Runoff Vs. Plurality: Does it Matter for Expenditures? Evidence from Italy
Finalist at ITAX PhD Student Award 2018
Work in Progress
Pessimistic Forecasts to Affect Policy Decisions? The “Brexit” Case (with A. Reslow)
Abstract: This paper explores whether macroeconomic forecasters are political agents and use their forecasts in order to influence voting outcomes. In a probabilistic voting model, we show that it is optimal for forecasters with economic interest (stakes) and influence over a referendum decision to publish prior to the vote scenarios different from their best estimates. We test our theory using high-frequency data at the forecaster level in the occasion of the “Brexit” referendum. The results show that forecasters with stakes and influence released much more pessimistic estimates for the following year GDP growth rate than the other institutions. The realization of the GDP growth rate in 2017 shows that forecasters with stakes and influence were also more incorrect than the other institutions, and that the “propaganda bias” explains up to 60% of their forecast error.
Government Stability in Parliamentary Democracies (with F. Carozzi and L. Repetto)
This paper studies how political fragmentation affects government stability. We first develop a two-period coalition formation model with heterogeneity in bargaining resources to show that more fragmented legislative may lead to more instability via two channels. The entry of new parties makes single-party majorities less likely. In addition, smaller members in coalition governments are more easily bought off by potential challengers. We test these and other predictions from the model empirically using data on over 50,000 local councils in Spain. Exploiting the existence of a 5\% vote entry threshold to induce exogenous variation in the number of parties in parliament we show that an additional party increases the probability of unseating the incumbent by 3.3 percentage points. We then study the effect of bargaining resources on stability by exploiting variation in support from upper tiers of government at the party level. Local governments that are aligned with the upper tier are three times less likely to be unseated. The effects interact, so that politicians with more resources are more successful at withstanding fragmentation. We also show that challengers that replace the incumbent after a no-confidence vote are younger, more educated, have more professional experience and are more likely to win the following elections, suggesting that there may be positive consequences of instability.