A Risky and Polarized World : Essays on Uncertainty, Ideology and Foreign Policy

Abstract: Essay 1 - We examine whether risk aversion as well as higher order risk attitudes (HORAs) (prudence and temperance) have changed during COVID-19. We include prudence and temperance as higher order measures, as these two have been largely understudied under extreme events but are determinants of decisions related to the health and financial domains. Once we account for socio-demographic characteristics, we find an overall increase in risk aversion during COVID-19. We do not find changes in prudence and temperance using the risk apportionment methodology.Essay 2 –I develop a new index of legal uncertainty, by extracting the topics in all laws approved in a country and year to calculate the unforecastable component in legal content, for a panel of 42 countries. I present how the index is constructed, test its robustness and compare it with available measures of institutional quality. I then apply the index to provide evidence on the consequences of legal uncertainty for investment and employment. Results show that, in the event of an increase in legal uncertainty, firms react by slowing down investments and laying off workers.Essay 3 - We implement a regression-discontinuity design on US data to study how divided government affects the polarization of the legislature, inter-branch conflict, and policy implementation. We document that Republican legislators serving under a divided government have more conservative ideologies than those serving under a fully unified government. We find an opposite effect for Democrats. In terms of policy implementation, we find evidence of moderation: compared to unified Republican governments, divided ones with a democratic chamber implement more liberal policies. Correspondingly, when Democrats lose unified control, policies become more conservative.Essay 4 - We analyze the impact of ideological alignment in the left-right spectrum between countries on the human rights recommendations sent within the Universal Periodic Review (UPR). By combining UPR records with data on political institutions, we determine if shared ideology between two country governments affects human rights policy. By using text-mining techniques, we analyze the sentiment of messages, and provide robust evidence that ideologically aligned governments send more positive and praising messages compared to non-aligned ones.