The Stakes and Informativeness Trade-Off: Electoral Incentives to Implement Programmatic Transfers
If a transfers policy is programmatic (it is transparent and non-manipulable), is it irrelevant for politicians' electoral fortunes? I show that the answer is no with a political agency model where politicians' competence is uncertain to all. In my setup, an incumbent can allocate a budget to public goods and transfers. These policies differ in one key dimension: the provision of public goods fluctuates more over time relative to transfers. When the incumbent increases the budget to public goods, two effects arise: his performance in office today reveals more information about his identity (an informativeness effect), and voters' anticipation of narrow transfers tomorrow increases the salience of political selection (a stakes effect). To the incumbent, these two effects move in opposing directions and, consequently, the strategic allocation of the budget helps him to advance his electoral fortunes.
Merchants of Reputation: Privatization under Elites' Outside Lobbying
An economic elite wants to buy a public asset as cheaply as possible. Its ownership is decided by an incumbent politician who can be of high or low competence. The elite can make a buying offer for the asset and manipulate the information that is available to voters about the incumbent's competence. By attacking the incumbent (trying to uncover bad news about his competence before making him an offer) or threatening him (with uncovering bad news if he refuses to sell), I show that the elite can reduce the prices that the incumbent would accept for selling the asset. I also show that the elite often (but not always) uses threats against a leading incumbent (one who has better reputation than his challenger) and attacks against a trailing one. I further find that a better reputation can actually render an incumbent more susceptible to the elite's influence.
A Political Economy of Tax Evasion: Theory and Evidence (with Alberto Parmigiani)
An influential citizen wants to get away with tax evasion, which is a risky practice as it can trigger audits that result in sanctions. To reduce the chances of being audited, he can invest in the complexity of his evasion scheme ---which we call ``brains". The probability that an audit results in a sanction depends on the effort exerted by an investigator. To reduce the effort that she exerts, the citizen can commit to delivering punishments ---which we call ``muscles". We show that there exists a threshold in the quality of institutions below which muscles and brains are complements and above which they are substitutes. The citizen's equilibrium strategies yield a testable prediction: estimates of international tax evasion display an inverted U-shape along the quality of institutions. We provide evidence of this finding by building a panel dataset of estimated offshore wealth by individuals for 37 countries between 2002 to 2016.