Dynamic Reform of Public Institutions: A Model of Motivated Agents and Collective Reputation (2017)
State capacity is optimized when public institutions are staffed by individuals with public-service motivation. However, when motivated agents value the collective reputation of their place of employment, steady-state equilibria with both high and low aggregate motivation (reputation) in the mission-oriented sector exist. Reforming a low-motivation institution requires a non-monotonic wage path: since the effect of higher wages on motivation is negative for a high-reputation institution, but positive for a low-reputation institution, a transition to a high-reputation steady state requires an initial wage increase to crowd motivated workers in, followed by a wage decrease to crowd non-motivated workers out. [PAPER]
Social Identity and Political Polarization (2016)
(Joint with Dominik Duell)
While scholars and pundits alike have pointed to a trend of increasing partisan affect in the US, there has been very little analysis as to how partisan affect impacts the decisions of voters. We hypothesize that affective polarization may effect voting both through an expressive channel, as voters become more likely to vote instinctively, and through an instrumental channel, as voters expect candidates to take decisions that are more favorable towards their partisan in-group. To explore this hypothesis, we conduct a laboratory experiment designed to separate between the expressive and instrumental impact of affective polarization, and find evidence that affect significantly impacts subjects’ voting decision through both channels. Importantly, however, we show that the instrumental impact of affective polarization depends on the underlying degree of polarization in policy preferences. Lastly, we compare the impact of affect between groups that are formed using a neutral prime (minimal groups) and groups that are formed using the subjects’ stated partisan identity. Surprisingly, we find no difference in voting behavior between the two treatments, implying that among a group of individuals that are otherwise relatively homogenous, namely university students, the impact of partisan identity is no greater than an arbitrary label. [Paper available on request]
A Rationale for Unanimity in Committees: Information aggregation with idiosyncratic payoffs and deliberation
(Joint with Yves Breitmoser)
Despite the fact that existing theoretical and experimental studies have established that unanimity is a uniquely poor decision rule for promoting information aggregation, unanimity is frequently used in committees making decisions on behalf of society. In this paper, we show that unanimity can facilitate truthful communication and efficient information aggregation in a setting where committee members are exposed to idiosyncratic payoffs that condition on their individual vote. That is, under majority, idiosyncratic payoffs introduce a free-rider problem that eliminates equilibria with optimal information aggregation. However, this free-rider problem is mitigated under unanimity, due to the fact that responsibility for the committee’s decision is uniformly enforced across all committee members. Our experimental results confirm that idiosyncratic payoffs cause strategic communication and sub-optimal decisions under majority, and we present the first evidence of an experimental setting where unanimity outperforms majority in terms of information aggregation. Together, this suggests a novel explanation for why unanimity is commonly used as a decision rule in juries, where individuals may be exposed to idiosyncratic payoffs such as guilt for voting not to convict an individual that goes on to commit a serious crime. [Paper available on request]
The Political Economy of Multilateral Aid Funds (2016)
(Joint with Jenny Simon)
When allocating foreign aid, donor countries face a problem of incentivizing recipient countries to invest in state capacity. In particular, a “Samaritan’s” problem occurs when donors cannot commit to link aid to the level of recipient-country investment. While delegating aid decisions to a third party has been suggested as a solution to the Samaritan’s problem, this solution requires the existence of an inde- pendent party with specific preferences that, say, prioritize efficiency over need. We show that, alternatively, donors can mitigate the Samaritan’s problem by committing to collective decision making: if aid allocation decisions are made ex post via bargaining between donors, then the negotiated outcome will be skewed towards aggregate efficiency, which induces the recipients to compete over ex ante investments. Our model links the fund’s composition of membership and its decision rules to participation, investment and allocation decisions. We show that delegation to a multilateral fund is optimal between donors that place similar utility weights on aid spending, but that diverge in their preferences over which recipients should receive funds. Also, we find that while majority rule induces stronger competition between recipients, it limits aid to a strict subset of recipient countries, which implies that unanimity is often the optimal decision rule. [PAPER]
Voting in Large Committees with Disesteem Payoffs: A ‘state of the art’ model (2017)
(Joint with Rune Midjord and Tomás Rodríguez Barraquer)
In this paper, we consider a committee of experts that decides whether to approve or reject a proposed innovation on behalf of society. In addition to a payoff linked to the adequateness of the committee's decision, each expert receives a disesteem payoff if he/she voted in favor of an ill-fated innovation. An example is FDA committees, where committee members can be exposed to a disesteem payoff (negative) if they vote to pass a drug that proves to be fatal for some users. Under the standard voting model, we show that information is aggregated in large committees provided disesteem payoffs are not overly large. However, we go on to document an empirically-relevant discontinuity in the standard model: if an arbitrarily large number of signals does not perfectly reflect the state of the world then, no matter how small the disesteem payoffs are, information aggregation fails in large committees and the committee rejects the innovation almost surely, providing an explanation for over-caution in committees.
Accepted, Games and Economic Behavior. [PAPER, Distinguished CESifo Affiliate Award] [Supplementary Appendix]
Centralized Fiscal Spending by Supranational Unions (2017)
(Joint with Jenny Simon)
We study fiscal spending by supranational unions, where participation is voluntary and countries bargain over contributions to and the allocation of a central budget. Since nations can threaten to exit (veto), bargaining power over the allocation becomes a function of contributions, which generically causes inefficiency in the presence of income asymmetry between member nations. This link between the budget allocation and contributions explains patterns of inefficient spending in the EU, for example why resources are diverted to low-productivity projects in high-income countries: due to the option of veto, there exist an inherent tradeoff between efficiency on the contributions margin (high-income countries contribute disproportionately to the budget) and efficiency on the allocation margin (spending is allocated where it has the highest marginal product).
Economica, 84(1), pp. 78-103. [PAPER; Klaus Liebscher Award for "papers dedicated to Economic and Monetary Union and European integration issues"]
A Note on Empathy in Games (2015)
(Joint with Jan Grohn and Steffen Huck)
In this note we discuss a concept that -- despite its prominence in both Hume (1739) and Smith (1759), its obvious relevance for social behavior, and its not so infrequent use in colloquial language -- has never gained a foothold in economic theory: the concept of empathy. Specifically, we illustrate how some insights from the psychological literature on empathy can be incorporated into a standard utility framework, and demonstrate the potential interaction of beliefs and utility through the channel of empathy.
Journal of Economic Behavior and Organization, 108, pp. 383–388. [PAPER]
Get Out The Vote: How Policies That Encourage Voting Change Political Outcomes (2012)
How do measures to increase turnout affect election outcomes? I use a novel approach to analyze how these measures influence both voter turnout and the candidates' political positions. Generally, lowering the net expense of voting reduces political polarization. If the net expense of voting is made very low, then candidates no longer have an incentive to take partisan positions to motivate turnout and will converge at the median voter's ideal point. For small changes in the net expense of voting, however, decreasing the cost of voting and penalties for not voting (two common measures) can result in drastically different political outcomes. Counter-intuitively, measures that make voting cheaper might not increase turnout: since these measures decrease the difference between the candidates' political positions, they also decrease the benefit of voting.
Economics and Politics, 24 (3), pp. 346-373. [PAPER]
Institutionalizing Eurozone Exit: A modified NEWNEY approach (2012)
(Joint with Steffen Huck)
In this note, we argue that the Eurozone needs an institutional exit mechanism to enhance Eurozone stability, and propose modifications to the Dobbs' NEWNEY mechanism.
The Connection Between Turnout and Policy (2010)
Joint with Yves Breitmoser.
Joint with Steffen Huck and Burkhard Schipper