What are the welfare effects of the information contained in macroeconomic statistics, central-bank communications, or news in the media? We address this question in a business-cycle framework that nests the neoclassical core of modern DSGE models. Earlier lessons that were based on "beauty...

We survey theoretical developments in the literature on the limits of arbitrage. This literature investigates how costs faced by arbitrageurs can prevent them from eliminating mispricings and providing liquidity to other investors. Research in this area is currently evolving into a broader...

How do public and private information affect equilibrium allocations and social welfare in economies with investment complementarities? And what is the optimal transparency in the information conveyed, for example, by economic statistics, policy announcements, or news in the media? We first...

The Israeli Ultra-Orthodox population doubles each seventeen years. With 60 % of prime aged males attending Yeshiva rather than working, that community is rapidly outgrowing its resources. Why do fathers with families in poverty choose Yeshiva over work? Draft deferments subsidize Yeshiva...

This paper investigates a real-business-cycle economy that features dispersed information about the underlying aggregate productivity shocks, taste shocks, and, potentially, shocks to monopoly power. We show how the dispersion of information can (i) contribute to significant inertia in the...

This is a survey of legal liability for accidents. Three general aspects of accident liability are addressed. The first is the effect of liability on incentives, both whether to engage in activities (for instance, whether to drive) and how much care to exercise (at what speed to travel) to...

The government often provides relief against large risks, such as disasters. A simple, general rationale for this role of government is considered here that applies even when private contracting to share risks is not subject to market imperfections. Specifically, the optimal private sharing of...

We develop a unifying framework for optimal income taxation in multi-sector economies with general patterns of externalities. Agents in this model are characterized by an N-dimensional skill vector corresponding to intrinsic abilities in N potentially externality-causing activities. The private...

This paper uses Roy's model of sorting behavior to study welfare implication of current health care data production infrastructure that relies on solicitation of research subjects. We show that due to severe adverse-selection issues, directionality of bias cannot be established and welfare may...

If rational individuals pay the full costs of their decisions about food intake and exercise, economists, policy makers, and public health officials should treat the obesity epidemic as a matter of indifference. In this paper, we show that, as long as insurance premiums are not risk rated for...