Horizontal Inequity can be a Good Thing

A switch from any given income tax schedule to a differentiated tax structure in which two groups of taxpayers are treated differently, each still facing the same local degree of progression, can induce an increase in welfare despite causing horizontal inequity. We demonstrate this result in a number of special case and make a general conjecture, the thrust of which is that society's acceptance of horizontal inequity will be second-best whenever the government must operate with a limited bundle of income tax instruments such as allowances, thresholds and marginal rates.

Fiscal equalization and political conflict

In this paper we analyze the political viability of equalization rules in the context of a decentralized country. In concrete terms, we suggest that when equalization devices are perceived as unfair by one or more regions, political conflict may emerge as a result. Political conflict is analysed through a non cooperative game. Regions are formed by identical individuals who, through lobbying, try to impose their regional preferences on the rest of the country, and political conflict is measured as the total contribution to lobbying. We conclude that the onset of conflict depends on the degree of publicness of the regional budget. When regional budgets are used to provide pure public goods, proportional equalization is politically feasible. However, no equalization rule is immune to conflicte when budgets are used to provide private goods or a linear combination of private and public goods

Strategic voting and happiness

In this paper we extend the research on happiness and spatial theory of voting by exploring whether strategic and sincere voting affect subjective well-being. We conduct the analysis with data on a large sample of individuals over 50 elections in 16 OECD countries. The results of the analysis show the existence of a negative effect of strategic voting on subjective well-being. In addition, the likelihood of being satisfied decreases when individuals vote strategically for a political party that wins the electoral race. Furthermore, when we analyse separately left-wing and right-wing voters, we find that the described effect holds for left-wing voters but no for right-wing voters. We discuss this evidence in the light of expressive voting theory (Hilman, 2010) and lack of empathy with future selves (Kahneman and Thaler, 1991). Our results are robust to different measures of strategic voting and subjective well-being

Homo economicus vs homo sapiens?

La crisi va ser la demostració incontestable que la recerca del benefici propi és una de les motivacions fonamentals de l'ésser humà en molts contextos, i especialment en els mercats. Significa això que l'homo sapiens és un homo economicus? No, en absolut. Hi ha una diferència clau entre assumir que l'ésser humà és en essència una criatura egoista, perfecta i maximitzadora, i assumir les característiques de l'homo economicus com una bona primera aproximació per estudiar determinats fenòmens

Gender differences and stereotypes in the beauty contest

Recent literature has emphasized that individuals display different depths of reasoning when playing games. In this paper, we explore gender differences in strategic sophistication and study whether these differences are endogenous. We report results from two different experiments employing the beauty contest. In the first, large study, we show that females react very strongly to incentives to the extent that gender differences disappear when a monetary prize is awarded. In the second study, we use a within subject design to analyze how depth of reasoning varies with gender priming and the gender composition of the set of players. We corroborate that females display higher levels of sophistication and even overtake males when incentives are provided and gender is primed. On the other hand, males who believe that females are better in the game display higher sophistication when playing against females

An axiomatization of difference-form contest success funcions [WP]

This paper presents an axiomatic characterization of difference-form group contests, that is, contests fought among groups and where their probability of victory depends on the difference of their effective efforts. This axiomatization rests on the property of Absolute Consistency, stating that the difference in winning probabilities between two contenders in the grand contest must be the same as when they engage in smaller contests. This property overcomes some of the drawbacks of the widely-used ratio-form contest success functions. Our characterization shows that the criticisms commonly-held against difference-form contests success functions, such as lack of scale invariance, are unfounded. Finally, we extend our axiomatization to relative-difference contests where winning probabilities depend on the difference of contenders effective efforts relative to total aggregate effort

Difference-form group contests

Contests are situations in which a set of agents compete for a valuable object, rent or award. The present paper analyzes difference-form group contests, that is, contests fought among groups and where their probability of victory depends on the difference of their effective efforts. First, we show that the non-existence of pure-strategy equilibria and the monopolization results obtained in previous analysis of difference-form contests rest critically on the assumption of a linear cost of effort. Under exponential costs, we show that pure strategy equilibria exist in a large set of cases and that more tan one group can expend positive effort in equilibrium. Second, we show that inequality of valuations of victory within groups hinders their chances of prevailing in the contest. If possible; members may find beneficial to engage in progressive redistribution within their group

The effect of within-group inequality in a conflict against a unitary threat

A group of agents must defend their individual income from an external threat by pooling their efforts against it. The winner of this confrontation is determined by a contest success function where members’ efforts may display different degrees of complementarity. Individual effort is costly and follows a convex isoelastic function. We investigate how the success of the group in the conflict and its members’ utilities vary with the degree of within-group inequality. We show that there is a natural relationship between the group’s probability of victory and the Atkinson index of inequality. If members’ efforts are complementary or the cost function convex enough, more egalitarianism within the group increases the likelihood of victory against the external threat. The opposite holds when members’ efforts are substitutes and the cost linear enough. Finally, we obtain conditions under which richer members of the group are willing to make transfers to poorer membres in order to enhance their final payoff

Gender differences and stereotypes in strategic thinking

Recent literature has emphasized that individuals display varying levels of strategic reasoning. This paper presents ten years worth of experimental data from two countries exploring the existence and endogeneity of gender differences in strategic sophistication. We report results from two experimental studies employing the beauty contest game, one from the classroom and one from the laboratory

El Fondo de Compensación Interterritorial: simulaciones de reforma

En este trabajo se plantean diversos escenarios de reforma del Fondo de Compensación Interterritorial (FCI), uno de los recursos condicionados de origen nacional a disposición de las comunidades autónomas españolas de menor nivel de renta. Para ello se concretan los principales elementos de este fondo vertical (dotación, alcance territorial y criterios de reparto) y se presentan los resultados correspondientes a cada escenario, tomando como referencia el ejercicio de 2007. La motivación de la reforma está relacionada con la actual reforma del sistema de financiación autonómica y la disminución de los fondos europeos prevista para el periodo 2007-2013. En estas circunstancias, redefinir y potenciar el FCI como instrumento de política regional, ligado a los objetivos de desarrollo y convergencia, es conveniente