I explore how and and to what extent policy uncertainty can account for the observed long-run cross-country differences in capital price and levels of aggregate investment and output. I present a model economy where the industry-level policy-related investment cost is uncertain. Holding the...

In this paper, the development of field of public policy is represented as three distinct ages of theory building and testing. The first was the classic period of studies of decision-making and rationality; the second was an age of synthesis when theories of decision-making were blended into...

I present a model economy where policy uncertainty creates short-term bias in investment and leads to a higher capital price and lower long-run investment and output. I conduct a calibration exercise using a set of industry-level investment data across countries. Between the lowest-income and...

What causes a government to adopt a new program or policy? Despite a large number of empirical studies available to date, the relative importance of various determinants remains obscure because of difficulties of statistical identification. We present an experimental setting to study the...

Thaler and Sunstein (2008) advance the concept of "nudge" policies -- non-regulatory and non-fiscal mechanisms designed to enlist people's cognitive biases so as to achieve the desired policy ends. A core assumption is that policy makers engage biases to advance the interests of the nudged...

Political distortions can aggravate macroeconomic volatility. The aim of this paper is to analyze a fiscal policy institution capable of reducing the influence of such distortions on fiscal policy outcomes. We introduce the distinction between mandatory and discretionary public spending in the...

We present a model of the creation of social networks, such as political parties, trade unions, religious coalitions, or political action committees, through discussion and mutual persuasion among their members. The key idea is that people are influenced by those inside their network, but not by...

This paper investigates the relationship between political instability and per capita GDP growth in a sample of 113 countries for the period 1950-1982. We define ?political instability? as the propensity of a government collapse, and we estimate a model in which political instability and...

This paper successfully tests on a sample of 70 countries for the period 1960-85 the following hypotheses. Income inequality, by fueling social discontent, increases socio-political instability. The latter, by creating uncertainty in the politico-economic environment, reduces investment. As a...