This paper studies the extent to which poor institutions compromise risk-sharing. We model a multilateral organization as a social contract that provides insurance to members. Countries privately observe the realization of a performance variable with a verification cost that differs across...

This paper uses a Costly State Verification model to analyze risk-sharing arrangements between a coalition of countries when there is uncertainty about the realization of a key performance variable. The realization of the performance variable is a country's private information, and the cost of...

The lack of a supra-national legal authority that can enforce private contracts across borders makes debt repayment in an international setting contingent on borrowers' willingness to pay rather than ability to pay. This market failure (i.e., inadequate enforcement) causes investment to fall...