Since the breakdown of the Bretton Woods System diverging current account positions in Europe have prevailed. While the Southern and Western European countries have tended to run current account deficits, the current accounts of the Central and Northern European countries, in particular Germany,...

This paper shows how conflicting normative views of fair contribution rules can be used to design sequential contribution mechanisms to foster human cooperation in heterogeneous populations. Our model predicts that a sequential mechanism which solicits contributions first from wealthy actors...

We consider fundamental questions of arbitrage pricing arising when the uncertainty model incorporates volatility uncertainty. With a standard probabilistic model, essential equivalence between the absence of arbitrage and the existence of an equivalent martingale measure is a folk theorem, see...

We study environmental pollution in an economic geography framework with two cities, where pollution arises from commuting within cities, goods transport between cities, production of manufacturing and agricultural goods, and residential energy use. We find that city size has an ambiguous effect...

We estimate the effect of changes in the body mass index on wages and satisfaction in a panel of German employees. Dynamic models indicate that satisfaction with life in general and with health are responsive to weight changes, but wages and satisfaction with work are not. These results mainly...

This paper deals with fiscal policy over the business cycle when international financial markets are imperfect. I document evidence that government expenditure tends to be more procyclical the higher is the borrowing cost for a sovereign. Decomposing government expenditure components shows that...

Applying the Monti-Klein framework, we examine the optimal financing strategy of a fi rm that requires funding for individual projects at an imperfect credit market. In particular, we study under which circumstances the firm should raise debt for projects separately (decentralized funding) or...

In a fair division game an indivisible object with an unknown common value is owned by a group of individuals and should be allocated to one of them while the others are compensated monetarily. Implementing fair division games in the lab, we fi nd many occurrences of the winner's curse under the...

Bank liability guarantee schemes have traditionally been viewed as costless measures to shore up investor confidence and stave off bank runs. However, as the experience of some European countries, most notably Ireland, has demonstrated, the credibility and effectiveness of these guarantees is...

Expectations matter for economic activity. To the extent that they are fundamentally unwarranted, they represent "undue optimism or pessimism" (Pigou, 1927). In this paper, we identify empirically the effect of undue optimism/pessism ("optimism shocks") on economic activity. In a first step, we...