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Working Paper
It's Good Weather for More Government: The Effect of Weather on Fiscal Policy
I show that weather conditions on election day affect future fiscal policy. When it rains during state elections, there is an increase in the relative income of voters, which is followed by an increase in expenditure and debt. The increase in expenditure is directed towards a larger police and safety budget. This result is compatible with a model of complementarity between consumption and public goods. In the model, high-income voters support an increase in safety budget because they benefit more from it than low-income voters.
Working Paper
Universal Basic Income versus Unemployment Insurance
In this paper we compare the welfare effects of unemployment insurance (UI) with an universal basic income (UBI) system in an economy with idiosyncratic shocks to employment. Both policies provide a safety net in the face of idiosyncratic shocks. While the unemployment insurance program should do a better job at protecting the unemployed, it suffers from moral hazard and substantial monitoring costs, which may threaten its usefulness. The universal basic income, which is simpler to manage and immune to moral hazard, may represent an interesting alternative in this context. We work within a ...
Journal Article
Failing to Provide Public Goods: Why the Afghan Army Did Not Fight
The theory of public goods is mainly about the difficulty in paying for them. Our question here is this: Why might public goods not be provided, even if funding is available? We use the Afghan Army as our case study. We explore this issue using a simple model of a public good that can be provided through collective action and peer pressure, by modeling the self-organization of a group (the Afghan Army) as a mechanism design problem. We consider two kinds of transfer subsidies from an external entity such as the U.S. government. One is a Pigouvian subsidy that simply pays the salaries, ...
Discussion Paper
Political Polarization in Consumer Expectations
Following the 2016 presidential election, as noted on this blog and many other outlets, Americans’ political and economic outlook changed dramatically depending on partisan affiliation. Immediately after the election, Republicans became substantially more optimistic relative to Democrats. In this blog post, we revisit the issue of polarization over the past twelve months using data from the New York Fed’s Survey of Consumer Expectations (SCE)—also the focus of a detailed technical overview in the latest edition of the Bank’s journal, the Economic Policy Review. The overview walks ...