We present new data documenting medieval Europe's “Commercial Revolution” using information on the establishment of markets in Germany. We use these data to test whether medieval universities played a causal role in expanding economic activity, examining the foundation of Germany's first...

A recent experimental study by Falk and Szech (Science, 2013) concludes that "markets erode moral values". If this were true, economists, who have emphasized the efficiency enhancing effects of markets for centuries, would have to reconsider their judgments fundamentally. This would be no less...

This paper studies the role of governments and its link to trust. We argue that the public's trust strongly depends on governments delivering on their core tasks in a market economy. In some economies, a neglect of core tasks can be observed and there seems to be some erosion, notably in terms...

Financial institutions are increasingly linked internationally. As a result, financial crisis and government intervention have stronger effects beyond borders. We provide a model of international contagion allowing for bank bailouts. While a social planner trades off tax distortions, liquidation...

When entering a monetary union, member-countries change the nature of their sovereign debt in a fundamental way (e.g., they cease to have control over the currency in which their debt is issued). As a result, financial markets can force these countries' sovereigns into default. In this sense,...

This paper investigates the welfare costs of unilateral versus internationally coordinated emission permit policies in a two-country overlapping generations model with producer carbon emissions. We show that, for a net foreign debtor country, the domestic welfare costs of a unilateral domestic...

Itaya et al. (2014) study the conditions for sustainability and stability of capital tax coordination in a repeated game model with tax-revenue maximizing governments. One of their major results is that the grand tax coalition is never stable and sustainable. The purpose of this note is to prove...

Economic shocks often permeate borders generating comovement in nations' business cycles over time. We highlight the fact that fiscal policy coordination is an important avenue by which national economies become more integrated, influencing the transmission of macroeconomic shocks between...

We interpret the Open Method of Coordination (OMC), recently adopted by the EU as a mode of governance in the area of social policy and other fields, as an imitative learning dynamics of the type considered in evolutionary game theory. The best-practise feature and the iterative design of the...

The efficiency effects of carbon pricing depend on how it impacts distortions in fossil fuel markets, most notably from local air pollution externalities. By offsetting these distortions, carbon pricing may generate significant net economic benefits, so it is in countries own interests to...