In this paper we develop a new concept of globalization defined as the exposure of a productivity follower industry in one country to the productivity leader in another country. Globalization is measured by the intensity of contacts through trade and foreign direct investment. In a simple model...

In this paper we examine the impact of tax contracts as a novel institution on elections, policies, and welfare. We consider a political game in which three parties compete to form the government. Parties have policy preferences about the level of public-good provision and benefit from perks...

We provide a justification why the core principal in liberal democracies one-person-one-vote is socially desirable. We compare two possible constitutions. Under a "fixed democracy", every person has one vote and has the same chance to propose public good provision. Under a "flexible democracy",...

We develop a model that incorporates salient features of growth in modern economies. We combine the expanding-variety growth model through horizontal innovations with a hierarchy of basic and applied research. The former extends the knowledge base, while the latter commercializes it. Two-way...

We consider an equilibrium refinement in signaling games by allowing agents to perform costly tests of beliefs by burning money. We apply the refinement in a model where the public is unsure about the ability of an agent, such as a government, to foresee the effects of long-term decisions....

Vote-buying is widely used by parties in developing countries to influence the outcome of elections. We examine the impact of vote-buying on growth. We consider a model with a poverty trap where redistribution can promote growth. We show that vote-buying contributes to the persistence of poverty...

In this paper we assess whether forward guidance for monetary policy regarding the future path of interest rates is desirable. We distinguish between two cases where forward guidance for monetary policy may be helpful. First, forward guidance may reveal private information of the central bank....

We augment a Schumpeterian growth model with a public basic-research sector to examine how much a country should invest in basic research. We find that the closer the country is to the world's technological frontier the more the government should invest in basic research. Basic-research...

We study an intertemporal model of committee decision-making where members differ in their levels of efficiency. They may acquire costly information that enhances their ability to make a correct decision. We focus on the impact of transparency. We show that the principal’s initial utility is...

We consider an infinitely repeated reappointment game in a principal-agent relationship. Typical examples are voter-politician or government-public servant relationships. The agent chooses costly effort and enjoys being in office until he is deselected. The principal observes a noisy signal of...