The aim of this paper is to develop a model that includes two tiers of government providing publi... more The aim of this paper is to develop a model that includes two tiers of government providing public goods with the same tax base to finance them. Their rent is related to the level of competition. Citizens maximize their own utility starting from these different levels of competition. Therefore, they can decide to turn down the governments to induce them to behave efficiently. Moreover, governments can choose whether to accept the behaviour urged by citizens or to maximize their rent for a single period of office and consequently lose the next elections.
The purpose of this paper is to show how two competitive governments can simultaneously choose th... more The purpose of this paper is to show how two competitive governments can simultaneously choose their income taxes. There are two different levels of government in competition: a central government and a local one. The problem is analysed starting from the Leviathan hypothesis and from the theory of incomplete contracts. We assume that a government includes its re-election in its utility function and study the allocation of the income tax rates between the two levels of government, free from any legal or regulatory constraint. We show that the governments are interested in meeting the re-election constraint, but this common interest does not generate an egalitarian allocation of the tax rates.
Analyses about supervision technology are not frequent in economic literature. This paper analyse... more Analyses about supervision technology are not frequent in economic literature. This paper analyses an efficiency wage model with an endogenous choice of supervision technology. Starting from Shapiro and Stiglitz (1984) and Bowles (1985) models’ I show a model with an endogenous and costly supervision technology to better explain the behaviour of firms and workers under asymmetric information in the labour market. In particular, I show how firms allocate costs between wages and supervision under these hypotheses and how unemployment affects this distribution.
The aim of this paper is to develop a model that considers the existence of two tiers of governme... more The aim of this paper is to develop a model that considers the existence of two tiers of government providing public goods with the same tax base to finance them. Their rent is related to the level of competition. Citizens need to maximize their own utility starting from these different levels of competition. Therefore, they can decide to turn down the governments to induce them to behave efficiently. Moreover, governments can choose whether to accept the behaviour proposed by citizens or to maximize their rent for a single period of office of the legislature and consequently loose the next elections.
La secessione delle province in Italia - The secession of Italian provinces is an institutional p... more La secessione delle province in Italia - The secession of Italian provinces is an institutional phenomenon that affects our country from North to South since the 90s and is far from a conclusion. The aim of this paper is to analyse this institutional change, starting from the Constitutional and legislative contexts (articles 114 and 133 of the Constitution and the 267/2000 law). After a brief description of the eight new provinces that were born in 1992 and a survey of the related literature, I consider the presence of an «organizing committee» of the secession that makes a sunk investment to obtain a benefit from the rent of the new offices. I use a model of rent-seeking neglecting any implication for citizens. JEL H70, H72, H77
As shown by the recent crisis, tax evasion poses a significant problem for countries such as Gree... more As shown by the recent crisis, tax evasion poses a significant problem for countries such as Greece, Spain and Italy. While these societies certainly possess weaker fiscal institutions as compared to other EU members, might broader cultural differences between northern and southern Europe also help to explain citizens' (un)willingness to pay their taxes? To address this question, we conduct laboratory experiments in the UK and Italy, two countries which straddle this North-South divide. Our design allows us to examine citizens' willingness to contribute to public goods via taxes while holding institutions constant. We report a surprising result: when faced with identical tax institutions, redistribution rules and audit probabilities, Italian participants are significantly more likely to comply than Britons. Overall, our findings cast doubt upon " culturalist " arguments that would attribute crosscountry differences in tax compliance to the lack of morality amongst southern European taxpayers.
Abstract Social norms are ubiquitous in human,life. Their role is essential in allowing,cooperati... more Abstract Social norms are ubiquitous in human,life. Their role is essential in allowing,cooperation toprevail, despite the presence of incentives to free ride. As far as norm enforcement devices are concerned, it would be impossible to have widespread social norms if second parties only enforced them. However, both the quantitative relevance and the motivations underlying altruistic punishment ,on the ,part of ‘unaffected’ third parties are still largely unexplored. This paper contributes to shed light on the issue, by means of an experimental design consisting of three treatments: a Dictator Game Treatment, a Third-Party Punishment Game Treatment (Fehr and Fischbacher, 2004) and a Metanorm Treatment, that is a variant of the Third-party Punishment Game where the Recipient can punish the third party. We find that third parties are willing to punish dictators (Fehr and Fischbacher, 2004; Ottone, 2008) and, in doing so, they are affected by ‘reference-dependent fairness’, rather than ...
The aim of this paper is to improve on the model by Fehr and Schmidt (1999) by developing a non-l... more The aim of this paper is to improve on the model by Fehr and Schmidt (1999) by developing a non-linear model (that leads to interior rather than corner solutions) and by taking into account that different levels of income imply different reactions of fair-minded people. We suggest to modify the inequity-aversion utility function proposed by Fehr and Schmidt by taking into account not only the difference between players' payoffs, but also their absolute value. This allows for a non-linear utility function where different stakes lead to different unique optimal interior solutions.
ABSTRACT This paper analyses, by means of an economic experiment, the impact of (judicial) review... more ABSTRACT This paper analyses, by means of an economic experiment, the impact of (judicial) review on third party punishment. Whereas the existing literature has studied extensively third party costly punishment as such(both by one or two potential punishers), it has not addressed the consequences of a second “vertical” punishment level (i.e. of a “second instance”) on the amount of punishment in the first instance and on the underlying incidence of “crime”. This is the question, we address in this paper, namely to ask, whether and how punishment decisions – and underlying decisions of committing a crime – change, if we allow for a second punisher (an “instance”) competent to confirm or modify, again at a certain positive cost, the punishment decisions previously taken by the first punisher (= first instance). Secondly, we will check whether the presence of the appeal court has a deterrence effect on crime. Finally, we will detect the level of satisfaction of the victims in all scenarios. This study should allow to better understanding to what extent resources spent in appeals lead to a higher quality of the sentences and to a higher level of satisfaction of the victims. Real world applications are, of course, plentiful, covering inter alia the organization of courts and of the appeals process.
The aim of this experiment is twofold. First of all, we want to investigate whether a winner-take... more The aim of this experiment is twofold. First of all, we want to investigate whether a winner-take-all scenario where subjects with homogeneous skills meet more than once stimulates subjects' cooperation. Secondly, we want to compare agents' tendency to cooperate in ...
ABSTRACT This article provides an experimental investigation of third parties’ sanctioning behavi... more ABSTRACT This article provides an experimental investigation of third parties’ sanctioning behavior, in order to understand whether public officials (e.g., judges, politicians, or regulators), when deciding about top-down interventions aimed at punishing wrongdoers, are sensitive to bottom-up pressure on the part of ordinary citizens, who are the major victims of wrongdoers’ behavior. We set up a novel five-treatment design and compare situations where a wrongdoer acts under: (1) no third-party punishment; (2) nonaccountable third-party punishment; and (3) accountable third-party punishment. We show that when citizens are active and make their voice heard, public officials sanction wrongdoing significantly more. Our experimental finding complements previous empirical work based on field data and suggests that when third-party institutions are held accountable, their propensity to fight misconduct is higher, other things equal. We view this result as good news with regard to domains where it implies that pro-consumer policies will be more likely (e.g., regulatory policies). The risk of pandering by elected officials and the danger of poorly informed decisions by the citizens are the flip side of the argument. (JEL C91, D02, D63, D72, K00)
In this paper we test the AK model of growth with laboratory experiments. In each period, agents ... more In this paper we test the AK model of growth with laboratory experiments. In each period, agents produce and trade output in a market, and allocate it to consumption and investment. The economy should experience a constant and positive rate of growth. We analyze two treatments differing from technology. We find evidence of positive and constant growth, and the treatment with a better technology exhibits higher growth. Remarkably, production, consumption and the capital stock grow at the same rate in the treatment with lower technology. We find that this growth process is fuelled by large inequalities between subjects.
The aim of this paper is to develop a model that includes two tiers of government providing publi... more The aim of this paper is to develop a model that includes two tiers of government providing public goods with the same tax base to finance them. Their rent is related to the level of competition. Citizens maximize their own utility starting from these different levels of competition. Therefore, they can decide to turn down the governments to induce them to behave efficiently. Moreover, governments can choose whether to accept the behaviour urged by citizens or to maximize their rent for a single period of office and consequently lose the next elections.
The purpose of this paper is to show how two competitive governments can simultaneously choose th... more The purpose of this paper is to show how two competitive governments can simultaneously choose their income taxes. There are two different levels of government in competition: a central government and a local one. The problem is analysed starting from the Leviathan hypothesis and from the theory of incomplete contracts. We assume that a government includes its re-election in its utility function and study the allocation of the income tax rates between the two levels of government, free from any legal or regulatory constraint. We show that the governments are interested in meeting the re-election constraint, but this common interest does not generate an egalitarian allocation of the tax rates.
Analyses about supervision technology are not frequent in economic literature. This paper analyse... more Analyses about supervision technology are not frequent in economic literature. This paper analyses an efficiency wage model with an endogenous choice of supervision technology. Starting from Shapiro and Stiglitz (1984) and Bowles (1985) models’ I show a model with an endogenous and costly supervision technology to better explain the behaviour of firms and workers under asymmetric information in the labour market. In particular, I show how firms allocate costs between wages and supervision under these hypotheses and how unemployment affects this distribution.
The aim of this paper is to develop a model that considers the existence of two tiers of governme... more The aim of this paper is to develop a model that considers the existence of two tiers of government providing public goods with the same tax base to finance them. Their rent is related to the level of competition. Citizens need to maximize their own utility starting from these different levels of competition. Therefore, they can decide to turn down the governments to induce them to behave efficiently. Moreover, governments can choose whether to accept the behaviour proposed by citizens or to maximize their rent for a single period of office of the legislature and consequently loose the next elections.
La secessione delle province in Italia - The secession of Italian provinces is an institutional p... more La secessione delle province in Italia - The secession of Italian provinces is an institutional phenomenon that affects our country from North to South since the 90s and is far from a conclusion. The aim of this paper is to analyse this institutional change, starting from the Constitutional and legislative contexts (articles 114 and 133 of the Constitution and the 267/2000 law). After a brief description of the eight new provinces that were born in 1992 and a survey of the related literature, I consider the presence of an «organizing committee» of the secession that makes a sunk investment to obtain a benefit from the rent of the new offices. I use a model of rent-seeking neglecting any implication for citizens. JEL H70, H72, H77
As shown by the recent crisis, tax evasion poses a significant problem for countries such as Gree... more As shown by the recent crisis, tax evasion poses a significant problem for countries such as Greece, Spain and Italy. While these societies certainly possess weaker fiscal institutions as compared to other EU members, might broader cultural differences between northern and southern Europe also help to explain citizens' (un)willingness to pay their taxes? To address this question, we conduct laboratory experiments in the UK and Italy, two countries which straddle this North-South divide. Our design allows us to examine citizens' willingness to contribute to public goods via taxes while holding institutions constant. We report a surprising result: when faced with identical tax institutions, redistribution rules and audit probabilities, Italian participants are significantly more likely to comply than Britons. Overall, our findings cast doubt upon " culturalist " arguments that would attribute crosscountry differences in tax compliance to the lack of morality amongst southern European taxpayers.
Abstract Social norms are ubiquitous in human,life. Their role is essential in allowing,cooperati... more Abstract Social norms are ubiquitous in human,life. Their role is essential in allowing,cooperation toprevail, despite the presence of incentives to free ride. As far as norm enforcement devices are concerned, it would be impossible to have widespread social norms if second parties only enforced them. However, both the quantitative relevance and the motivations underlying altruistic punishment ,on the ,part of ‘unaffected’ third parties are still largely unexplored. This paper contributes to shed light on the issue, by means of an experimental design consisting of three treatments: a Dictator Game Treatment, a Third-Party Punishment Game Treatment (Fehr and Fischbacher, 2004) and a Metanorm Treatment, that is a variant of the Third-party Punishment Game where the Recipient can punish the third party. We find that third parties are willing to punish dictators (Fehr and Fischbacher, 2004; Ottone, 2008) and, in doing so, they are affected by ‘reference-dependent fairness’, rather than ...
The aim of this paper is to improve on the model by Fehr and Schmidt (1999) by developing a non-l... more The aim of this paper is to improve on the model by Fehr and Schmidt (1999) by developing a non-linear model (that leads to interior rather than corner solutions) and by taking into account that different levels of income imply different reactions of fair-minded people. We suggest to modify the inequity-aversion utility function proposed by Fehr and Schmidt by taking into account not only the difference between players' payoffs, but also their absolute value. This allows for a non-linear utility function where different stakes lead to different unique optimal interior solutions.
ABSTRACT This paper analyses, by means of an economic experiment, the impact of (judicial) review... more ABSTRACT This paper analyses, by means of an economic experiment, the impact of (judicial) review on third party punishment. Whereas the existing literature has studied extensively third party costly punishment as such(both by one or two potential punishers), it has not addressed the consequences of a second “vertical” punishment level (i.e. of a “second instance”) on the amount of punishment in the first instance and on the underlying incidence of “crime”. This is the question, we address in this paper, namely to ask, whether and how punishment decisions – and underlying decisions of committing a crime – change, if we allow for a second punisher (an “instance”) competent to confirm or modify, again at a certain positive cost, the punishment decisions previously taken by the first punisher (= first instance). Secondly, we will check whether the presence of the appeal court has a deterrence effect on crime. Finally, we will detect the level of satisfaction of the victims in all scenarios. This study should allow to better understanding to what extent resources spent in appeals lead to a higher quality of the sentences and to a higher level of satisfaction of the victims. Real world applications are, of course, plentiful, covering inter alia the organization of courts and of the appeals process.
The aim of this experiment is twofold. First of all, we want to investigate whether a winner-take... more The aim of this experiment is twofold. First of all, we want to investigate whether a winner-take-all scenario where subjects with homogeneous skills meet more than once stimulates subjects' cooperation. Secondly, we want to compare agents' tendency to cooperate in ...
ABSTRACT This article provides an experimental investigation of third parties’ sanctioning behavi... more ABSTRACT This article provides an experimental investigation of third parties’ sanctioning behavior, in order to understand whether public officials (e.g., judges, politicians, or regulators), when deciding about top-down interventions aimed at punishing wrongdoers, are sensitive to bottom-up pressure on the part of ordinary citizens, who are the major victims of wrongdoers’ behavior. We set up a novel five-treatment design and compare situations where a wrongdoer acts under: (1) no third-party punishment; (2) nonaccountable third-party punishment; and (3) accountable third-party punishment. We show that when citizens are active and make their voice heard, public officials sanction wrongdoing significantly more. Our experimental finding complements previous empirical work based on field data and suggests that when third-party institutions are held accountable, their propensity to fight misconduct is higher, other things equal. We view this result as good news with regard to domains where it implies that pro-consumer policies will be more likely (e.g., regulatory policies). The risk of pandering by elected officials and the danger of poorly informed decisions by the citizens are the flip side of the argument. (JEL C91, D02, D63, D72, K00)
In this paper we test the AK model of growth with laboratory experiments. In each period, agents ... more In this paper we test the AK model of growth with laboratory experiments. In each period, agents produce and trade output in a market, and allocate it to consumption and investment. The economy should experience a constant and positive rate of growth. We analyze two treatments differing from technology. We find evidence of positive and constant growth, and the treatment with a better technology exhibits higher growth. Remarkably, production, consumption and the capital stock grow at the same rate in the treatment with lower technology. We find that this growth process is fuelled by large inequalities between subjects.
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Papers by Ferruccio Ponzano