacity, that is smaller, or that is larger. This model can also explain the decrease over time of user fees for road use.Positive analysis of policy-making and implementation; Externalities; Government policy on transportation