Subjective evaluations are widely used, but call for different contracts from traditional moral-hazard settings. Previous literature shows that contracts require payments to third parties, which real-world contracts rarely use. I show that the implicit assumption of deterministic contracts makes...

How do parties motivate candidates to exert effort in closed-list elections? If each candidate's primary goal is winning a seat, then those in safe and hopeless list positions have weak incentives to campaign. We present a model in which (i) candidates care about both legislative seats and the...

We attempt to formulate and explain two types of self-fulfilling prophecy, called the Pygmalion effect (if a supervisor thinks her subordinates will succeed, they are more likely to succeed) and the Galatea effect (if a person thinks he will succeed, he is more likely to succeed). To this...

Half of the jobs in the U.S. feature pay-for-performance. We study nonlinear income taxation in a model where such contracts arise in private labor markets that are constrained by moral hazard frictions. We derive novel formulas for the incidence of arbitrarily nonlinear reforms of a given tax...

We explore the rationale for regulatory rules that prohibit banks from developing some of their natural activities when their capital level is low, as epitomized by the US Prompt Corrective Action (PCA). This paper is built on two insights. First, in a moral hazard setting, capital requirement...

We exploit the precise timing of natural disasters to provide empirical evidence on the connection between electoral accountability and politicians’ support for special interests. We show that, in the immediate aftermath of a disaster, the evening news substantially reduce their coverage of...

Using evidence from Russia, we explore the effect of the introduction of deposit insurance on bank risk. Drawing on variation in the ratio of firm deposits to total household and firm deposits before the announcement of deposit insurance, so as to capture the magnitude of the decrease in market...

We suggest an explanation for the existence of “mission drift”, the tendency for Microfinance Institutions (MFIs) to lend money to wealthier borrowers rather than to the very poor. We focus on the relationship between MFIs and external funding institutions. We assume that both the MFIs and...