This article surveys the literature on principal-agent problems with moral hazard that gained popularity following the seminal works of Mirrlees (1976), Holmström (1979), and others. This literature is concerned with designing incentives to motivate one or more workers—typically by paying for...

The purpose of this paper is to offer a formal model of corporate income tax evasion. While individual tax evasion is essentially a portfolio selection problem, corporate income tax evasion is much more complicated. When the owner of a firm decides to evade taxes, not only does it risk being...

The absence of the deselection threat in incumbents’ last term in office can be negative or positive for society. Some politicians may reduce their efforts, while others may pursue beneficial long-term policies that may be unpopular in the short term. We propose a novel pension system that...

We study, experimentally, how two alternative incentive mechanisms affect team performance, and how a team chooses between alternative mechanisms. We study a group incentive mechanism, where team output is shared equally among team members, and a hierarchical mechanism team output is allocated...

The global financial crisis of 2008 illustrates the recent notion of a "Predatory economy" (Galbraith, 2006). This begins to answer the question of why near catastrophic corporate malfeasance exists with serious damaging consequences to the global financial system and the real economy. Indeed,...

This paper focus on the dynamics of organizations. Agents are grouped into three classes, high, medium and low productivity. We analyze the evolution of organizations which take decisions on whom to hire and how to share the output by plurality voting. We study the evolution of political power...

This paper analyzes the extent to which international public goods and agency problems are present in international organizations. A noncooperative model of the funding choices of donor countries and the subsequent policy choices of an international agency is used to develop hypotheses about the...

Representative democracy consists of a chain of delegation from voters to the executive and a corresponding chain of accountability, with some questions (particularly constitutional questions) reserved for popular vote. This structure reflects the high transaction costs of coordinating...

This paper presents a political economy model of exchange rate policy. The theory is based on a common agency approach with rational expectations. Financial and exporter lobbies exert political pressures to influence the government's choice of exchange rate policy, before shocks to the economy...

This article studies how a firm fosters formal and informal interaction among its employees to create a collective identity and positively influence their effort. We develop an agency model, in which employees have both a personal and a social ideal for effort. The firm does not observe the...