Working Papers

La Cordata: Loyalty in Tournaments  

Wouter Dessein  and Luis Garicano (October 2023).  

Abstract:

We study the allocation of talent in tournaments between (political) teams. The winner-take-all nature of these contests implies that talented members may quit if the odds of winning diminish. A leader must choose between competent individuals who increase the chances of winning but may bolt at the first hint of bad news, and loyalists who have fewer outside options. The value of loyalty increases when outside options are more valuable, pre-election information (polls, primaries) is more predictive, or elections are more competitive. We discuss organizational responses, such as ideological platforms, and the role of leader loyalty in improving talent allocation.

Narrative Entanglement: The Case of Climate Policy

September 2024

Adam Brzezinski (LSE) and Luis Garicano  

Abstract:

Political economy models often assume voter beliefs are consistent with available information. Recent work emphasises instead the role played by narratives, subjective causal models that may be incorrectly specified. We develop a theory of narrative entanglement, where policy dimensions—initially distinct—become strategically intertwined through narratives created by politicians to sway support. Shocks in one dimension can thus influence unrelated policy areas.  We test this theory in the context of climate policy. We use a large language model to analyze if EU Parliament speakers distinguish between climate and economic dimensions or reduce narratives to a single, oversimplified message. We leverage the Ukraine war as an exogenous shock that affects economic but not climate urgency. We find that the model classifies the tone and content of the  speeches with high accuracy.  We find that narratives are strongly entangled: speeches emphasizing the need to address climate change also emphasize economic benefits, while those denying climate change stress economic costs. This pattern holds at the individual politician level. After an energy price shock, shifts occur in both economic and climate narratives, with right-wing parties showing a more pronounced change than left-wing parties.