We develop a theoretical nonlinear model of equilibrium unemployment and test its policy implications for a number of OECD countries. The theory here sees the natural rate and the associated equilibrium path of unemployment as endogenous, pushed by the interaction of shocks (mainly...

China was the largest economy in the world before the end of the 19th century; then became one of the poorest countries in the world in a few decades. Now China is returning to its historical past. To understand China’s development, and to understand where and how far China will move forward,...

This review paper articulates the relationship between prediction market data and event studies, with a special focus on applications in political economy. Event studies have been used to address a variety of political economy questions from the economic effects of party control of government to...

There is often a gap between the prescriptions of an "optimal" tax system and actual tax systems, some of which can be neither efficient economically nor efficient at redistributing income. With a focus on personal income taxes, this paper reviews the political economics literature on tax...

This paper presents a case study on reforming a very dysfunctional labour market with a deep insider-outsider divide, namely the Spanish case. We show how a dual market, with permanent and temporary employees makes real reform much harder, and leads to purely marginal changes that do not alter...

What determines the sustainability of sovereign debt? In this paper, we develop a model where myopic governments seek electoral popularity but can nevertheless commit credibly to service external debt. They do not default when they are poor because they would lose access to debt markets and be...

We study the distribution of food aid in Ethiopia between 1994 and 2004 using data from the Ethiopian Rural Household Survey. Over this period village leaders had considerable discretion in disbursing aid subject to official guidelines and periodic monitoring. We use a principal-agent model and...

Extreme-right-wing (ERW) parties are on the rise in many countries. Moreover, there is an alarmingly high cross-country correlation between the election success of ERW parties and immigration. Motivated by this evidence, we explore one potentially important channel through which immigration may...

We study how rich shareholders can use their economic power to deregulate firms that they own, thus skewing the income distribution towards themselves. Agents differ in productivity and choose how much labor to supply. High productivity agents also own shares in the productive sector and thus...

We consider a moral hazard economy with the potential for collusion between bankers and borrowers to study how incentives for risk taking are affected by the quality of supervision. We show that low interest rates or a low return on investment may generate excessive risk taking. Because of a...