Why not in your Backyard? On the Location and Size of a Public Facility

In this paper, we tackle the issue of locating a public facility which provides a public good in a closed and populated territory. This facility generates differentiated benefits to neighborhoods depending on their distance from it. In the case of a Nimby facility, the smaller is the distance, the lower is the individual benefit. The opposite is true in the case of an anti-Nimby facility. We first characterize the optimal location which would be chosen by a social planner. Then we introduce a common-agency lobbying game, where agents attempt to influence the location and provision decisions by the government. Some interesting results arise in the case where only a subset of neighborhoods lobby. First, the solution of the lobbying game can replicate the optimal solution. Second, under-provision and over-provision of the public good may be obtained both in the Nimby and the anti-Nimby cases. The provision outcome depends on the presence of either a congestion effect or an agglomeration effect. Third, some non-lobbying neighborhoods may be better off than in the case where all neighborhoods lobby, which raises the possibility of free-riding at the lobbying stage.

Real Estate Prices and the Importance of Bequest Taxation

In the context of a general equilibrium model with overlapping generations and intergenerational altruism we show that, ceteris paribus, a decrease in taxes on inter vivos donations and bequests brings about an increase in real estate prices. This result has relevant policy implications. We test the predictions of our theory exploiting the abolition of bequest and donation taxation that took place in Italy in 2001. We implement this test by using an original and unique dataset on sales, donations and real estate prices for 13 italian cities between 1993 and 2004. Our estimates suggest that, controlling for other explanatory variables, the 2001 abolition of taxation on bequests and donations contributed substantially to the appreciation of Italian residential real estate.bequest tax; donations; real estate

Aggregate uncertainty, political instability and redistribution

This paper associates political instability to real shocks affecting the income of the median voter, in a two-period model where two political parties set redistribution in order to defend the interests of well-defined constituencies. Implemented policies affect future voting outcomes and an intertemporal trade-off arises for the parties since their optimal one-period strategy does not maximize the probability of being reelected. The higher the volatility of the real shock, the more likely that parties deviate from the optimal one-period strategy by choosing a conservative strategy, which increases their chances of reelection and the expected lifetime utility of their constituencies

Special Interests and Technological Change

We study an OLG economy where productivity growth comes from two alternative sources: process innovation and learning-by-doing. There is a trade-off between the two in so far as frequent technological updates reduce the scope for learning on existing technologies. A conflict is shown to arise between the young and the old, because the former favor innovation while the latter prefer learning. We model the interaction between overlapping generations and policy makers as a dynamic common agency problem, where competing generations invest a certain amount of resources to lobby either for the maintenance of the current technology or the adoption of a new one. By focusing on truthful Markov perfect equilibria, we characterize the political equilibrium and show its dependence on the underlying demographic, technological and preference parameters.Technological change, Technology option, Pressure goups, Dynamic common agency

When the Union Hurts the Workers: A Positive Analysis of Immigration Policy

This paper studies the determinants of immigration policy in an economy with entrepreneurs and workers where a trade union has monopoly power over wages. The presence of the union leads a benevolent government to implement a high level of immigration and induces a welfare loss not only from an aggregate point of view, but even from the point of view of workers. In the politico-economic equilibrium where interest groups lobby for immigration, we show the condition under which workers are no longer hurt by the presence of the union.

Unions and the political economy of immigration

To study the political economy of immigration, we develop a common agency model where a trade union and a lobby of entrepreneurs offer contributions to the government to influence its decision on how many immigrants can enter the domestic economy. In the political equilibrium, anticipating that the union will use its power to raise the wage rate above the competitive level, the government sets the level of immigration above the socially optimal one. In this case, the union would be better off by foregoing its power on wage determination and engaging exclusively in the lobbying activityImmigration, unions, lobbying

Political Persistence, Connections and Economic Growth

Using data on a panel of 56 democratic countries in the period 1975-2004, we find evidence of a negative association between political stability and economic growth which is stronger and empirically more robust in countries with high bureaucratic costs. Motivated by these results, which contrast with previous contributions, we develop a model of growth with quality improvements where political connections with long-term politicians can be exploited by low-quality producers to defend their monopoly position and prevent innovation and entry of high-quality competitors. This requires that the incumbent politician remains in office and that the red-tape cost advantage granted by political connections is large relative to the quality upgrade related to innovation. Consistently with our empirical findings, the model delivers a negative association between the probability that the incumbent politician remains in office and average economic growth in the presence of high bureaucratic costs.political persistence, growth, innovation

Persistence of Politicians and Firms' Innovation

We empirically investigate whether the persistence of politicians in political institutions affects the innovation activity of firms. We use 12,000 firm-level observations from three waves of the Italian Observatory over Small and Medium Enterprises, and introduce a measure of political persistence defined as the average length of individual political careers in political institutions of Italian municipalities. Standard OLS shows no raw correlation between political persistence and firms’ innovation activity. However, once the causal effect is isolated by means of instrumental variables, using death of politicians as an exogenous source of variation of political persistence, we find a robust negative relation between political persistence and the probability of process innovation. This finding is consistent with the view that political stability may hinder firms’ incentive to innovate to maintain their competitiveness, as long as they can extract rents from long-term connections with politicians.innovation, politicians, tenure, instrumental variable

Persistence of high income inequality and banking crises: 1980-2010

Differently from Atkinson and Morelli (2011) who detect no clear link between increases in income inequality and systemic banking crises, we show that a large majority of crises occurred between 1982 and 2008 have been preceded by persistently high levels of income inequality. Such association is robust when considering Gini values for incomes after-tax as well as before-tax and transfers. Moreover, we investigate the pattern of income inequality levels before and after a group of banking crises and the relative levels of income inequality in a large sample of OECD countries that did not experience banking crises between 1980 and 2010