DE DONDER Philippe

This thesis consists of three chapters in political economy. The central theme linking the chapters is the analysis of voter turnout. The first chapter examines voting participation and candidate strategies in a model of political competition. The etic motivation to participate in voting is related to abstention motivated by indifference or alienation - that of citizens who place themselves at the same distance from all candidates or too far from each one. Contrary to the median voter theorem, candidates move away from the center if citizens are polarized and inclined to alienation. They thus offer extreme policies to mobilize their supporters to participate. At the individual level, the analysis shows how voters may share the costs of voting for their candidate, depending on the intensity of their preference. The comparative statics results are consistent with the empirical evidence on voter turnout and voter/candidate polarization. The second chapter is motivated by evidence of a "bandwagon" effect in the experimental voting games, often due to higher turnout among majority members. This evidence, however, is in contrast to the pivotal voting model, which predicts a higher turnout among the minority group, due to a higher probability of being decisive. The paper resolves this contradiction by showing that a bandwagon effect can be generated by concave utility functions, making voter participation more costly for supporters of the likely loser. The analysis thus establishes the role of risk aversion as a determinant of a bandwagon effect. The third chapter studies a voting model in which voters are interested in the legitimacy of the government formed by the winning group. A measure of "legitimate mandate" is introduced as a function of the margin of victory and total turnout. The main result shows that the relationship between legitimacy and turnout can be reversed in equilibrium: an increase in the size of turnout can thus reduce it while increasing the legitimacy of the mandate. This effect arises from a change in the turnout of competing groups, leading to a higher margin of victory for the majority. The model offers additional justification for a bandwagon effect, due to low turnout by citizens who do not want to contribute to the legitimacy of an opposing government.

The presence of consumers able to respond to changes in wholesale electricity prices facilitates the penetration of renewable intermittent sources of energy such as wind or sun power. We investigate how adapting demand to intermittent electricity supply by making consumers price-responsive - thanks to smart meters and home automation appliances - impacts the energy mix. We show that it almost always reduces carbon emissions. Furthermore, when consumers are not too risk-averse, demand response is socially beneficial because the loss from exposing consumers to volatile prices is more than offset by lower production and environmental costs. However, the gain is decreasing when the proportion of reactive consumers increases. Therefore, depending on the costs of the necessary smart hardware, it may be non-optimal to equip the whole population.

Is green consumerism beneficial to the environment and the economy? To shed light on this question, we study the political economy of environmental regulations in a model with neutral and green consumers where the latter derive some warm glow from buying a good of higher environmental quality produced by a pro…t-maximizing monopoly, while the good bought by neutral consumers is provided by a competitive fringe. Consumers unanimously vote for a standard set at a lower than first-best level, or for a tax delivering the first-best environmental protection level. Despite its under-provision of environmental protection, the standard dominates the tax from a welfare perspective due to its higher productive efficiency, i.e., a smaller gap between the environmental qualities of the two goods supplied. In stark contrast, voters unanimously prefer a tax to a standard when the willingness to pay for greener goods is small enough.

The French abstract was not provided by the author.

This paper conducts a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against nancial risks associated with long-term care needs. Using exogenous variation in prices from the survey design and individual cost estimates, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance. Our results are twofold. First, information frictions are pervasive. Second, measuring the welfare losses associated with frictions in a framework that also allows for selection, it is found that information frictions reduce equilibrium take-up and lead to large welfare losses while selection plays little role.

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This thesis contributes to the study of interactions between individuals within cities. More concretely, my research focuses on three main themes - (1) residential segregation, (2) local politics, (3) and real estate agent behavior - which are investigated through four empirical studies. The literature on residential segregation analyzes the extent to which multiple population groups are able to interact within a space. Despite the numerous studies on this topic, little is known about the consequences of industrialization on intergroup diversity or isolation (religious or ethnic). The first chapter of this thesis is co-authored with Professor Saleh. We document the consequences of two waves of industrialization on residential segregation between Muslims and non-Muslims in nineteenth-century Cairo. The opening and closing of large state-owned factories allows us to observe the evolution of intergroup segregation in the neighborhoods most impacted by these waves of industrialization. We thus compare the arrival of unskilled workers (mostly Muslim) in these neighborhoods with the evolution of intergroup isolation measured at the local level. In this first project, we show that policies implemented at the city level impact the ability of individuals to interact. Conversely, relationships between individuals can impact policy and decision making at the local level. In the second chapter of this thesis, I show that family networks also play an important role in these elections in cities with more than 3500 inhabitants. More than 40% of the lists in municipal elections include several individuals from the same family. Moreover, voters seem to react to these "family networks". Indeed, lists composed of several individuals from the same family obtain fewer votes than lists where no individual seems to compete with another family member. I then discuss some mechanisms that might explain this result and show that it is not simply a matter of ineffective list leaders using their family networks. It is possible that voters sanction the risk of nepotism. In another chapter (chapter 3), I study the issuance of building permits within cities and show that individuals who supported the municipal majority during the 2008 elections obtain more building permits for new housing than those who supported other lists. I discuss the mechanisms that may generate this result. The incentives of local politicians seem crucial, especially those related to political competition. For example, the difference in obtaining building permits is larger in cities with low political competition. The final chapter of this thesis studies the behavior of real estate agents. Previous studies (Levitt and Syverson (2008) in particular), illustrate the agency problem between real estate agents and sellers. The former want to sell faster (and therefore perhaps cheaper) than the latter. As a result, agents may wish to bias their estimates of property values to convince sellers to lower their prices. In joint work with Professor Cherbonnier, we show that increasing competition can partially solve this problem. Agents value properties at higher levels when they are in competition, which results in higher listing prices and higher sales prices. Conversely, more coordination among real estate agents negatively impacts prices.

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Between 1945 and 2008, the number of internationally recognized countries increased from 74 to 193 (Spolaore, 2008). More recently, several countries have experienced a growing wave of decentralization. In OECD countries, for example, the number of subnational governments reached 140,000 in 2014. Moreover, these subnational governments are increasingly influential in these countries (OECD, 2014). Given these trends toward increasing decentralization, this thesis studies two aspects of it: tax competition, and endogenous border choice. In terms of tax competition, this thesis studies the auctioning of new investments by a multi-location firm. The purpose of this analysis is to study the strategic behavior of the firm in this type of competition. Indeed, contrary to the existing literature that only considers firms that produce in one location, the first chapter of the thesis shows that the firm can modify the allocation of its investments by differentiating them, to attract higher subsidies. In the second chapter, the thesis studies how the addition of infrastructure costs for regions prior to the auction affects competition between regions as well as the firm's behavior. In terms of endogenous border choice, this thesis provides two analyses: one empirical, and one experimental. In the third chapter, the thesis studies the decision of voters in 213 Quebec cities to leave a municipal merger that was imposed on them a few years earlier. The analysis reveals that voters choose to secede more when the income and language differences between their city and other cities in the same merger are greater. The analysis also reveals that these two factors are not independent. Indeed, income differences have a more pronounced effect on the secessionist vote when language differences are also high. Given the importance of language as an ethno-linguistic group in Quebec, the results in this chapter suggest that voter choice is sensitive to ethnic differences, and not just to differences in taste for public goods, as suggested by Alesina, Baqir and Hoxby (2004). Finally, the last chapter presents the results of a laboratory experiment on the link between decentralization and secession. The literature on the subject suggests the existence of two contradictory effects. Decentralization could counteract secessionist movements by allowing regions to make more decisions at a local level, but it could also provide additional resources to secessionist movements, thus reinforcing the tendency towards separation. The results of the experiment show that the total effect of decentralization is to decrease the probability of voting for secession.

Individuals, differing in productivity and life expectancy, vote over the size and type of a collective annuity. Its type is represented by the fraction of the contributive (Bismarckian) component (based on the worker�s past earnings) as opposed to the non- contributive (Beveridgean) part (based on average contribution). The equilibrium collective annuity is either a large mostly Bismarckian program, a smaller pure Beveridgean one (in accordance with empirical evidence), or nil. A larger correlation between longevity and productivity, or a larger average life expectancy, both make the equilibrium collective annuity program more Beveridgean, although at the expense of its size.

Pricing strategies for parcels delivery from e-commerce remain a hot topic for postal and parcel delivery operators. As shown by Borsenberger (2015), the e-commerce sector is subject to concentration trends, due to a fierce price competition between retailers, the existence of increasing returns to scale in e-commerce activity, and the importance of retailers’ reputation to attract consumers.

We provide an explanation for why estate taxation is surprisingly little used over the world, given the skewness of the estate distribution. Taxing estates implies meddling with intra-family decisions, which may be frown upon by many. At the same time, the concentration of estates means that a low proportion of the population stands to gain a lot by decreasing estate taxation. We provide an analytical model, together with numerical simulations, where agents bequeathing large estates make monetary contributions that are used to play up the salience of the encroachment aspects of estate taxation on family decisions in order to decrease its political support.

We study the delivery market for e-commerce products, with two technologies: home delivery and delivery to a relay point. Taste differences for these are represented by a Hotelling model. Operators choose the (costly) quality of their delivery service. We study a single operator who uses both technologies and a duopoly with two single-technology operators. The home delivery operator may or may not be regulated. the relay operator is not regulated. We study pricing policies and the impact of competition on welfare. We also show that quality regulation may have an adverse effect on welfare.

We build an analytical model a la Hotelling describing the process of e-substitution in the market for transactional mail. A generic firm sells a final good to customers, with each unit sold requiring one unit of communication between firm and customer, which can take the form of either letter mail or of an e-substitute. A fraction of customers has no access to the e-substitute technology, and the other customers differ in their exogenous preference for mail vs substitute. Also, the communications strategy of the business impacts on the demand for its final product, with letter mail may be preferred for some types of communications, on the grounds that it could increase overall demand. We then calibrate the model and show how the extent of e-substitution depends on the distribution of preferences, the objective function of the representative firm, and on how much mail impacts the firm’s final demand. We conclude with suggestions as to how this analysis may inform a postal operator intent on slowing down e-substitution.

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Given the focus of this special issue of Medicine/Science on personalized medicine, it seems unnecessary for two economists to attempt to summarize or comment from a medical perspective on the advances and innovations that have characterized genetics research over the past two decades. Instead, we will focus on the implications of advances in genetic research on health insurance markets, their functioning and the levels of coverage they offer to individuals under the current regulations. More precisely, we will address the central theme of the value of information in a first section, while in a second section, we will study how the different effects that make up this value of information decline according to the regulations in force in the health insurance markets.

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We provide conditions under which a Condorcet winner exists when voters are exogenously distributed in groups, with preferences satisfying the single-crossing property separately inside each group. We also show that the majority voting social preference is acyclic.

We develop a model where individuals all have the same probability of becoming dependent and\ud vote over the social long term care insurance contribution rate before buying additional private\ud insurance and saving. We study three types of behavioral biases, all having in common that\ud agents under-weight their dependency probability when taking private decisions. Sophisticated\ud procrastinators anticipate their mistake when voting, while optimistic and myopic agents have\ud preferences that are consistent across choices. Optimists under-estimate their own probability\ud of becoming dependent but know the average probability while myopics underestimate both.\ud Sophisticated procrastinators attain the Örst-best allocation while myopics and optimists insure\ud too little and save too much. Myopics and optimists more (resp., less) biased than the median\ud are worse o§ (resp., better o§), at the majority voting equilibrium, when private insurance is\ud available than when it is not.

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We consider an industry where an upstream firm determines the size of a network used by two downstream firms. We contrast ownership unbundling and legal unbundling, where the upstream firm maximizes its total profit, including the profit of its downstream subsidiary(ies), but does not discriminate between them. Furthermore, each downstream subsidiary maximizes its own profit. We show that ownership separation is more detrimental to welfare than legal unbundling, whether the downstream market is perfectly competitive or not, and whether there are asymmetries in network needs across downstream firms, and downstream investments, or not.

We develop a model where a genetic test reveals whether an individual has a low or high probability of developing a disease. A costly prevention effort allows high-risk agents to decrease this probability. Agents are not obliged to take the test, but must disclose its results to insurers, and taking the test is associated to a discrimination risk. We study the individual decisions to take the test and to undertake the prevention effort as a function of the effort cost and of its efficiency. If effort is observable by insurers, agents undertake the test only if the effort cost is neither too large nor too low. If the effort cost is not observable by insurers, moral hazard increases the value of the test if the effort cost is low. We offer several policy recommendations, from the optimal breadth of the tests to policies to do away with the discrimination risk.

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