Essays on Public Economics and Political Economy
My doctoral dissertation consists of three chapters on political economy and public economics. The first chapter discusses the effect of media bias on a voting competition. The second chapter focuses on how residents respond to increasing natural disaster risks in a multi-community framework. The third chapter investigates a coalition formation game with congestion effects. In chapter 1, I present a two-party election model with media noise. The media may provide polarized messages instead of those that explain the parties' actual policies. The rational voter relies on the media as an imperfect information source regarding a party's platform. Given this framework, I show that Downsian policy convergence is not valid. Moreover, when a party's ideology is relatively strong and the media bias is significant, one-sided polarization can occur: the party with more imprecise reports may adopt a more extreme strategy, whereas its opponent is more of a centrist in a perfect Bayesian equilibrium. This occurs when one party is misrepresented more often, causing the voter to think that the other party has more incentive to polarize. Therefore, the voter may favor the highly misrepresented party, which gives that party more room to polarize. I also show that parties never gain from these increasing misrepresentations, and a biased media environment can negatively affect the voter's welfare. My results suggest that the public should pursue a balanced media environment. Global warming and climate change have become increasingly important. In chapter 2, I investigate a local public goods economy using a new element: location-specific risks of disasters. Agents in this economy ``vote with their feet'' by choosing their favorite location as their residential base. In each location, all residents use majority rule to decide the local wealth tax rate and the amount of local public goods provision that can reduce the loss caused by disasters. I show that the equilibrium is wealth stratified if preferences are represented by a homothetic Stone-Geary utility function. Moreover, when disaster risks at a location increase, the population usually moves away from that location and the housing rents consequently decrease. Meanwhile, the housing rents and tax rates increase at the location the residents shift to. Moreover, I use this framework to numerically evaluate two policies: foreign donation and inter-jurisdiction transfer. If developed countries provides subsidies to a location with greater risks in a developing country, wealthier agents in the recipient country may move into the said location and force poorer agents to move out. This effect makes the wealthier the direct beneficiary of the foreign subsidy. Furthermore, I find that the inter-jurisdiction transfer may harm the poorer by rising housing rents. In chapter 3, I consider a coalition-formation problem, in which there is a set of feasible alternatives for each coalition and each player's payoff is affected by the coalition she belongs to and by its chosen alternative. In this chapter, I focus on ``congestion effects'': an agent's payoff goes down as an additional player joins the coalition other things being equal. The equilibrium notion considered is ``stability": a stable allocation (pairs of coalition structure and alternatives chosen by each coalition) is an allocation such that no coalition has an incentive to deviate from it. I find quite robust counterexamples to show that stability may fail to exist even under strong preference conditions such as the intermediate preference property and single peakedness. Nevertheless, I show a sufficient condition for the nonemptiness of stability: congruent-pair solvability. I also provide some results on the ``Nash-like" equilibrium notion.