Antoine LOEPER           (BACK TO MAIN PAGE)


Crossborder Externalities and Cooperation among Representative Democracies
Forthcoming, European Economic Review

Working paper version (the pure public good model)
This paper analyzes the provision of transnational public goods by sovereign democracies. The contribution of each country is decided by a representative elected by majority rule at the country level. We compare two cases: representatives can choose their respective policies either noncooperatively, or through Coasian cooperation. Cooperation helps representatives internalize cross-border externalities, but induces strategic voters to elect representatives who care less about the public good, so as to reduce their share of the cost of provision. The paper characterizes the main drivers of the magnitude of this detrimental electoral effect. Whether cooperation increases public good provision in equilibrium depends neither on voters' preferences, nor on the magnitude of spillovers, nor on the size, bargaining power, or efficiency of each country. Instead, it depends only on the elasticity of the demand for the public good, and the degree of substitutability between countries' contributions. Hence, the desirability of international cooperation depends mostly on the type of public good considered.

Dynamic Collective Choice with Endogenous Status quo (joint with Wiola Dziuda)
Journal of Political Economy, 2016, Volume 124, Issue 4, Pages 1148-1186
Working paper version (with a few additional results)
This paper analyzes an ongoing bargaining situation in which preferences evolve over time and the previous agreement becomes the next status quo, determining the payoffs until a new agreement is reached. We show that the endogeneity of the status quo induces perverse incentives that exacerbate the players' conflict of interest: Players disagree more often than they would if the status quo was exogenous. This leads to inefficiencies and status quo inertia. Under certain conditions, the endogenous status quo leads the negotiations to a complete gridlock in which players never reach an agreement. Such gridlock can occur between players with arbitrarily similar preferences, provided they are sufficiently patient. When applied to the legislative setting, our model predicts polarized behavior, and explains why oftentimes legislators fail to react in a timely fashion to economic shocks.

Influential Opinion Leaders (joint with joint with Jakub Steiner and Colin Stewart)
The Economic Journal, Volume 124, Issue 581, December 2014, Pages 1147-1167
We present a two-stage coordination game in which early choices of experts with special interests are observed by followers who move in the second stage. We show that the equilibrium outcome is biased toward the experts’ interests even though followers know the distribution of expert interests and can account for it when evaluating observed experts’ actions. Expert influence is fully decentralized in the sense that each individual expert has a negligible impact. The bias in favor of experts results from a social learning effect that is multiplied through a coordination motive. The total effect can be large even if the direct social learning effect is small. We apply our results to the onset of social movements and to the diffusion of products with network externalities.

Federal Directives, Local Discretion, and the Majority Rule
Quarterly Journal of Political Science
, Volume 8, issue 1, January 2013, Pages 41-74.
I consider a heterogeneous federal system in which policy coordination is desirable but underprovided in the absence of a federal intervention. To improve policy coordination, the federal layer can intervene by imposing bounds on local policies. These federal bounds define a restricted policy space within which local jurisdictions have residual discretion. I analyze a voting game in which the federal bounds are determined directly by the citizens via federal majority rule.
The voting equilibrium exhibits various forms of inefficiencies. When the distribution of voters' ideal policy is skewed in one direction, the federal bounds are biased in the opposite direction. When the gains from policy coordination are negligible, local discretion is too limited, and a majority of voters are worse-off with the federal intervention than without. When policy coordination is more important, the federal intervention is supported by a majority of voters, but contrary to the received wisdom, it is socially worse than no intervention. Hence, the model shows that inadequate and excessively rigid federal interventions can emerge in a democratic federation without agency costs or informational imperfections.

Coordination in Heterogeneous Federal Systems
Journal of Public Economics, Volume 95, Issues 7–8, August 2011, Pages 900–912

We compare centralized and decentralized policy making in a federation in which policy heterogeneity is inherently costly and preferences vary across jurisdictions: all jurisdictions agree that some harmonization is desirable but no one agrees on the direction of harmonization. This type of collective choice problem arises when members of a federal system have to coordinate nonbudgetary policies such as laws, regulations, standards, or diplomatic policies. Contrary to the common wisdom, decentralization becomes optimal when coordination becomes very important. When coordination costs are symmetric, decentralization dominates centralization irrespective of the magnitude of externalities and the heterogeneity of preferences. In the case of discontinuous network effects, standardization never Pareto dominates decentralization.


Gridlock and Inefficient Policy Instruments (Joint with David Austen-Smith, Bard Harstad, and Wiola Dziuda)
Last revision: July 2016

Policy makers often regulate the economy using ine¢ cient rather than e¢ cient policy instruments. For example, externalities are typically regulated by quotas or standards even if Pigou taxes could have raised revenues and led to a Pareto improvement. This paper recognizes that, in many political systems, there are multiple veto players and the current policy deÖnes the status quo to be used in the future. Thus, even if a player beneÖts from the e¢ cient policy instrument today, it is anticipated that this instrument will be particularly hard to repeal once implemented. Less interventionist players, therefore, can prefer use of a Pareto dominated instrument that is easier to repeal when appropriate. Within a dynamic political economy model that captures this intuition, we also show, inter alia, that both relatively more and less interventionist players may propose ine¢ cient policy interventions in equilibrium, and that access to a Pareto dominated policy instrument can be welfare improving as it mitigates ine¢ ciencies due to legislative gridlock.

Voting Rules in a Changing Environment (Joint with Wiola Dziuda)
Last revision: June 2015

We identify a novel distortive effect of supermajoritarian requirements and checks and balances such as the filibuster, bicameralism, or presidential veto. Under such voting rules, different voters become pivotal under different status quos. If policies are continuing in nature and a changing environment creates the need for renegotiation, legislators distort their voting behavior in favor of alternatives that make them more likely to be pivotal in future votes. As a result, players vote in a more polarized way, and the policy is less responsive to the environment. We show that the voting distortions are bigger, the greater the supermajoritarian requirement, and more generally the more inclusive the voting rule is. The distortions generated by inclusive rules are greater when the environment is more volatile.

Agglomeration, Segregation, and Social Welfare in Group Formation Games (preliminary and incomplete)
Last revision: January 2012

We consider a non cooperative game in which a continuum of heterogeneous individuals partition themselves into communities. A player's payoff depends on the community she chooses and the set of players who choose the same community as her.
When group externalities are anonymous, we show that free mobility equilibria are socially optimal when group externalities vary logarithmically with community size. When they increase less (more) than logarithmically, the equilibrium exhibits excessive agglomeration (excessive fragmentation). These results hold irrespective of the distribution of preferences over communities.
When group externalities are not anonymous, free mobility affects the size, but also the composition of groups. We characterize conditions under which free mobility equilibria are excessively or insufficiently segregated. When applied to local public goods economies, these results provide insights on the social welfare effect of free mobility as a function of the local public good technology, the income distribution, and the tax scheme.

Contractual Federalism and Strategyproof Coordination
Last revision: December 2008

This paper takes a mechanism design approach to federalism and assumes that local preferences are the private information of local jurisdictions. Contractual federalism is defined as a strategy-proof contract among the members of the federation supervised by a benevolent but not omniscient federal authority. We show that even if the size of the information to be elicited is minimal, the incentive compatibility constraint has a bite in terms of flexibility and welfare. Strategy-proof and efficient federal mechanisms are necessarily uniform. There exists inefficient and non-uniform strategy-proof mechanisms, but they are socially worse than non cooperative decentralization. Federal mechanisms which are neutral and robust to coalition manipulations are equivalent to voting rules on uniform policies.

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