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The European debate on abuse of dominance issues in antitrust has been recently characterized by an emphasis on purely economic aspects, and by an emerging consensus on the merits of taking an “effects-based approach” aimed at the maximization of consumer welfare and the protection of competition. The European Commission has recently issued a Guidance Paper on exclusionary abuses which purports to move EU enforcement on abuse of dominance in this direction. In spite of these developments, we are still far from reaching any consensus on the best way to apply competition policy to specific issues such as predatory pricing, bundling, vertical restraints, exclusive dealing and so on. We analyze the genesis of the European approach to antitrust and discuss the leading economic theories on competition policy and abuse of dominance, as developed by the Chicago School, the post-Chicago approach and the endogenous market structures approach. Finally, we use these economic foundations to analyze the EU approach to abuse of dominance, we examine the Guidance Paper, we provide a comparison with the American approach, and we discuss the implications of some recent important cases

The European debate on abuse of dominance issues in antitrust has been recently characterized by an emphasis on purely economic aspects, and by an emerging consensus on the merits of taking an “effects-based approach” aimed at the maximization of consumer welfare and the protection of competition. The European Commission has recently issued a Guidance Paper on exclusionary abuses which purports to move EU enforcement on abuse of dominance in this direction. In spite of these developments, we are still far from reaching any consensus on the best way to apply competition policy to specific issues such as predatory pricing, bundling, vertical restraints, exclusive dealing and so on. We analyze the genesis of the European approach to antitrust and discuss the leading economic theories on competition policy and abuse of dominance, as developed by the Chicago School, the post-Chicago approach and the endogenous market structures approach. Finally, we use these economic foundations to analyze the EU approach to abuse of dominance, we examine the Guidance Paper, we provide a comparison with the American approach, and we discuss the implications of some recent important cases

This paper develops a small New Keynesian model augmented with a steady state level of public debt and a share of rule-of-thumb consumers (ROTC henceforth) as in Gali' et al. (2004; 2007). The paper focuses on the consequences for the design of monetary and fiscal rules, of the bifurcation generated by the presence of ROTC on the demand side of the economy, in the absence of Ricardian equivalence. We find that, when fiscal policy follows a balanced budget rule, the amount of ROTC determines whether an active and/or a passive monetary policy in the sense of Leeper (1991) guarantees determinacy. When short run public debt assets are introduced, the amount of ROTC determines whether equilibrium determinacy requires a mix of active (passive) monetary policy and a passive (active) fiscal policy or a mix where policies are both active or passive. This set of equilibria has the potential to explain the empirical evidence on the U.S. postwar data on monetary and fiscal policy interactions

This paper displays an analysis of geopolitical organizations within the framework proposed by Alesina and Spolaore (1997), where heterogeneity concerns the geographical space. This model adds heterogeneity in terms of income. Main results of the paper: (i) in the normative equilibrium (social planner solution) there is an inverse relationship between income inequality and public good provision within each jurisdiction; (ii) in the positive equilibrium (equilibrium geography) we find that in some cases there are no equilibria depending upon income inequality

This paper is the first product of an ongoing research on the determinants and the role of entrepreneurship in Italian economic development. Its primary aim is the creation of a data-set of Italian entrepreneurs for the period encompassed between the Unification of the Kingdom (1861) and the end of the XXth century. The main source of the research is a collection of 390 entrepreneurial biographies, prepared for an ongoing Dictionary of Italian Entrepreneurs. The first part of the paper presents a descriptive analysis of the main peculiarities of the country’s entrepreneurship on the basis of a few standard variables traditionally used in economic analysis. The second one refines the descriptive approach through a methodology – Multiple Correspondence Analysis and Cluster Analysis – usual by now in standard statistics, yet not very familiar to scholars in economic and/or business history. This has allowed us to single out a few entrepreneurial typologies of the history of Italian capitalism which partly confirm the “traditional” features already emphasized by historiography; such as the prominence of northern entrepreneurs, the strong relations both with own and partner’s families, the almost total absence of female entrepreneurs and an essentially middle-class rooted entrepreneurship. However a few novel interesting aspects emerge, the most surprising being the good level of formal education of the sample: a neat majority (60%) has a medium/high degree and almost one third an university degree.

This paper displays an analysis of geopolitical organizations within the framework proposed by Alesina and Spolaore (1997), where heterogeneity concerns the geographical space. This model adds heterogeneity in terms of income. Main results of the paper: (i) in the normative equilibrium (social planner solution) there is an inverse relationship between income inequality and public good provision within each jurisdiction; (ii) in the positive equilibrium (equilibrium geography) we find that in some cases there are no equilibria depending upon income inequality

This paper develops a small New Keynesian model augmented with a steady state level of public debt and a share of rule-of-thumb consumers (ROTC henceforth) as in Gali' et al. (2004; 2007). The paper focuses on the consequences for the design of monetary and fiscal rules, of the bifurcation generated by the presence of ROTC on the demand side of the economy, in the absence of Ricardian equivalence. We find that, when fiscal policy follows a balanced budget rule, the amount of ROTC determines whether an active and/or a passive monetary policy in the sense of Leeper (1991) guarantees determinacy. When short run public debt assets are introduced, the amount of ROTC determines whether equilibrium determinacy requires a mix of active (passive) monetary policy and a passive (active) fiscal policy or a mix where policies are both active or passive. This set of equilibria has the potential to explain the empirical evidence on the U.S. postwar data on monetary and fiscal policy interactions

This paper is the first product of an ongoing research on the determinants and the role of entrepreneurship in Italian economic development. Its primary aim is the creation of a data-set of Italian entrepreneurs for the period encompassed between the Unification of the Kingdom (1861) and the end of the XXth century. The main source of the research is a collection of 390 entrepreneurial biographies, prepared for an ongoing Dictionary of Italian Entrepreneurs. The first part of the paper presents a descriptive analysis of the main peculiarities of the country’s entrepreneurship on the basis of a few standard variables traditionally used in economic analysis. The second one refines the descriptive approach through a methodology – Multiple Correspondence Analysis and Cluster Analysis – usual by now in standard statistics, yet not very familiar to scholars in economic and/or business history. This has allowed us to single out a few entrepreneurial typologies of the history of Italian capitalism which partly confirm the “traditional” features already emphasized by historiography; such as the prominence of northern entrepreneurs, the strong relations both with own and partner’s families, the almost total absence of female entrepreneurs and an essentially middle-class rooted entrepreneurship. However a few novel interesting aspects emerge, the most surprising being the good level of formal education of the sample: a neat majority (60%) has a medium/high degree and almost one third an university degree.

Property law usually reacts to encroachments with ejectment. Building encroachments differ, as restoring landowner’s property claims implies the reversal of often large costs sustained by the builder. The authority faces thus the following dilemma: either it stands by the landowner and faces the social costs of undoing significant investments, or it defends the investment of the builder at the cost of neglecting landowner’s claims. To address building encroachments, national property laws have deployed interestingly different remedies that range from a property rule in favor of the landowner to a property rule in favor of the builder with a variety of liability rules in between. The paper models the builder-owner conflict after the theory of optional law (Ayres, 2005), it frames different national solutions into a common analytical setting and it evaluates the different laws in their relative allocative and distributive outcomes. Moreover the paper offers support to the idea that property law may implement put-option types of remedies.

Property law usually reacts to encroachments with ejectment. Building encroachments differ, as restoring landowner’s property claims implies the reversal of often large costs sustained by the builder. The authority faces thus the following dilemma: either it stands by the landowner and faces the social costs of undoing significant investments, or it defends the investment of the builder at the cost of neglecting landowner’s claims. To address building encroachments, national property laws have deployed interestingly different remedies that range from a property rule in favor of the landowner to a property rule in favor of the builder with a variety of liability rules in between. The paper models the builder-owner conflict after the theory of optional law (Ayres, 2005), it frames different national solutions into a common analytical setting and it evaluates the different laws in their relative allocative and distributive outcomes. Moreover the paper offers support to the idea that property law may implement put-option types of remedies.

In the paper the development of economic history will be placed within the evolution of Western thought and culture. Therefore an analysis of the connections between economic history and contemporary epistemology will be carried out. In this perspective an analogy with the traditional division between analytic philosophy and continental philosophy would appear to be useful for economic history too: the first had long prevailed in Anglo-Saxon, the second in continental, culture. This partition evokes and embraces the antithesis between scientific and humanist culture, between logic and rhetoric, analysis and interpretation, conceptual clarification and visions of the world. The paper suggest that the opposition that loomed large over the post W.W.II decades between Anglo-American and European economic histories can also be conceived as a specific form of the wider opposition between ‘analytic style’ and ‘continental style’.

This paper investigates the validity of the Expectations Hypothesis of the Term Structure (EHTS) employing standard forward-spot regressions which accommodate for the presence of time-varying term premia. The novelty of this paper is that the analysis is conducted by taking advan- tage of the following two properties of the Kalman Filter: first, it makes possible to model time-varying term premia as unobservables, and second it delivers recursive estimations of forward-spot regressions as more data become available. In fact, previous studies have modelled term premia by means of macroeconomic variables. To the extent that term premia are influenced by political and social climates which are difficult to ob- serve, it might be preferable to model them as unobservables, rather than by means of observed variables. Moreover, especially when tested over long periods of data, the EHTS might hold for certain periods while it might not for others. These periodic departures from and reversions to the EHTS cannot be detected by constant parameters models, which there- fore can provide only broad brush evidence. This paper shows that the recursive nature of the Kalman filter can be employed to construct a test for the EHTS which gives more refined evidence. The analysis is carried out focusing on the short-end of the US term structure spectrum.

In this paper we empirically study the preferences of European citizens concerning the allocation of powers between EU and the member States. To this aim, we use various issues of the Eurobarometer survey from year 1995 to year 2003. In the first part of the paper we present descriptive results regarding preferences of EU citizens by country and by policy domains and we find interesting results pointing out a ranking of countries according to their level of Europeanism, and a quite clear pattern of preferences relative to the allocation of competences for specific policy domains. In the second part of the paper we turn to econometric analysis; first, we regress a measure of “Europeanism” of EU citizens on a number of individual characteristics including demographic information and various indicators of the attitude towards EU. Next, we select a certain number of policy domains and, for each of these, we investigate which individual characteristics make European citizens more prone to prefer centralisation of competences. Also econometric analysis reveals interesting patterns regarding EU citizens’ preferences for allocation of powers.

This paper investigates the validity of the Expectations Hypothesis of the Term Structure (EHTS) employing standard forward-spot regressions which accommodate for the presence of time-varying term premia. The novelty of this paper is that the analysis is conducted by taking advan- tage of the following two properties of the Kalman Filter: first, it makes possible to model time-varying term premia as unobservables, and second it delivers recursive estimations of forward-spot regressions as more data become available. In fact, previous studies have modelled term premia by means of macroeconomic variables. To the extent that term premia are influenced by political and social climates which are difficult to ob- serve, it might be preferable to model them as unobservables, rather than by means of observed variables. Moreover, especially when tested over long periods of data, the EHTS might hold for certain periods while it might not for others. These periodic departures from and reversions to the EHTS cannot be detected by constant parameters models, which there- fore can provide only broad brush evidence. This paper shows that the recursive nature of the Kalman filter can be employed to construct a test for the EHTS which gives more refined evidence. The analysis is carried out focusing on the short-end of the US term structure spectrum.

In the paper the development of economic history will be placed within the evolution of Western thought and culture. Therefore an analysis of the connections between economic history and contemporary epistemology will be carried out. In this perspective an analogy with the traditional division between analytic philosophy and continental philosophy would appear to be useful for economic history too: the first had long prevailed in Anglo-Saxon, the second in continental, culture. This partition evokes and embraces the antithesis between scientific and humanist culture, between logic and rhetoric, analysis and interpretation, conceptual clarification and visions of the world. The paper suggest that the opposition that loomed large over the post W.W.II decades between Anglo-American and European economic histories can also be conceived as a specific form of the wider opposition between ‘analytic style’ and ‘continental style’.

In this paper we empirically study the preferences of European citizens concerning the allocation of powers between EU and the member States. To this aim, we use various issues of the Eurobarometer survey from year 1995 to year 2003. In the first part of the paper we present descriptive results regarding preferences of EU citizens by country and by policy domains and we find interesting results pointing out a ranking of countries according to their level of Europeanism, and a quite clear pattern of preferences relative to the allocation of competences for specific policy domains. In the second part of the paper we turn to econometric analysis; first, we regress a measure of “Europeanism” of EU citizens on a number of individual characteristics including demographic information and various indicators of the attitude towards EU. Next, we select a certain number of policy domains and, for each of these, we investigate which individual characteristics make European citizens more prone to prefer centralisation of competences. Also econometric analysis reveals interesting patterns regarding EU citizens’ preferences for allocation of powers.

In this paper, we shed light on the relationship between taxation and steady states by analyzing the OGL model of Chakraborty [2004]. We show that there is (i) a non-monotonic relationship between taxation and growth; (ii) a threshold value of taxation in such a way that there is no effect on the steady state; and finally, (iii) the effect on the two nontrivial steady states is not equal: an increase in tax rate will initially reduce (increase) the unstable (stable) steady state and will then increase (reduce) it.

In this paper, we shed light on the relationship between taxation and steady states by analyzing the OGL model of Chakraborty [2004]. We show that there is (i) a non-monotonic relationship between taxation and growth; (ii) a threshold value of taxation in such a way that there is no effect on the steady state; and finally, (iii) the effect on the two nontrivial steady states is not equal: an increase in tax rate will initially reduce (increase) the unstable (stable) steady state and will then increase (reduce) it.

'Count Pietro Verri (1728-97) - Schumpeter writes (History, p. 178) - - would have to be included in any list of the greatest economists'. Within the Milanese school, he certainly stands out, alongside with Cesare Beccaria, during one of the most interesting periods from a history of analysis point of view. Luigi Cossa's famous introduction to the study of political economy rates Pietro Verri to be inferior to Beccaria in ingenuity and scientific cultivation, but greatly to be ahead of him as an economist.1 This judgement by Cossa, in particular, seems to echo the relative position of the two men in the history of ideas, particularly after Beccaria's rise to fame with a book - On crimes and punishments - which had in fact been largely inspired by Verri himself and defended by him.2 It is proposed in the present paper to revisit some of the basic tenets of Pietro Verri's political economy, with more in view than dwell on specific intuitions and theorems: namely relate those to Verri's own - quite original - conception of the economy. The scholarly work of Pietro Verri - with a special reference to his Meditazioni sulla economia politica of 1771 - provides the first systematic contribution stemming from the quarters of Lombard enlightenment in the field of political economy, especially so if one considers that Cesare Beccaria's parallel work - namely his Elementi di economia pubblica, conceived and drafted at the same time as Verri's Meditazioni - would only be published posthumously several years later. From the vantage point afforded by Verri's political economy, we gain a considerably attractive view of the most significant elements and characteristic concepts of Lombard enlightenment during the latter half of the 18th century; Verri, moreover, as we shall see, builds on a number of them in a new and original way. This paper is aimed at discussing Verri's political economy mainly along two distinct, but related, lines. In the first place the conception of commercia

'Count Pietro Verri (1728-97) - Schumpeter writes (History, p. 178) - - would have to be included in any list of the greatest economists'. Within the Milanese school, he certainly stands out, alongside with Cesare Beccaria, during one of the most interesting periods from a history of analysis point of view. Luigi Cossa's famous introduction to the study of political economy rates Pietro Verri to be inferior to Beccaria in ingenuity and scientific cultivation, but greatly to be ahead of him as an economist.1 This judgement by Cossa, in particular, seems to echo the relative position of the two men in the history of ideas, particularly after Beccaria's rise to fame with a book - On crimes and punishments - which had in fact been largely inspired by Verri himself and defended by him.2 It is proposed in the present paper to revisit some of the basic tenets of Pietro Verri's political economy, with more in view than dwell on specific intuitions and theorems: namely relate those to Verri's own - quite original - conception of the economy. The scholarly work of Pietro Verri - with a special reference to his Meditazioni sulla economia politica of 1771 - provides the first systematic contribution stemming from the quarters of Lombard enlightenment in the field of political economy, especially so if one considers that Cesare Beccaria's parallel work - namely his Elementi di economia pubblica, conceived and drafted at the same time as Verri's Meditazioni - would only be published posthumously several years later. From the vantage point afforded by Verri's political economy, we gain a considerably attractive view of the most significant elements and characteristic concepts of Lombard enlightenment during the latter half of the 18th century; Verri, moreover, as we shall see, builds on a number of them in a new and original way. This paper is aimed at discussing Verri's political economy mainly along two distinct, but related, lines. In the first place the conception of commercia

This paper discusses the recent revival of interest in the concept of civil society and explores its possible utilization in the analysis of a cluster of relationships and processes that we shall denote with the concept of international civil society. The ambition of this paper is to cast the discussion on civil society into an original theoretical mould. In particular, the elaboration of what will be called an 'economic theory of civil society' will be attempted by following a sequence of logical steps. First, the conceptual field of civil society will be explored by considering the historical setting in which the early discussion and later evolution of the concept took place. Against such a background, we shall then proceed to outline a logical framework which decomposes the concept of civil society into a number of constitutive elements, such as trust, commercial society, division of labour, horizontal (or 'civil') network of interpersonal relationships. Such an analytical exercise is carried out with the aim of developing a consistent theoretical framework that is stimulated by the classical discussion on civil society, but attempts to develop it beyond the interpretative framework of the classical writers. The main purpose of the paper is thus analytical rather than historical: a theoretical approach is followed in order better to explore the manifold implications of the classical concepts and to bring to the fore the virtual relationships and processes that may be identified on the basis of the classical framework. In this way economic theory will be used in order to detect unknown or unexplored relationships, rather than in order to explain phenomena that are already known. Such an approach is then applied in the exploration of the concept of 'international civil society', which is considered to be especially interesting for the theoretical (virtual) possibilities it highlights, and also for the manifold implications it may have in the interpretation of curre

This paper discusses the recent revival of interest in the concept of civil society and explores its possible utilization in the analysis of a cluster of relationships and processes that we shall denote with the concept of international civil society. The ambition of this paper is to cast the discussion on civil society into an original theoretical mould. In particular, the elaboration of what will be called an 'economic theory of civil society' will be attempted by following a sequence of logical steps. First, the conceptual field of civil society will be explored by considering the historical setting in which the early discussion and later evolution of the concept took place. Against such a background, we shall then proceed to outline a logical framework which decomposes the concept of civil society into a number of constitutive elements, such as trust, commercial society, division of labour, horizontal (or 'civil') network of interpersonal relationships. Such an analytical exercise is carried out with the aim of developing a consistent theoretical framework that is stimulated by the classical discussion on civil society, but attempts to develop it beyond the interpretative framework of the classical writers. The main purpose of the paper is thus analytical rather than historical: a theoretical approach is followed in order better to explore the manifold implications of the classical concepts and to bring to the fore the virtual relationships and processes that may be identified on the basis of the classical framework. In this way economic theory will be used in order to detect unknown or unexplored relationships, rather than in order to explain phenomena that are already known. Such an approach is then applied in the exploration of the concept of 'international civil society', which is considered to be especially interesting for the theoretical (virtual) possibilities it highlights, and also for the manifold implications it may have in the interpretation of curre

In this paper we propose a model in which there are ideological and strate- gic voters who vote under poportional rule. We prove that the behavior of ideological voters matters for the determination of the outcome. We show that a subset of strategic voters partially counteracts the votes of the ideological voters

What are the causes of the shadow economy? We provide new answers to this old question. The sharp distinction between theoretical priors on the institutional determinants of the shadow economy and the technique used for its measurement is the first novel contribution of the paper. The second innovation is that, unlike previ- ous contributions, we document a specific role for institutional variables in shaping economic incentives to "go underground", irrespective of the stage of economic de- velopment. The third innovation is that - after controlling for institutional quality and for the level of development - public expenditures have a negative impact on the shadow economy

In this paper we propose a model in which there are ideological and strate- gic voters who vote under poportional rule. We prove that the behavior of ideological voters matters for the determination of the outcome. We show that a subset of strategic voters partially counteracts the votes of the ideological voters

What are the causes of the shadow economy? We provide new answers to this old question. The sharp distinction between theoretical priors on the institutional determinants of the shadow economy and the technique used for its measurement is the first novel contribution of the paper. The second innovation is that, unlike previ- ous contributions, we document a specific role for institutional variables in shaping economic incentives to "go underground", irrespective of the stage of economic de- velopment. The third innovation is that - after controlling for institutional quality and for the level of development - public expenditures have a negative impact on the shadow economy

This paper shows how to maximize revenue when a contest is noisy. We consider a case where two or more contestants bid for a prize in a stochastic contest with proportional probabilities, where all bidders value the prize equally. We show that by fixing the number of tickets, thus setting a limit to total expenditures, it is possible to maximize the auctioneer's revenue and obtain (almost) full rent dissipation. We test this hypothesis with a laboratory experiment. The results indicate that, as predicted, revenue is significantly higher in a lottery with rationing than in a standard lottery. On the other hand, an alternative rationing mechanism that does not limit total expenditures fails to increase revenue relative to a standard lottery

This paper studies the impact of reputation on the reporting strategy of experts that face conflicts of interest. The framework we propose applies to different settings involv- ing decision makers that rely on experts for making informed decisions, such as financial analysts and goverment agencies. We show that reputation has a non-monotonic effect on the degree of information revelation. In general, truthful revelation is more likely to occur when there is more uncertainty on an expert's ability. Furthermore, above a certain threshold, an increase in reputation always makes truthful revelation more difficult to achieve. Our results shed light on the relationship between the institutional features of the reporting environment and informational efficiency

Economists have largely neglected the analysis of the relevant factors that induce policymakers and trade unions to sign social pacts, despite their clear implications for economic policies and the functioning of labour markets. In this paper we fill this gap. We build a simple theoretical framework that models social pacts as the outcome of a bargaining process, where the probability of observing a pact is essentially determined by politico-economic factors. Then we test the model using a new and original data set that documents the features of social pacts implemented in advanced economies over the last 30 years

This paper provides an assessment of quality of life in Italian cities using the hedonic approach. We analyze micro-level data for housing and labor markets to estimate compensating differentials for local amenities within five domains: climate, environment, services, society and economy. The estimated implicit prices are used to construct overall and domain-specific quality of life indices. We find that differences in amenities are reflected in substantial compensating differentials in housing prices, whereas the effects on wages are relatively small. Quality of life varies substantially across space and is strongly related to differences in public services and economic conditions. Overall, quality of life is highest in medium-sized cities of the Center-North, displaying relatively high scores in all the domains considered. Northern cities fare better with respect to services, social and economic conditions, while relatively worse for climate and environmental conditions.

This paper explores Scitovsky’s contribution to behavioral economics and examines in particular the changes his theory based on the findings of human brain psychophysiologists has brought to choice theory. The evidence here gathered points out how Scitovsky was making his suggestions for an alternative to the rationalist-based theory of choice model as far back in the early 1970s. The same evidence singles out Scitovsky as one of the most influential forerunners of a successful program of psychologically-based economic research which has only recently been acknowledged as a promising field for further investigation

This paper presents an experimental investigation of persuasion bias, a form of bounded rationality whereby agents communicating through a social network are unable to account for possible repetitions in the information they receive. The results indicate that network structure plays a significant role in determining social influence. However, the most influential agents are not those with more outgoing links, as predicted by the persuasion bias hypothesis, but those with more incoming links. We show that a boundedly rational updating rule that takes into account not only agents' outdegree, but also their indegree, provides a better explanation of the experimental data. In this framework, consensus beliefs tend to be swayed towards the opinions of influential listeners. We then present an effort-weighted updating model as a more general characterization of information aggregation in social networks

This paper presents the results of a survey-based experiment on the role of equity and efficiency for altruistic behavior. Using simple binary decisions for a representative pool of subjects, we find that both equity and efficiency are relevant for the decision to give. However, contrary to the findings in several laboratory experiments, our results indicate that equity plays a major role for altruistic behavior. Differences in relative payoffs have a significant effect on the decision to give. When giving is not costly, more than half of the subjects prefer equal payoffs to a socially efficient but unequal allocation. When giving is Pareto-improving, half the subjects choose to sacrifice a higher payoff in order to avoid payoff inequality. We also find that preferences, as revealed by experimental choices, are largely consistent with reported pro-social activities, while only weakly related to self-reported well-being

We show that the combination rule-of-thumb consumers and consump- tion habits dramatically aspects the dynamic performance of DSGE mod- els, resurrecting Bilbiie's (2008) inverted Taylor principle. Another origi- nal contribution of the paper is the analysis of optimal operational simple rules when RT households and habit formation in consumption are taken into account. We are able to show that the higher the share of RT con- sumers the more important for the optimal monetary policy is the stabi- lization of the wage gap, the variable that drives consumption volatility for RT consumers. The combination of consumption habits and RT con- sumers aspect the dynamic performance of the model under the optimal simple rule. Even a relatively small share of RT consumers is sufficient to generate a substantial increase in volatility. When the share of RT con- sumers is sufficiently large to require an inversion of the Taylor principle to preserve dynamic stability, optimal monetary policy is forced to gen- erate some "unconventional" impulse-response functions. For instance, a favourable productivity shock is followed by an increase in inflation and by a positive output gap

We show that the combination rule-of-thumb consumers and consump- tion habits dramatically aspects the dynamic performance of DSGE mod- els, resurrecting Bilbiie's (2008) inverted Taylor principle. Another origi- nal contribution of the paper is the analysis of optimal operational simple rules when RT households and habit formation in consumption are taken into account. We are able to show that the higher the share of RT con- sumers the more important for the optimal monetary policy is the stabi- lization of the wage gap, the variable that drives consumption volatility for RT consumers. The combination of consumption habits and RT con- sumers aspect the dynamic performance of the model under the optimal simple rule. Even a relatively small share of RT consumers is sufficient to generate a substantial increase in volatility. When the share of RT con- sumers is sufficiently large to require an inversion of the Taylor principle to preserve dynamic stability, optimal monetary policy is forced to gen- erate some "unconventional" impulse-response functions. For instance, a favourable productivity shock is followed by an increase in inflation and by a positive output gap

Economists have largely neglected the analysis of the relevant factors that induce policymakers and trade unions to sign social pacts, despite their clear implications for economic policies and the functioning of labour markets. In this paper we fill this gap. We build a simple theoretical framework that models social pacts as the outcome of a bargaining process, where the probability of observing a pact is essentially determined by politico-economic factors. Then we test the model using a new and original data set that documents the features of social pacts implemented in advanced economies over the last 30 years

This paper shows how to maximize revenue when a contest is noisy. We consider a case where two or more contestants bid for a prize in a stochastic contest with proportional probabilities, where all bidders value the prize equally. We show that by fixing the number of tickets, thus setting a limit to total expenditures, it is possible to maximize the auctioneer's revenue and obtain (almost) full rent dissipation. We test this hypothesis with a laboratory experiment. The results indicate that, as predicted, revenue is significantly higher in a lottery with rationing than in a standard lottery. On the other hand, an alternative rationing mechanism that does not limit total expenditures fails to increase revenue relative to a standard lottery

This paper presents an experimental investigation of persuasion bias, a form of bounded rationality whereby agents communicating through a social network are unable to account for possible repetitions in the information they receive. The results indicate that network structure plays a significant role in determining social influence. However, the most influential agents are not those with more outgoing links, as predicted by the persuasion bias hypothesis, but those with more incoming links. We show that a boundedly rational updating rule that takes into account not only agents' outdegree, but also their indegree, provides a better explanation of the experimental data. In this framework, consensus beliefs tend to be swayed towards the opinions of influential listeners. We then present an effort-weighted updating model as a more general characterization of information aggregation in social networks

This paper explores Scitovsky’s contribution to behavioral economics and examines in particular the changes his theory based on the findings of human brain psychophysiologists has brought to choice theory. The evidence here gathered points out how Scitovsky was making his suggestions for an alternative to the rationalist-based theory of choice model as far back in the early 1970s. The same evidence singles out Scitovsky as one of the most influential forerunners of a successful program of psychologically-based economic research which has only recently been acknowledged as a promising field for further investigation

This paper presents the results of a survey-based experiment on the role of equity and efficiency for altruistic behavior. Using simple binary decisions for a representative pool of subjects, we find that both equity and efficiency are relevant for the decision to give. However, contrary to the findings in several laboratory experiments, our results indicate that equity plays a major role for altruistic behavior. Differences in relative payoffs have a significant effect on the decision to give. When giving is not costly, more than half of the subjects prefer equal payoffs to a socially efficient but unequal allocation. When giving is Pareto-improving, half the subjects choose to sacrifice a higher payoff in order to avoid payoff inequality. We also find that preferences, as revealed by experimental choices, are largely consistent with reported pro-social activities, while only weakly related to self-reported well-being

This paper provides an assessment of quality of life in Italian cities using the hedonic approach. We analyze micro-level data for housing and labor markets to estimate compensating differentials for local amenities within five domains: climate, environment, services, society and economy. The estimated implicit prices are used to construct overall and domain-specific quality of life indices. We find that differences in amenities are reflected in substantial compensating differentials in housing prices, whereas the effects on wages are relatively small. Quality of life varies substantially across space and is strongly related to differences in public services and economic conditions. Overall, quality of life is highest in medium-sized cities of the Center-North, displaying relatively high scores in all the domains considered. Northern cities fare better with respect to services, social and economic conditions, while relatively worse for climate and environmental conditions.

This paper studies the impact of reputation on the reporting strategy of experts that face conflicts of interest. The framework we propose applies to different settings involv- ing decision makers that rely on experts for making informed decisions, such as financial analysts and goverment agencies. We show that reputation has a non-monotonic effect on the degree of information revelation. In general, truthful revelation is more likely to occur when there is more uncertainty on an expert's ability. Furthermore, above a certain threshold, an increase in reputation always makes truthful revelation more difficult to achieve. Our results shed light on the relationship between the institutional features of the reporting environment and informational efficiency

This paper investigates the effects of motivations on the perceived kindness of an action within the context of strong social indirect reci- procity. We test experimentally the hypothesis that, for a given dis- tributional outcome, an action is perceived by a third party to be less kind if it can be strategically motivated. The results do not support this hypothesis: social indirect reciprocity is indeed found to be signif- icantly stronger when strategic motivations cannot be ruled out. We interpret these findings as an indication of the role played by team reasoning in explaining reciprocal behavior

The standard economic theory of crime deterrence predicts that the conviction of an innocent (type-I error) is as detrimental to deterrence as the acquittal of a guilty individual (type-II error). In this paper, we qualify this result theoretically, showing that in the presence of risk aversion, loss-aversion, or differential sensitivity to procedural fairness, type-I errors can have a larger effect on deterrence than type-II errors. We test these predictions with an experiment where participants make a decision on whether to steal from other individuals, being subject to different probabilities of judicial errors. The results indicate that both types of judicial errors have a large and significant impact on deterrence, but these effects are not symmetric. An increase in the probability of type-I errors has a larger negative impact on deterrence than an equivalent increase in the probability of type-II errors. This asymmetry is largely explained by risk aversion and, to a lesser extent, type-I error aversion

This paper analyses the choice of full versus shared ownership of the production affiliate made by Italian multinationals in Asia, based on an entirely new firm-level dataset, constructed by the author. The decision to internalise production, rather than relying on a local partner, is driven by the threat of Dissipation of Intangible Assets, both at a theoretical and an empirical level. In particular, we show that full ownership is more likely to emerge in Asia for Italian firms endowed with better technology and human capital, or belonging to high tech sectors

This paper studies empirically the link between financial markets volatility and primary placements of stocks and bonds for the US economy. We find that the impact of volatility on primary placements is not statistically significant

This paper tests the rational-choice approach to fertility decisions by investigating the relationship between parenthood and well-being in a large sample of individuals from 94 countries. We find that world- wide, controlling for demographic and socioeconomic characteristics, having children has a negative effect on well-being. Conditioning on age, gender, marital status and education can only partially help to interpret this finding. We show that the negative effect of parent- hood on well-being is explained by a large adverse impact on financial satisfaction, that on average dominates the positive impact on non- financial satisfaction. The results are robust to alternative empirical specifications and to the inclusion of the reported ideal number of children as a proxy variable to address the endogeneity of parenthood decisions

Despite the increasing consumption of new media, watching television remains the most important leisure activity worldwide. Research on audience reactions has demostrated that there are major contradictions between television consumption and the satisfaction obtained from this activity. Similar findings have also emerged in the relationship between TV consumption and overall well-being. This paper argues that television viewing can provide a major example where consumption choices do not maximize satisfaction. We review the evidence on the welfare effects of TV consumption choices, focusing on two complementary dimensions: consumption satisfaction and overall well-being Within each of these two dimensions, we consider both absolute and relative over-consumption, referring to quantity and content of television viewing, respectively. We find that research in different social sciences provides evidence of overconsumption in television viewing. The relevance of these findings for consumption of new media is discussed in the conclusions

In this paper we propose a model in which there are ideological and strategic voters who vote under poportional rule. We prove that the behavior of ideological voters matters, in that it a¤ects the outcome. We also show how a subset of strategic voters changes his voting be- havior to balance the ideological players? votes. However, they can only partially adjust. Strategic voters will vote accordingly to this cutpoint outcome: any strategic voter on its right votes for the right- most party and any strategic voter on its left votes for the leftmost party

We empirically investigate the e®ect of trade liberalization on trade tax revenues applying panel-data methods to a large sample of African countries from the period 1970-2000. The goal of this paper is to determine whether controlling for macroeconomic features of African economies and taking into account the existence of political constraints that might either support or weaken the power of the trade reform, a change in trade policy has a positive or negative e®ect on trade tax revenues. We ¯nd that there exists a large trade o® between a greater degree of openness to international trade and the revenue collected from import and export taxation. We document the existence of a La®er ef- fect between trade openness and trade tax revenues and stress the impor- tance of exchange rate policies along with the stability of the macroeco- nomic environment in determining trade reform outcomes. Interestingly, we also provide evidence of the relevance of government credibility in explaining trade tax revenues