Entering a currency union without any political union European countries have taken a gamble: will the needs of the currency union force a political integration (as anticipated by Monnet) or will the tensions create a backlash, as suggested by Kaldor, Friedman and many others? We try to answer...

We exploit time variation in the degree of development of local credit markets and matched employer-employee data to assess the role of the firm as an internal credit market. In less developed local credit markets firms can offer a flatter wage-tenure profile than firms in more developed credit...

The empirical evidence on rational inattention lags far behind the theoretical developments: micro evidence on the most immediate consequence of observation costs - the infrequent observation of state variables - is not available in standard datasets. We contribute to filling the gap with two...

This chapter reviews the recent debate about the role of social capital in economics. We argue that all the difficulties this concept has encountered in economics are due to a vague and excessively broad definition. For this reason, we restrict social capital to the set of values and beliefs...

A vast literature has investigated the relationship between trust and aggregate economic performance. We investigate the relationship between individual trust and individual economic performance. We find that individual income is hump-shaped in a measure of intensity of trust beliefs available...

Since Max Weber, there has been an active debate on the impact of religion on people’s economic attitudes. Much of the existing evidence, however, is based on cross-country studies in which this impact is confounded by differences in other institutional factors. We use the World Values Surveys...

Rational investors perceive correctly the value of financial information. Investment in information is therefore rewarded with a higher Sharpe ratio. Overconfident investors overstate the quality of their own information, and thus attain a lower Sharpe ratio. We contrast the implications of the...

Informational frictions between borrowers and lenders differ across classes of borrowers. Innovative firms undertake high-risk-high-return projects which are likely to be little understood by financial intermediaries. As a consequence, they may end up allocating too large a share of funds to...

We test for the presence of precautionary saving using a self-reported measure of earnings uncertainty drawn from the 1989 Italian Survey of Household Income and Wealth. The effect of uncertainty on saving and wealth accumulations is consistent with the theory of precautionary saving and with...

Theoretical models of investment under uncertainty predict that the sign and the strength of the investment-uncertainty relationship is in principle ambiguous and can vary greatly across groups of firms depending on the degree of irreversibility of investment and the market power of the firm....