Using cross-country data, we find evidence for a significant negative interaction effect between democracy and inequality in determining the quality of growth-promoting institutions like rule of law. Democracy is associated with institutions of higher quality when inequality is lower.

Standard search theory assumes that individuals know, with certainty, how they compare to competing searchers in terms of ability. In contrast, we hypothesize that searchers are uncertain about relative ability, with important implications for search behavior. We test our hypotheses in a...

This paper presents a model of the labor market in which unemployed workers are uncertain about their relative ability to find a job. Unsuccessful search induces individuals to revise their beliefs downwards. Once self-confidence is sufficiently low, workers become discouraged and give up on...