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Using Re-election Thresholds to Curb Political Polarization
(2021)CEPR Discussion PapersWe examine how tightening reelection hurdles for incumbents can curb political polarization and increase welfare. We use a two-period model in which a politician is elected for office in the first period and enacts a new policy. In the second period, elections take place between the incumbent and a challenger, and the winning candidate chooses the extent to which the first-period policy is reformed. Reforming a policy is costly, and such ...Working Paper -
Gainers and Losers from Market Integration
(2021)CEPR Discussion PapersWe compare integration of economic, matching and networking markets. There can be losers from integration in all three cases, but their relative numbers depend on the type of market. There can be many losers from integration of pure exchange economies. There are relatively few losers from integration of networking markets. In the matching case, the relative numbers tend to lie between those of the other two cases.Working Paper -
Who Produces the Robots?
(2021)CEPR Discussion PapersTo assess how disruptive automation and digitization could be, we develop a three-industry model involving routine and non-routine production of consumption goods or services, as well as capital good production. Workers exhibit different skill levels and only high-skilled workers can perform non-routine tasks in production. We compare an industrial economy in which the production of capital goods (machines) requires routine tasks with a ...Working Paper -
Contingent Contracts in Banking: Insurance or Risk Magnification?
(2021)CEPR Discussion PapersWhat happens when banks compete with deposit and loan contracts contingent on macroeconomic shocks? We show that the private sector insures the banking system efficiently against banking crises through such contracts when banks focus on expected profit maximization and failing banks go bankrupt. When risks are large, banks may shift part of the risk to depositors who receive state-contingent contracts. Repackaging of the risk among ...Working Paper -
Vote Delegation Favors Minority
(2021)arXivWe examine vote delegation when delegators do not know the preferences of representatives. We show that free delegation favors minorities, that is, alternatives that have a lower chance of winning ex-ante. The same—but to a lesser degree—occurs if the number of voting rights actual voters can have is capped. However, when the fraction of delegators increases, the probability that the ex-ante minority wins under free and capped delegation ...Working Paper -
A Refunding Scheme to Incentivize Narrow-spectrum Antibiotic Development
(2020)CEPR Discussion PapersStarting from a general framework for the study of antibiotic-resistance, we introduce a market-based refunding scheme that incentivizes companies to develop antibiotics against resistant bacteria and, in particular, narrow-spectrum antibiotics that target specific resistant bacterial strains. Successful companies can claim a refund from a newly-established antibiotics fund that partially covers their development costs. The refund involves ...Working Paper -
Appointed Learning for the Common Good: Optimal Committee Size and Efficient Rewards
(2020)SSRNA population of identical individuals must choose one of two alternatives under uncer- tainty about what the right alternative is. Individuals can gather information of increasing accuracy at an increasing convex utility cost. For such a setup, we analyze how vote del- egation to a committee and suitable monetary transfers for its members can ensure that high or optimal levels of information are (jointly) acquired. Our main insight is ...Working Paper -
Monetary Policy with a Central Bank Digital Currency: The Short and the Long Term
(2020)CEPR Discussion PapersWe examine how the introduction of an interest-bearing central bank digital currency (CBDC) impacts bank activities and monetary policy. Depositors can switch from bank deposits to CBDC as a safe medium of exchange at any time. As banks face digital runs, either because depositors have a preference for CBDC or fear bank insolvency, monetary policy can use collateral requirements (and default penalties) to initially increase bankers' ...Working Paper -
Appointed Learning for the Common Good: Optimal Committee Sitze and Efficient Rewards
(2020)CEPR Discussion PapersA population of identical individuals must choose one of two alternatives under uncertainty about what the right alternative is. Individuals can gather information of increasing accuracy at an increasing convex utility cost. For such a setup, we analyze how vote delegation to a committee and suitable monetary transfers for its members can ensure that high or optimal levels of information are (jointly) acquired. Our main insight is that ...Working Paper