This paper relies on the variation of terror attacks across time and space as an instrument to identify the causal effects of terrorism on the preferences of the Israeli electorate. We find that the occurrence of a terror attack in a given locality within three months of the elections causes an increase of 1.35 percentage points on that locality’s support for the right bloc of political parties out of the two blocs vote. This effect is of a significant political magnitude because of the high level of terrorism in Israel and the fact that its electorate is closely split between the right and left blocs. Moreover, a terror fatality has important electoral effects beyond the locality where the attack is perpetrated, and its electoral impact is stronger the closer to the elections it occurs. Interestingly, in left-leaning localities, local terror fatalities cause an increase in the support for the right bloc whereas terror fatalities outside the locality increase the support for the left bloc of parties. Given that a relatively small number of localities suffer terror attacks we demonstrate that terrorism does cause the ideological polarization of the electorate. Overall, our analysis provides strong empirical support for the hypothesis that the electorate shows a highly sensitive reaction to terrorism.

This paper presents an experimental study of the effects of polls on voters’ welfare. The analysis shows that polls have a different effect on closely divided and lopsided divided electorates. The data show that in closely divided electorates (and only for these electorates) the provision of information on the voters’ distribution of preferences significantly raises the participation of subjects supporting the slightly larger team relative to the smaller team. This causes a substantial increase on the frequency of electoral victories of the larger team. As a consequence, we observe a steep decrease in the welfare of the members of the smaller team because they vote more often and yet they loose the elections more frequently. Polls are detrimental to aggregate welfare in closely divided electorates because the decrease in the payoffs of the minority is stronger than the increase in the payoffs of the majority. In lopsided divided electorates polls don’t have a significant different effect on the voters’ turnout conditional on their team size. We do observe an increase on the frequency of electoral victories of the larger team after the provision of information, but this is in part due to smaller teams’ members voting less frequently and saving the participation costs. As a consequence, while polls have a negative effect on the relative payoffs of the minority for these electorates as well, they have a positive effect on total welfare.

This paper develops a positive theory of overlapping income taxation in a federation of states. The analysis provides a complete characterization of the equilibrium federal and states tax rates as functions of the level of total productivity dispersion between the states. The federal rate is increasing in the level of total productivity dispersion between the states, even if the income of the decisive voter at the federal level is above the mean income. Given that the individuals’ income is endogenously determined there exists a negative trade-off between the implemented federal tax rate and the resulting states’ tax rates, regardless of the pre-tax income of the decisive voter at the state level. Thus, high levels of productivity dispersion between the states cause a higher than optimal federal tax rate together with low states’ tax rates. It is also shown that a system of overlapping income taxation is not efficient. The resulting inefficiency might be exacerbated by the implementation of a federal matching grants program, contradicting previous results in the related normative literature.

This article investigates the interaction between terror attacks and electoral outcomes in Israel. The authors analyze a dynamic model of reputation that captures the salient characteristics of this conflict. The equilibrium of the theoretical model generates two precise empirical predictions about the interaction between terrorism and electoral outcomes. First, the relative support for the right-wing party is expected to increase after periods with high levels of terrorism and to decrease after periods of relative calm. Second, the expected level of terrorism is higher when the left-wing party is in office than it is during the term of the right-wing party. The authors test these hypotheses by using a newly created data set on terrorist attacks in Israel between 1990 and 2003. The first hypothesis is strongly supported by data culled from public opinion polls about the Israeli electorate’s political preferences. The second theoretical hypothesis is strongly supported by the three Israeli governments to which the theory can be applied that served during the studied time period.

This paper develops a political economy model that is consistent with the fact that  democracies have a preference for increasing marginal tax rates on income. We present a model in which there is an exogenous set of political parties with preferences over the set of admissible tax schedules. This set contains virtually any increasing and piecewise linear continuous function. Each party decides whether or not to present a candidate for election. There is a fixed cost of running. The elected candidate implements one of her preferred tax policies. Our main results provide conditions under which a Strong Nash Equilibrium exists, and a tax schedule with increasing marginal tax rates is implemented in some Nash Equilibria and in any Strong Nash Equilibrium.

This paper develops a political economy model that is consistent with the fact that democracies have a preference for increasing marginal tax rates on income. We present a model in which there is an exogenous set of political parties with preferences over the set of admissible tax schedules. This set contains virtually any increasing and piecewise linear continuous function. Each party decides whether or not to present a candidate for election. There is a fixed cost of running. The elected candidate implements one of her preferred tax policies. Our main results provide conditions under which a Strong Nash Equilibrium exists, and a tax schedule with increasing marginal tax rates is implemented in some Nash Equilibria and in any Strong Nash Equilibrium.