Does trade openness cause higher GDP per capita? Since the seminal instrumental variables (IV) estimates of Frankel and Romer [F&R](1999) important doubts have surfaced. Is the correlation spurious and driven by omitted geographical and institutional variables? In this paper, we generalize F&R's...

Using the extended Ramsey rule, the socially efficient rate is the difference between a wealth effect and a precautionary effect of economic growth. This second effect is increasing in the degree of uncertainty affecting the future. In the literature, it is usually calibrated by estimating the...

Following the collapse of planning, new small and medium-sized firms rapidly emerged in all transition economies. Using firm level data, we investigate the interaction between the widespread opportunities for new business activities such firms faced and their business environment. The business...

This paper provides evidence of efficient taxation of groups with heterogeneous levels of ‘tax morale'. We set up an optimal income tax model where high tax morale implies a high subjective cost of evading taxes. The model predicts that ‘nice guys finish last': groups with higher tax morale...