An electronic version of the paper may be downloaded

of yardstick competition. (JEL D72, H20, H71) The electoral cost of raising taxes is a stock political anecdote. However, while folk wisdom suggests that incumbents raise taxes at their peril, proper treatment of the issue recognizes that voters ' choices and incum-bent behavior are determined simultane-

Identifying the effects of political endorsements has historically been difficult. Before the 2008 Democratic Presidential Primary, Barack Obama was endorsed by Oprah Winfrey. We assess the endorsement’s impact using subscriptions to O! – The Oprah Magazine and the sales of books Winfrey has recommended as measures of her influence. We find it had a positive effect on the votes and financial contributions Obama received, and on voter participation. No connection is found between the measures of Oprah's influence and previous elections, nor with underlying political preferences. Our results suggest Winfrey's endorsement was responsible for approximately 1,000,000 additional votes for Obama.

An electronic version of the paper may be downloaded

We analyze Senate roll-call votes concerning tariffs on specific goods in order to understand the economic and political factors influencing the passage of the Smoot-Hawley Tariff Act of 1930. Contrary to recent studies emphasizing the partisan nature of the Congressional votes, our reading of the debates in the Congressional Record suggests that the final, party-line voting masks a rich votetrading dynamic. We estimate a logit model of specific tariff votes that permits us to identify (a) important influences of specific producer beneficiaries in each Senator’s constituency and (b) logrolling coalitions among Senators with otherwise unrelated constituency interests which succeeded in raising tariff rates.

The political impediments to reform and the forces allowing its success are studied in a model where the tax base and statutory rate are separate instruments of tax policy. The model predicts that big bang reforms—large changes in the tax code–may be easier to enact than marginal reforms. Preferences over the tax base face a tipping point where even the beneficiaries from tax exemptions support re-form. At such a “reform moment”, tax reform is Pareto improving. Politically feasible tax reform occurs when fiscal needs are large, but may nonetheless involve reductions in marginal tax rates. There is strategic complementary in lobbying for tax exemptions, resulting in multiple equilibria. Evidence from tax-base changes in a panel of OECD countries supports a number of the main predictions.

• from the CESifo website: www.CESifo.de CESifo Working Paper No. 1032 DECENTRALIZATION AND THE FATE OF MINORITIES This paper analyses the welfare effects of a change from centralized to decentralized political authority. The potential disadvantage with decentralization in our model is that local dominant groups with rather “extreme ” preferences may win the vote and implement policies that harm the well-being of local minorities. When the national median voter represents a “moderate ” position, centralization can be seen as a way of protecting the interests of local minorities. Our main result is that the centralized solution may welfare dominate decentralization even in the absence of scale economics and interregional spillovers. We also demonstrate that increased segregation, increased mobility, and increased heterogeneity in preferences, factors that are normally considered to be arguments in favor of decentralization, may reduce the attractiveness of the decentralized solution from a welfare perspective. Finally, we show that when the national median voter is an “extreme ” type, decentralization may represent a way of protecting local minority interests.

that complete policy commitment may be absent in democracies, as is found in this case. (JEL D72, D78, H11, H50) There are strong moral and economic arguments suggesting that it is in the interest of society to improve the economic standing of historically disadvantaged minority groups. 1 In democracies

The analogy-based expectation equilibrium, or simply analogy equilibrium (AE), analyzes equilibrium stereotypes by imposing consistency of infinitely large action samples with the expectation that broad classes of opponent types behave identically. This paper introduces the payoff-confirming analogy equilibrium (PAE) to refine the set of analogy equilibria. The concept imposes additionally that sample marginal of own payoffs be consistent with one’s expectations. Robust incorrect equilibrium stereotypes, i.e. non-Bayesian Nash PAE are shown to exist. General conditions are given for the prevalence of such stereotypes under correct expectations on exogenous uncertainty. In monotone selection games susceptible to winner’s curse, naive behavioral equilibrium leading to aggravation of adverse selection has been shown to match plausible informational assumptions of experienced, but behaviorally biased, equilibrium play. Here, behavioral equilibrium is matched with a corresponding PAE with an incorrect prior and correct prior is shown to imply correct overall expectations.

is well explained by a structural nonequilibrium model of initial responses based on level-k thinking. (JEL C72, C92, D83)... professional investment may be likened to those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being