Merchants of Reputation: Privatization under Elites' Outside Lobbying (Manuscript available upon request)

An economic elite wants to buy a public asset, whose control is within the authority of an office and legacy motivated incumbent politician. The elite wants the asset and they want it cheap. In the extensive margin, the incumbent decides whether to sell or not; in the intensive margin, he decides at what price to sell. The main contribution of the paper is to uncover how the intensive margin creates an incentive for the elite to invest in outside lobbying ex-ante so as to get the asset as cheap as possible. In my framework, outside lobbying is the elite's use of their media to attack or to threaten the incumbent: they can affect his electoral fortunes by manipulating voter's beliefs about his competence. I show that the elite's optimal lobbying strategies take two broad forms on the equilibrium path: if the incumbent is unwilling to privatize, then the elite employs threats; if he is willing to privatize, the elite employs attacks. The paper shows that even in the absence of traditionally studied channels of influence (like bribery), the elite can induce significant variability in the asset sale prices. Both the outside lobbying strategies and the privatization prices emerge endogenously in equilibrium.

Machiavellian Fair Play: Programmatic Transfers and the Political Control of Information Effects

If a welfare transfers program is transparent (rules are clear), public (rules are common knowledge) and broad (rules are non-partisan), can incumbent politicians benefit electorally from implementing it? I study a probabilistic voting model in which an office-motivated incumbent politician, of high or low competence, can design a long-term programmatic transfers policy which affects the per-period budget that is otherwise used for the provision of public goods. In my framework, a transfers program is not only less efficient than public goods provision but it is also an easier policy to implement which results in transfers being less informative about the incumbent's competence. The main contribution of the paper is to show how non-linearities in the probability distribution of valence shocks creates incentives for the strategic allocation of the budget across policy instruments. In deciding a budget allocation, the incumbent faces a key trade-off: while increasing transfers decreases the amount of information revelation, it also decreases the stakes of the election. The resolution of this trade-off broadly depends on the incumbent's electoral status with respect to his challenger: a leading incumbent increases the stakes of the election at the cost of opening up information revelation; and a trailing incumbent decreases the stakes of the election at the cost of shutting down his chances of proving himself to the electorate. The theoretical implications for empirical models are two-fold. First, the experimental ideal to isolate the causal effect of programmatic transfers on vote shares involves the randomization of the policy instrument itself, and not simply randomizing who becomes a beneficiary. The second implication is that, even under mild assumptions, different empirical strategies can imply different probability distributions over the directions of causal estimates that can be recovered: I show that from a regression discontinuity design at the eligibility threshold within a locality, we are likely to recover null effects; and from a matching on covariates design at some locality level, we are likely to recover positive or negative effects.