Three Essays on the Formation and Impact of Economic Policy

Introduction In my thesis I argue that economic policy is all about economics and politics. Consequently, analysing and understanding economic policy ideally has at least two parts. The economics part, which is centered around the expected impact of a specific policy on the real economy both in terms of efficiency and equity. The insights of this part point into which direction the fine-tuning of economic policies should go. However, fine-tuning of economic policies will be most likely subject to political constraints. That is why, in the politics part, a much better understanding can be gained by taking into account how the incentives of politicians and special interest groups as well as the role played by different institutional features affect the formation of economic policies. The first part and chapter of my thesis concentrates on the efficiency-related impact of economic policies: how does corporate income taxation in general, and corporate income tax progressivity in specific, affect the creation of new firms? Reduced progressivity and flat-rate taxes are in vogue. By 2009, 22 countries are operating flat-rate income tax systems, as do 7 US states and 14 Swiss cantons (for corporate income only). Tax reform proposals in the spirit of the "flat tax" model typically aim to reduce three parameters: the average tax burden, the progressivity of the tax schedule, and the complexity of the tax code. In joint work, Marius Brülhart and I explore the implications of changes in these three parameters on entrepreneurial activity, measured by counts of firm births in a panel of Swiss municipalities. Our results show that lower average tax rates and reduced complexity of the tax code promote firm births. Controlling for these effects, reduced progressivity inhibits firm births. Our reading of these results is that tax progressivity has an insurance effect that facilitates entrepreneurial risk taking. The positive effects of lower tax levels and reduced complexity are estimated to be significantly stronger than the negative effect of reduced progressivity. To the extent that firm births reflect desirable entrepreneurial dynamism, it is not the flattening of tax schedules that is key to successful tax reforms, but the lowering of average tax burdens and the simplification of tax codes. Flatness per se is of secondary importance and even appears to be detrimental to firm births. The second part of my thesis, which corresponds to the second and third chapter, concentrates on how economic policies are formed. By the nature of the analysis, these two chapters draw on a broader literature than the first chapter. Both economists and political scientists have done extensive research on how economic policies are formed. Thereby, researchers in both disciplines have recognised the importance of special interest groups trying to influence policy-making through various channels. In general, economists base their analysis on a formal and microeconomically founded approach, while abstracting from institutional details. In contrast, political scientists' frameworks are generally richer in terms of institutional features but lack the theoretical rigour of economists' approaches. I start from the economist's point of view. However, I try to borrow as much as possible from the findings of political science to gain a better understanding of how economic policies are formed in reality. In the second chapter, I take a theoretical approach and focus on the institutional policy framework to explore how interactions between different political institutions affect the outcome of trade policy in presence of special interest groups' lobbying. Standard political economy theory treats the government as a single institutional actor which sets tariffs by trading off social welfare against contributions from special interest groups seeking industry-specific protection from imports. However, these models lack important (institutional) features of reality. That is why, in my model, I split up the government into a legislative and executive branch which can both be lobbied by special interest groups. Furthermore, the legislative has the option to delegate its trade policy authority to the executive. I allow the executive to compensate the legislative in exchange for delegation. Despite ample anecdotal evidence, bargaining over delegation of trade policy authority has not yet been formally modelled in the literature. I show that delegation has an impact on policy formation in that it leads to lower equilibrium tariffs compared to a standard model without delegation. I also show that delegation will only take place if the lobby is not strong enough to prevent it. Furthermore, the option to delegate increases the bargaining power of the legislative at the expense of the lobbies. Therefore, the findings of this model can shed a light on why the U.S. Congress often practices delegation to the executive. In the final chapter of my thesis, my coauthor, Antonio Fidalgo, and I take a narrower approach and focus on the individual politician level of policy-making to explore how connections to private firms and networks within parliament affect individual politicians' decision-making. Theories in the spirit of the model of the second chapter show how campaign contributions from lobbies to politicians can influence economic policies. There exists an abundant empirical literature that analyses ties between firms and politicians based on campaign contributions. However, the evidence on the impact of campaign contributions is mixed, at best. In our paper, we analyse an alternative channel of influence in the shape of personal connections between politicians and firms through board membership. We identify a direct effect of board membership on individual politicians' voting behaviour and an indirect leverage effect when politicians with board connections influence non-connected peers. We assess the importance of these two effects using a vote in the Swiss parliament on a government bailout of the national airline, Swissair, in 2001, which serves as a natural experiment. We find that both the direct effect of connections to firms and the indirect leverage effect had a strong and positive impact on the probability that a politician supported the government bailout.

Pathological science.

Review of the book : The undergrowth of science: delusion, self-deception and human frailty, by W. Gratzer, Oxford University Press, Oxford, UK

Genetic architecture of ambulatory blood pressure in the general population: insights from cardiovascular gene-centric array.

Genetic determinants of blood pressure are poorly defined. We undertook a large-scale, gene-centric analysis to identify loci and pathways associated with ambulatory systolic and diastolic blood pressure. We measured 24-hour ambulatory blood pressure in 2020 individuals from 520 white European nuclear families (the Genetic Regulation of Arterial Pressure of Humans in the Community Study) and genotyped their DNA using the Illumina HumanCVD BeadChip array, which contains ≈50 000 single nucleotide polymorphisms in >2000 cardiovascular candidate loci. We found a strong association between rs13306560 polymorphism in the promoter region of MTHFR and CLCN6 and mean 24-hour diastolic blood pressure; each minor allele copy of rs13306560 was associated with 2.6 mm Hg lower mean 24-hour diastolic blood pressure (P=1.2×10(-8)). rs13306560 was also associated with clinic diastolic blood pressure in a combined analysis of 8129 subjects from the Genetic Regulation of Arterial Pressure of Humans in the Community Study, the CoLaus Study, and the Silesian Cardiovascular Study (P=5.4×10(-6)). Additional analysis of associations between variants in gene ontology-defined pathways and mean 24-hour blood pressure in the Genetic Regulation of Arterial Pressure of Humans in the Community Study showed that cell survival control signaling cascades could play a role in blood pressure regulation. There was also a significant overrepresentation of rare variants (minor allele frequency: <0.05) among polymorphisms showing at least nominal association with mean 24-hour blood pressure indicating that a considerable proportion of its heritability may be explained by uncommon alleles. Through a large-scale gene-centric analysis of ambulatory blood pressure, we identified an association of a novel variant at the MTHFR/CLNC6 locus with diastolic blood pressure and provided new insights into the genetic architecture of blood pressure.

On the use of IRMS in forensic science: proposals for a methodological approach.

The flourishing number of publications on the use of isotope ratio mass spectrometry (IRMS) in forensicscience denotes the enthusiasm and the attraction generated by this technology. IRMS has demonstratedits potential to distinguish chemically identical compounds coming from different sources. Despite thenumerous applications of IRMS to a wide range of forensic materials, its implementation in a forensicframework is less straightforward than it appears. In addition, each laboratory has developed its ownstrategy of analysis on calibration, sequence design, standards utilisation and data treatment without aclear consensus.Through the experience acquired from research undertaken in different forensic fields, we propose amethodological framework of the whole process using IRMS methods. We emphasize the importance ofconsidering isotopic results as part of a whole approach, when applying this technology to a particularforensic issue. The process is divided into six different steps, which should be considered for a thoughtfuland relevant application. The dissection of this process into fundamental steps, further detailed, enablesa better understanding of the essential, though not exhaustive, factors that have to be considered in orderto obtain results of quality and sufficiently robust to proceed to retrospective analyses or interlaboratorycomparisons.

Une pensée économique russe?: présentation, traduction et annotation de l'article "Science Economique" (1899) de Mikhail Ivanovich Tugan-Baranovskij

L'économiste russe Tugan-Baranovskij (1865-1919) a publié en 1899 une notice sur le développement de la « science économique russe » pour la première encyclopédie universelle russe, le Brockhaus-Efron. Sous la forme d'un catalogue chronologique des économistes russes et de leurs ouvrages tout au long du XIXe siècle, le récit de Tugan-Baranovskij représente une des premières tentatives d'écrire une histoire de la pensée économique russe. L'intérêt du texte se manifeste lorsqu'on s'interroge sur l'existence d'une telle science « nationale » de l'économie politique. Nous présentons ici en traduction française ce récit jamais encore traduit du russe, et nous l'accompagnons de notes sur les auteurs et les ouvrages qui y sont signalés.

Evolutionary ecology of learning: insights from fruit flies

Ecologically and evolutionarily oriented research on learning has traditionally been carried out on vertebrates and bees. While less sophisticated than those animals, fruit flies (Drosophila) are capable of several forms of learning, and have an advantage of a short generation time, which makes them an ideal system for experimental evolution studies. This review summarizes the insights into evolutionary questions about learning gained in the last decade from evolutionary experiments on Drosophila. These experiments demonstrate that Drosophila have the genetic potential to evolve substantially improved learning performance in ecologically relevant learning tasks. In at least one set of selected populations the improved learning generalized to another task than that used to impose selection, involving a different behavior, different stimuli, and a different sensory channel for the aversive reinforcement. This improvement in learning ability was associated with reduction in other fitness-related traits, such as larval competitive ability and lifespan, pointing out to evolutionary trade-offs of improved learning. These trade-offs were confirmed by other evolutionary experiments where reduction in learning performance was observed as a correlated response to selection for tolerance to larval nutritional stress or for delayed aging. Such trade-offs could be one reason why fruit flies have not fully used up their evolutionary potential for learning ability. Finally, another evolutionary experiment with Drosophila provided the first direct evidence for the long-standing ideas that learning can under some circumstances accelerate and in other slow down genetically-based evolutionary change. These results demonstrate the usefulness of fruit flies as a model system to address evolutionary questions about learning.