I argue that systemic bankruptcy of firms can originate from coordination failure in an economy with investment complementarities. This new explanation about the origin of systemic bankruptcy promotes better understanding of how financial fragility arises, and provides theoretical guidance for...

We study economies where improving the quality of institutions - modeled as improving contract enforcement - requires resources, but enables trade that raises output by reducing the dispersion of marginal products of capital. We find that in this type of environment it is optimal to combine...

This paper critically and selectively surveys the literature on protection for sale and discusses directions for future research in this area. It suggests that the standard approach needs to be augmented to provide more compelling tests of this model.

Optimal monetary policy is studied in an environment in which money plays an essential role in facilitating exchange and aggregate shocks affect individual agents asymmetrically. Exchange may be conducted using either bank deposits (inside money) or fiat currency (outside money). A central...

Social engineering refers to deliberate attempts, often under the form of legislative moves, to promote changes in customs and norms that hurt the interests of marginalized population groups. This paper explores the analytical conditions under which social engineering is more or less likely to...

Summary There is an ongoing discussion about the relationship of power and preferences: Is power reflected in what the agents can do and what they want to do, or, alternatively, are preferences and power two separate dimensions of determining the outcome of decisionmaking? In the latter case...

The UK and the US have experienced both rising skill premia and rising employment of skilled workers since the 1980s. These trends are typically interpreted as concurrent shifts of relative skill supplies and demands, and the demand shifts are attributed to skill-biased technological change or...

The ?prospect of upward mobility? (POUM) hypothesis formalised by Benabou and Ok (2001a) finds explicit assumptions under which some individuals that are poorer than the average optimally choose to oppose redistribution policies. The underlying intuition is that these individuals rationally...