This essay memorializes Giuseppe Eusepi contribution to political economy by refining the theme he and I set forth in 2017 in Public Debt: An Illusion of Democratic Political Economy. There, we claimed that it was illusory to describe democratic governments as being indebted. We did not advance...

This paper examines the effect of reduced self-control on debt-taking in a laboratory experiment. We manipulate self-control using an ego depletion task and show that it is effective. Following the ego depletion task, participants can anonymously buy hot drinks on credit. We find no significant...

We report experimental evidence on the effect of observability of actions on bank runs. We model depositors' decision-making in a sequential framework, with three depositors located at the nodes of a network. Depositors observe the other depositors' actions only if connected by the network....

We study the effects of deposit insurance and observability of previous actions on the emergence of bank runs by means of a controlled laboratory experiment. We consider three depositors in the line of a common bank. Depositors decide in sequence between withdrawing or keeping their money...

We set up an experimental coordination game among bank depositors à la Diamond and Dybvig (1983). We elicit subjects' financial literacy and study the impact of revealing this information on the coordination problem typical of this game with multiple equilibria. We find that when no information...

This paper presents experimental evidence on depositor behavior under partial deposit insurance schemes. In the experiment, the size of a deposit insurance fund cannot fully cover all deposits and the level of insurance depends on the number of depositors running on the bank. We show that this...

By creating liquid claims on illiquid assets banks provide liquidity to investors but are also exposed to panic-based bank runs. In this paper we implement an experiment based on a global games approach. We investigate the effects of previous experience, induced risk aversion, level-k thinking,...

Is there a link between public debt and wealth inequality? Could government bondholders use intra-generational redistribution strategically to make the repayment of debt politically viable? Using a two-generations game-theoretic model, we identify coordination and divide-and-conquer as key...

This paper examines the costs of recent sovereign defaults using synthetic control methods, a novel econometric technique based on comparative case studies. Evidence on the effects of debt crises is thus presented on a case-by-case basis, uncovering large variations in country-specific...

In this paper, we report the design and results of an experiment in human judgment in which decision makers were allowed to choose the information cues they used in making their judgments. The results of this study show that the subjects' choice of information, rather than their processing of...