We model the link between inequality, lack of political commitment, and ex-cessive risk taking. If politicians cannot commit to a long-term tax schedule, increasing returns to tax avoidance induce the middle class to take on non rewarded ?nancial risk despite risk aversion. Electoral pressure...

We offer a model of currency carry trades in which carry traders earn positive excess returns if they successfully coordinate on supply- ing excessive capital to a target economy. The interest-rate differential between their funding currency and the target currency is their coor- dination...

Afluent households can respond to taxation with means that are not economically viable for the rest of the population, such as sophisticated tax plans and international tax arbitrage. This paper studies an economy in which an inequality-averse social planner faces agents who have access to a...