E. D. Domar and R. A. Musgrave (1944) showed that taxing the return from risky investments may encourage risk taking. The effect has come under attack as being one of partial analysis that would disappear in general equilibrium. This paper shows that the contrary is true if capital markets...

We study the residential choice of siblings who are altruistic towards their parents. The firstborn child's location choice influences the behavior of the second-born child and can shift some of the burden of providing care for the parents from one child to the other. These strategic...

Restrictions on work hours are more important in countries with a large welfare state. We show that this empirical observation is consistent with the strategic effects of such restrictions in a welfare state in the context of optimal direct taxation in the tradition of Mirrlees (1971). Our...

Contestants have to choose whether to initiate a contest or war, or whether to remain peaceful for another period. We find that agents wait and initiate the contest once their rival is sufficiently weak to be an easy target.

We study how norms can solve distributional conflict inside a clan and the efficient coordination of collective action in a conflict with an external enemy.We characterize a fully non-cooperative equilibrium in a finite game in which a self-enforcing norm coordinates the members on efficient...

Where product innovation requires several complementary patents, fragmented property rights can be a factor that limits firms’ willingness to invest in the development and commercialization of new products. This paper studies multiple simultaneous R&D contests for complementary patents...

This Paper compares education investment in closed and open economies without government and with a benevolent government. Closed economies suffer from a hold-up problem of excessive redistribution, and governments use education policy as a second-best tool. Globalization that increases labour...

We study the residential choice of siblings who are altruistic towards their parents. If some sibling moves further away, he or she can shift some of the burden of taking care of the parents to his or her siblings. Thus, siblings have a strategic incentive to move away that only children do not...

Incomplete information is a commitment device for time consistency problems. In the context of time consistent labour income taxation privacy reduces welfare losses and increases the effectiveness of public education as a second best policy.

We study a setting with search frictions in the marriage market and with incomplete contracting inside the family. Everyone prefers a partner that has a high income and is a perfect emotional match, but compromises must often be struck. A high-income earner may abstain from marrying a low-income...