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Most hospital payment systems based on diagnosis-related groups (DRGs) provide payments for newly approved technologies. In Germany, they are negotiated between individual hospitals and health insurances. The aim of our study is to assess the functioning of temporary reimbursement mechanisms. We used multilevel logistic regression to examine factors at the hospital and state levels that are associated with agreeing innovation payments. Dependent variable was whether or not a hospital had successfully negotiated innovation payments in 2013 (n = 1532). Using agreement data of the yearly budget negotiations between each German hospital and representatives of the health insurances, the study comprises all German acute hospitals and innovation payments on all diagnoses. In total, 32.9% of the hospitals successfully negotiated innovation payments in 2013. We found that the chance of receiving innovation payments increased if the hospital was located in areas with a high degree of competition and if they were large, had university status and were private for-profit entities. Our study shows an implicit self-controlled selection of hospitals receiving innovation payments. While implicitly encouraging safety of patient care, policy makers should favour a more direct and transparent process of distributing innovation payments in prospective payment systems. [ABSTRACT FROM AUTHOR]

How does fractionalization affect political collaboration on reform? We develop a theory to explain observable variation in legislative output over time and policy areas. We show how the properties of a reform project determine the extent to which fractionalization affects political collaboration on reform. We apply our framework to the case of Lebanon and present mixed-methods evidence based on a novel comprehensive dataset of legislative activity and 32 interviews with parliamentarians, ex-ministers, and other high ranking officials. Our findings contribute to explaining ambiguous evidence in the literature on the political economy of reform. [ABSTRACT FROM AUTHOR]

We examine the net benefits of social distancing to slow the spread of COVID-19 in USA. Social distancing saves lives but imposes large costs on society due to reduced economic activity. We use epidemiological and economic forecasting to perform a rapid benefit–cost analysis of controlling the COVID-19 outbreak. Assuming that social distancing measures can substantially reduce contacts among individuals, we find net benefits of about $5.2 trillion in our benchmark case. We examine the magnitude of the critical parameters that might imply negative net benefits, including the value of statistical life and the discount rate. A key unknown factor is the speed of economic recovery with and without social distancing measures in place. A series of robustness checks also highlight the key role of the value of mortality risk reductions and discounting in the analysis and point to a need for effective economic stimulus when the outbreak has passed. [ABSTRACT FROM AUTHOR]

United States Environmental Protection Agency (USEPA) has regulated drinking water since the 1974 Safe Drinking Water Act (SDWA). Congress directed it to achieve three conflicting goals: (i) establish stringent nationwide standards, (ii) ensure that these standards are both technologically and economically feasible, and (iii) accommodate significant differences in cost among water systems of different sizes with different water sources. USEPA chose to emphasize goal (i) at the expense of (ii) and (iii). In 1986, Congress intensified its preference for (i), was silent concerning goal (ii), and criticized USEPA for failing to achieve goal (iii). In lieu of economic feasibility, the Agency substituted "affordability," defined as expenditures up to 2.5 % of national median household income irrespective of the benefits. This imposed deadweight losses, and substantial inequities on rural areas, low-income communities, and low-income households generally. In 1996, Congress directed USEPA to use benefit-cost analysis positively and normatively. Regulations issued since 1996 do not appear to comply, however. A review of post-1996 drinking water standards indicates that most were certified by USEPA as having benefits that justified costs, but these determinations were unsupported by the Agency's own regulatory impact analyses. This article proposes that USEPA define by regulation that "economic feasibility" means marginal benefits exceed marginal costs for the smallest water system subject to SDWA, and that all future drinking water standards must be economically feasible. Economic efficiency would be greatly enhanced and the pervasive inequities of "affordability" greatly diminished. Unlike "affordability," this definition is objective and compatible with lay intuition about the meaning of key regulatory terms. [ABSTRACT FROM AUTHOR]

In a family context with endogenous timing, multiple public goods, and alternative parental instruments, we show that the optimality of authority (leadership) delegation for the sequential-action game played by rotten kids and a parent depends crucially on the degree of heterogeneity in the kids' preferences. For homogeneous kids, the rotten kid theorem—the situation in which rotten kids find it desirable to internalize all externalities that arise in the family setting—holds irrespective of the parental policy instrument, implying that it is optimal to delegate leadership to the kids. If the kids are heterogeneous, however, parental leadership yields a first best outcome if the kids are economically dependent and agree on the tradeoff between public goods. For economically independent kids, parental leadership is optimal if the degree of heterogeneity is sufficiently high. These findings provide us with empirically testable hypotheses and contribute to the debate regarding the social desirability of the 'authoritative parenting style'. [ABSTRACT FROM AUTHOR]

On 24 September 2019, in a unanimous judgment the UK Supreme Court ([2019] UKSC 41) ruled that the Prime Minister's action to prorogue (suspend) Parliament for 5 weeks in the run-up to the 31-10-2019 deadline of the UK leaving the European Union, was unlawful and of no effect, as it prevented Parliament from carrying out its constitutional functions without reasonable justification. Although the Court did not pronounce on the merits and demerits of Brexit, its decision delighted "Remainers" but appalled "Leavers". The Court ruling epitomises the potency of constitutional review by an independent judiciary. The paper applies collective choice theory to analyse the ruling of the Supreme Court. This is accomplished by (a) examining the legal basis of the Court ruling; (b) reviewing arguments for judicial review and (c) exploring the effect of the Court as an additional player in the game of collective choice in a spatial decision model. [ABSTRACT FROM AUTHOR]

We investigate empirically how electoral democracy and judicial independence relate to personal freedom. While judicial independence is positively and robustly related to personal freedom in all its forms, electoral democracy displays a robust, positive relationship with only two out of seven types of personal freedom (freedom of association, assembly and civil society; freedom of expression and information). Interaction terms and more refined indicators of the political system reveal that countries without elections or with only one political party benefit more from judicial independence than both democracies and multi-party systems without free elections. [ABSTRACT FROM AUTHOR]

This article has three sections, each of which deals with an Executive Order. The first section, "Office of Information and Regulatory Affairs (OIRA) Past," emphasizes the critical role that Executive Orders played in the formation of OIRA. More specifically, OIRA owes its initial existence to the establishment of a centralized regulatory review system, the Quality of Life Review, which initiated Office of Management and Budget (OMB) review of environmental regulations through the issuance of a directive from OMB. Every subsequent President expanded OMBs powers through the issuance of Executive Orders which culminated in the Iconic Executive Order 12291. The section concludes with the recommendation that a select class of Executive Orders, and OMB Directives, be designated as "Iconic" by the National Archivist in consultation with the OIRA, and then given substantial deference by incoming Administrations. The second section, "OIRA Present," describes an Executive Order issued during the Kennedy Administration which remains in effect but was promulgated prior to the establishment of OIRA and therefore recommends that a new Executive Order be issued which gives OIRA specific authority to participate in the conduct of interagency reviews of Executive Orders. The third section, "OIRA Future," describes an Executive Order which implements a regulatory budget (RB) and institutionalizes a mechanism for controlling the size of the administrative state. This final section of the article recommends that the aforementioned Executive Order be reviewed and modified based upon the outcome of a request for public comments, and rules with demonstrated positive net benefits should no longer be accorded an automatic entitlement for issuance as a final rule absent their inclusion in an RB. [ABSTRACT FROM AUTHOR]

We model a society that values coherence between the long-term commitment of politicians to given levels of public good provision and current policy. In that context, we suggest a novel mechanism by which issuing government debt can affect electoral results. Debt is exploited by an incumbent politician who favors a low level of public good supply, taking advantage of the cost paid by her opponent, who is committed to a higher level of supply. More public debt reduces voters' preferred level of public good consumption and therefore are less likely to elect the opponent, given her commitment to a losing policy. [ABSTRACT FROM AUTHOR]

This paper introduces a new matching mechanism that is a hybrid of the two most common mechanisms in school choice, the Boston Mechanism (BM) and the Deferred Acceptance algorithm (DA). BM is the most commonly used mechanism in the field, but it is neither strategyproof nor fair. DA is the mechanism that is typically favored by economists, but it is not Pareto efficient. The new mechanism, the Secure Boston Mechanism (sBM), is an intuitive modification of BM that secures any school a student was initially guaranteed but otherwise prioritizes a student at a school based upon how she ranks it. Relative to BM, theoretical results suggest that sBM is an improvement in terms of strategyproofness and fairness. We present experimental evidence using a novel experimental design that confirms that sBM significantly increases truth-telling and fairness. Relative to DA, theoretical results suggest that sBM can be a Pareto improvement in equilibrium but the efficiency comparison of sBM and DA is theoretically ambiguous. We present simulation evidence that suggests that sBM often does Pareto dominate DA when DA is inefficient, while sBM and DA very often overlap when DA is efficient. Overall, our results strongly support the use of sBM over BM and suggest that sBM should be considered as a viable alternative to DA. [ABSTRACT FROM AUTHOR]

We search for impartiality in the allocation of objects when monetary transfers are not possible. Our main focus is anonymity. The standard definition requires that if agents' names are permuted, their assignments be permuted in the same way. Since no rule satisfies this definition, we introduce weaker variants, "anonymity for distinct preferences," "pairwise-anonymity for distinct preferences," "pairwise-anonymity for fully differentiated profiles," and "independence of others' permutations." We show that for more than two agents and two objects, no rule is pairwise-anonymous for distinct preferences and Pareto-efficient (Theorem 1), no rule is pairwise-anonymous for distinct preferences and independent of others' permutations (Theorem 2), and no rule is pairwise-anonymous for fully differentiated profiles and strategy-proof (Theorem 3). [ABSTRACT FROM AUTHOR]

The article introduces the special section on "Geographical Clustering and the Evaluation of Cluster Policies". We first provide a motivation of cluster policies and briefly review the state of the art in cluster evaluation research. We proceed with summaries of the papers comprising the special section, which take different perspectives and cover distinct facets of cluster policy evaluation. The papers identify challenges for evaluation by highlighting the variety of approaches towards cluster policies addressed at different policy levels. Additional challenges for an identification of policy impact result from the complexity as well as the timing of policy effects. Thus, proper evaluations should employ and combine a broad set of evaluation methods. Based on the main lessons learned, we finally propose several avenues for future research to cope with these challenges. [ABSTRACT FROM AUTHOR]

Over the past two decades, the cluster concept has become firmly established in regional and innovation policy, as well as regional and local economic development at all spatial levels across Germany. The coming of age of such cluster policies shifts the focus of academic interest to the assessment of their outcomes. This paper seeks to contribute to the growing literature on cluster-policy evaluation in three ways: firstly, it focuses on regional cluster policies below the level of federal states in Germany to complement the majority of studies on federal and state-level programmes. Secondly, it adopts a public-choice perspective, whereas most existing research concentrates on methodological and conceptual issues associated with cluster-policy evaluation. Thirdly, this paper attempts to see cluster policies as a whole by linking evaluation with the practices of policy design and implementation, which are interconnected in the policy cycle. Following a brief overview of regional cluster policies in Germany, we summarise the challenges, impacts and evaluation practices of seven case studies on a regional scale, i.e. below the level of federal states. Arguing that causal effects of such policies are difficult to measure, we suggest that the real impacts are rather qualitative improvements in regions' organisational capacities, whereas independent evaluations not primarily serving to legitimise political decisions require more active engagement by the academic community. [ABSTRACT FROM AUTHOR]

We propose that policy-making in the realm of innovation policy can be fruitfully analyzed from the perspective of Behavioral Political Economy. Citizens, policy-makers and also bureaucrats are prone to biases that have been empirically identified in behavioral economic and psychological research. When applied to innovation policy, it can be shown that under certain conditions, policy-makers are willing to support riskier innovative projects and that this tendency is amplified by public sector incentives, such as soft budget constraints. The same holds for a tendency to support ongoing innovative projects even if their profitability becomes increasingly doubtful. Finally, we also highlight how special-interest policies aimed at distorting risk perceptions can slow down the innovation process. [ABSTRACT FROM AUTHOR]

Why do rational politicians choose inefficient policy instruments? Environmental regulation, for example, often takes the form of technology standards and quotas even when cost‐effective Pigou taxes are available. To shed light on this puzzle, we present a stochastic game with multiple legislative veto players and show that inefficient policy instruments are politically easier to repeal than efficient instruments. Anticipating this, heterogeneous legislators agree more readily on an inefficient policy instrument. We describe when inefficient instruments are likely to be chosen, and predict that they are used more frequently in (moderately) polarized political environments and in volatile economic environments. We show conditions under which players strictly benefit from the availability of the inefficient instrument. [ABSTRACT FROM AUTHOR]

Increasingly, more school districts across the United States are using centralized admissions for charter, magnet, and neighborhood schools in a common enrollment system. We first show that across all school‐participation patterns, full participation in the common (or unified) enrollment system leads to the most preferred outcome for students. Second, we show that, in general, participation by all schools may not be achievable because schools have incentives to stay out. This may explain why some districts have not managed to attain full participation. We also consider some specific settings where full participation can be achieved and propose two schemes that can be used by policymakers to achieve full participation in general settings. [ABSTRACT FROM AUTHOR]

We generalize the school choice problem by defining a notion of allowable priority violations. In this setting, a weak axiom of stability (partial stability) allows only certain priority violations. We introduce a class of algorithms called the student exchange under partial fairness (SEPF). Each member of this class gives a partially stable matching that is not Pareto dominated by another partially stable matching (i.e., constrained efficient in the class of partially stable matchings). Moreover, any constrained efficient matching that Pareto improves upon a partially stable matching can be obtained via an algorithm within the SEPF class. We characterize the unique algorithm in the SEPF class that satisfies a desirable incentive property. The extension of the model to an environment with weak priorities enables us to provide a characterization result that proves the counterpart of the main result in Erdil and Ergin (2008). [ABSTRACT FROM AUTHOR]

We present the approach to comparative economic development of Why Nations Fail. Economic prosperity requires inclusive economic institutions—those which create broad based incentives and opportunities in society. Extractive economic institutions, which lack these properties, create poverty. Variation in economic institutions is created by differences in political institutions. Inclusive economic institutions are the result of political choices which arise under inclusive political institutions: a strong state and a broad distribution of power in society. When either of these conditions fails one has extractive political institutions that lead to extractive economic institutions. We relate our analysis to Tullock's notion of 'rent seeking'. [ABSTRACT FROM AUTHOR]

This paper argues that political brokers pay particular attention to household size, and the age distribution of its members, when allocating scarce indivisible social benefits. Because people usually share their income with other household members, allocating a social benefit to an individual member of a household with n voters is likely to bring more political support than allocating the same benefit to an individual member of a household with n-1 voters. Based on the main Argentine household survey and on personal interviews with 120 brokers, this paper shows that brokers effectively collect information on family size and age composition and allocate scarce temporary public works programs to families with more voters, unintentionally discriminating against families with children not old enough to vote. [ABSTRACT FROM AUTHOR]

Motivated by various trade restrictions in real-life object allocation problems, we introduce an object allocation with a particular class of trade restrictions model. The set of matchings that can occur through a market-like process under such restrictions is defined, and each such matching is called feasible. We then introduce a class of mechanisms, which we refer to as "Restricted Trading Cycles" (RTC). Any RTC mechanism is feasible, constrained efficient, and respects endowments. An axiomatic characterization of RTC is obtained, with feasibility, constrained efficiency, and a new property that we call hierarchically mutual best. In terms of strategic issues, feasibility, constrained efficiency, and respecting endowments together turns out to be incompatible with strategy-proofness. This in particular implies that no RTC mechanism is strategy-proof. Lastly, we consider a probabilistically restricted trading cycles (PRTC) mechanism, which is obtained by introducing a certain randomness to the RTC class. While PRTC continues to be manipulable, compared to RTC, it is more robust to truncations and reshufflings. [ABSTRACT FROM AUTHOR]

Can elected officeholders use their power to extract rents for themselves, or can their accountable behavior be ensured by a threat of future elections? It has been argued that such a threat may fail, particularly if voters are forward looking and elections serve a selection purpose. We consider the accountability problem in elections with selection concerns and multiple voters. When there are multiple voters, pivotality considerations may support equilibria where incumbents behave accountably even with a selection incentive in their favor. In an accompanying laboratory experiment we find that there is heterogeneity among incumbents in terms of their accountability—some incumbents extract much, others do not. Voters are always more likely to re-elect the incumbent if there is a higher future benefit to the voters from her re-election, but less so if they extract rents. An interesting equilibrium is when the incumbent creates a majority group of voters and treats them favorably, with this favored majority voting for her. Here voters' beliefs about their pivot probabilities are tied to whether they are in this majority group or not. [ABSTRACT FROM AUTHOR]

We study assignment systems where objects are assigned to agents sequentially. Student placement to exam and mainstream schools in the USA and centralized teacher appointment in Turkey are two of many examples. Despite their prevalence in practice, research on sequential systems has been rather limited. We analyze the properties of the systems in use in these places and show that they do not satisfy desirable fairness, welfare, and incentive criteria. It turns out such shortcomings are inherent in more general sequential assignment systems as well. We then analyze preference revelation games associated with various sequential systems including those comprising of combinations of well-known mechanisms. [ABSTRACT FROM AUTHOR]

Using a model with forward-looking voting strategies, we examine the tax policies of public officials who maximize the weighted average of rents and benefits to their specific electoral clienteles when commitment is possible. We assume that the degree of commitment to a tax policy can be varied through its design and institutional anchoring. At the center of the analysis lies the question of the extent to which public officials restrict the policy space of future governments. On the one hand, stronger restrictions make it more difficult for political opponents to enact unwanted policy changes, but, on the other hand, they also reduce the likelihood of reelection. We show that incumbents prefer perfect commitment to the absence of any commitment and that, from the point of view of an incumbent, imperfect commitment can be superior to perfect commitment. Imperfect commitment allows incumbents to raise their reelection chances either by binding themselves and causing the opponent to deviate or binding the opponent and deviating themselves. [ABSTRACT FROM AUTHOR]

Are public contracts less adaptable than private contracts? Using a comprehensive set of contracts for a standard product, we compare procurement contracts in which the procurer is either a public administration or a private corporation. We find that public‐to‐private contracts feature more rigidity clauses than private‐to‐private contracts and that the use of rigidity clauses in public contracts rises when political risks are more salient. We argue that a significant part of the increased rigidity of public contracts is a contractual adaptation to limit political hazards from political opponents and interested third parties. [ABSTRACT FROM AUTHOR]

Decisions-makers often rely on information supplied by interested parties. In practice, some parties have easier access to information than other parties. In this light, we examine whether more powerful parties have a disproportionate influence on decisions. We show that more powerful parties influence decisions with higher probability when their stakes are sufficiently large. However, in expected terms, decisions do not depend on the relative strength of interested parties. When parties have not provided information, decisions are biased towards the less powerful parties. Finally, we show that compelling parties to supply information destroys incentives to collect information. [ABSTRACT FROM AUTHOR]

This paper presents the informal trade estimates for 184 countries including North America, Latin America and the Caribbean, South Asia, East Asia and Pacific, Europe and Central Asia, Middle East and North Africa, and the countries of Sub-Saharan Africa covering the period 2002–2013. In the presence of a model with multiple indicators and multiple causes (MIMIC), the empirical results indicate that the average rate of global informal trade (in % of formal trade) in 184 countries is 20.06%, 22.22% in 35 North America, Latin America and the Caribbean countries, 20.048% in 8 South Asia countries, 15.57% in 27 East Asia and Pacific countries, 16.67% in 48 Europe and Central Asia countries, 18.43% in 21 Middle East and North Africa countries, and 25.23% in 45 Sub-Saharan Africa countries. We suggest policies (economic) to solve the informal trade dilemma not only in the abovementioned regions but also in different countries. The solutions include simplifying regulations and procedures, promoting effective and free government, tackling corruption, increasing the likelihood of control over borders, reducing unnecessary transaction costs; and finally, creating or reforming market institutions. [ABSTRACT FROM AUTHOR]

Environmental water uses and their social values have been mostly overlooked in traditional water management over the last few decades, and recently, the maintenance of environmental flows has been considered a key issue in water policies. Addressing the more sustainable management of water resources involves introducing new water allocation policies. However, these policies are often associated with tradeoffs across sectors, stakeholders, and spatial locations. This study aims to evaluate the tradeoffs and political economy aspects of allocating water among economic water uses and environmental flows in water-scarce river basins. An empirical analysis has been conducted in the Ebro River basin (Spain) as a case study, where an intense debate on the environmental flow allocation of the Ebro mouth is taking place. The study uses a hydroeconomic model that includes the major water uses in the Ebro to analyze the effects of different water allocation policies under combinations of water availability and environmental flow scenarios. The results of this study highlight the importance of assessing the opportunity costs and political implications of reallocating water from economic activities to the environment under impending climate change impacts. Moreover, the results indicate that well-functioning water allocation policies should be not only economically efficient but also socially acceptable to reduce the likelihood of failure of water reallocation to the environment. [ABSTRACT FROM AUTHOR]

We study a multidimensional collective decision under incomplete information. Agents have Euclidean preferences and vote by simple majority on each issue (dimension), yielding the coordinate‐wise median. Judicious rotations of the orthogonal axes—the issues that are voted upon—lead to welfare improvements. If the agents' types are drawn from a distribution with independent marginals, then under weak conditions, voting on the original issues is not optimal. If the marginals are identical (but not necessarily independent), then voting first on the total sum and next on the differences is often welfare superior to voting on the original issues. We also provide various lower bounds on incentive efficiency: in particular, if agents' types are drawn from a log‐concave density with independently and identically distributed marginals, a second‐best voting mechanism attains at least 88% of the first‐best efficiency. Finally, we generalize our method and some of our insights to preferences derived from distance functions based on inner products. [ABSTRACT FROM AUTHOR]

The main purpose of this paper is to explore the consequences of the formation of either a Regional Popular Vote Interstate compact or a National Popular Vote Interstate compact on the functioning of a toy symmetric version of the Electoral College. The two versions of interstate compacts that are considered here differ in only one respect: in one case, the interstate compact allocates its electoral votes to the regional popular winner, while in the other case it allocates the votes to the national popular winner. They both differ from the ongoing National Popular Vote Interstate Compact as it is assumed that the agreement is effective as soon as the members sign it. Decisiveness and welfare analyses are conducted with a simplified symmetric theoretical version of the Electoral College wherein malapportionment problems are absent. The three most popular probabilistic models are considered and the study is conducted either from the self-interest perspective of the initiators of the interstate compact or from a general interest perspective. The analysis combines analytical arguments and simulations. [ABSTRACT FROM AUTHOR]

We study the school choice problem in which a school district assigns school seats to students. There has been a long debate over the three best-known rules for this problem: the deferred acceptance rule (DA), the top-trading cycles rule (TTC), and the immediate acceptance rule (IA). We evaluate these rules by investigating how often they satisfy three central requirements, efficiency, fairness, and consistency. We compare the restricted domains of students' preferences on which each rule satisfies these requirements. From the containment relations between them, we show that DA performs better than IA, which itself performs better than TTC in terms of efficiency and fairness. If we consider consistency instead, IA performs better than DA, which itself performs better than TTC. [ABSTRACT FROM AUTHOR]

Which incentives have the strongest impact on the size of the informal economy? Is it about government’s pressure against entrepreneurs operating in this sector, or is it about the benefits of legality? The goal of this paper is to explicitly contrast the role of sticks (court repressiveness) and carrots (financial aid to small- and medium-sized firms) as factors determining the size of the informal economy, using the case of the Russian taxi market. It uses a unique dataset of taxi licensing data from regional transport departments and indicators for taxi market demand and supply to estimate the extent of informal business. When controlling for market demand and supply, it finds a strong and robust positive effect of sanctions on the size of the official market, with higher repressiveness leading to a smaller informal economy. In contrast, the effect of carrots was insignificant. The results suggest that the effectiveness of carrot policies is compromised when entrepreneurs operate informally to avoid dealing with corrupt bureaucrats and have low trust in the government. [ABSTRACT FROM AUTHOR]

János Kornai published an interesting and important paper in 2000 about the "system paradigm", and another in 2016 about the "system paradigm revisited". In the last one he made a theoretical approach for differences between democracies, autocracies and dictatorships; made a typology for the most important elements for characterization of different political systems. In the second half of the 2010's a debate has started among political analysts, public intellectuals and journalists, how we can characterize the new political system of Hungary led by Viktor Orbán. We can read detailed analyses about "hybrid regime", "limited democracy", "illiberal democracy", "plebiscite leader democracy" etc. In this paper I would like to deal with the question of different political systems in general, and – on the experiences of the debates about the current Hungarian system – I would like to think further – the Kornai's model. Kornai pointed out 10 elements for characterization of it (the questions of removable governments, opposition parties in parliaments, elections, civil society, freedom of press, etc.) – I would like to differentiate 10 new potential elements, especially from the side of the political ideas, historical backgrounds and other viewpoints. [ABSTRACT FROM AUTHOR]