What if TTIP Changed the Regulation of Public Services ?Lessons for Europe from Developing Countries

This paper argues that the TTIP negotiators may be underestimating some of the risks associated with the treatment of public services. De facto opening the door to supranational regulation of key public services may be well intended to protect investors. But when the bargaining power of these investors operating in non-competitive markets (which is the case for most public services) becomes excessive as a result, the experience of developing countries in interactions with many of the same large players points to risks. It is likely that outcomes in terms of the usual policy criteria (efficiency, equity and fiscal viability) will not be as positive as promised in an environment in which regulation ends up weaker (because it is captured or less specialized). Ignoring these lessons and failing to internalize them in the design of negotiation is likely to cost Europe.

Nonparametric tests of collectively rational consumption behavior: an integer programming procedure

We present an IP-based nonparametric (revealed preference) testing procedure for rational consumption behavior in terms of general collective models, which include consumption externalities and public consumption. An empirical application to data drawn from the Russia Longitudinal Monitoring Survey (RLMS) demonstrates the practical usefulness of the procedure. Finally, we present extensions of the testing procedure to evaluate the goodness-of-…t of the collective model subject to testing, and to quantify and improve the power of the corresponding collective rationality tests.

Other-Regarding Preferences in General Equilibrium

We study competitive market outcomes in economies where agents have other-regarding preferences. We identify a separability condition on monotone preferences that is necessary and sufficient for one’s own demand to be independent of the allocations and characteristics of other agents in the economy. Given separability, it is impossible to identify other-regarding preferences from market behavior: agents be- have as if they had classical preferences that depend only on own consumption in competitive equilibrium. If preferences, in addition, depend only on the final allocation of consumption in society, the Sec- ond Welfare Theorem holds as long as an increase in resources can be distributed such that all agents are better off. Nevertheless, the First Welfare Theorem generally does not hold. Allowing agents to care about their own consumption and the distribution of consump- tion possibilities in the economy, we provide a condition under which agents have no incentive to make direct transfers, and show that this condition implies that competitive equilibria are efficient given prices.

Fast-Track Authority and International Trade Negotiations

Fast Track Authority (FTA) is the institutional procedure in the Unites States whereby Congress grants to the President the power to negotiate international trade agreements. Under FTA, Congress can only approve or reject negotiated trade deals, with no possibility of amending them. In this paper, we examine the determinants of FTA voting decisions and the implications of this institutional procedure for trade negotiations. We describe a simple two-country trade model, in which industries are unevenly distributed across con- stituencies. In the foreign country, trade negotiating authority is delegated to the executive, while in the home country Congress can retain the power to amend trade agreements. We show that legislators’ FTA voting behavior depends on the trade policy interests of their own constituencies as well as those of the majority of Congress. Empirical analysis of the determinants of all FTA votes between 1974 (when fast track was first introduced) and 2002 (when it was last granted) provides strong support for the predictions of our model.

Democratic Peace and Electoral Accountability

One of the few stylized facts in international relations is that democracies, unlike autoc- racies, very rarely fight each other. We examine the sustainability of international peace between democracies and autocracies, where the crucial difference between these two po- litical regimes is whether or not policymakers are subject to periodic elections. We show that the fear of losing office can deter democratic leaders from engaging in military con- flicts. Crucially, this discipline effect can only be at work if incumbent leaders can be re-elected, implying that democracies in which the executives are subject to term limits should be more conflict prone. To assess the validity of our predictions, we construct a large dataset on countries with executive term limits. Our analysis of inter-state conflicts for the 1816-2001 period suggests that electoral incentives are indeed behind the democratic peace phenomenon: while democratic dyads are in general less likely to be involved in conflicts than any other dyads, this result does not hold for democracies in which the executive faces binding term limits; moreover, the dispute patterns of democracies with term limits depend on whether the executive is in the last or penultimate mandate.

One Person, Many Votes: Divided Majority and Information Aggregation

In elections, majority divisions pave the way to focal manipulations and coordination failures, which can lead to the victory of the wrong candidate. This paper shows how this flaw can be addressed if voter preferences over candidates are sensitive to information. We consider two potential sources of divisions: majority voters may have similar preferences but opposite information about the candidates, or opposite preferences. We show that when information is the source of majority divisions, Approval Voting features a unique equilibrium with full information and coordination equivalence. That is, it produces the same outcome as if both information and coordination problems could be resolved. Other electoral systems, such as Plurality and Two-Round elections, do not satisfy this equivalence. The second source of division is opposite preferences. Whenever the fraction of voters with such preferences is not too large, Approval Voting still satisfies full information and coordination equivalence.

Trade Liberalization and Organizational Change

We embed a simple incomplete-contracts model of organization design in a standard two-country perfectly-competitive trade model to examine how the liberalization of product and factor markets affects the ownership structure of firms.In our model, managers decide whether or not to integrate their firms, trading off the pecuniary benefits of coordinating production decisions with the private benefits of operating in their preferred ways. The price of output is a crucial determinant of this choice, since it affects the size of the pecuniary benefits. In particular, non-integration is chosen at “low” and “high” prices, while integration occurs at moderate prices. Organizational choices also depend on the terms of trade in supplier markets, which affect the division of surplus between managers. We obtain three main results. First, even when firms do not relocate across countries, the price changes triggered by liberalization of product markets can lead to significant organizational restructuring within countries. Second, the removal of barriers to factor mobility can lead to inefficient reorganization and adversely affect consumers. Third, “deep integration” — the liberalization of both product and factor markets — leads to the convergence of organizational design across countries.

An Afriat theorem for the collective model of household consumption

We provide a nonparametric 'revealed preference’ characterization of rational household behavior in terms of the collective consumption model, while accounting for general (possibly non-convex) individual preferences. We establish a Collective Axiom of Revealed Preference (CARP), which provides a necessary and sufficient condition for data consistency with collective rationality. Our main result takes the form of a ‘collective’ version of the Afriat Theorem for rational behavior in terms of the unitary model. This theorem has some interesting implications. With only a finite set of observations, the nature of consumption externalities (positive or negative) in the intra-household allocation process is non-testable. The same non-testability conclusion holds for privateness (with or without externalities) or publicness of consumption. By contrast, concavity of individual utility functions (representing convex preferences) turns out to be testable. In addition, monotonicity is testable for the model that assumes all household consumption is public.