We report evidence that salience may have economically significant effects on homeowners' borrowing behavior, through a bias in favour of less salient but more costly loans. We outline a simple model in which some consumers are biased. Under plausible assumptions, the bias may affect prices in...

Capital structure studies have generally been aimed at studying the determinants of optimal leverage. Empirically, the focus is, however, on studying the association between observed leverage and a set of explanatory variables. This approach has a number of shortcomings. First, the observed...

The common approach in empirical capital structure research has been to study the determinants of optimal leverage by studying the association between observed leverage and a set of explanatory variables. This approach has two major shortcomings. First, the observed leverage need not necessarily...

We study the effect of political polarization on public spending using the dispersion of self-reported political preferences as our measure of polarization. Political polarization is strongly associated with smaller government in democratic countries, but there is no relationship between...

This paper models the interaction between individuals' identity choices and redistribution. Both redistributive policies and identity choices are endogenous, and there might be multiple equilibria. The model is applied to ethnicity and social class. In an equilibrium with high taxes, the poor...

This paper considers redistributive as well as political consequences of tax avoidance. When investing in tax avoidance is possible, the official tax rate does not necessarily correspond to what individuals actually pay in taxes. This affects both redistributive outcomes as well as individual's...