Rich behavioral biases, mistakes and limits on rational decision-making are often thought to make equilibrium analysis much more intractable. We show that this is not the case in the context of the neoclassical growth model (potentially incorporating incomplete markets and distortions). We break...

In this essay, we provide a simple conceptual framework to elucidate the forces that lead to institutional persistence and change. Our framework is based on a dynamic game between different groups, who care both about current policies and institutions and future policies, which are themselves...

The recent ascent of right-wing populist movements in many countries has rekindled interest in understanding the causes of the rise of Fascism in inter-war years. In this paper, we argue that there was a strong link between the surge of support for the Socialist Party after World War I (WWI) and...

We study the effects of testing policy on voluntary social distancing and the spread of an infection. Agents decide their social activity level, which determines a social network over which the virus spreads. Testing enables the isolation of infected individuals, slowing down the infection. But...

This paper studies how firm failures and the resulting disruptions to supply chains can amplify negative shocks. We develop a non-competitive model where customized supplier-customer relations increase productivity, and the relationship-specific surplus generated between firms and their...

We study targeted lockdowns in a multi-group SIR model where infection, hospitalization and fatality rates vary between groups--in particular between the "young", "the middle-aged" and the "old". Our model enables a tractable quantitative analysis of optimal policy. For baseline parameter values...

This paper develops a network model of interbank lending, in which banks decide to extend credit to their potential borrowers. Borrowers are subject to shocks that may force them to default on their loans. In contrast to much of the previous literature on financial networks, we focus on how...

We argue that the US tax system is biased against labor and in favor of capital and has become more so in recent years. As a consequence, it has promoted inefficiently high levels of automation. Moving from the US tax system in the 2010s to optimal taxation of capital and labor would raise...

Many developing countries have suffered under the personal rule of kleptocrats', who implement highly inefficient economic policies, expropriate the wealth of their citizens, and use the proceeds for their own glorification or consumption. We argue that the success of kleptocrats rests, in part,...

Many technologies used by the LDCs are developed in the OECD economies, and as such are designed to make optimal use of the skills of these richer countries' workforces. Due to differences in the supply of skills, some of the tasks performed by skilled workers in the OECD economies will be...