We consider a small open economy where domestic residents combine their own income with credit obtained either at home or abroad in order to finance capital investments. These investments are subject to a costly state verification (CSV) problem. In addition, lenders to domestic residents...

Many rent-sharing decisions in a society are result from a bargaining process between groups of individuals (such as between the executive and the legislative branches of government, between legislative factions, between corporate management and shareholders, etc.). The purpose of this work is...

Regulators of natural monopolies advocate inducing monopolies to maximize the sum of consumer and producer surplus to the extent possible. Although such maximization is efficient in partial equilibrium, its general equilibrium properties have not yet been fully explored. We study the welfare...

It is shown that in a generic two-jurisdiction model of the type introduced by Caplin and Nalebuff (1997), the number of sorting equilibria (with jurisdictions providing distinct policies) is finite and even.

It is generally understood that in situations of asymmetric information, the principal is better off committing to long term contracts than committing to short term contracts. The result holds true even when long term contracts are constrained to be renegotiation proof. The paper argues that the...

We consider the problem of a Central Bank that has some exchange rate goals. We compare "direct" Intervention through sale/purchase of reserves in the currency market with an alternative strategy of intervention with options. The intervention affects the currency markets because as a result of...

Macroeconomists have long been interested in understanding differences in hours worked across countries. Prescott (2004) shows that differences in labor income tax explain the majority of the difference in hours worked between the United States and European countries. In this paper we go one...

We survey and synthesize the political economy literature on dynamic elections in the two traditional settings, spatial preferences and rent-seeking, under perfect and imperfect monitoring of politicians actions. We define the notion of stationary electoral equilibrium, which encompasses...

The schooling repayment hypothesis for private transfers predicts a positive relationship between the amount of parental investment in childrens education and the amount that adult children transfer to their parents. This paper provides evidence on the repayment motive using data from the...