Growth expectations and banking system fragility in developing economies

The likelihood of a banking crisis appears to be higher in fast-developing countries. An explanation is provided in a Diamond and Dybvig framework, where banks are vehicles of consumption-smoothing, offering insurance against shocks to the consumption path of consumers. The theoretical model shows that the higher consumer growth expectations, the higher the optimal level of illiquidity insurance — even if it implies higher exposure bank runs. Empirical evidence supports this result and suggests that the effect of deposit interest rates on the probability of crisis is stronger after a period of high, uniterrupted growth. Policies of providing bail-outs or deposit insurance are demonstrated to be efficient even when they increase the fragility of the banking system.

False Consensus in Economic Agents

In an incentivized experiment we identify a powerful and ubiquitous bias: individuals regard their own characteristics and choices as more common than is the case. We establish this \false consensus" bias in terms of happiness, political stance, mobile phone brand and on the attitude to deference in a hypothetical restaurant choice, and show that it is not limited to the distribution of hard to observe characteristics and choices but also to weight and height. We also show that the bias is not driven by the fact that the tallest, happiest, most left/right-wing, etc. are more salient.false consensus; saliency; biased beliefs; happiness; politics; height; weight.

Self-Centered Beliefs : An Empirical Approach

We perform an experiment designed to assess the accuracy of beliefs about distributions. The beliefs relate to behavior (mobile phone purchasing decisions, hypothetical restaurant choices), attitudes (happiness, politics) and observable characteristics (height, weight) and are typically formed through real world experiences. We nd a powerful and ubiquitous bias in perceptions that is \self-centered" in the sense that an individual's beliefs about the population distribution changes with their own position in the distribution. In particular, those at extremes tend to perceive themselves as closer to the middle of the distribution than is the case. We discuss possible explanations for this bias. Key words: subjective beliefs ; attitudes ; observable characteristics ; self-centered bias JEL classification: D03 ; C83 ; D84

Happy voters

In this paper we investigate whether or not recent initiatives taken by governments and international organizations to come up with indicators of Subjective Well Being (SWB) to inform policy makers go in the same direction as citizens expectations on what policy makers should do. We test retrospective voting hypotheses by using standard measures of SWB as a proxy for utility instead of the commonly used indicators of economic and financial circumstances. Using the British Household Panel Survey Data we find that citizens who are satisfied with their life are more likely to cast their vote in favour of the ruling party, even taking into account ideological preferences. We show that SWB influences voting decision even when the event affecting the SWB is beyond the government’s control, like the spouse death

Bias in the Relative Assessment of Happiness,Political Stance, Height and Weight

Cognitive biases have been a recognised feature of research into human behaviour since at least Kahneman and Tversky’s ground-breaking work of the 1970s. We find that such biases extend into the realm of perceptions about relative happiness and we compare and contrast this phenomenon across three other characteristics : height, weight and political stance. Our findings indicate a powerful and consistent bias in the way individuals perceive their place in the population distribution. In particular, those at extremes perceive a population distribution that is incorrectly and heavily biased towards themselves,irrespective of whether the characteristic is objective and easily observed or not. 

Democracy, Collective Action and Intra-Elite Conflict

This paper studies the conditions under which intra-elite conflict leads to a democ- racy. There are two risk averse elites competing for the appropriation of a unit of so- cial surplus, with an ex-ante uncertainty about their future relative bargaining power, and a large non-elite class unable to act collectively. We characterize a democracy as consistng of both franchise extension to, and lowering the cost of collective political activity for, individuals in the non-elite. In the absence of democracy, the stronger elite is always able to appropriate the entire surplus. We show that in a democ- racy, the newly enfranchised non-elite organize and always prefer to form a coalition with weaker elite against the stronger resulting in a more balanced surplus allocation between the two elites. Accordingly, the elites choose to democratize if they are sufficiently risk averse. Our formal analysis can account for stylized facts that emerge from a comparative analysis of Indian and Western European democracies.

From the Sakai-Sugimoto Model to the Generalized Skyrme Model

We derive the generalized Skyrme model as a low-energy effective model of the Sakai-Sugimoto model. The novelty with the past is the presence of the sextic term equal to the topological charge squared. This term appears when the $\omega$ meson, and the tower of states on top of it, are integrated out. We claim that, in the small 't Hooft coupling limit, the instanton is well described by a Skyrmion arising from the low energy effective Lagrangian of the Sakai-Sugimoto model. The sextic term plays a dominant role in this limit. Moreover, when a pion mass term is added we recover the BPS Skyrme model in the small 't Hooft coupling limit.Comment: 17 pages, 6 figures. v2: minor correction