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This paper shows that ignoring the political relevance of labor and social policies can lead to the failure of an industrial policy designed to modernize an economy. Our analysis is based on a simple model of a two-sector economy (one old and one new) in which policy decisions are adopted under a majority rule. This model suggests that unless, (i) the labor policy ensures that workers have enough bargaining power to give them an incentive to find a job matching their skills in a restructured economy and (ii) the government adopts a social policy compensating the losers of the industrial policy, the new sector is unlikely to develop. Moreover, we find that the credibility of the commitments made drives the effectiveness of the coordination of the three policy elements.

We study the coordination between industrial, labor and social policy when voting determines policy choices. Firms choose to invest in either an old or a new sector. Most workers have skills constraining them to work in the old sector. A minority of workers are more productive in the new sector, and choose to be active where they expect a higher wage. Aggregate surplus is higher if firms invest in both sectors and workers are employed where they are the most productive. We identify conditions for such a modernized economy to develop. First, any labor policy must give workers enough bargaining power to have incentives to find the right job. Second, for an industrial policy to stimulate the new sector, a social policy involving both workers and firms must compensate the losers of modernization. Third, policies must be delegated to a social planner able to commit to the joint implementation of reforms and transfers. ; info:eu-repo/semantics/published

Cost inefficiencies in public procurement tend to come from two sources: corruption (moral hazard) and incompetence (adverse selection). In most countries, audit authorities are responsible for monitoring costs but do not distinguish both sources of inefficiency in their audits. Judicial courts typically rely on these cost audits, but only sanction corruption. In a model of public procurement by politicians, we study how the respective quality of the two courts affects corruption as well as cost efficiency. We find that while better courts have the direct effect of decreasing corruption, they may have a negative indirect effect on the abilities of the pool of politicians, so that the net effect on cost efficiency is ambiguous.

We study a game where inefficiencies in public procurement managed by politicians comefrom two sources: corruption (moral hazard) and incompetence (adverse selection). We characterizethe respective impact of judicial and accounting courts on the cost effectiveness ofprocurement and the level of corruption. Although improving the quality of both courts mattersas a direct deterrent of corruption, it may also indirectly decrease the quality of the poolof politicians and hence deteriorates the cost efficiency of procurement. ; info:eu-repo/semantics/published

We study a political system in which voters can optimally pick between political platforms,but cannot screen the quality of individual politicians associated with these platforms.A bad individual achievement can correspond to either incompetence (adverse selection) orcorruption (moral hazard). Information could improve, if independent experts assess achievementsas compared to commitments, allowing independent judges to investigate possible corruption.We find that while good experts are always beneficial as they increase transparency,the impact of the quality of judges is ambiguous. Above a threshold, with risk-averse socialplanners, good judges increase the incentive-compatible punishment of politicians, at the costof possible judiciary mistakes. ; info:eu-repo/semantics/published

This paper shows how high bargaining power for firms and search costs in the labor market can impede a switch towards new, more competitive economic activities. This is because search costs drive the quality of the horizontal matching between worker types and the old and new sectors of the economy. The high bargaining power of firms pushes wages down, so that small search costs are enough for young workers or workers with new skills to give up looking for jobs in the new sector. Employers end up giving up offering these jobs as well. Politically popular labor policies protecting a dominating old sector and old workers, fail to address the mismatches and increase unemployment. Simply switching support to the new sector may cut jobs for the older workers and thus create other welfare losses. A more effective modernization policy, for both jobs and products, is to link wages to output. ; info:eu-repo/semantics/published

Building on a model of competition with endogenous product differentiation and using data from the shrimp aquaculture industry, we show how a cost-reducing innovation can hurt the profit of the innovator by decreasing product diversity and strengthening competition. In the late 1990s, a US governmental program designed a new pathogen-free breed reducing the production cost of white legs shrimp. This innovation gave a temporary boost to the profit of American producers, largely specialized in that variety. However, over time other countries abandoned their native production to adopt the new breed. In this phase of technological catch-up US producers thus not only lost their cost advantage, but also the market power derived from the pre-innovation product differentiation.

This paper shows how decentralized election results can be used to understand patterns of electoral volatility. Comparing two elections, the model provides a lower bound of the share of voters lost by a party, and of the number of new voters that it managed to convince. The paper proposes a typology of electoral results based on the estimated parameters of the model. We argue that the model can be used to better understand the local specificities linked to the personalization of politics, to avoid errors linked to omitting the role of abstention, and that it also provides a simple tool for better during the fact prediction of electoral results. ; info:eu-repo/semantics/nonPublished

Cette contribution propose un modèle théorique permettant d'identifier les tendances générales dans le mouvement des électeurs volatiles. Notre méthode permet à partir de données décentralisées de compléter les enquêtes d'opinions pour comprendre quelle part du résultat d'un parti provient d'électeurs fidèles conservés d'une élection à l'autre, et quelle part de l'électorat a été renouvelée. Elle peut également être utilisée à des fins prédictives :à partir d'un faible nombre de résultats provenant potentiellement de zones considérées comme peu représentatives, notre modèle permet d'extraire une tendance générale et de la reproduire sur l'ensemble d'un territoire donné. Nous proposons une typologie des résultats possibles des différents partis (gagnant, perdant, stable ou renouvelé). A titre d'illustration, nous appliquons ce modèle aux élections fédérales belges de 2010, en utilisant comme référence le résultat des élections régionales de 2009. ; info:eu-repo/semantics/published