Essays in Political Economy

This dissertation consists of two chapters on topics in political economy. In the first chapter, I study alternative decentralization institutions. I argue that decentralization institutions differ from each other in terms of the degree of power they grant to local authorities in decision-making. Successfully designing decentralization institutions depends on understanding the local and central authorities\u27 preferences over the types of public investments and how alternative decentralization institutions aggregate them. Focusing on these key components, I build and estimate a dynamic committee decision-making model to study how public investment choices vary with the degree of power granted to local governments. I characterize alternative decentralization institutions as voting mechanisms the committee can employ. I implement my model using a novel dataset from a unique institution in Colombia. I find that the local governments are more likely to invest on targeted transfers than is the central government. Counterfactual exercises show that a complete decentralized system would significantly increase the number and size of the targeted transfer spending. In the second chapter, which is co-authored with Devin J. Reilly, I develop a model of campaign strategies, namely the choice to campaign negatively or positively. In particular, I construct a model of political campaigns, based off of Skaperdas and Grofman (1995), in which candidates allocate their budget between positive and negative campaigning. Elections vary according to politician- and district-specific characteristics, as well as the unobservable (to the econometrician) measure of voter types. I calibrate the model to match stylized facts on campaign tone that we document using a wide array of sources, including data on advertising tone from Wisconsin Advertising Project, campaign contributions from the Database on Ideology, Money in Politics, and Elections, and election results. The calibrated model implies that, overall, campaign spending is not particularly effective at increasing votes -- a 10\% increase in the average candidate\u27s budget, corresponding to about \$240,000, raises his or her expected vote share by about 0.4 percentage points. The model also implies that negativity is marginally more useful for candidates who are trailing than those leading, though not by a wide margin