Optimal Transmission Regulation in an Integrated Energy Market

The capacity of the transmission network determines the extent of integration of a multinational energy market. Cross-border externalities render coordination of network maintenance and investments across countries valuable. Is it then optimal to collect powers in the hands of a single regulator? Should a common system operator manage the entire network? I show that optimal network structure depends on (i ) how the common regulator would balance the interests of the different member states; (ii ) how the gains from market integration vary across countries; (iii ) network characteristics (substitutability versus complementarity); and (iv ) the social cost of operator rent.Multi-national Energy Market; Transmission; Supranational Regulation; System Operation; Multi-contracting

Voter Turnout in Direct Democracy: Theory and Evidence

We analyse voter turnout as a function of referendum types. An advisory referendum produces advice that a legislature may or may not take into account when choosing between two alternatives, whereas a binding referendum generates a decisive decision. In theory, voter turnout should be higher under binding than advisory referendums, higher in small than large electorates and higher in close than less close referendums. These predictions are corroborated by evidence from 230 local referendums in Norway. For example, a shift from an advisory to a semi-binding referendum leads to an average increase in voter turnout by 11.5 percentage points.Voting Behaviour; Referendum Types; Rational Choice

Ethnic Diversity and Civil War

We construct a model in which a number of equally powerful ethnic groups compete for power by engaging in civil war. In non-redistributive equilibrium, ethnically homogeneous and ethnically diverse countries face a lower probability of civil war than countries with a moderate degree of ethnic diversity. The likelihood of conflict is maximized when there are two ethnic groups. When rent-extraction possibilities are not too big and society sufficiently ethnically homogeneous, there also exists a pacific equilibrium path sustained by redistribution from the ruling group to the out-of-power groups.Civil War; Ethnic Diversity; Redistribution; Dynamic Game

Unilingual versus Bilingual Education: a Political Economy Analysis

We consider an economy with two language groups, where only agents who share a language can produce together. Schooling enhances the productivity of students. Individuals attending a unilingual school end up speaking the language of instruction only, while bilingual schools render individuals bilingual at the same cost. The politically dominant group(not necessarily the majority) chooses the type(s) of schools accessible to each language group, and then individuals decide whether to attend school. We show that the dominant either choose laissez-faire or restrict access to schools in the language of the dominated. Instead, the dominated favour the use of their own language. Thus, while agents do not derive utility from speaking their mother tongue, language conflicts of the expected type endogenously arise. Democracy (majority rule) always leads to the implementation of a socially optimal education system, while restrictions to the use of the language of the dominated are implemented too often under minority rule. The model is consistent with evidence from Belgium, France, and Finland

Real-time versus day-ahead market power in a hydro-based electricity market

We analyse in a theoretical framework the link between real-time and day-ahead market performance in a hydro-based and imperfectly competitive wholesale electricity market. Theoretical predictions of the model are tested on data from the Nordic power exchange, Nord Pool Spot (NPS).We reject the hypothesis that prices at NPS were at their competitive levels throughout the period under examination. The empirical approach uses equilibrium prices and quantities and does not rely on bid data nor on estimation of demand or marginal cost functions

On the Role of Public Opinion Polls in Political Competition

This paper presents a model of strategic positioning during an election campagin in which candidates use results from opinion polls to extract information about voter preferences. It is shown that the distance between policy announcements decreases over the course of the campaign: candidates announce initial policies at either extreme of the political spectrum and commit to moderate final policies. An underdog effect arises: the difference in candidate popularity decreases as the campaign evolves. A public opinion poll constitutes a Pareto improvement if final policies are expected to become more moderate after the introduction of the poll