Achieving peace and building the institutions that will make it last require much time and effort on the part of adversaries. While making this effort, the likelihood of peace is uncertain and preparations for confict are on-going. We examine a setting that takes such considerations into...

Public investment can cause the preferences of the decisive voter in one period to differ from preferences of the decisive voter in an earlier period. Forward-looking voters may therefore vote against a policy that would increase the incomes of all persons. The effect may arise when increased...

For many countries in the world today and for much of history, investment in ordinary productive capital has been overshadowed by investment in enforcive capital: castles and siege machines; tanks, missiles and army barracks. We introduce a dynamic model which allows for investment in the latter...

A congestion toll may have two purposes. First, to reduce congestion the current period. Second, to induce investment which will reduce demand and congestion in later periods. When government cannot credibly commit to future tolle, the optimal toll in the each period may be low, and congestion...

This paper examines the link between international trade, investment in human capital and inequality in the distribution of income and wealth.

Caballero (1991) shows that a larger uncertainty only increases the investment of a perfectly competitive firm with a constant returns to scale technology. We show, however, that the option value generated by a one-time fixed cost can cause the increasing uncertainty to reduce investment from a...

Some regulatory programs are effective only if firms make some irreversible investments which reduce the cost of compliance. A firm potentially subject to regulation may therefore behave strategically - not investing and thus forcing the regulator to void the proposed regulation. We show that...

For a perfectly competitive firm with a constant returns to scale techenology, a greater price uncertainty has been shown to increase investment even in the presence of irrecersible investment. We show, however, that the option value generated by a one-time fixed cost can cause increasibg...

In many economic environments agents make costly and irreversible investments that may enhance their respective threat payoffs but also shrink the utility possibilities set. In such settings, with variable threats and a variable utility possibilities set, it becomes possible to rank different...

During the past two decades, an intriguing contrast arose in unemplyments of the US and European countries. Unemployment raets have hovered around two totally different levels across the Atlantic (Bean 1994). From the viewpoint of applied reserach and policy, such differences among countries are...