This paper argues that campaign finance policy, in the form of contribution limits and matching public financing, can be Pareto improving even under very optimistic assumptions concerning the role of campaign advertising and the rationality of voters. The optimistic assumptions are that candidates use campaign contributions to convey truthful information to voters about their qualifications for office and that voters update their beliefs rationally on the basis of the information they have seen.The argument also assumes that campaign contributions are provided by interest groups and that candidates can offer to provide policy favors to attract higher contributions.

This paper shows that altruism provides an efficiency rationale for public provision of insurance to the poor. The framework is one in which there are rich altruists and risk-averse poor who face some possibility of loss. The government represents the rich and makes transfers on their behalf. With unconditional transfers, the poor may forgo insurance and rely on private charity to bail them out in the event of loss. This reliance on private charity has adverse efficiency effects. These may be avoided if the government makes in-kind transfers of insurance. Copyright 1995 by American Economic Association.

Whether those who claim benefits should face a work requirement has been an issue of long-standing social concern. Important examples of schemes which require work are the Californian workfare program, Indian food security schemes and the English Poor Law of 1834. We present two arguments for demanding work for benefits: first, a work requirement can scree the truly needy from those who are not in need of support and second, it can provide incentives for people to invest in skills which enable them to avoid poverty. In the context of a simple model of a target population with two ability types we find conditions under which a work requirement reduces the costs of poor relief, and those when it does not. We concentrate on a case when work done in return for benefits has no social value, showing that even if this is true, work requirements may be a valuable policy tool.

An important question in political economy concerns the form of transfers to special interests. The Chicago view is that political competition leads politicians to make such transfers efficiently. The Virginia position is that lack of information on the part of voters leads politicians to favor inefficient "sneaky" methods of redistribution. This paper analyzes the form of transfers in a model of political competition in which politicians have incentives to make transfers to special interests. It shows that when voters have imperfect information about both the effects of policy and the predispositions of politicians, inefficient methods of redistribution may be employed.

A key question concerning affirmative action is whether the labor-market gains it brings to minorities can continue without it becoming a permanent fixture in the labor market. The authors argue that this depends on how the policy affects employers' beliefs about the productivity of minority workers. They study the joint determination of employer beliefs and worker productivity in a model of statistical discrimination in job assignments. The authors prove that, even when identifiable groups are equally endowed ex ante, affirmative action can bring about a situation in which employers (correctly) perceive the groups to be unequally productive, ex post. Copyright 1993 by American Economic Association.

This paper presents a theory of the market provision of broadcasting and uses it to address the nature of market failure in the industry. Equilibrium advertising levels may be too low or too high, depending on the nuisance cost to viewers, the substitutability of programmes, and the expected benefits to advertisers from contacting viewers. The equilibrium amount of programming may also be below or above the socially optimal level. Perhaps surprisingly, the ability to price programming may reduce social surplus, while monopoly ownership may increase it.

This paper presents a political economy theory of fiscal policy. Policy choices are made by a legislature that can raise revenues via an income tax and by borrowing. Revenues can be used to finance a public good, whose value is stochastic, and pork-barrel spending. Policymaking cycles between a “business- as-usual” regime in which legislators bargain over pork, and a “responsible policymaking” regime in which policies maximize the collective good. Transitions between regimes are brought about by shocks in the value of the public good. Equilibrium tax rates are too high, public good provision is too low, and debt levels are too high. (JEL D72, E62, H20, H50, H60)

This paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining. The policy space incorporates both productive and distributive public spending and distortionary taxation. The productive spending is investing in a public good that benefits all citizens (e.g., national defense) and the distributive spending is district-specific transfers (e.g., pork-barrel spending). Investment in the public good creates a dynamic linkage across policymaking periods. The analysis explores the dynamics of legislative policy choices, focusing on the efficiency of the steady-state level of taxation and allocation of spending. (JEL D72, E62, H20, H50)