Divide et impera: Strategic underpricing in privatizations

In several recent initial public offerings in privatization casesshares seemed to be severely underpriced. In this paper weprovide a political economy explanation for this apparentunderpricing. Using a variant of Grossmann and Helpmann's (1996)model of special interest politics, we demonstrate thatgovernments may raise their election chances by rationinginvestors because the resulting broader distribution of sharesmakes regulation that is favorable to the privatized firm morepopular. Somewhat surprisingly, even revenues from theprivatization can be increased through rationing. The model alsoexplains the common practice of bonus systems designed to preventinvestors from taking profits immediately.     

Zukunftsfähige Agrarlandschaften in Deutschland – Ziele und Anforderungen aus ökologischer, ökonomischer und rechtlicher Sicht

Natur und Recht - Die global steigenden Treibhausgase verändern in zunehmenden Maße auch in Deutschland die klimatischen Verhältnisse. Betroffen sind insbesondere hiesige...     

Pareto Efficiency and Majority Voting: Why High Taxes on the Middle Class may be Desirable

In this paper we use a simple median voter model to analyze the effects of tax systems with differing degrees of progressivity. We find that relatively high taxes on middle incomes have two important advantages: On the one hand, they help to ensure that all citizens are better off than they would be in a world without government, and on the other hand, they reduce the tax level chosen in the election. Therefore, the progression in the middle income range not only ensures that Wicksell's requirement of ex post efficiency of the tax system is achieved, it may also increase social welfare.