The fundamental feature of private contracting is its relational nature. When faced with unforeseen or unexpected circumstances, private parties, as long as the relation remains worthwhile, adjust their required performance without the need for costly renegotiation or formal recontracting....

Estimates of democracy's effect on the public sector are obtained from comparisons of 142 countries over the years 1960-90. Based on three tenets of voting theory -- that voting mutes policy preference intensity, political power is equally distributed in democracies, and the form of voting...

This paper demonstrates that there is a robust empirical association between the extent to which an economy is exposed to trade and the size of its government sector. This association holds for a large cross-section of countries, in low- as well as high-income samples, and is robust to the...

We provide the planner's solution to a model where households learn from exogenous natural disaster arrivals about arrival rates and spend to mitigate future damages. Mitigation cannot be decentralized due to positive externalities from curtailing aggregate risks. First-best can be implemented...

Aging populations in advanced economies are placing ever-increasing demands on government spending in the form of old-age benefits. Economies that have promised substantially more benefits than they have made provision to finance are heading into a prolonged era of fiscal stress. Unresolved...

International environment and development agencies increasingly emphasize external cofinancing when selecting projects to fund. This paper considers whether the emphasis on cofinancing helps promote institutional objectives, or creates perverse and inefficient incentives. We present a model of...

This paper examines the regional distribution of public employment in Italy. It documents two sets of facts. This first is the use of public employment as a subsidy from the North to the less wealthy South. We calculate that about half of the wage bill in the South of Italy can be identified as...

In this paper we disentangle the sources of public sector inefficiency using 1982-1995 panel data on manufacturing firms in Indonesia. We consider two leading hypotheses: (1) public sector enterprises are inefficient due to monitoring problems and (2) public sector enterprises are inefficient...