Davide Ticchi

Road pricing as a citizen-candidate game

Edoardo Marcucci et al. — Sat, 10 Sep 2011 06:04:02 PDT

We construct a political economy model to analyze the political acceptability of road pricing policies. We use a citizen-candidate framework with a population composed by three groups differing for their income level. We show that road pricing policies are never applied when there is no redistribution of the resources in favour of other modes of transport or when the congestion of these types of transport is relatively high. The results suggest that the efficiency of the redistribution of resources from road to the alternative types of transport as well as the fraction of the population that uses the road transport are key factors in explaining the adoption of road pricing schemes.

Persistence of Civil Wars

Daron Acemoglu et al. — Sun, 06 Sep 2009 01:06:27 PDT

A notable feature of post-World War II civil wars is their very long average duration. We provide a theory of the persistence of civil wars. The civilian government can successfully defeat rebellious factions only by creating a relatively strong army. In weakly-institutionalized polities this opens the way for excessive influence or coups by the military. Civilian governments whose rents are largely unaffected by civil wars then choose small and weak armies that are incapable of ending insurrections. Our framework also shows that when civilian governments need to take more decisive action against rebels, they may be forced to build over-sized armies, beyond the size necessary for fighting the insurrection, as a commitment to not reforming the military in the future.

A Theory of Military Dictatorships

Daron Acemoglu et al. — Mon, 10 Mar 2008 08:53:03 PDT

We investigate how nondemocratic regimes use the military and how this can lead to the emergence of military dictatorships. The elite may build a strong military and make the concessions necessary for the military to behave as their perfect agent, or they may risk the military turning against them. Once transition to democracy takes place, a strong military poses a threat against the nascent democratic regime until it is reformed. We study the role of income inequality and natural resources in the emergence of military dictatorships and show how the national defense role of the military may facilitate democratic consolidation.

War and Endogenous Democracy

Davide Ticchi et al. — Thu, 24 Jan 2008 07:36:09 PST

Many episodes of extension of franchise in the 19th and especially in the 20th century occurred during or in the aftermath of major wars. Motivated by this fact, we offer a theory of political transitions which focuses on the impact of international conflicts on domestic political institutions. We argue that mass-armies, which appeared in Europe after the French Revolution, are an effective military organization only if the conscripted citizens are willing to put effort in fighting wars, which in turn depends on the economic incentives that are provided to them. The need to provide such incentives implies that an oligarchy adopting a mass-army may voluntarily decide to promise some amount of income redistribution to its citizens, conditionally on satisfactory performance as soldiers. When the elite cannot credibly commit to provide an incentive-compatible redistribution, they may cope with the moral hazard problem of the citizens-soldiers only by relinquishing political power to them through the extension of franchise. This is because democracy always implements a highly redistributive fiscal policy, which makes fighting hard incentive-compatible for the citizens-soldiers. We show that a transition to democracy is more likely to occur when the external threat faced by an incumbent oligarchy is in some sense intermediate. A very high external threat allows the elite to make credible commitments of future income redistribution in favor of the citizens, while a limited external threat makes it optimal for the elite not to make any (economic or political) concession to the masses. Greater income inequality or higher specificity of production factors make it more likely that the elite will grant neither economic nor political concessions to the lower classes. Some historical evidence consistent with our theory is also provided.

An Economic Theory of Constitutional Choice

Davide Ticchi et al. — Mon, 10 Sep 2007 06:47:16 PDT

On Wars and Political Development. The Role of International Conflicts in the Democratization of the West

Davide Ticchi et al. — Fri, 25 May 2007 00:37:38 PDT

The revised version of this paper has a new title: "War and Endogenous Democracy"

Emergence and Persistence of Inefficient States

Daron Acemoglu et al. — Fri, 25 May 2007 00:26:00 PDT

We present a theory of the emergence and persistence of inefficient states based on patronage politics. The society consists of rich and poor individuals. The rich are initially in power, but expect to transition to democracy, which will choose redistributive policies. Taxation requires the employment of bureaucrats. By choosing an inefficient state structure, the rich may use patronage and capture democratic politics, so reducing the amount of redistribution in democracy. Moreover, the inefficient state creates its own constituency and tends to persist over time. Intuitively, an inefficient state structure creates more rents for bureaucrats than would an efficient one. When the poor come to power in democracy, they will reform the structure of the state to make it more efficient so that higher taxes can be collected at lower cost and with lower rents for bureaucrats. Anticipating this, when the society starts out with an inefficient organization of the state, bureaucrats support the rich, who set lower taxes but also provide rents to bureaucrats. We show that the rich-bureaucrat coalition may also expand the size of bureaucracy "excessively" so as to generate enough political support. The model shows that an equilibrium with an inefficient state is more likely to arise when there is greater income inequality, when bureaucratic rents take intermediate values, and when individuals are sufficiently forward-looking.

Endogenous Constitutions

Davide Ticchi et al. — Fri, 25 May 2007 00:03:59 PDT

We present a theory of the choice of alternative democratic constitutions, a majoritarian or a consensual one, in an unequal society. A majoritarian democracy redistributes resources from the collectivity toward relatively few people, and has a relatively small government and low level of taxation. A consensual democracy redistributes resources toward a broader spectrum of social groups but also has a larger government and a higher level of taxation. We show that a consensual system turns out to be preferred by society when ex ante income inequality is relatively low, while a majoritarian system is chosen when income inequality is relatively high. We also obtain that consensual democracies should be expected to be ruled more often by center-left coalitions while the right should have an advantage in majoritarian constitutions. The implications for the relationship between inequality and redistribution are discussed. Historical evidence and a cross-sectional analysis support our results.

Risk-Aversion and the Investment-Uncertainty Relationship: A Comment

Enrico Saltari et al. — Thu, 24 May 2007 03:30:15 PDT

This paper shows that the solution of Nakamura’s [Journal of Economic Behavior and Organization 38 (1999) 357] model is incorrect. We propose an alternative framework that allows us to obtain closed form results on the investment-uncertainty relationship.

Risk Aversion, Intertemporal Substitution, and the Aggregate Investment-Uncertainty Relationship

Enrico Saltari et al. — Thu, 24 May 2007 03:30:14 PDT

We analyze the role of risk aversion and intertemporal substitution in a simple dynamic general equilibrium model of investment and savings. Our main finding is that risk aversion cannot by itself explain a negative relationship between aggregate investment and aggregate uncertainty, as the effect of increased uncertainty on investment also depends on the intertemporal elasticity of substitution. In particular, the relationship between aggregate investment and aggregate uncertainty is positive even if agents are very risk averse, as long as the elasticity of intertemporal substitution is low. A negative investment–uncertainty relationship requires that the relative risk aversion and the elasticity of intertemporal substitution are both relatively high or both relatively low. We also show that the implications of our model are consistent with the available empirical evidence.