Brazil's public-sector wage bill is comparatively high. It grows inertially and competes with other spending. Rightsizing the wage bill could stimulate administrative efficiency and bring more equity into a system where public employees earn more than private in comparable professions. Most...

This paper uses a vertical differentiation duopoly framework to analyze firms’ relocation decisions, when the removal of trade barriers or restrictions on capital outflows or inflows (“globalization”) allows them to serve the domestic market through foreign plants in low-wage countries....

We investigate the conditions for sustainability of debt roll-over schemes under uncertainty. In contrast with the requirements identified in recent research, we show that a necessary and sufficient condition for sustainability of such schemes is that the asymptotic interest rate on government...

We analyze in this paper how the mutual dependence of private sector expectations in different countries on one another influences the stability of fixed exchange rate regimes. The crisis probabilities of countries trading with one another are interdependent because wage setters react to an...

In a general equilibrium in which bribe-extracting bureaucrats can endogenously choose regulatory burden and delay, the effective (not just nominal) red tape and bribery can be positively correlated across firms. Using data from three worldwide firm surveys, this paper finds evidence consistent...

This paper examines interactions between self-interested agents in a two-tier government hierarchy, consisting of a central authority and bureaucrats in a two-stage game, where the actions of agents affect private sector allocations. Conditions under which lower-tier corruption arises as an...

This paper examines the question of how to design an optimal and sustainable exchange rate regime in a world economy of two interdependent countries. It develops a Barro-Gordon type two-country model and compares noncooperative equilibria under different assumptions of monetary policy...

This paper analyzes the strategic role of investment from a debtor country’s perspective. The framework is one in which, if the debtor country is unable to meet debt obligations, a bargaining regime determines the amount of debt repayment. In the context of a two-country real trade model, debt...

Since an enterprise, which is to be privatized, has to be restructured in uncertainty, and the restructuring investments are sunk when the final decision on the sale price is taken, there is an imminent danger that restructuring is not efficient, and there is underinvestment. We consider,...

It is shown in a game theoretic framework that it may pay off to signal a “conservative” policy stance--giving a high priority to price stability--by appreciating the exchange rate. Such an appreciation demonstrates to domestic producers and more precisely to the trade union that the new...