1,721,066 research outputs found
International Unions
Full text linkWe model an international union as a group of countries deciding together on the provision of public goods or policies that generate spillovers across members. The trade-off between benefits of coordination and loss of independent policymaking endogenously determines size, composition and scope of the union. Policy uniformity reduces the union’s size, may block enlargement processes and induce excessive centralization. We study flexible rules with non-uniform policies that reduce these ine?- ciencies focusing on arrangements relevant in the context of existing unions or federal states, like enhanced cooperation, subsidiarity, federal mandates and earmarked grants.
Globalization and Political Geography
Full text linkI study a model of geopolitical organization endogenizing the size of nations, of their public spending and of their degree of openness. The optimal geography may not be a stable equilibrium and the Alesina-Spolaore bias toward too many nations tends to be confirmed. However, multiple equilibria can emerge with globalization backlash associated with large nations and high protectionism and equilibria with smaller countries and high openness which are also Pareto superior. A dynamic version of the model shows stable paths of decreasing size of nations, increasing globalization and (at least initially) increasing public spending. Such a process seems consistent with the historical experience, but it may converge toward a steady state with excessive globalization, too many countries and typically too much government spending.
The Endogenous Market Structures Approach. A Non-technical Survey with Applications to the Crisis and Future Scenarios for the New Economy
Full text linkThe EMSs approach to macroeconomics introduces strategic interactions and endogenous entry decisions in the analysis of aggregate phenomena as business cycle, international trade and growth. This survey provides a non-technical discussion of the applications of the EMSs approach to positive and normative issues, and relates these with recent debates on the current recession, future scenarios for glabalization, policymaking and the New Economy.
Optimal monetary policy under Calvo pricing with Bertrand competition
Full text linkWe consider a NK model characterized by a small and fixed number of firms competing in
prices à la Bertrand and we study the implications for monetary policy under both exogenous
and endogenous market concentration. We find that the implied NKPC has a lower
slope compared to a standard NK model with atomistic firms, and the determinacy region
enlarges assuming a standard Taylor rule. We characterize the impact of competition on
the optimal monetary rules within the linear-quadratic approach of Rotemberg–
Woodford. The optimal monetary rule requires a less aggressive reaction to inflationary
shocks compared to monopolistic competition, but an increase in competition, due to
either an increase in substitutability between the goods or in the number of firms, makes
it optimal to adopt a more aggressive reaction in front of inflationary shocks. Finally, more
competition increases the gains from commitmen
National Sovereignty in an Interdependent World
Full text linkWhat are the sovereign rights of nations in an interdependent world, and to what extent do these rights stand in the way of achieving important international objectives? These two questions rest at the heart of contemporary debate over the role and design of international institutions as well as growing tension between globalization and the preservation of national sovereignty. In this paper, we propose answers to these two questions. We do so by first developing formal definitions of national sovereignty that capture features of sovereignty emphasized in the political science literature. We then utilize these definitions to describe the degree and nature of national sovereignty possessed by governments in a benchmark (Nash) world in which there exist no international agreements of any kind. And with national sovereignty characterized in this benchmark world, we then evaluate the extent to which national sovereignty is compromised by international agreements with specific design features. In this way, we delineate the degree of tension between national sovereignty and international objectives and describe how that tension can be minimized and in principle at times even eliminated through careful institutional design.
Do side payments help? Collective decisions and strategic delegation
Full text linkI investigate when a exible bargaining agenda, where side payments are possible, facilitates cooperation in a context with strategic delegation. On the one hand, allowing side payments may be necessary when one partys participation constraint otherwise would be violated. On the other, with side payments each principal appoints a delegate that values the project less, since this increases her bargaining power. Reluctant agents, in turn, implement too few projects. I show that side payments are bad if the heterogeneity is small while the uncertainty and the typical value of the project are large. With a larger number of parties there may be a stalemate without side payments, but delegation becomes more strategic as well, and cooperation decreases in either case.Collective action, side transfers, bargaining agenda, strategic delegation, issue linkages
Endogenous Market Structure and the Business Cycle
Full text linkWe introduce endogenous strategic interactions under competition in quantities and in prices together with endogenous entry in a dynamic stochastic general equilibrium model with flexible prices. The endogenous mark ups depend on the form of competition and on the degree of substitutability between goods, and they vary countercylically while profits are procyclical. Positive temporary shocks to productivity and government spending attract entry. Entry strengthens competition between firms, which temporary reduces mark ups and prices: this creates an intertemporal substitution effect which provides an extra boost to consumption. The model outperforms the standard RBC framework in matching impulse response functions and second moments for US data.Endogenous Market Structure, Firms?Entry, Business Cycle
The Impact of Referendums on the Centralisation of Public Goods Provision: A Political Economy Approach
Full text linkThe paper compares decision-making on the centralisation of public goods provision in the presence of regional externalities under representative and direct democratic institutions. A model with two regions, two public goods and regional spillovers is developed in which uncertainty over the true preferences of candidates makes strategic delegation impossible. Instead, it is shown that the existence of rent extraction by delegates alone suffices to make cooperative centralisation more likely through representative democracy. In the non-cooperative case, the more extensive possibilities for institutional design under representative democracy increase the likelihood of centralisation. Direct democracy may thus be interpreted as a federalism-preserving institution.centralisation; direct democracy; representative democracy; public good provision.
Dynamics and Stability of Constitutions, Coalitions, and Clubs
Full text linkA central feature of dynamic collective decision-making is that the rules that govern the procedures for future decision-making and the distribution of political power across players are determined by current decisions. For example, current constitutional change must take into account how the new constitution may pave the way for further changes in laws and regulations. We develop a general framework for the analysis of this class of dynamic problems. Under relatively natural acyclicity assumptions, we provide a complete characterization of dynamically stable states as functions of the initial state and determine conditions for their uniqueness. We show how this framework can be applied in political economy, coalition formation, and the analysis of the dynamics of clubs. The explicit characterization we provide highlights two intuitive features of dynamic collective decision-making: (1) a social arrangement is made stable by the instability of alternative arrangements that are preferred by sufficiently many members of the society; (2) efficiency-enhancing changes are often resisted because of further social changes that they will engender.
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