We consider the interaction between the monetary policy of a common central bank in a monetary union, and the separate fiscal policies of the member countries. We construct a model of the Barro-Gordon type extended to many countries and countercyclical fiscal stabilization policies. Each...

We consider the interaction between monetary and fiscal policies, in one country and in a monetary union. In a Nash equilibrium, at least one of the outcomes (output and inflation) are more extreme than the ideal points of both policy authorities. We allow very general stochastic shocks to the...

We model the electoral politics of redistribution. Taxation has efficiency and equity effects. Citizens and parties care about inequality in addition to their private concerns for consumption and votes respectively. In equilibrium, each party's strategy can be implemented by a proportional...

We model the electoral politics of redistribution. Taxation has efficiency and equity effects. Citizens and parties care about inequality in addition to their private concerns for consumption and votes respectively. In equilibrium, each party's strategy can be implemented by a proportional...

The Coase Theorem states that costless enforcement of voluntary agreements yields efficient outcomes. We argue that previous treatments fail to recognize the full meaning of voluntariness: it requires a two-stage game; a non-cooperative participation decision, followed by Coaseian bargaining only...

Consider a world of traders separated in geographic, economic, or social space. Honest trade offers larger gains for more distant traders, but frequencies of meetings, and information flows about cheating, have local bias. Honesty is self-enforcing only between pairs of sufficiently close...

Transaction-cost politics views economic policy-making as a political process constrained by asymmetric information and limited commitment possibilities. This paper examines some implications of this perspective for less-developed countries (LDCs) considering policy reform. It emphasizes that...

The law of insurance contracts provides that if the policyholder is shown to have knowingly misrepresented material facts about his risks in his application, the insurer can cancel the contract ex post facto and refuse to pay any claims. This good faith principle is widespread, but implemented...

This chapter discusses tax policy in open economies. The chapter discusses the theory of optimum taxation in an economy open to international trade. Most formal models of optimum taxation assume away international trade. Its presence does not alter any basic issues or methods. The economic...