This paper presents a tractable dynamic general equilibrium model that can explain cross-country empirical regularities in geographical mobility, unemployment and labor market institutions. Rational agents vote over unemployment insurance (UI), taking the dynamic distortionary effects of...

Why do public-sector workers receive so much of their compensation in the form of pensions and other benefits? This paper presents a political economy model in which politicians compete for taxpayers' ’and government employees' votes by promising compensation packages, but some voters cannot...

Manipulation of government finances for the benefit of narrowly defined groups is usually thought to be limited to the part of the budget over which politicians exercise discretion in the short run, such as earmarks. Analyzing a revenue-sharing program between the central and local governments...

The classic theory of fiscal federalism suggests that different people should have different governments. Yet, separate local governments with homogeneous constituents often end up doing poorly. This paper explains why and answers three questions: when regions are heterogeneous, what determines...

We construct and calibrate a general equilibrium business cycle model with unemployment and precautionary saving. We compute the cost of business cycles and locate the optimum in a set of simple cyclical fiscal policies. Our economy exhibits productivity shocks, giving firms an incentive to hire...

This paper examines the role of work as an incentive device in income maintenance programs in different informational environments. To that end, we make both the income generating ability and the disutility of labor of individuals unobservable, and compare the resulting benefit schedules with...

This paper breaks new ground toward contractual and institutional innovation in models of homeownership, equity building, and mortgage enforcement. Inspired by recent developments in the affordable housing sector and in other types of public financing schemes, this paper suggests extending...

Firms select not only how many, but also which workers to hire. Yet, in standard labor market models, all workers have the same probability of being hired. We argue that selective hiring crucially affects welfare analysis. Our model is isomorphic to a standard search and matching model under...

Unemployment rates in developed countries have recently reached levels not seen in a generation, and workers of all ages are facing increasing probabilities of losing their jobs and considerable losses in accumulated assets. These events likely increase the reliance that most older workers will...

Evidence suggests that unemployed individuals sometimes can affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity arises only for some individuals and the identity of those is unobservable. Unemployment insurance should...