In this Paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse. We show: (1) politicians tend to over-extract natural resources relative to the efficient extraction path because they discount the future too...

This paper explores the implications for trade relations of the greening of world politics. It modifies the standard theory of changing comparative advantages in a growing world economy to show the effects on trade of taking into account the fact that the demand for domestic environmental...

International trade and environmental regulation are interdependent. Central and East European Countries (CEECs) are now being integrated in international markets, and the question arises how environmental issues should be taken account of during this process and which institutional framework is...

We consider the decision of an agent with time inconsistent preferences to undertake an irreversible investment that yields an uncertain current benefit and a delayed cost. We show that, if the flow of information revealed between periods when the investment is postponed is sufficiently high,...

We analyze the decision of individuals with time inconsistent preferences who undertake irreversible activities yielding either a current cost and a future benefit or a current benefit and a future cost. We first show that, when benefits come earlier than costs, the individual faces a...

Unilateral second-best carbon taxes are analysed in a two-period, two-country model with international trade in final goods, oil and bonds. Acceleration of global warming resulting from a future carbon tax is large if the price elasticities of oil demand are large and that of oil supply is...

We study the incentives of parents to invest in their children when these investments improve their marriage prospects, in a frictionless marriage market with non-transferable utility. Stochastic returns to investment eliminate the multiplicity of equilibria that plagues models with...

We show that financial sector bailouts and sovereign credit risk are intimately linked. A bailout benefits the economy by ameliorating the under-investment problem of the financial sector. However, increasing taxation of the non-financial sector to fund the bailout may be inefficient since it...

A 'folk theorem' originating, among others, in the work of Stiglitz maintains that competitive equilibria are always or 'generically' inefficient (unless contracts directly specify consumption levels as in Prescott and Townsend, thus bypassing trading in anonymous markets). This paper critically...

We study interventions to restore efficient lending and investment when financial markets fail because of adverse selection. We solve a design problem where the decision to participate in a program offered by the government can be a signal for private information. We charac terize optimal...