This paper extends the currency crisis model of Morris and Shin to the case where players not only hold heterogenous beliefs but also differ in a characteristic feature such as individual transaction costs. It shows that there is a unique aggregate cut off point where the government abandons the...

Under a constitution, which establishes a state under the rule of law, violations of unconstitutional laws are not punished. We argue that this is the true strength of the constitution. In our model, citizens decide on whether or not to evade taxes. For this they have to infer their probability...

This paper presents an analytical approach, which connects the form of a government and the level of expenditures, which it runs. It explains the findings on spending patterns of minority and majority coalition governments reported by the empirical literature. A government formation game is...

Why does the government not defect from the constitution? This article focuses on the dynamic restraints the government faces under the rule of law: violations against unconstitutional laws are not punished under the constitution. If a violating government cannot commit itself never to reinstall...

This paper develops an intertemporal model of legislative bargaining in the presence of distorting redistributive instruments. It includes negotiations in the cabinet and in the parliament that acts with or without coalitional discipline. We focus on the comparison of outcomes with negotiations...