Democratization as a cost-saving device

We propose a theoretical analysis of democratization processes in which an elite extends the franchise to the poor when threatened with a revolution. The poor could govern without changing the political system by maintaining a continuous revolutionary threat on the elite. Revolutionary threats, however, are costly to the poor and democracy is a superior sys- tem in which political agreement is reached through costless voting. This provides a rationale for democratic transitions that has not been discussed in the literature.

Shocks, Monetary Policy and Institutions: Explaining Unemployment Persistence in Persistence in “Europe” and the United States

This paper examines the rise in European unemployment since the 1970s by introducing endogenous growth into an otherwise standard New Keynesian model with capital accumulation and unemployment. We subject the model to an uncorrelated cost push shock, in order to mimic a scenario akin to the one faced by central banks at the end of the 1970s. Monetary policy implements a disinfl ation by following an interest feedback rule calibrated to an estimate of a Bundesbank reaction function. 40 quarters after the shock has vanished, unemployment is still about 1.8 percentage points above its steady state. Our model also broadly reproduces cross country differences in unemployment by drawing on cross country differences in the size of cost push shock and the associated disinfl ation, the monetary policy reaction function and the wage setting structure.

Optimal contracting with private information on cost expectation and variability

We study the screening problem that arises in a framework where, initially, the agent is privately informed about both the expected production cost and the cost variability and, at a later stage, he learns privately the cost realization. The speci c set of relevant incentive constraints, and so the characteristics of the optimal mechanism, depend nely upon the curvature of the principal s marginal surplus function as well as the relative importance of the two initial information problems. Pooling of production levels is optimally induced with respect to the cost variability when the principal's knowledge imperfection about the latter is sufficiently less important than that about the expected cost.

A Futuristic Least-cost Optimisation Model of CO2 Transportation and Storage in the UK/UK Continental Shelf

NORTH SEA STUDY OCCASIONAL PAPER No. 112

On the cost of rent-seeking by government bureaucrats in a Real-Business-Cycle framework

This paper studies the wasteful e ffect of bureaucracy on the economy by addressing the link between rent-seeking behavior of government bureaucrats and the public sector wage bill, which is taken to represent the rent component. In particular, public o fficials are modeled as individuals competing for a larger share of those public funds. The rent-seeking extraction technology in the government administration is modeled as in Murphy et al. (1991) and incorporated in an otherwise standard Real-Business-Cycle (RBC) framework with public sector. The model is calibrated to German data for the period 1970-2007. The main fi ndings are: (i) Due to the existence of a signi ficant public sector wage premium and the high public sector employment, a substantial amount of working time is spent rent-seeking, which in turn leads to signifi cant losses in terms of output; (ii) The measures for the rent-seeking cost obtained from the model for the major EU countries are highly-correlated to indices of bureaucratic ineffi ciency; (iii) Under the optimal scal policy regime,steady-state rent-seeking is smaller relative to the exogenous policy case, as the government chooses a higher public wage premium, but sets a much lower public employment, thus achieving a decrease in rent-seeking.

Can Early Intervention Policies Improve Well-being? Evidence from a randomized controlled trial

Many authors have proposed incorporating measures of well-being into evaluations of public policy. Yet few evaluations use experimental design or examine multiple aspects of well-being, thus the causal impact of public policies on well-being is largely unknown. In this paper we examine the effect of an intensive early intervention program on maternal well-being in a targeted disadvantaged community. Using a randomized controlled trial design we estimate and compare treatment effects on global well-being using measures of life satisfaction, experienced well-being using both the Day Reconstruction Method (DRM) and a measure of mood yesterday, and also a standardized measure of parenting stress. The intervention has no significant impact on negative measures of well-being, such as experienced negative affect as measured by the DRM and global measures of well-being such as life satisfaction or a global measure of parenting stress. Significant treatment effects are observed on experienced measures of positive affect using the DRM, and a measure of mood yesterday. The DRM treatment effects are primarily concentrated during times spent without the target child which may reflect the increased effort and burden associated with additional parental investment. Our findings suggest that a maternal-focused intervention may produce meaningful improvements in experienced well-being. Incorporating measures of experienced affect may thus alter cost-benefit calculations for public policies.

Tracking cost savings from competitive tendering in the short and long run

A major initiative of the Thatcher and Major Conservative administrations was that public sector ancillary and professional services provided by incumbent direct service organisations [DSOs] be put out to tender. Analyses of this initiative, in the UK and elsewhere, found costs were often reduced in the short run. However, few if any studies went beyond the first round of tendering. We analyze data collected over successive rounds of tendering for cleaning and catering services of Scottish hospitals in order to assess the long term consequences of this initiative. The experience of the two services was very different. Cost savings for cleaning services tended to increase with each additional round of tendering and became increasingly stable. In accordance with previous results in the literature, DSOs produced smaller cost reductions than private contractors: probably an inevitable consequence of the tendering process at the time. Cost savings from DSOs tended to disappear during the first round of tendering, but they appear to have been more permanent in successive rounds. Cost savings for catering, on the other hand, tended to be much smaller, and these were not sustained.