Tim Besley’s research while affiliated with Brandeis University and other places

This paper develops a signalling model of HIV testing, and evaluates an information experiment designed to test the theory and reduce stigma. We find that stigma is in part explained by statistical discrimination between potential sexual partners, and that this form of stigma is a significant barrier to HIV testing. Discrimination is based on false beliefs about antiretroviral drugs, the medication used to treat HIV. In our setting, we find that providing precise, new information about the public benefit of antiretroviral drugs reduces stigma and increases HIV testing. The results demonstrate that social stigma can be due to rational behavior by a misinformed public, and that providing new information can be an effective way to mitigate its effects. * l.c.derksen@lse.ac.uk. Laura Derksen is grateful to her supervisor, Oriana Bandiera and her advisor, Greg Fischer, for their continued guidance and encouragement. This paper also benefited from discussions with seminar participants at LSE and the Oxford Development Economics Workshop. We gratefully acknowledge assistance with field work and data collection from the Malawi College of Medicine, Dignitas International and Invest in Knowledge Initiative, as well as financial support from LSE, STICERD and the Russell Sage Foundation. All errors remain those of the authors.

This paper develops a signalling model of HIV testing, and evaluates an information experiment designed to test the theory and reduce stigma. We find that stigma is in part explained by statistical discrimination between potential sexual partners, and that this form of stigma is a significant barrier to HIV testing. Discrimination is based on false beliefs about antiretroviral drugs, the medication used to treat HIV. In our setting, we find that providing precise, new information about the public benefit of antiretroviral drugs reduces stigma and increases HIV testing. The results demonstrate that social stigma can be due to rational behavior by a misinformed public, and that providing new information can be an effective way to mitigate its effects. * l.c.derksen@lse.ac.uk. Laura Derksen is grateful to her supervisor, Oriana Bandiera and her advisor, Greg Fischer, for their continued guidance and encouragement. This paper also benefited from discussions with seminar participants at LSE and the Oxford Development Economics Workshop. We gratefully acknowledge assistance with field work and data collection from the Malawi College of Medicine, Dignitas International and Invest in Knowledge Initiative, as well as financial support from LSE, STICERD and the Russell Sage Foundation. All errors remain those of the authors.

Much macroeconomic research hypothesizes income distribution to play an important role for economic growth, as inequality shapes the process of development through its interac-tion with credit market imperfections or the political economy. However, the nature of this research remains conjectural, and all hitherto available evidence comes from correlations. As a consequence, little is known empirically about the causal relationship between inequal-ity and growth, its determinants, and its direction. To obtain evidence on the causal link from inequality to growth, this paper presents an analysis of a randomized controlled trial in 40 villages of an Amazonian hunter-gatherer society. In the experiment, we randomly allocated substantial income transfers in the form of rice, altered their associated degree of village income inequality, and measured the short-run e¤ects on important individual-level determinants of development. While in one treatment we divided an aggregate amount of rice equally among all households in the treated villages, in another treatment we injected greater income equality in some villages by transferring the same amount of rice but al-locating it only to the poorest 20% of households. This design enables us to disentangle ordinary income e¤ects from relative income e¤ects due to social comparisons, which are derived from reduced income inequality. We …nd that human capital investments (in the form of studying Spanish) and modern-asset wealth, both of which increase the villagers' expected future earnings through exposure to the outside labor market, are strongly driven by relative social comparisons. Unlike in the treatment where the aggregate transfer was divided equally, the poorest 20% neither signi…cantly improved their Spanish nor worked harder foraging and farming when they were the primary bene…ciaries of the rice transfers, We thank for their comments and suggestions, and Jimena Vásquez for very good research assistance.

This paper shows that local governments are more accountable when they have more capacity to tax their citizens. I construct a principal-agent model of public finance in which public revenues come from taxes and inter-governmental transfers. An increase in taxes keeping transfers constant changes the equilib-rium allocation of public revenues towards more public goods and less political rents because citizens have better information on taxes than on transfers. I then consider a program in Brazil that invests in the modernization of local tax ad-ministrations. Using 10 years of panel data and quasi-exogenous variations in the timing of program uptake I find that the program increases tax collection of local governments by 11% after four years. This increase in taxes is used to raise local public good provision but not corruption : the share of resources diverted by local politicians in total public revenues decreases as taxes increase. A dis-continuity in the rule allocating federal transfers to local governments is used to compare the impact on spending outcomes of an exogenous increase in transfers to that of a raise in tax revenues thanks to the program. Results show, in line with the model's predictions, that local officials use extra tax revenues more to increase the supply of municipal public goods and less on private rents than they do with extra transfer revenues.

We study the co-evolution of norms and institutions in order to better understand the con-ditions under which potential gains from new trading opportunities are realized. New trading opportunities are particularly vulnerable to opportunistic behavior and therefore tend to pro-vide fertile ground for cheating. Cheating discourages production, raising equilibrium prices and therefore the return to cheating, thereby encouraging further cheating. However, such conditions also provide institutional designers with relatively high incentives to improve insti-tutions. We show how an escape from the shadow of opportunism requires that institutional improvements out-pace the deterioration of norms. A key prediction from the model emerges: larger economies are more likely to evolve to steady states with strong honesty norms, even though larger economies need not have better institutions. This prediction is tested using a cross section of countries; population size is found to have a significant positive relationship with a measure of trust, even when controlling for standard determinants of trust and institu-tional quality.

Party polarization is widely considered a pervasive but negative feature of mod-ern democracies because it undercuts the voice of the majority to the advantage of a minority in the policy making process. In this paper we show that political polarization, despite its costs, also provides some important benefits to the median voter. Modelling the interaction between candidates and voters as an infinitely re-peated game within a two-parties system, we show that polarization on ideological stances is key to obtain electoral accountability on non-ideological issues. We find a positive relationship between heterogeneity of ideological preferences and party polarization. Thus, when heterogeneity of preferences is large, the median voter is more likely to obtain accountability. At the same time, he is also less likely to see his ideological preferences represented. Because under party convergence accountability is inevitably compromised, the median voter faces a trade-off between "ideological representation" and accountability. Our results are consistent with several findings from a substantial empirical literature. as well as the participants to the Summer School on Heterogeneity at CORE (2006), the PAC meeting (Palma de Majorca, 2007) and the seminar audiences Rotterdam for useful comments and suggestions. Remaining errors are only mine. But when the citizens entertain different opinions upon subjects which af-fect the whole country alike, (...) then distinctions arise that may correctly be styled parties. Parties are a necessary evil in free governments. (Tocqueville 1835).

The political process in the United States appears to be highly polarized: ev-idence from voting patterns finds that the political positions of legislators have diverged substantially, while the largest campaign contributions come from the most extreme lobby groups and are directed to the most extreme candidates. Is the rise in campaign contributions the cause of growing polarity of politi-cal views? In this paper, we show that, in standard models of lobbying and electoral competition, free-rider problems amongst potential contributors leads naturally to a divergence in campaign contributors without any divergence in candidates' policy positions. However, we go on to show that a modest de-parture from standard assumptions — allowing candidates to directly value campaign contributions (because of "ego rents" or because lax auditing allows them to misappropriate some of these funds) — delivers the ability of campaign contributions to cause policy divergence.

I estimate the impact of Islamic rule on secular education and labor market outcomes. Using a regression discontinuity design, I compare elections where an Islamic party barely won or lost municipal mayor seats in Turkey. The results show that Islamic rule has had a large positive e¤ect on education, especially for women. This impact is not only larger when the opposing candidate is from a secular left-wing, instead of a right-wing party; but also in poorer and more pious areas. This participation result also extends to the labor market, with fewer women classi…ed as housewives, a larger share of employed women receiving wages, and a shift in female employment towards higher-paying sectors. A detailed cohort analysis con…rms this expansion in opportunities for women, as Islamic rule also attracts the already educated. Part of the increased participation, in especially education, may come through investment from religious foundations, by providing facilities more tailored toward religious conservatives. Altogether, these …ndings stand in contrast to the stylized view that more Islamic inuence is invariably associated with adverse development outcomes, especially for women. One interpretation is that limits on religious expression, such as the headscarf ban in public institutions, raise barriers to entry for the poor and pious. In such environments, Islamic movements may have an advantage over secular alternatives.

Workers are exposed to the risk of permanent disability. We rely on a dynamic mechanism design approach to determine how imperfect information on health should optimally be used to improve the trade-o¤ between inducing the able to work and providing insurance to the truly disabled. After deriving the …rst-order conditions to this problem, we calibrate the model and run a numerical simula-tion. The government should o¤er back-loaded incentives and make a strategical use of the gap in timing between the age at which disability occurs and the age of eligibility to disability bene…ts. Also, the able who are (mistakenly) tagged as disabled should be encouraged to work until some early retirement age. This makes a decrease in the strictness of the disability test desirable which would reduce the number of disabled who are not awarded the tag and, hence, improve insurance. Finally, we show how the …rst-best allocation of resources could asymptotically be implemented by making a strategical use of the disability test. to seminar participants at the London School of Economics for useful comments and suggestions.

Why do elected officials often suffer from political paralysis and fail to implement the best policies available? This paper considers a new yet intuitive explanation that focuses on the quality of the politicians competing to replace the incumbent. The key insight is that a 'good' incumbent with preferences identical to those of a representative voter will want to keep corrupt politicians out of office; she may do so by distorting her policy choices to signal her type and win re-election. The value of signalling and staying in office increases with the fraction of corrupt types in the population of politicians. Electing good types may therefore not be enough to ensure that the best policies are implemented, especially when corrupt politicians are common. This provides a new explanation for why political failure is particularly severe in corrupt democracies.