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Campaigns, political mobility, and communication
(2011)Economics Working Paper SeriesWe present a model of elections in which interest group donations allow candidates to shift policy positions. We show that if donations were prohibited, then a unique equilibrium regarding the position choices of candidates would exist. With unrestricted financing of political campaigns two equilibria emerge, depending on whether a majority of interest groups runs to support the leftist or rightist candidate. The equilibria generate a ...Working Paper -
Basic research, openness, and convergence
(2010)Economics Working Paper SeriesWe study a model where economic growth is fueled by public basic-research investment and the importation of leading technology from foreign countries. In each period, the government chooses the amount of basic research, balancing the cost and benefits of stimulating growth through both channels. We establish the existence of steady states and the long-run share of technologically advanced sectors in the economy. Then, we explore how ...Working Paper -
Rules vs. targets: Climate treaties under uncertainty
(2012)Economics Working Paper SeriesWe demonstrate the advantages of a climate treaty based solely on rules for international permit markets when there is uncertainty about abatement costs and environmental damages. Such a ‘Rules Treaty’ comprises a scaling factor and a refunding rule. Each signatory can freely choose the number of permits it allocates to domestic firms. For every permit so issued, an international agency is allowed to issue additional permits in accordance ...Working Paper -
Economic rationales for investments in science
(2018)Economics Working Paper SeriesWorking Paper -
Default risk in stochastic volatility models
(2010)Economics Working Paper SeriesWe consider a stochastic volatility model of the mean-reverting type to describe theevolution of a firm’s values instead of the classical approach by Merton with geometricBrownian motions. We develop an analytical expression for the default probability. Oursimulation results indicate that the stochastic volatility model tends to predict higherdefault probabilities than the corresponding Merton model if a firm’s credit quality isnot too ...Working Paper -
A human relations paradox
(2011)Economics Working Paper SeriesWe present a variant of a general equilibrium model with group formation to study how changes of non-consumptive benefits from group formation impact on the well-being of group members. We identify a human relations paradox: Positive externalities increase, but none of the group members gains in equilibrium. Moreover, a member who experiences an increase of positive emotional benefits in a group may become worse off in equilibrium.Working Paper -
History-bound reelections
(2015)Economics Working Paper SeriesOften political races are not really competitive, and the path to reelection is smooth for many incumbents. In two-candidate races for office we suggest the introduction of a new re-election rule, which we call the “Score-replication Rule.” This rule requires that, to be reelected, any incumbent has to obtain a percentage of votes that is at least as high as the highest vote-share he/she obtained in any previous election (reduced by some ...Working Paper -
On the global supply of basic research
(2013)Economics Working Paper SeriesIn this paper we study the incentives for basic-research investments by governments in a globalized world. For this purpose, we develop a two-country Schumpeterian growth model in which each country chooses its basic-research investments. We find that a country’s basic-research investments increase with the country’s level of human capital and decline with its ownmarket size. This may explain the large basic-research investments by small ...Working Paper -
Balanced Voting
(2015)Economics Working Paper SeriesWe introduce ‘Balanced Voting’, a new voting scheme that is particularly suitable for making fundamental societal decisions. Such decisions typically involve subgroups that are strongly in favor of, or against, a new fundamental direction, and others that care much less. In a two-stage procedure, Balanced Voting works as follows: Citizens may abstain from voting on a fundamental direction in a first stage. In a second voting stage, this ...Working Paper -
Taxation, innovation, and entrepreneurship
(2014)Economics Working Paper SeriesWe explore optimal and politically feasible growth policies in the form of basic research investments and taxation. Basic research is a public good that benefits innovating entrepreneurs, but its provision and financing also affect the entire economy – in particular, occupational choices of potential entrepreneurs, wages, dividends, and aggregate output. We show that the impact of basic research on the general economy rationalizes a ...Working Paper