How can banks and similar institutions design optimal compensation systems? Would such systems conflict with the goals of society? This paper considers a theoretical framework of how banks structure job contracts with their employees to explore three points: the structure of a socially optimal...

"This study argues that both unequal opportunity and social mobility are necessary implications of an efficient societal arrangement when incentives must be provided"--Federal Reserve Bank of Minneapolis web site

"This paper presents a simple model of government reputation which captures two characteristics of policy outcomes in less developed countries: governments which betray public trust do so erratically, and, after a betrayal, public trust is regained only gradually"--Federal Reserve Bank of...