We present a model of wage contract violation that implies a possibility of multiple equilibria in the level of arrears. Positive feedback arises because each employer's arrears affect the costs of late payment faced by other employers operating in the same labor market, resulting in a network...

We present a model of wage contract violation that implies a possibility of multiple equilibria in the level of arrears. Positive feedback arises because each employer's arrears affect the costs of late payment faced by other employers operating in the same labor market, resulting in a network...

The paper explores a game-theoreticmodel of petty corruption involving a sequence of entrepreneurs and a track of bureaucrats. Each entrepreneur's project is approved if and only if it is cleared by each bureaucrat. The project value is stochastic; its value is observed only by the entrepreneur,...

The paper explores a game-theoreticmodel of petty corruption involving a sequence of entrepreneurs and a track of bureaucrats. Each entrepreneur's project is approved if and only if it is cleared by each bureaucrat. The project value is stochastic; its value is observed only by the entrepreneur,...

Conventional wisdom depicts corruption as a tax on incumbent firms. This paper challenges this view in two ways. First, by arguing that corruption matters not so much because of the value of the bribe ("tax"), but because of another less studied feature of corruption, namely bribe...

We study how inefficiencies of market failure may be further amplified by political choices made by interest groups created in the inefficient market. We take an occupational choice framework, where agents are endowed heterogeneously with wealth and talent. In our model, market failure due to...

Reforming economies have typically placed little attention on the impact of illegal activities on the success of reform/stabilization packages and optimal policy design. This paper aims at developing a framework in which to assess an economy`s response to alternative stabilization/reform...

We analyze how intermittent large expenditures on family ceremonies may affect an entrepreneur's investment decision in an informal enterprise. Our hypothesis is that the barrier between family and enterprise is thin and permeable. We test this hypothesis using a survey from Sénégal that...

We develop a formula for the optimal size of a joint savings association between individuals who share the same financial goal and who can save towards that goal at the same rate. Our motivating example and the core of our analysis is a Rotating Savings and Credit Association (ROSCA). We measure...