Items where Subject is "Economics"

Are individuals more sensitive to losses than gains in terms of economic growth? We find that measures of subjective well-being are more than twice as sensitive to negative as compared to positive economic growth. We use Gallup World Poll data from over 150 countries, BRFSS data on 2.3 million US respondents, and Eurobarometer data that cover multiple business cycles over four decades. This research provides a new perspective on the welfare cost of business cycles, with implications for growth policy and the nature of the long-run relationship between GDP and subjective well-being.

Cooperation in the form of vote trading, also known as logrolling,is central for law-making processes, shaping the development of democratic societies. Empirical evidence of logrolling is scarce and limited to highly specific situations because existing methods are not easily applicable to broader contexts. We have developed a general and scalable methodology for revealing a network of vote traders, allowing us to measure logrolling on a large scale. Analysis on more than 9 million votes spanning 40 years in the U.S. Congress reveals a higher logrolling prevalence in the Senate and an overall decreasing trend over recent congresses, coincidental with high levels of political polarization. Our method is applicable in multiple contexts, shedding light on many aspects of logrolling and opening new doors in the study of hidden cooperation.

The post-2008 period focused attention on "twin-crises". Banking crises may lead to sovereign crises where fiscal vulnerabilities are exacerbated by the extension of support for the banking system. We develop a model that describes private sector generated capital inflow that is used to finance investment and consumption expenditure. In the event of an economic contraction, the (convex) haircut on outstanding debt is negotiated, or bargained, centrally by the sovereign. Two results arise: the volume of debt and haircut rate are inefficient. In this setting the accumulation of capital achieves two goals. First, it generates sufficient optimism about future income to allow the debt market to function. Second, and counter-intuitively, it increases expected haircuts by raising the value of the outside option of complete default. These competing forces characterize the optimal balanced-budget macroprudential policy targeting capital investment.