A law issued to combat political corruption and Mafia infiltration of city councils in Italy has resulted in episodes of large, unanticipated, temporary contractions in local public spending. Using these episodes as instruments, we estimate the output multiplier of spending cuts at provincial...

Entrepreneurs may be legally bound to bequeath a minimal stake to noncontrolling heirs. The size of this stake can reduce investment in family firms, by reducing the future income they can pledge to external financiers. Using a purpose-built indicator of the permissiveness of inheritance law and...

We analyze the political determinants of investor and employment protection. Our model predicts that proportional electoral systems are conducive to weaker investor protection and stronger employment protection than majoritarian systems. This prediction is consistent with international panel...

The excess sensitivity of consumption to current income fluctuations is higher in countries where consumers borrow less. Low levels of consumer debt can result either from capital market imperfections or from a low demand for loans. The evidence suggests that the former view is more appropriate...