We build a model of firms’ choice between formality and informality. Complying with costly registration procedures allows the firms to benefit from key public goods, enforcement of property rights and contracts, that make the participation in the formal credit market possible. In a moral...

We consider an extension of the standard Rubinstein model where both players are randomly allowed to leave the negotiation after a rejection, in which case they obtain a payoff known value. We show that, when the value of the outside opportunities is of intermediate size, there exist a continuum...

This paper presents a model of a self-fulflling price cycle in an asset market. Price oscillates deterministically even though the underlying environment is stationary. The mechanism that we uncover is driven by endogenous variation in the investment horizons of the different market...

This paper considers a long-term relationship between two agents who both undertake a costly action or investment that together produces a joint benefit. Agents have an opportunity to expropriate some of the joint benefit for their own use. Two cases are considered: (i) where agents are risk...

State-wide class-size reduction (CSR) policies have typically failed to produce large achievement gains. One explanation is that the introduction of such policies forces schools to hire relatively low-quality teachers. This paper uses data from an anonymous state to explore whether teacher...

Biological features and social preferences have been studied separately as factors influencing human strategic behaviour. We run two studies in order to explore the interplay between these two sets of factors. In the first study, we investigate to what extent social preferences may have some...

This paper analyses RE macromodels from the methodological perspective. It proposes a particular property, robustness, which should be considered a necessary feature of scienti?cally valid models in economics, but which is absent from many RE macromodels. To restore this property many...

Most of the expansion of global trade during the last three decades has been of the North-South kind – between capital-abundant developed and labour-abundant developing countries. Based on this observation, I argue that the recent growth of world trade is best understood from a...

The standard approach to the economics of climate change, which has its best known implementation in Nordhaus's DICE and RICE models (well described in Nordhaus's 2008 book, A Question of Balance) is not well equipped to deal with the possibility of catastrophe, since we are unable to evaluate a...

In many moral hazard problems, the principal evaluates the agent's performance based on signals which the agent may suppress and replace with counterfeits. This form of fraud may affect the design of optimal contracts drastically, leading to complete market failure in extreme cases. I show that...