Redistribution or Education? The Political Economy of the Social Race

In an overlapping generations model with two social classes, rich and poor, parents of the different social classes vote on two issues: redistributive policies for them and education investment for their children. Public education is the engine for growth through its effect on human capital; but it is also the vehicle through which children born to poor families may exchange their positions with children born to rich families. This is because education reduces the probability of a mismatch, i.e. individuals with low talent but coming from rich families being placed in jobs which should be reserved to people with high talent (and vice-versa). We find a political economy equilibrium of the voting game using probabilistic voting. When the poor are more politically influential, the economy is characterized by higher levels of education, growth and social mobility than under political regimes supported by the rich; pre-tax inequality is greater in the former case, but post-tax is lower.social mobility, talents’ mismatch, probabilistic voting

Coordination in Networks Formation: Experimental Evidence on Learning and Salience

We present experiments on repeated non-cooperative network formation games, based on Bala and Goyal (2000). We treat the one-way and the two-ways flow models, each for high and low link costs. The models show both multiple equilibria and coordination problems. We conduct experiments under various conditions which control for salient labeling and learning dynamics. Contrary to previous experiments, we find that coordination on non-empty Strict Nash equilibria is not an easy task for subjects to achieve, even in the mono-directional model where the Strict Nash equilibria is a wheel. We find that salience significantly helps coordination, but only when subjects are pre-instructed to think of the wheel network as a reasonable way to play the networking game. Evidence on learning behavior provides support for subjects choosing strategies consistent with various learning rules, which include as the main ones Reinforcement and Fictitious Play.Experiments, Networks, Behavioral game theory, Salience, Learning dynamics