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...

Work and trade relationships are often governed by relational contracts, in which incentives for cooperative action today stem from the prospective future benefits of the relationship. In this paper, we study how reductions in clarity about the financial consequences of actions, induced by...

We study the interplay of inequality and trust in a dynamic game, in which trust increases efficiency and thus allows higher growth of the experimental economy in the future. We find that trust is initially high in a treatment starting with equal endowments, but decreases over time. In a...

As the Internet economy has grown, so too has the need for trust. A degree of trust is a critical ingredient in virtually all economic relationships, Internet or otherwise. Every day we choose to trust plumbers, doctors, employers, employees, teachers, airlines, and others. The need for trust...

Recent contributions on off shoring often assume that firms can freely split their production process into separate steps which can be ranked according to the cost savings from producing abroad. We replace this assumption by the notion of a technologically determined sequence of production...

The aggregate economic impact of any developmental project depends on its effects within the chosen administrative region as well as its economic spillovers into other regions. However, little is known about how these spillovers propagate through geographic, ethnic and road networks. In this...

Maintaining the security of critical infrastructure networks is vital for a modern economy. This paper examines a game-theoretic model of attack and defense of a network in which the defender's objective is to maintain network connectivity and the attacker's objective is to destroy a set of...

Monetary policy shocks have a large impact on aggregate stock market returns in narrow event windows around press releases by the Federal Open Market Committee. We use spatial autoregressions to decompose the overall effect of monetary policy shocks into a direct (demand) effect and an indirect...

In this paper we review recent advances in financial economics in relation to the measurement of systemic risk. We start by reviewing studies that apply traditional measures of risk to financial institutions. However, the main focus of the review is on studies that use network analysis paying...

We investigate the trade-off between the risk-sharing gains enjoyed by more interconnected firms and the costs resulting from an increased risk exposure. We find that when the shock distribution displays “fat” tails, extreme segmentation into small components is optimal, while minimal...