Research Seminars

Individual preferences for a specific majority threshold can be influenced by voters’ attitudes toward uncertainty. It has been theoretically demonstrated and experimentally verified that a higher majority threshold is associated with risk aversion, serving as a means to protect against the tyranny of the majority (Attanasi, Corazzini & Passarelli 2017). In this paper, we posit that the absence of ex-ante information regarding the likelihood of the voting outcome introduces an additional layer of uncertainty - namely, ambiguity - which motivates decision-makers to seek increased protection.

We model the impact of both the level of ambiguity and ambiguity aversion on the desired majority threshold of a voting lottery in a KMM environment (Klibanoff, Marinacci and Mukerji 2005). We assume that as the number of voters increases, so does the level of complexity – and consequently, the ambiguity – of the voting lottery, which in turn activates ambiguity attitudes. We test our predictions through a series of 32 classroom experiments conducted between 2020 and 2024, involving approximately 1,200 undergraduate and graduate students in Italy and France, with voter group sizes ranging from 7 to 281.

Our findings confirm a positive correlation between risk aversion and the desired majority threshold. Additionally, we provide support for our two novel predictions: first, that the desirable threshold is positively correlated with ambiguity aversion, and second, that it increases with the number of voters through this channel. These results highlight the significance of ambiguity in strategic voting.

International trade flows show strong persistence over time. This is true for yearly data and even more so for higher-frequency data such as monthly data. Standard gravity theory cannot explain the persistence, i.e., why lagged trade flows should enter as an explanatory variable. While some dynamic gravity models have been explored, the dynamics in these models are either driven by country-specific factors (such as capital accumulation or technology) or ad hoc (like assuming bilaterally specific capital). We provide a structural dynamic gravity framework where the persistence stems from firms’ sluggish adjustment of destination-specific prices, akin to sticky pricing a la Calvo (1983). Our theoretical framework provides a micro-foundation for a gravity equation with lagged trade flows as an explanatory variable. Using OECD trade data at high and low frequencies, we document the persistence of trade flows and estimate the parameter governing the share of firms that sluggishly adjust prices. Consistent with the literature on nominal rigidities, we find a high degree of price stickiness at monthly frequency and a lower degree at annual frequency. Our results help to explain the propagation of trade cost shocks to trade, prices, and welfare over the short and long run.

Note: This study has been conducted in collaboration with Mario Larch and Dennis Novy.