Working Papers

This paper introduces the notion of a 'norm of compromise' and demonstrates its importance for cooperation among agents with diverse preferences over a public policy.

Agents choose to cooperate when they join a coalition and agree to support a commonly proposed policy that could be far away from their preferred policy. A norm of compromise is an exogenous protocol used by a coalition to arrive at this commonly proposed or 'compromise' policy. I consider a parameterized class of norms in which the compromise policy's relative sensitivity to moderates and extremists in the coalition can be dialed. I study the effect of these norms on the stability of the grand coalition (or full cooperation) in a model where an agent faces a trade-off between compromise if she joins a coalition and increased risk if she does not. I find that polarization does not always reduce cooperation: it destabilizes the grand coalition under norms with low relative sensitivity to moderates but stabilizes it under norms with high relative sensitivity to moderates. This can lead to a situation where norms enabling cooperation in a polarized society do not enable cooperation in a homogeneous one. I also find the counterintuitive result that under some norms extremists are less willing to cooperate when moderates' preferences get closer to these extremists. This work sheds light on the emergence of cooperation within social movements like Black Lives Matter and the Arab Spring, where political actors compromise in the relative absence of formal institutional structures.

Agents within diverse communities create externalities when they consume market goods to express their identity.

These identity expression externalities create a link between diversity and taxation. We provide a model in which local governments use taxation and agents adjust social networks to address identity expression externalities. Taxation and network adjustments can be strategic complements or substitutes depending on agents’ taste for out-group identity expression. Based on our theoretical framework we estimate a simultaneous equations model using US city data on ethnic diversity, taxation, and segregation. The empirical evidence is in line with the notion that taxation and social networks are strategic complements in addressing moderately positive ethnic identity expression externalities.

Ideologically Radical, Tactically Conservative

We study the conditions for legislative gridlock to occur within a majoritarian assembly with endogenous coalitions.

Legislators possess Euclidean preferences over multiple policy dimensions, and are ordered according to a multidimensional notion of the left vs. right divide. Gridlock occurs if no coalition can propose a reform that gains stable support. As a result, the status quo is maintained. We derive both necessary and sufficient conditions for the existence of a stable gridlock. These conditions depend on two measures characterizing a legislator’s ideology, that we call conservatism and extremism. Conservatism characterizes the attractiveness of the status quo relative to median legislator’s preferred policy. Extremism measures the distance of an agent’s preference from the preference of the median legislator along the left-right divide. We show that gridlock can be a stable outcome only if a majority of legislators is sufficiently conservative and extremist. Moreover, gridlock occurs if a coalition that includes relatively conservative legislators located on both sides of the political spectrum tactically proposes a more conservative reform than the one that is preferred by the median legislator.