“Counting votes right: strategic voters versus strategic parties” (Joint with F. Mezzanotti)
Abstract: Voters are defined to be strategic if they switch their vote from their favorite candidate to one of the main contenders in a tossup election. High levels of strategic voting are a concern for democracy and the allocation efficiency of government goods.We use a clean quasi experiment to highlight the shortcomings of previous identification strategies, which fail to fully account for the strategic behavior of parties. In an ideal experiment, we would want to observe two identical votes with exogenous variation in the party victory probability. Among world parliamentary democracies 104 have a unique Chamber, 78 have two Chambers with different functions, and only one nation has two Chambers with the same identical functions: Italy. This allows us to observe two identical votes and therefore a valid counterfactual. In addition, the majority premiums are calculated at the national level for the Congress ballot and at the regional level for the Senate one. This provides exogenous variation in the probability of victory. Because the two Chambers have identical functions, a sincere voter should vote for the same coalition in the two ballots. A strategic voter would instead respond to regions’ specific victory probabilities. We approach this hypotheis with a geographical Regression Discontinuity approach, which allows us to compare voters across multiple regional boundaries. We find much smaller estimates (5%) and argue that previous larger estimates (35% to 80%) confounded strategic parties and strategic voters due to the use of non-identical votes as counterfactuals.
"Stock Market Performance and Political Proximity: the Costs of Conflict of Interest"
Abstract: I conduct a study that estimates the distortions due to conflict of interest during Berlusconi’s rule over Italy. The identification is based on the efficient market hypothesis. In particular, I use electoral polls and stock market data to estimate the effect of surprising electoral outcomes, defined as the difference between actual and expected electoral results, on the stock market performance of Berlusconi’s firms. I find evidence that there are substantial distortions due to conflict of interest: 6% increase of market capitalization per percentage point of a positive electoral surprise. I then match two of Berlusconi’s companies operating in the same media sector but in different countries. This allows me to further test whether the extra returns are due to political distortions under different regulatory authorities,. I find that the abnormal returns can be ascribed to “conflict of interest” rather than to the CEO-founder stepping down. Finally, I perform robustness tests to ensure that the cumulative abnormal returns estimates are not spurious.
“Optimal Contracts for Information Acquisition with Entropic Costs” (Joint with A. Clark)
Abstract: We study a principal-agent problem where the agent is entrusted with collecting and processing information to make a decision on behalf of a principal and where the cost of acquiring information is given by the average reduction in the entropy of the prior. The principal cannot monitor the information acquisition of the agent and therefore a moral hazard problem arises. The principal can incentivize the agent to collect information with a contract that depends on the realized state of the world and the chosen decision. We show that the optimal contract has a linear structure: the agent receives a fixed fraction of output, a state dependent payoff, and a decision dependent payoff. This implies that the optimal contract is linear in differences. We provide conditions on the prior and output under which the optimal contract is linear.
Research in Progress
" Slipped my Mind: Hand Washing and Habit Formation” (with R. Hussam and N. Rigol)
Abstract: Diarrheal disease and respiratory infection are two leading causes of child mortality in the developing world, amounting to upwards of 3 million deaths per year. These deaths are often due to bacterial and viral contamination, deemed to be largely preventable through improved hand hygiene. Nevertheless, hand washing with soap is a largely absent phenomenon across the developing world, particularly in the context of our study, rural West Bengal. We explore a series of interventions aimed at generating sustained behavioral change in hand hygiene via habit formation. The project involves two steps: first, we develop a device which non-invasively measures and monitors hand washing and delivers objective data on frequency and time of use. We then utilize this device to design a set of interventions aimed at not only increasing immediate take-up of hand washing, but also creating a long-term hand washing habit. We explore the role of information, monitoring, reminders, and monetary incentives in the transformation of hand washing from a costly to a desired (craved) activity.