Institutions are important for proper economic performance, but are replaceable by trust or other social norms. We show that when proper institutions and trust are missing, integrity of the individuals can replace them. We construct a model of a transactions-based economy with contracts...

How strong are peer effects on the beliefs and spending decisions of individuals? We use a randomized control study in which treated households are told about either average income or debt of individuals like them to assess how peer effects influence their beliefs and spending. The information...

We develop an economic theory of tolerance where lifestyles and traits are invested with symbolic value by people. Value systems are endogenous and taught by parents to their children. In conjunction with actual behavior, value systems determine the esteem enjoyed by individuals. Intolerant...

In this paper, we use a two-stage bargaining model to analyze the living arrangement of a disabled elderly parent and the assistance provided to the parent by her adult children. The first stage determines the living arrangement: the parent can live in a nursing home, live alone in the...

We provide a price theory for incomplete markets that extends the traditional Walrasian analysis. We derive formulas expressing the consumption response to current and future changes in interest rates and income. Our analysis provides a natural decomposition of these responses into substitution...

Households' and firms' subjective inflation expectations play a central role in macroeconomic and intertemporal microeconomic models. We discuss how subjective inflation expectations are measured, the patterns they display, their determinants, and how they shape households' and firms' economic...

For the last fifty years, countries in Asia and elsewhere witnessed a surge in aggregate savings per capita. Some empirical studies attribute this trend to the increases in life longevity of the populations of these countries. It has been argued that the rise in savings is short-run, eventually...

This paper explores the role of marriage when markets are incomplete so that individuals cannot diversify their idiosyncratic labor income risk. Ceteris paribus, an individual would prefer to marry a "hedge" (i.e., a spouse whose income is negatively correlated with her own) as it raises her...

We study differences in economic outcomes by perceived skin tone among African Americans using full-count U.S. decennial census data from the late-19th and early-20th centuries. Comparing children coded as "Black" or "Mulatto" by census enumerators and linking these children across population...

Despite extensive use of bargaining models in economics and despite Becker's insistence on the importance of altruism in families, the theoretical literature on bargaining ignores altruism and assumes that everyone is an egoist. This paper shows that incorporating altruism into cooperative...