Depository receipts (DRs) are instruments issued in a foreign market representing ownership in the underlying securities on the home stock market. DRs are practically the same as the underlying stocks and we can analyze price adjustment between the underlying stocks and DRs under the law of one...

This paper proposes a normative theory of constitutional rules. We characterize the set of optimal constitutional rules under different assumptions about the degree of contractual imperfections. Our model explains why constitutions contain different types of rules. In particular, we derive...

We use data from Texas liquor referenda to evaluate the performance of the pivotal-voter theory of voter turnout. We structurally estimate the parameters of a pivotal-voter model using the referendum data. We then use the estimates to evaluate the out of sample performance of the model. Finally,...

When people share risk in financial markets, intermediaries provide costly enforcement for most trades and, hence, are an integral part of financial markets' organization. We assess the degree of risk sharing that can be achieved through financial markets when enforcement is based on the threat...

In this paper, the issue of strategic behavior in the presence of environmental regulations and international trade is investigated. In a two-country, one-good, two-producer model as in Ulph (1996), we analyze the Nash equilibrium of the game where governments may behave strategically in...

Money managers are rewarded for increasing the value of assets under management, and predominantly so in the mutual fund industry. This gives the manager an implicit incentive to exploit the well-documented positive fund-flows to relative-performance relationship by manipulating her risk...

Does the Pareto criterion discriminate among policy choices when the policymaker does not know the correct model of the economy? If the policymaker can specify ex ante preferences for each agent, there will typically be some policy change that improves the welfare of each agent relative to a...

This paper examines the welfare of consumers in an incomplete markets economy with extrinsic uncertainty. It is shown that the utility of one consumer may be minimized at the Walrasian allocation relative to all other equilibrium allocations for a given security structure. Thus, this consumer...

The main goal of this paper is to investigate the role of campaign fund in congressional careers. To achieve this goal, we specify a dynamic model of career decisions of a member of Congress. In particular, we model how the amount of campaign funds raised affects the probability of winning...

Students of politics are familiar with two common forms of influence exercised by special interests over politicians: the provision of financial support to favored candidates during election campaigns, and the application of lobbying power when dealing with elected politicians. However, in...