We study how the announcement of a foreign military intervention, which improves expectations about the state’s future functioning, can raise citizens’ willingness to participate in state-building processes. We analyze the impact of the 2012 United Nations Security Council resolution that authorized intervention in Mali to reunify the country and restore democracy during a profound institutional crisis on individuals’ attitudes toward the state. By exploiting the randomness of the foreign intervention announcement relative to the timeline of the Afrobarometer interviews conducted in South Mali, we document that individuals interviewed in the days after the announcement report more optimistic beliefs about the country’s future level of democracy than individuals interviewed immediately before, with the same characteristics, region, and ethnic group. Consistent with a prospective-beliefs channel, respondents interviewed after the announcement report higher tax morale and more favorable tax-related attitudes across a broad range of outcomes. While optimism about future democracy increases widely, the increase in tax morale appears concentrated in areas with low state capacity, limited ethnic diversity, and individuals who do not perceive discrimination against their ethnic group. Our results indicate that foreign military interventions can enhance perceptions of state-building and the benefits of participation.

ABSTRACTThis paper studies the effects of mobilization for war on the development of fiscal capacity and the values of tax compliance (tax morale). We propose a dynamic setting where governments may invest resources to improve the efficiency of the fiscal apparatus and the citizens' tax morality in order to raise the necessary revenues for the defense against a threat (external or internal), and parents optimally choose to transmit their preferences of tax compliance to children. Despite fiscal capacity and tax morale are initially substitutes, we show how a dynamic complementarity may arise in equilibrium from a more efficient transmission of the values of tax compliance in countries with high fiscal capacity, and this may explain why they tend to move together over time. Under reasonable conditions, we obtain that the effect of a higher threat of war on the steady‐state level of the culture of tax compliance is negative when fiscal capacity is relatively low, and positive when the latter is large. We show cross‐country evidence based on war frequency, fiscal capacity, and tax morale that is consistent with the results of our theory.

This paper investigates the effects of a retreat from global economic integration on the European regional production network for the period 2000-2010. We find that production has become increasingly fragmented, although the degree of heterogeneity across regions is substantial. This heterogeneity is also present in the direct and indirect effects of three different deglobalisation scenarios that we simulate. Our results show that deglobalisation generates winners and losers. Specifically, two groups of regions emerge; regions that would benefit from a return to a less integrated world, and regions that would instead gain from a strengthening of the European production network.

This paper studies an age-based lockdown that keeps over-60 workers at home as policy response to COVID-19 pandemic in a sample of thirty countries of the European single market. Three main policy issues are addressed, and the results can be summarized as follows. First, age-based lockdown policies are associated with limited output losses and, therefore, are an efficient strategy to limit the spread of the virus in a pandemic, especially in presence of strong age-dependent fatality rates. Second, lockdown policies generate substantial spillover effects; hence, international policy coordination avoiding that too many countries are in lockdown contemporaneously or that such coordination takes place across the countries with the highest integration of over-60 workers along GVCs may be helpful in reducing disruptions. Third, non-targeted lockdowns are much more costly than age-based ones; therefore, other things equal, age-based policies should always be preferred to non-targeted ones. Our analysis also suggests that, in our sample, the over-60 workers are relatively more numerous in sectors where the value added and the integration in GVCs is lower; this feature should be kept in mind in the design of other policies as it might play an important role.

We study the coevolution of religion, science and politics. We first uncover, in international and U.S. data, a robust negative relationship between religiosity and patents per capita. The model then combines: (i) scientific discoveries that raise productivity but sometimes erode religious beliefs; (ii) a government that allows innovations to diffuse, or blocks them; (iii) religious institutions that can invest in doctrinal reform. Three long-term outcomes emerge. The “Western-European Secularization” regime has declining religiosity, unimpeded science, and high taxes and transfers. The “Theocratic” regime involves knowledge stagnation, unquestioned dogma, and high religious-public-goods spending. The “American” regime combines scientific progress and stable religiosity through doctrinal adaptations, with low taxes and some fiscal-legal advantages for religious activities. Rising income inequality can, however, empower a Religious-Right alliance that starts blocking belief-eroding ideas.

If people understand that some macroeconomic policies are unsustainable, why would they vote for them in the first place? We develop a political economy theory of the endogenous emergence of fiscal crises, based on the idea that the adjustment mechanism to a crisis favors some social groups, that may be induced ex-ante to vote in favor of policies that are more likely to lead to a crisis. People are entitled to a certain level of a publicly provided good, which may be rationed in times of crises. After voting on that level, society votes on the extend to which it will be financed by debt. Under bad enough macro shocks, a crisis arises: taxes are set at their maximum but despite that some agents do not get their entitlement. Some social groups do better in this rationing process than others. We show that public debt —which makes crises more likely — is higher, as is the probability of a crisis, the greater the level of favoritism. If the favored group is important enough to be pivotal when society votes on the entitlement level, favoritism also leads to greater public expenditure. We show that the favored group may strategically favor a weaker state in order to make crises more frequent. Finally, the decisive voter when choosing expenditure may be different from the one when voting on debt. In such a case, constitutional limits on debt may raise the utility of all the poor, relative to the equilibrium outcome absent such limits.

This paper investigates the role of the domestic value chain in transmitting the economic impact of Covid-19 lockdown measures. By employing techniques of complex networks analysis and input–output traditional tools, the study identifies those sectors that are key in the complex structure of the Italian supply chain and provides different rankings of the most 'systemically important' industries involved in the Covid-19 lockdown. The results suggest that by stopping the production process of many key sectors, the lockdown has led to a drop in input and output that, in turn, has generated a lock of about 52% of total circulating value added, 30% of which has been locked within indirect value chains. Further, by adding sectoral physical proximity indexes to the scenarios analysis, the method developed here provides a tool to guide governments in designing safe and efficient reopening policies.

One of the standard predictions of the agency theory is that more incentives can be given to agents with lower risk aversion. In this paper, we show that this relationship may be absent or reversed when the technology is endogenous and projects with a higher efficiency are also riskier. Using a modified version of the Holmstrom and Milgrom’s framework, we obtain that lower agent’s risk aversion unambiguously leads to higher incentives when the technology function linking efficiency and riskiness is elastic, while the risk aversion–incentive relationship can be positive when this function is rigid.

Il presente lavoro discute gli effetti delle regole costituzionali sulle politiche fiscali e analizza come alcuni fattori economici possano, a loro volta, influenzare la scelta delle regole costituzionali stesse. In particolare, il lavoro si focalizza su due istituzioni specifiche: la forma di governo e il sistema elettorale. Dopo averne analizzato gli effetti sulle politiche fiscali e, di conseguenza, sulla distribuzione del reddito della societa, l’articolo presenta i meccanismi attraverso i quali la disuguaglianza del reddito possa influenzare, a sua volta, la scelta delle regole costituzionali stesse. Infine, si illustrano alcuni casi storici di scelte costituzionali coerenti con la teoria da noi esposta. This paper discusses the effects of constitutional rules on fiscal policies and how some economic fundamentals can in turn affect the choice of such rules. In particular, the paper focuses on two specific institutions: the form of government and the electoral system. We present the effects of these institutions on fiscal policies and, therefore, on income distribution; then, we illustrate the mechanisms through which income inequality affects the choice of constitutions. Finally, some historical cases of constitutional choice are presented.

We develop a theory of endogenous political entrenchment in a simple two-party dynamic model of income redistribution with probabilistic voting. A partially self-interested left-wing party may implement (entrenchment) policies reducing the income of its own constituency, the lower class, in order to consolidate its future political power. Such policies increase the net gain that low-skill agents obtain from income redistribution, which only the Left (but not the Right) can credibly commit to provide, and therefore may help offsetting a potential future aggregate ideological shock averse to the left-wing party. We demonstrate that political entrenchment by the Left occurs only if incumbency rents are suffi ciently high and that low-skill citizens may vote for this party even though they rationally expect the adoption of these policies. We also discuss the case where the left-wing party may have the incentive to ex-ante commit to not pursue entrenchment policies once in power. Finally, we show that, in a more general framework, the entrenchment policies can be implemented also by the right-wing party. The comparative statics analyzes the effects of state capacity, a positive bias of voters for one party and income inequality on the incentives of the incumbent party to pursue entrenchment policies. The importance of our theory for constitutionally legislated term limits is also discussed. The theory sheds light on why left-wing parties or politicians often support liberal immigration policies of unskilled workers, are sometime in favor of free trade with less developed economies and of globalization more generally, or fail to reform plainly “dysfunctional”public educational systems damaging the lower classes.

Many episodes of extension of franchise in the 19th and especially in the 20th century occurred during or in the aftermath of major wars. Motivated by this fact, we o¤er a theory of political transitions which focuses on the impact of international con‡icts on domestic political institutions. We argue that mass-armies, which appeared in Europe after the French Revolution, are an e¤ective military organization only if the conscripted citizens are willing to put e¤ort in …ghting wars, which in turn depends on the economic incentives that are provided to them. The need to provide such incentives implies that an oligarchy adopting a mass-army may voluntarily decide to promise some amount of income redistribution to its citizens, conditionally on satisfactory performance as soldiers. When the elite cannot credibly commit to provide an incentive-compatible redistribution, they may cope with the moral hazard problem of the citizens-soldiers only by relinquishing political power to them through the extension of franchise. This is because democracy always implements a highly redistributive …scal policy, which makes …ghting hard incentive-compatible for the citizens-soldiers. We show that a transition to democracy is more likely to occur when the external threat faced by an incumbent oligarchy is in some sense intermediate. A very high external threat allows the elite to make credible commitments of future income redistribution in favor of the citizens, while a limited external threat makes it optimal for the elite not to make any (economic or political) concession to the masses. Greater income inequality or higher speci…city of production factors make it more likely that the elite will grant neither economic nor political concessions to the lower classes. Some historical evidence consistent with our theory is also provided. Keywords: Autocracy, Democracy, Political Transitions, Wars, Mass-Armies, Redistribution, Commitment. JEL Classi…cation: P16, H11. Davide Ticchi: Department of Economics, University of Urbino (Italy). E-mail: davide.ticchi@uniurb.it. Andrea Vindigni: Department of Politics, Princeton University and IZA. E-mail: vindigni@princeton.edu. A previous version of this paper circulated under the title “On Wars and Political Development. The Role of International Con‡icts in the Democratization of the West.”We thank Roland Bénabou, Avner Greif, Howard Rosenthal and seminar participants at UC Berkeley, the Institute for International Economic Studies (Stockholm), Princeton University, University of Urbino and Yale University for useful comments. We are especially grateful to Daron Acemoglu and James Robinson for encouragements, conversations and many useful comments and suggestions. The usual disclaimers apply. “The basis of democratization is everywhere purely military in character... Military discipline meant the triumph of democracy because the community wished and was compelled to secure the cooperation of the non-aristocratic masses and hence put arms, and along with arms political power, into their hands.”Max Weber (1950 pp. 325-326).

Can an incumbent political party increase its chances at re-election by implementing inefficient policies that harm its constituency? This paper studies the possibility of such a phenomenon, which we label political entrenchment. We use a two-party dynamic model of redistribution with probabilistic voting. Political entrenchment by the Left occurs only if incumbency rents are sufficiently high. Low-skill citizens may vote for this party even though they rationally expect the adoption of these policies. We discuss: the possibility of entrenchment by the Right; the scope for commitment to avoid entrenchment policies; and the effect of state capacity, income inequality and party popularity on the likelihood of entrenchment. We illustrate our theory with a number of historical examples.

In earlier work (Bénabou, Ticchi and Vindigni 2013) we uncovered a robust negative association between religiosity and patents per capita, holding across countries as well as US states, with and without controls. In this paper we turn to the individual level, examining the relationship between religiosity and a broad set of proor anti-innovation attitudes in all five waves of the World Values Survey (1980 to 2005). We thus relate eleven indicators of individual openness to innovation, broadly defined (e.g., attitudes toward science and technology, new versus old ideas, change, risk taking, personal agency, imagination and independence in children) to five different measures of religiosity, including beliefs and attendance. We control for all standard socio-demographics as well as country, year and denomination fixed effects. Across the fifty-two estimated specifications, greater religiosity is almost uniformly and very significantly associated to less favorable views of innovation. Roland Bénabou Department of Economics and Woodrow Wilson School Princeton University Princeton, NJ 08544 and NBER rbenabou@princeton.edu Davide Ticchi IMT Institute for Advanced Studies Lucca Piazza San Ponziano, 6 55100 Lucca-Italy davide.ticchi@imtlucca.it Andrea Vindigni IMT Institute for Advanced Studies Lucca Piazza San Ponziano, 6 55100 Lucca-Italy andrea.vindigni@imtlucca.it Nihil Sub Sole Novum. (Ecclesiastes 1:9)

In earlier work we identified a robust negative association between religiosity and patents per capita, holding across countries as well as US states. In this paper we relate 11 indicators of individual openness to innovation (e.g., attitudes toward science and technology, new versus old ideas, change, risk taking, agency, imagination, and independence in children) to 5 measures of religiosity, including beliefs and attendance. We use five waves of the World Values Survey and control for sociodemographics, country and year fixed effects. Across the 52 regressions, greater religiosity is almost uniformly associated to less favorable views of innovation, with high significance.

We develop a theory of endogenous regimes transitions (with a focus on democratic consolidation), which emphasizes the role of political culture and of its interaction with political institutions. Political culture reflects the extent of individual commitment across citizens to defend democracy against a potential military coup, and it is an endogenous state variable of the model along with formal political institutions. We focus on two agencies of political socialization: the family and the state. Parents invest resources in order to transmit their own political values (commitment to democracy) to their children. The state invests resources in public indoctrination infrastructures.The model displays two-way complementarities between political regimes and political culture diffusion. Consolidated democracy emerges when sufficiently many people are committed to democracy. Otherwise the model features persistent fluctuations in and out of democracy as well as cycles of political culture. Importantly, the politico-economic equilibrium may exhibit a persistent (although declining) incongruence between political institutions and political culture, which tends to evolve more slowly than formal institutions.

This paper examines the likelihood of credit rationing faced by firms of different size. Contrary to common thought, several recent contributions on this topic argue that, when rationing credit, size alone is not a sufficient condition for discriminating between firms. We show that this result can be predicted using a framework based on the Stiglitz-Weiss model. In particular, in an environment of asymmetric information, we highlight how the likelihood of credit rationing depends upon the shape of the distribution function of project returns, especially its asymmetry and Kurtosis. Our empirical results do not support the hypothesis that small firms face more credit rationing than larger firms.

This paper examines the likelihood of credit rationing faced by firms of dif­ferent size. Cantrary to common thought, several recent contributions on this topic argue that, when rationing credit, size alone is not a sufficient con­dition for discriminating between firms. We show that this result can be predicted using a framework based on the Stiglitz-Weiss model. In particular, in an environment of asymmetric information, we highlight how the likeli­hood of credit rationing depends upon the shape of the,distribution function of project returns, especially its asymmetry and Kurtosis. Our empirical re­sults do not support the hypothesis that small firms face more credit ration­ing than larger firms. JEL Codes: D82, G21

The aim of this paper is to analyze from an economic perspective the eects of the judicial careers arrangement on the trials'outcome. The institutional organization of judicial careers follows two distinct ideal systems. One is characterized by the fact that public prosecutor and judge belong to the same professional body, as magistrates, while the other one is characterized by the separation of the judiciary from prosecutors. We model this feature of the judicial system as a continuum variable and explain why this choice can be appropriate. We obtain that a more uni…ed system of judicial careers leads to fewer distortions in the process preceding the trial, while it introduces more distortions during the trial. We …nd the optimal degree of separation of judicial careers and provide some comparative statics results.

We present a theory of the choice of alternative democratic constitutions, a majoritarian or a consensual one, in an unequal society. A majoritarian democracy redistributes resources from the collectivity toward relatively few people, and has a relatively small government and low level of taxation. A consensual democracy redistributes resources toward a broader spectrum of social groups but also has a larger government and a higher level of taxation. We show that a consensual system turns out to be preferred by society when ex ante income inequality is relatively low, while a majoritarian system is chosen when income inequality is relatively high. We also obtain that consensual democracies should be expected to be ruled more often by center-left coalitions while the right should have an advantage in majoritarian constitutions. The implications for the relationship between inequality and redistribution are discussed. Historical evidence and a cross-sectional analysis support our results. Keywords: Endogenous Constitutions, Consensual Democracy, Majoritarian Democracy, Inequality, Redistribution. JEL Classi…cation Numbers: D72, P16. — — — — — — — — — — — — — — — — — — — — — — * Part of this paper was written while Davide Ticchi was at University Pompeu Fabra whose hospitality is gratefully acknowledged. We thank two anonymous referees, Daron Acemoglu, Alberto Alesina, Roland Bénabou, Walter Garcia-Fontes, José Garcia Montalvo, Gene Grossman, Arend Lijphart, Massimo Morelli, Elias Papaioannou, Torsten Persson, Gérard Roland, Stefano Sacchi, Gilles Saint-Paul, Davide Sala, James Snyder, Guido Tabellini, Jonathan Temple, Ernesto Villanueva, Fabrizio Zilibotti and seminar participants at Princeton University, Brown University, MIT, Toulouse University, University of Turin, University of Ancona, IGIER-Bocconi, Yale University, University of Modena, University of Urbino and The World Bank for useful comments. We are heavily indebted to Antonio Ciccone and Howard Rosenthal for long discussions, encouragements, and many valuable comments and suggestions. The usual disclaimers apply. y Contact information: Davide Ticchi: Department of Economics and Quantitative Methods, University of Urbino. E-mail: davide.ticchi@uniurb.it. Andrea Vindigni: Department of Politics, Princeton University and IZA. E-mail: vindigni@princeton.edu. In recent years, there has been an increasing interest in the political economics literature for the role of key constitutional norms in shaping …scal policy outcomes. Important theoretical contributions include, among others, Myerson (1993), Persson, Roland and Tabellini (1997, 2000), Persson and Tabellini (2000), Austen-Smith (2000), Lizzeri and Persico (2001) and Milesi-Ferretti, Perotti and Rostagno (2002) and generally predict that proportional electoral systems and parliamentary regimes should be associated with more provision of public goods and universalistic welfare programs, as well as with larger size of governments. These results have been con…rmed by some recent empirical works. Persson and Tabellini (2003, 2004) present cross-country evidence suggesting that a switch from proportional to majoritarian elections reduces total government spending by almost 5% of GDP and welfare spending by 2-3% of GDP, and obtain similar results for a switch from a parliamentary to a presidential regime. Milesi-Ferretti, Perotti and Rostagno (2002), Lijphart (1999) and other works provide empirical evidence going in the same direction. These contributions are based on the premise of taking political institutions as given. But if di¤erent constitutional provisions lead to di¤erent …scal policies, and therefore generate di¤erent bene…ts for the various groups in the society, we should expect individuals having di¤erent preferences over constitutions and taking this into account at the time of the constitutional choice. In this paper, we start from the consideration that the various groups in the society may have con‡icting interests over constitutions, and provide an economic theory of the choice of a democratic constitution on the base of the (pre-tax) distribution of income within a society.1 In other words, we recognize that constitutions are endogenous and their choice a¤ected by economic fundamentals. Whereas constitutional models di¤er along several dimensions, in our analysis we focus on the electoral system as this is generally considered one of the most important constitutional provisions, at least from a …scal policy outcome perspective. As pointed out by Lijphart (1999), in parliamentary regimes, the electoral system leads to two distinctive types of democratic models. One is the majoritarian model characterized by a majoritarian (plurality rule or …rst-past-the-post) electoral system that generally leads to the formation of a two party system and to the concentration of power in the hands of the prime minister. The 1The focus on the distribution of income is motivated by the insights provided by the positive political economics theory of taxation and redistribution in democracies (e.g. Romer, 1975, Roberts, 1977, Meltzer and Richard, 1981), which stresses the importance of this variable in shaping …scal policy outcomes when individual preferences are aggregated directly by majority voting. The class con‡ict perspective over different institutional frameworks and the key role played by income inequality have been …rst emphasized by Acemoglu and Robinson (2000) in their analysis about democratic transitions.

A notable feature of post-World War II civil wars is their very long average duration.We provide a theory of the persistence of civil wars.The civilian government can successfully defeat rebellious factions only by creating a relatively strong army.In weakly-institutionalized polities this opens the way for excessive influence or coups by the military.Civilian governments whose rents are largely unaffected by civil wars then choose small and weak armies that are incapable of ending insurrections.Our framework also shows that when civilian governments need to take more decisive action against rebels, they may be forced to build over-sized armies, beyond the size necessary for fighting the insurrection, as a commitment to not reforming the military in the future.