This research revisits the effects of a country's institutional framework on individual firms' behavior, focusing, in particular, on firms' propensity to comply with legal rules. We purport to explain the variation in compliance with legal rules by employing a rich data set on thousands of firms...

This paper uses a large cross-country survey of business firms to assess their influence on government policies. When controlling for endogeneity, we find that such an influence is associated with larger firms and to a lesser extent with government ownership, but not with the degree of...

We estimate the income elasticity of government expenditures using variation in the international oil price as a plausibly exogenous source of within-country variation of countries’ permanent income. Our short run elasticity estimates, between 0.25-0.50, are generally somewhat smaller than the...

This paper provides instrumental variable estimates of the permanent income elasticity of government expenditures. It uses annual variation in the international oil price weighted with countries' average oil net-export GDP shares as a plausibly exogenous source of within-country variation in...

To what extent do imposed institutions shape preferences? We consider this issue by comparing the market-versus-state attitudes of respondents from a capitalist country, Finland, and an ex-communist group of Baltic countries, and arguing that the period under the communist rule can be viewed as...

This paper presents theory and evidence on the determinants of the size of the informal sector. We propose a simple theoretical model in which it is positively related to income inequality, more so under weak institutions, and is negatively related to the economy's wealth. These predictions are...

This Paper presents theory and evidence on the relationship between inequality and institutional quality. We exhibit a model in which the two dynamically reinforce each other and set to test this relationship with a broad array of institutional measures. We establish the double causality between...