We propose a two-stage process called minority voting to allocate public projects in a polity. In the first period, a society decides by a simple majority decision whether to provide the public project. If the proposal in the first period is rejected, the process ends. Otherwise the process...

When politicians have lower discount factors than voters, democratic elections cannot sufficiently motivate politicians to undertake long-term socially beneficial projects. When politicians can offer incentive contracts which become effective upon reelection, the hierarchy of contracts and...

We examine financial intermediation when banks can offer deposit or loan contracts contingent on macroeconomic shocks. We show that the risk allocation is efficient if there is no workout of banking crises. In this case, banks will shift part of the risk to depositors. In contrast, under a...

We introduce democratic mechanisms where individual utilities are not observable by other people at the legislative stage. We show that the combination of three rules can yield e±cient provision of public projects: first, flexible and double majority rules where the size of the majority depends...