1. Herrera, H., D. Levine., and C. Martinelli, "Policy Platforms, Campaign Spending and Voter Participation," Journal of Public Economics, 92 (2008): 501-513.
We model electoral competition between two parties in a winner-take-all election. Parties choose strategically first their platforms and then their campaign spending under aggregate uncertainty about voters' preferences. We use the model to examine why campaign spending in the United States has increased at the same time that politics has become more polarized. We find that a popular explanation--more accurate targeting of campaign spending--is not consistent. While accurate targeting may lead to greater spending, it also leads to less polarization. We argue that a better explanation is that voters preferences have become more volatile from the point of view of parties at the moment of choosing policy positions. This both raises campaign spending and increases polarization. It is also consistent with the observation that voters have become less committed to the two parties.
2. Kaplan, D., J. Sadka., and J.L. Silva, "Litigation and Settlement: New Evidence from Labor Courts in Mexico," Journal of Empirical Legal Studies, 5 (2008): 309-350.
Using a newly assembled data set on procedures filed in Mexican labor tribunals, we study the determinants of final awards to workers. On average, workers recover less than 30% of their claim. Our strongest result is that workers receive higher percentages of their claims in settlements than in trial judgments. We also find that cases with multiple claimants against a single firm are less likely to be settled, which partially explains why workers involved in these procedures receive lower percentages of their claims. Finally, we find evidence that a worker who exaggerates her claim is less likely to settle.
3. Krasa, S., T. Sharma., and A. Villamil, "Bankruptcy and Firm Finance," Economic Theory, 36 (2008): 239-266.
This paper analyzes how an enforcement mechanism that resembles a court affects firm finance. The court is described by two parameters that correspond to enforcement costs and the amount of creditor/debtor protection. We provide a theoretical and quantitative characterization of the effect of these enforcement parameters on the contract loan rate, the default probability and welfare. We show that when constraints bind, which give agents an incentive to default and pursue bankruptcy, the enforcement parameters have a sharply non-linear effect on firm finance and welfare. The result provides guidance on when models which abstract from enforcement provide good approximations and when they do not. The bankruptcy rule corresponds to firm liquidation.
4. Lobato, I., and C. Velasco, "Power comparison of Tests for Fractional Unit Roots," Economics Letters, 99 (2008): 152-154.
This article compares the asymptotic power properties of the Wald, the Lagrange Multiplier and the Likelihood Ratio test for fractional unit roots. The paper shows that there is an asymptotic inequality between the three tests that holds under fixed alternatives.
5. Martinelli, C., and S. Parker, "Do School Subsidies Promote Human Capital Investment among the Poor?," Scandinavian Journal of Economics, 110 (2008): 261-276.
We investigate the hypothesis that conditioning transfers to poor families on school attendance leads to a reallocation of household resources enhancing the human capital of the next generation, via the effect of the conditionality on the shadow price of human capital and (possibly) via the effect of the transfers on household bargaining. We provide a model to study the effects of conditional transfers on intrahousehold allocations, and provide suggestive evidence of the importance of price effects using data from a conditional transfer program in Mexico.
6. Rojas, J., and C. Urrutia, "Social Security with Uninsurable Income Risk and Endogenous Borrowing Constraints," Review of Economic Dynamics, 11 (2008): 83-103.
We study the effects of a social security reform in a large overlapping generations model where markets are incomplete and households face uninsurable idiosyncratic income shocks. We depart from the previous literature by assuming that, because of lack of commitment in the credit market, the borrowing constraint in the unique asset is endogenously determined by individuals' incentives to default on previous debts. In our model, after the reform the incentives to default are lower and consequently households face more relaxed borrowing limits, leading to an increase in debt and a reduction in the size of precautionary savings. However, the quantitative impact of this mechanism on stationary aggregate savings is small. Computing the transitional dynamics for the basic model following the social security reform we obtain important welfare gains for workers at the bottom of the income distribution (equivalent to 1.3% of consumption each period) associated to the relaxation of the endogenous borrowing constraints, which are missed in an environment with fixed borrowing limits.