We analyze an economy where production is subject to moral hazard. The degree of the incentive (agency) costs introduced by the presence of moral hazard naturally depends on the information structure in the economy; it is cheaper to induce correct incentives in a society which posesses better ex...

A political constitution is like an incomplete contract: it spells out a procedure for making decisions and for delegating power, without specifying the content of those decisions. This creates a problem: the appointed policymaker could use this power for his own benefit against the interests of...

Do males differ from females in terms of self-confidence? The structure of the Economics I exam at Stockholm University provides an opportunity to shed some light on this question. By answering an extra, optional question, the students can aim for a higher mark. We find a clear gender difference...

This paper uses exogenous variation in rainfall across districts in Uganda to estimate the causal effects of household income shocks to in children’s enrollment and cognitive skills conditional on gender. I find negative income shocks to have large negative and highly significant effects on...

Over the past few years, a large number of studies have aimed at estimating changes in relative income distribution across countries and globally. Some of the studies find the distribution to have worsened considerably, others that it has become more even. One objective of this article is to...

The gravity model is used to estimate the trade volume effects of the creation of the European currency union. The euro is estimated to have raised the level of aggregate trade between euro countries in 1998-2002 compared to 1989-1997 by 15 per cent and the level of trade with outside countries...

In a broad psychological perspective, both economic incentives and social norms may be be regarded as giving rise to purposesful, or “rational” behavior. By this I simply mean that individuals act in accordance with expected reward or punishment, even though the form these take differs...

A standard capital asset pricing model is extended to allow for stochastic shifts in the volatility of the news process. This model is then estimated on bivariate stock market data to separate two exogenous news processes – a world and a domestic. The results indicate that the influence of the...

We show in a union-bargaining model that a decrease in the unemployment benefit level increases not only equilibrium employment, but also nominal wage flexibility, and thus reduces employment variations in the case of nominal shocks. Long-term wage contracts lead to higher expected real wages...

Policy rules that are consistent with inflation targeting are examined in a small macroeconometric model of the US economy. We compare the properties and outcomes of explicit 'instrument rules' as well as 'targeting rules'. The latter, which imply implicit instrument rules, may be closer to...