We present a model of political selection in which voters elect a president from a set of candidates. We assume that some of the candidates are benevolent and that all voters prefer a benevolent president, i.e. a president who serves the public interest. Yet, political selection may fail in our...

We integrate strategic-trade and political-economy considerations in a unified framework to analyze unilateral trade policy. Foreign firms compete on Home´s market through export or foreign direct investment (FDI). They also lobby Home´s government which sets trade (tariff) and industrial...

An infinitely repeated monetary policy game à la Barro and Gordon (1983) is considered. Before the game starts the government announces a policy rule. If there is a slight probability that government is honest and a slight probability that the government makes mistakes, then a sufficiently...

We investigate experimentally the effects of corrupt experts on information aggregation in committees. We find that non-experts are significantly less likely to delegate through abstention when there is a probability that experts are corrupt. Such decreased abstention, when the probability of...

We explore the political acceptance of taxation in commodity markets. Participants in our experiment earn incomes by trading and must collectively choose one of two tax regimes to raise a given tax revenue. A "uniform tax" (UT) imposes the same tax rate on all markets and is fair in that it...

Partisan voters are optimistic about electoral outcomes: their estimates of the probability of electoral success for their party or candidate are substantially higher than the average among the electorate. This has large potential implications for political bargaining. Optimism about future...

Adaptive contracting is defined as a strategy in which a principal experiments - through trial-and-error - with the degree of contractual completeness. We highlight two potential benefits of an adaptive approach: First, the implied delegation of authority can be beneficial for the principal even...

Two parties have different goals. Voters, but not parties, are uncertain about the functioning of the economy, in this case the costs of producing a public good. The parties each propose a policy, an election is held and the policy of the winning party is implemented. Voters and parties care...

This paper studies the relation between political polarization and delegation of stabilization policy. There is asymmetric information about how the economy works: unlike voters, two political parties know the variance of an employment shock. Prior to an election each party proposes a central...

According to the “Mill hypothesis”, the tax burden from indirect taxation is underestimated because indirect taxes are less “visible” than direct taxes. We experimentally test the Mill hypothesis and identify tax framing as a cause of fiscal illusion. We find that the tax burden...