-activity version of the model, and discuss how our results might apply to savings, addiction, and other behaviors. Keywords: Doing It, Hyperbolic Discounting, Preproperation, Procrastination, Time Inconsistency. JEL Classifications: A12, B49, C70, D11, D60, D74, D91, E21 Acknowledgments: We thank Steven Bl...

• from the CESifo website: www.CESifo.de CESifo Working Paper No. 1032 DECENTRALIZATION AND THE FATE OF MINORITIES This paper analyses the welfare effects of a change from centralized to decentralized political authority. The potential disadvantage with decentralization in our model is that local dominant groups with rather “extreme ” preferences may win the vote and implement policies that harm the well-being of local minorities. When the national median voter represents a “moderate ” position, centralization can be seen as a way of protecting the interests of local minorities. Our main result is that the centralized solution may welfare dominate decentralization even in the absence of scale economics and interregional spillovers. We also demonstrate that increased segregation, increased mobility, and increased heterogeneity in preferences, factors that are normally considered to be arguments in favor of decentralization, may reduce the attractiveness of the decentralized solution from a welfare perspective. Finally, we show that when the national median voter is an “extreme ” type, decentralization may represent a way of protecting local minority interests.

Homeowners at risk of default face a debt overhang that reduces their incentive to invest in their property: in expectation, some value created by equity investments will go to the lender. Using rich microdata on household expenditures, I show that debt overhang plays an important role in household financial decisions, as negative equity homeowners cut back substantially on mortgage principal payments and home improvement spending even when they are financially unconstrained. At the same time, these households do not reduce spending on physical assets that the homeowner may retain in default, including vehicles and home-related durables (appliances and furnishings). The decline in mortgage principal payments is particularly large for negative equity homeowners in non-recourse states, where strategic default is more likely because lenders have limited claim on non-housing wealth. Debt overhang best explains this set of facts. These findings highlight an important financial friction that is suppressing household investment during the recovery from the housing crash and recession of the late 2000s. Given the prevalence of negative home equity in today’s housing market, the results also suggest that home values will grow more slowly in the future because of reduced investment.

This paper compares reward systems to intellectual property rights (patents and copyrights). Under a reward system, innovators are paid for innovations directly by government (possibly on the basis of sales), and innovations pass immediately into the public domain. Thus, reward systems engender incentives to innovate without creating the monopoly power of intellectual property rights, but a principal difficulty with rewards is the information required for their determination. We conclude in our model that intellectual property rights do not possess a fundamental social advantage over reward systems, and that an optional reward system — under which innovators choose between rewards and intellectual property rights — is superior to intellectual property rights.

separability of the public goods the deviation from symmetry is at most rank two. JEL: D11, C72

a significant portion of the recent growth in upper quantile weights. (JEL D11, I12, Z13)

with certainty when she is faced with a new income level. This alters her indirect utility function and makes her more risk averse at her current reference income level and less risk averse for a range of incomes below her reference income level. (JEL: D11) 1.

Capital, Networks, Syndication, Investment Performance JEL classification: G24, L14. Networks are widespread in many financial markets. Bulge-bracket investment banks, for instance, have strong relationships with institutional investors which they make use of when pricing and distributing corporate

flat part when a flat rate is optimal among the class of two-part tariffs. (JEL: D11, D43, L11)

that complete policy commitment may be absent in democracies, as is found in this case. (JEL D72, D78, H11, H50) There are strong moral and economic arguments suggesting that it is in the interest of society to improve the economic standing of historically disadvantaged minority groups. 1 In democracies