We present a dynamic two-country model in which military spending, geopolitical risk, and government bond prices are jointly determined. The model is consistent with three empirical facts: hegemons have a funding advantage, this advantage rises with geopolitical tensions, and war losers suffer...

This paper investigates the role that idiosyncratic uncertainty plays in shaping social preferences over the degree of labor market flexibility, in a general equilibrium model of dynamic labor demand where the productivity of firms evolves over time as a Geometric Brownian motion. A key result...

I investigate the argument that, in a twoparty system with different regulatory objectives, political uncertainty generates regulatory risk. I show that this risk has a fluctuation effect that hurts both parties and an outputexpansion effect that benefits one party. Consequently, at least one...