How Does Voice Matter? Evidence from the Ultimatum Game

Prior research in economics and psychology has shown that process can matter in determining outcomes in many social situations. In particular, the opportunity to express ones opinion-voice-has been found to be highly influential. However, little is known about the channels through which voice may operate. In this paper, we develop a simple economic model of voice to explore these channels. We show that individuals value voice for: 1) its effect on outcomes, 2) its inherent value, or 3) its role in signaling one's social standing. Through the introduction of a hypothetical round in the standard ultimatum game, we were able to test the channels of voice directly by observing recipients' responses to offers which are lower than what they asked for. Our experimental results suggest that voice works primarily through its inherent value which appears to exceed its contribution to the perception of procedural fairness. Further, unlike voice which softens the impact of an unfair outcome, the possibility for voice may have dichotomous effects.voice, ultimatum game

Windows Into Public Attitudes Towards Redistribution

redistribution, income taxation, public opinion

A new approach to causality and economic growth.

This paper examines the issue of causality in cross-sectional empirical models of economic growth. Using an approach to determining causal structures based on tests for conditional independence in sets of variables, we uncover alternative causal structures that are consistent with the correlation pattern of the variables in the data. We use these methods to develop alternative causal empirical models of economic growth. One of our consistent findings is that we can rule out the possibility that equipment investment causes growth. Our search procedure leads naturally to a structural model with latent variables which we then estimate. The results of our estimation are broadly consistent with traditional models of economic growth augmented for human capital.Economic development ; Econometric models

INTEREST RATES, EXCHANGE RATES AND PRESENT VALUE MODELS OF THE CURRENT ACCOUNT

This paper develops an intertemporal model of the current account that allows for variable interest rates and exchange rates. These additional variables are channels through which external shocks may influence the domestic current account. We test the restrictions imposed by the theory, using quarterly data from three small open economies. The paper finds that including the interest rate and exchange rte significantly improves the fit of the intertemporal model over what was found in previous studies. the augmented model produces a forecast that better matches the volatility of current account data and better explains historical episodes of current account imbalance.

LITIGATION, SCHOOL FINANCE REFORM, AND AGGREGATE EDUCATIONAL SPENDING

The United States has traditionally financed elementary and secondary education through property taxation. In the past two decades, litigation in many states has triggered educational reform movements designed to reduce the inequalities in educational expenditures across districts inherent in a property tax financed system. While these movements have been successful in reducing inequalities, there are some who argue that this movement has had adverse affects on the level of educational spending. If, indeed, this is the case, then there would be trade-offs between reductions in inequality and the level of investment in education. In this paper, we use a panel data set across all the states from 1970-1990 to examine the role of litigation and educational finance reform in determining the level of education funding in a flexible, dynamic setting. This allows us to analyze the determinants of educational spending and to assess the differential impacts of litigation and reform movements across states. The dynamics are driven by four effects - an income effect, a state control effect, a state budget effect, and a base effect. An important finding of our work is that litigation and reform have differential effects across the states, in some cases leading to increases while in other cases decreases in spending. We supplement our empirical research with a closer examination of several case studies.

UNANTICIPATED MONEY GROWTH AND OUTPUT FLUCTUATIONS

Almost all tests of rational expectation models have been conducted under the hypothesis of complete price flexibility. In these models, it is unanticipated inflation that causes business fluctuations. William Poole (1976] recently reviewed empirical studies of rational expectation models and concluded that they fail to explain the persistence of business cycles. 1 However, rational expectation models because of their striking theoretical implications do deserve more extensive testing. In this paper, it is shown that even without instantaneous price adjustment it is possible to have cyclical fluctuations in output arising solely from informational inadequacies. A test of this hypothesis is developed which involves looking directly at unanticipated money growth and fiscal policy. Series for unanticipated money growth and fiscal variables are calculated from time-series analysis; economic actors are taken to use all currently available time-series information for forecasting. A minor econometric innovation is a procedure for preventing future values of a stochastic process from affecting current estimates of the process that the agents use

Behavioral Law and Economics Is Not Just a Refinement of Law and Economics

A number of prominent advocates of applying behavioral economics to the law make the claim that behavioral law and economics is simply a refinement of traditional law and economics. The key difference is that behavioral law and economics uses more realistic descriptions of human behavior as its foundation. This paper takes issue with that claim. We first demonstrate through a series of examples that the strongest adherents of behavioral law and economics take positions that can be seen as subversive of the fundamentals of the core rationality principles underlying traditional law and economics. Second, the assessment of welfare within behavioral economics differs sharply from the traditional economic paradigm used in law and economics

Government Equity-Bonds and Stabilization: A Proposal

Government Equity-Bonds and Stabilization: A Proposal Current monetary policy is conducted by open market operations which swap money for bonds. This may be an ineffective means of controlling the ratio of market value of the capital stock to its replacement value or “q’” in James Tobin’s notation. A proposal is made to issue some of the government debt in a bond which is indexed to equity or the stock market. By conducting open market operations in this security, the government would be able to control equity prices rather precisely and, hence, control q. Evidence is summarized which illustrates the role of equity prices in the determination of national income and suggests that some mechanism is needed to control equity prices more precisely. The feasibility of the government equity-bond is discussed in some detail. It is concluded that the bond should be readily marketable, can be priced rather easily by investors and would provide efficient diversification for many investors. Stabilization policy with these bonds would generally involve open market operations in regular debt and equity-debt. The political dynamics of monetary policy following the introduction of this bond may differ considerably from the presen