Three essays on mechanism design and institutions

This thesis is concerned with both mechanism design and political economy issues. The first chapter examines the conditions under which information aggregation (through an appropriately designed mechanism) can solve hidden-types (also commonly referred as adverse selection) problems. The remaining two chapters adopt a contract theory approach in order to explain prominent institutions of many contemporary political regimes. Chapter two provides a theory on why laws, which restrict the freedom of private parties to commit on certain transactions, may actually be beneficial for increasing social surplus and promoting economic growth and how the evolution of these laws interacts with the process of economic development. Finally, chapter three examines the issue on how the separation between the legislative and the executive branch of a government can complement political competition in order to achieve an efficient provision of public goods

Voting as a Signaling Device

In this paper, citizens vote in order to influence the election outcome and in order to signal their unobserved characteristics to others. The model is one of rational voting and generates the following predictions: (i) The paradox of not voting does not arise, because the benefit of voting does not vanish with population size. (ii) Turnout in elections is positively related to the size of the local community and the importance of social interactions. (iii) Voting may exhibit bandwagon effects and small changes in the electoral incentives may generate large changes in turnout due to signaling effects. (iv) Signaling incentives increase the sensitivity of turnout to voting incentives in communities with low opportunity cost of social interaction, while the opposite is true for communities with high cost of social interaction. Therefore, the model predicts that smaller communities have more volatile turnout than larger communities.electoral incentives, signaling, voting