Leif Helland

Fiscal Constitutions, Fiscal Preferences, Information and Deficits: An Evaluation of 13 West-European Countries 1978 – 95

Why does budgetary balance vary over time within the same country? And what causes the balance to vary over a group of countries at a certain time? A rapidly growing body of positive political economy offers explanations to these questions.87 Until the early nineties, however, fiscal constitutions were largely overlooked as determinants of fiscal discipline.88 This may seem odd, since it has long been known that in strategic models of budgeting, equilibrium behavior is typically non-robust to changes in the rules of the game. That is to say, rules seem to matter at least in theory.89

When Does Informal Enforcement Work

We study experimentally how enforcement influences public goods provision when subjects face two free-rider options that roughly parallel the nonparticipation and noncompliance options available for countries in relation to multilateral environmental agreements (MEAs). Our results add to the MEA literature in two ways. First, they suggest that compliance enforcement will fail to enhance compliance in the absence of participation enforcement. Second, they indicate that compliance enforcement will boost compliance significantly in the presence of participation enforcement. Our results also add to the experimental literature on public goods provision, again in two ways. First, they reveal that previous experimental findings of enforcement boosting cooperation are valid only in settings with forced (or enforced) participation. Second, they show that subjects’ willingness to allocate costly punishment points is significantly stronger when the enforcement system permits punishment of both types of free riding than when it permits punishment of only one type.

Self-serving dictators

We provide experimental evidence of self-serving fairness ideals in a dictator game design that includes treatments where funds can be transferred in two ways to the one player and in one way to the other. Two methods for transferring funds to the recipient produce the same results as the regular dictator game. However, two methods for transferring funds to the dictator reduce her generosity significantly. Hence, the fairness ideal adopted by dictators appears to be equal share per individual in the former case (as in the regular dictator game), and equal share per transfer method in the latter case.

Candidate competition and strategic coordination: evidence from four early Norwegian elections

This article investigates strategic coordination in four elections to the Norwegian Storting (1909-18). The elections were held under a majority-plurality dual-ballot system, with unrestricted participation in the second-ballot. The focus is on elections with Conservative, Liberal and Labour candidates as main contenders. Supported by historical and theoretical arguments, the authors assume universally sincere voting in the first-ballot. Given this assumption, second-ballot elections can be analyzed as regular plurality elections. Hypotheses about behavior are formed using the game theoretic framework of Myerson and Weber (American Political Science Review 87 (1993) 102-114). It is found that while voters follow the predictions of theory fairly closely, the extent of coordination present at the candidate level can be questioned.

Information and Coordination Frictions in Experimental Posted Offer Markets

We experimentally investigate buyer and seller behavior in small markets with two kinds of frictions. First, a subset of buyers may have (severely) limited information about prices, and choose a seller at random. Second, sellers may not be able to serve all potential customers. Such capacity constraints can lead to coordination frictions where some sellers and buyers may not be able to trade. Theory predicts very different equilibrium outcomes when we vary the set-up along these two dimensions. In particular, it implies that a higher number of informed buyers will lead to lower prices when sellers do not face capacity constraints, while prices may actually increase if sellers are capacity constrained, as shown by Lester (2011). In the experiment, the differences between the constrained and non-constrained case are confirmed; prices fall when sellers are not capacity constrained but either do not fall by much or even increase when they are not. We find that prices are quite close to the predicted equilibrium values except in treatments where unconstrained sellers face a large fraction of informed buyers. However, introducing noise into the theoretical decision making process produces a pattern of deviations that fits well with the observed ones.

Electoral agency in the lab: learning to throw out the rascals

Models of electoral agency address the levels of discipline and selection that voters can achieve in elections. The models are demanding in terms of individual belief formation and consistency of behavior. We investigate a baseline model of electoral agency in a controlled laboratory environment. This baseline model, although simple, forms the central plank of more complex electoral agency models. Our design seeks to limit the behavioral impact of social preferences. We find little support for the baseline model in our data. However, simple (non-rational) learning rules explain behavioral patterns well. Simulations indicate that non-rational learning drives behavior most forcefully towards equilibrium in situations that are favorable to Bayesian updating.

Can Exit Prizes Induce Lame Ducks to Shirk Less? Experimental Evidence

Elected representatives serving their final period face only weak incentives to provide costly effort. However, overlapping generations (OLG) models suggest that exit prizes sustained by trigger strategies can induce representatives in their final period to provide such effort. We evaluate this hypothesis using a simple OLG public good experiment, the central treatment being whether exit prizes are permitted. We find that a significantly higher number of subjects in their final period contribute when exit prizes are permitted. However, this result does not originate from use of trigger strategies. More likely explanations include gift-exchange and focal-point effects.

Biased Competition, Popularity Shocks, and Government Inefficiency

We present an electoral agency model that, in a stylized way, captures the public finance structure of Norwegian municipal governments. It drives the following main implication: increasing partisan bias in favor of the incumbent reduces efficiency in public production, and more so the higher the variation of random popularity shocks in voting. This implication is tested on panel-data regressions for the period 2001-2009, including more than 400 Norwegian local governments per year. Local governments are insitutionally similar, and produce welfare services subject to a fixed amount of revenue. Utilizing exogenous sources of variation to construct our measures of random shocks and partisan bias, we find strong statistical support for the model implication. Furthermore the effects of electoral agency on efficiency are both plausible and sizable in economic terms.

Learning to Throw Out the Rascals: Electoral Agency in the Lab

Models of electoral agency address the amount of discipline and selection that can be achieved by voters in elections. The models are demanding in terms of individual belief-formation and consistency of behavior. We investigate a baseline model of electoral agency in a controlled laboratory environment. This baseline model, although simple, form the core of more complex electoral agency models. Our design seeks to limit the behavioral impact of social preferences. We find little support for the baseline model in our data. However, simple (non-rational) learning rules explain behavioral patterns well. Simulations indicate that non-rational learning pushes behavior most forcefully towards equilibrium in situations that are favorable to bayesian updating.