Beliefs and Redistributive Politics under Incomplete Information

The reason why the social contract is so different in two otherwise comparable societies like the United States and continental Western European countries represents a challenging question. Large empirical evidence shows that the difference in the political support for redistribution appears to reflect a difference in the social perceptions regarding the determinants of individual wealth and the underlying sources of income inequality. I present a model of beliefs and redistribution which explains this evidence through multiple politico-economic equilibria. Differently fromthe recent literaturewhich obtains multiple equilibria by modeling agents characterized by psychological biases, my model is based on standard assumptions. Multiple equilibria originate frommultiple optimal levels of information for the society. Multiple optimal levels of information exist because increasing the informativeness of an economy produces a trade-off between a decrease in adverse selection and an increase in moral hazard. The framework allows the analysis of various comparative statics in order to answer to policy questions.Politico-Economic Equilibria ; Redistribution ; Incomplete Information

Real Options and Game Theoretical Approaches to Real Estate Development Projects: Multiple Equilibria and the Implications of Different Tie-Breaking Rules

This paper builds on a fast growing literature which introduces game theory in the analysis of real option investments in a competitive setting. Specifically, in this paper we focus on the issue of multiple equilibria and on the implications that different equilibrium selections may have for the pricing of real options and for subsequent strategic decisions. We present some theoretical results of the necessary conditions to have multiple equilibria and we show under which conditions different tie-breaking rules result in different economic decisions. We then present a numerical exercise using the information set obtained on a real estate development in South London. We find that risk aversion reduces option value and this reduction decreases marginally as negative externalities decrease.game theory and real options, equilibrium selection, real estate development

Real Options and Game Theoretical Approaches to Real Estate Development Projects: Multiple Equilibria and the Implications of Different Tie-Breaking Rules

This paper contributes to a fast growing literature which introduces game theory in the analysis of real option investments in a competitive setting. Specifically, in this paper we focus on the issue of multiple equilibria and on the implications that different equilibrium selections may have for the pricing of real options and for subsequent strategic decisions. We present some theoretical results of the necessary conditions to have multiple equilibria and we show under which conditions different tie-breaking rules result in different economic decisions. We then present a numerical exercise using the in formation set obtained on a real estate development in South London. We find that risk aversion reduces option value and this reduction decreases marginally as negative externalities decrease.Game theory and real options, equilibrium selection, real estate development

Non-Existence of Competitive Equilibria with Dynamically Inconsistent Preferences

This paper shows the robust non existence of competitive equilibria even in a simple three period representative agent economy with dynamically inconsistent preferences. We distinguish between a sophisticated and naive representative agent. Even when underlying preferences are monotone and convex, we show by example that the induced preferences, at given prices, of the sophisticated representative agent over choices in first period markets are both non convex and satiated. Therefore, even allowing for negative prices, the market clearing allocation is not contained in the convex hull of demand. Finally, with a naive representative agent, we show that perfect foresight is incompatible with market clearing and individual optimization at given prices.dynamically inconsistent preferences ; competitive equilibrium ; existence ; satiation ; non convexity

Beliefs and redistributive politics under incomplete information

The reason why the social contract is so different in two otherwise comparable societies like the United States and continental Western European countries represents a challenging question. Large empirical evidence shows that the difference in the political support for redistribution appears to reflect a difference in the social perceptions regarding the determinants of individual wealth and the underlying sources of income inequality. I present a model of beliefs and redistribution which explains this evidence through multiple politico-economic equilibria. Differently from the recent literature which obtains multiple equilibria by modeling agents characterized by psychological biases, my model is based on standard assumptions. Multiple equilibria originate from multiple optimal levels of information for the society. Multiple optimal levels of information exist because increasing the informativeness of an economy produces a trade-off between a decrease in adverse selection and an increase in moral hazard. The framework allows the analysis of various comparative statics in order to answer to policy questions

The (Implicit) Microeconomic Foundations of The Economy of Francesco

In this paper, I analyse the microeconomic foundations of the economic judgements expressed in the encyclical letters of Pope Francis. I argue that these judgements are based on the implicit assumption that 1) human preferences are not those of the selfish Homo economicus and 2) market outcomes are neither equitable nor efficient. I discuss how both 1) and 2) are alternative foundations of the standard neoclassical paradigm, and I offer a review across economic fields of the most important contributions that explicitly put forward these microeconomic foundations. The fact that 1)is a criticism of individual assumptions and 2) is a criticism of an aggregate outcome poseschallenges and opportunities: a growing body of recent economic research has offered importantcontributions on such links; therefore, I show that modern economic research can offer a comprehensive microeconomic foundation of The Economy of Francesco

Redistributive politics under optimally incomplete information

This thesis wants to contribute to the understanding of the role of collective beliefs and incomplete information in the analysis of the dynamics of inequality, growth and redistributive politics. Extensive evidence shows that the difference in the political support for redistribution appears to reflect a difference in the social perceptions regarding the determinants of individual wealth and the underlying sources of income inequality. The thesis presents a theoretical framework of beliefs and redistribution which explains this evidence through multiple politico-economic equilibria. Differently from the recent literature which obtains multiple equilibria by modeling agents characterized by psychological biases, my framework is based on standard assumptions. Multiple equilibria originate from multiple welfare maximizing levels of information for the society. Multiplewelfare-maximizing levels of information exist because increasing the informativeness of an economy produces a trade-off between a decrease in adverse selection and an increase in moral hazard. The framework provides a new micro-foundation of incomplete information as an institutional feature and answers various macroeconomic policy questions with different models

Non-existence of competitive equilibria with dynamically inconsistent preferences

This paper shows the robust non existence of competitive equilibria even in a simple three period representative agent economy with dynamically inconsistent preferences. We distinguish between a sophisticated and naive representative agent. Even when underlying preferences are monotone and convex, we show by example that the induced preferences, at given prices, of the sophisticated representative agent over choices in first period markets are both non convex and satiated. Therefore, even allowing for negative prices, the market clearing allocation is not contained in the convex hull of demand. Finally, with a naive representative agent, we show that perfect foresight is incompatible with market clearing and individual optimization at given prices

Who benefits from reducing the cost of formality? Quantile regression discontinuity analysis

This paper studies the effects of increasing formality via tax reduction and simplification schemes on micro-firm performance. It uses the 1997 Brazilian SIMPLES program. We develop a simple theoretical model to show that SIMPLES has an impact only on a segment of the micro-firm population, for which the effect of formality on firm performance can be identified, and that can be analyzed along the single dimensional quantiles of the conditional firm revenues. To estimate the effect of formality, we use an econometric approach that compares eligible and non-eligible firms, born before and after SIMPLES in a local interval about the introduction of SIMPLES. We use an estimator that combines both quantile regression and the regression discontinuity identification strategy. The empirical results corroborate the positive effect of formality on microfirms' performance and produce a clear characterization of who benefits from these programs

Redistributive politics under optimally incomplete information

This thesis wants to contribute to the understanding of the role of collective beliefs and incomplete information in the analysis of the dynamics of inequality, growth and redistributive politics. Extensive evidence shows that the difference in the political support for redistribution appears to reflect a difference in the social perceptions regarding the determinants of individual wealth and the underlying sources of income inequality. The thesis presents a theoretical framework of beliefs and redistribution which explains this evidence through multiple politico-economic equilibria. Differently from the recent literature which obtains multiple equilibria by modeling agents characterized by psychological biases, my framework is based on standard assumptions. Multiple equilibria originate from multiple welfare maximizing levels of information for the society. Multiplewelfare-maximizing levels of information exist because increasing the informativeness of an economy produces a trade-off between a decrease in adverse selection and an increase in moral hazard. The framework provides a new micro-foundation of incomplete information as an institutional feature and answers various macroeconomic policy questions with different models.EThOS - Electronic Theses Online ServiceFondazione di Piacenza e Vigevano (FPV)University of Warwick. Dept. of Economics (UoW)GBUnited Kingdo