This paper studies a principal-agent model of the relationship between officeholder and the electorate, where everyone is initially uninformed about the officeholder’s ability. If office-holder effort and ability interact in the determination of performance in office, then an office-holder has...

This paper employs an optimal taxation framework in order to study the credibility of monetary policy-making in an open economy. Since inflation is, in part, uncontrollable due to stochastic disturbances, the authority's actions cannot be monitored perfectly when exchange rate floats, thus...

This paper shows that delegation of monetary policy to a weight-conservative central banker is optimal, although the government can also use an inflation contract, an employment target, an inflation target or any combination of these to control the central banker. The key feature of our model is...

The reason why the social contract is so different in two otherwise comparable societies like the United States and continental Western European countries represents a challenging question. Large empirical evidence shows that the difference in the political support for redistribution appears to...