The number of firm bankruptcies is surprisingly low in economies with poor institutions. We study a model of bank-firm relationship and show that the bank’s decision to liquidate bad firms has two opposing effects. First, the bank receives a payoff if a firm is liquidated. Second, it loses the...

Performance-based aid has been proposed as an alternative to the failed traditional approach whereby donors make aid conditional on the reform promises of recipient countries. However, hardly any empirical evidence exists on whether ex post rewards are effective in inducing reforms. We attempt...

The medieval Champagne fairs are widely used to draw lessons about the institutional basis for long-distance impersonal exchange. This paper re-examines the causes of the outstanding success of the Champagne fairs in mediating international trade, the timing and causes of the fairs’ decline,...

We use survey responses by firms to examine the firm-level determinants and effects of political influence, their perception of corruption and prevalence of bribe paying. We find that: (a) measures of political influence and corruption/bribes are uncorrelated at the firm level; (b) firms that...

This paper studies the interactions between the structure of product demand, relative wages, and the allocation of economic activity across two sectors. The agrarian sector produces a homogeneous good and consists of informal firms employing adults and children. The modern sector produces a...

This paper studies the impact of decentralization on the shadow economy. We argue that decentralization may decrease the size of the shadow economy mainly through two transmission channels: (1) Decentralization enhancing public sector efficiency (efficiency effect), and (2) decentralization...

This paper scrutinizes the recently postulated link between the European Marriage Pattern (EMP) and economic success. A metastudy of the historical demography literature shows that the EMP did not prevail throughout Europe, its three key components did not always coincide, and its more extreme...

This paper presents the various methods to estimate the size of the shadow economy, their strengths and weaknesses. The purpose of the paper is twofold. Firstly, it demonstrates that no ideal method to estimate the size and development of the shadow economy exists. Because of its flexibility,...

In this paper we analyze the influence of direct democratic institutions on the size and development of the shadow economies. The framework developed predicts a negative relationship between the degree of direct democracy and the size of the shadow economy. Countries where direct democratic...

We study the impact of loan regulation in rural India on child labor with an overlapping-generations model of formal and informal lending, human capital accumulation, adverse selection, and differentiated risk types. Specifically, we build a model economy that replicates the current outcome with...