the political economy of bilateral bailouts imf loans during times of financial crisis often occur in conjunction with bilateral financial rescues these bilateral bailouts are substantial in size and a central component of international cooperation during financial crises we analyze the political economy of bilateral bailouts and study the trade offs that potential creditor governments experience when other countries find themselves in financial distress creditor governments want to stabilize crisis countries by providing additional liquidity particularly if the crisis country is economically or politically important to them but they are constrained by domestic politics politicians aim to balance these countervailing pressures they provide bailouts when their own economy is exposed to negative spillover effects and when the crisis country is important for geostrategic military or political reasons domestic economic and political constraints on the other hand limit their ability to bail out other countries we test our hypotheses using an original data set on bilateral bailouts by the g7 countries to countries that experienced financial crises between 1975 and 2010 the findings of our statistical analysis support our theoretical argument and contribute to a deeper understanding of international cooperation s complex structure during financial crises

a theory of disagreement in repeated games with bargaining this paper proposes a new approach to equilibrium selection in repeated games with transfers supposing that in each period the players bargain over how to play although the bargaining phase is cheap talk following a generalized alternating offer protocol sharp predictions arise from three axioms two axioms allow the players to meaningfully discuss whether to deviate from their plan the third embodies a theory of disagreement that play under disagreement should not vary with the manner in which bargaining broke down equilibria that satisfy these axioms exist for all discount factors and are simple to construct all equilibria generate the same welfare optimal play under agreement generally requires suboptimal play under disagreement whether patient players attain efficiency depends on both the stage game and the bargaining protocol the theory extends naturally to games with imperfect public monitoring and heterogeneous discount factors and yields new insights into classic relational contracting questions

renegotiation and symmetry in repeated games abstract the paper derives a theory of renegotiation proofness in symmetric repeated games based on a notion of equal bargaining power according to consistent bargaining equilibrium a player can mount a credible objection to a continuation equilibrium in which he receives a particular expected present discounted value if there are other self enforcing agreements that never give any player such a low continuation value after any history the definition does not imply strongly symmetric solutions but under modest assumptions consistent bargaining equilibria of infinitely repeated games with perfect monitoring are strongly symmetric such solutions have an unusually elementary characterization journal of economic literature classification numbers c7 c72

inequity aversion and the international distribution of trade protection one important puzzle in international political economy is why lower earning and less skilled intensive industries tend to receive relatively high levels of trade protection this pattern of protection holds across countries with vastly different economic and political characteristics and is not well accounted for in existing political economy models we propose and model one possible explanation that individual inequity aversion leads to systematic differences in support for trade protection across industries we conduct original survey experiments in china and the united states and provide strong evidence that individual policy opinions about sector specific trade protection depend on the earnings of workers in the sector we also present structural estimates that advantageous and disadvantageous inequality influence support for trade protection in the two countries o ne important puzzle in international political economy is why lower earning and less skilled intensive industries tend to receive relatively high levels of trade protection because this pattern of protection holds even in low income countries for which lower earning and less skilled intensive industries are likely to be comparative advantage sectors it is arguably at odds with the common empirical finding that declining comparative disadvantage industries are more likely to receive protection moreover it is at odds with most theoretical political economy models which tend to either predict consistent with most empirical work that losing sectors from international trade receive more protection or that expanding sectors that gain from greater trade should enjoy more government support existing accounts are generally good at explaining support for winners or for losers they are not however good at

learning to love globalization education and individual attitudes toward international trade recent studies of public attitudes toward trade have converged on one central finding support for trade restrictions is highest among respondents with the lowest levels of education this has been interpreted as strong support for the stolper samuelson theorem the classic economic treatment of the income effects of trade that predicts that trade openness benefits those owning factors of production with which their economy is relatively well endowed those with skills in the advanced economies while hurting others low skilled workers we reexamine the available survey data showing that the impact of education on attitudes toward trade is almost identical among respondents in the active labor force and those who are not even those who are retired we also find that while individuals with college level educations are far more likely to favor trade openness than others other types of education have no significant effects on attitudes and some actually reduce the support for trade even though they clearly contribute to skill acquisition combined these results strongly suggest that the effects of education on individual trade preferences are not primarily a product of distributional concerns linked to job skills we suggest that exposure to economic ideas and information among college educated individuals plays a key role in shaping attitudes toward trade and globalization this is not to say that distributional issues are not important in shaping attitudes toward trade just that they are not clearly manifest in the simple broad association between education levels and support for free trade the authors would like to thank james alt jeffry frieden robert lawrence dani rodrik ron rogowski ken scheve andy baker peter gourevitch and beth simmons for helpful comments on earlier drafts

social identification and redistribution in heterogeneous federations evidence from germany and belgium recent evidence of increasing income heterogeneity within developed countries has reignited debates concerning the redistribution of income and wealth in this article we contribute to this debate

the political economy of the euro crisis this article introduces the special issue on the political economy of the euro crisis which aims to improve our understanding of the causes consequences and implications of the highly unusual nature of this crisis a financial crisis among developed countries within a supranational monetary union the article provides a brief chronology of the crisis discusses its underlying causes and reviews the ways in which comparative and international political economy can help us understand the crisis the article then discusses the individual and collective contributions of the articles in the special issue and discusses possible future research paths on the political economy of the euro crisis we conclude with a brief discussion of how a political economy perspective informs our understanding of the long term prospects for the eurozone and european integration

mechanism design with interdependent valuations efficiency ggagents valuations are interdependent if they depend on the signals or types of all agents under the implicit assumption that agents cannot observe their outcome decision payoffs previous literature has shown that with interdependent valuations and independent signals efficient design is impossible this paper shows that an efficient mechanism exists in an environment where first the final outcome e g allocation of the goods is determined then the agents observe their own outcome decision payoffs and then final transfers are made

incentive compatible regulation of a foreign owned subsidiary abstract transfer prices are administered charges for intra firm transfers of factors of production for a multinational firm transfer prices for international transfers provide the means to redistribute costs and increase global profits given variations in national tax and profit repatriation policies local regulation of a subsidiary may thus be necessary to limit the welfare costs of strategic transfer pricing prusa journal of international economics 1990 28 155 172 characterizes the welfare maximizing regulations for a monopoly subsidiary that induce the firm to report transfer prices truthfully we show however that it can be more efficient to implement regulations that encourage the firm to misrepresent its true transfer costs

economic integration and mass politics market liberalization and public attitudes in the european union theory theories of how domestic politics influence international economic policy differ fundamentally in their treatment of the mass public a central issue in this controversy is whether members of the mass public form attitudes about international economics that reflect their economic interests this article examines this assumption using international economic theory to identify variation in economic interests regarding international economic policy hypotheses citizens of the european union eu form attitudes toward eu membership an international economic policy that are consistent with their occupation based economic interests methods individual level heteroskedastic ordered probit analysis of eurobarometer survey data and oecd economic statistics from 1975 to 1992 results while controlling for a variety of potentially confounding factors the likelihood of positive evaluations of eu membership is positively related to intraoccupational differences in economic benefits from eu membership

the political geography of the eurocrisis the european union provided a mixed response to the 2008 financial crisis on the one hand it refused to pursue fiscal integration through a common budget on the other it introduced significant transfers between countries that were designed to produce financial stabilization the authors analyze this response as the outcome of democratic constraints on eu leaders given the eu s current institutional structure citizens preferences pose a binding constraint on what leaders can do as these preferences limit the scope of risk pooling among members and the degree of political tolerance for different courses of action the authors show that citizens preferences reflect differences in the geography of income production regimes and institutional organization the heterogeneity of constituencies redistribution preferences combined with a diverse economic geography helps to explain why political constraints on national governments prevent them from engaging in further fiscal integration by contrast externalities among member states shift the preferences of citizens who may experience negative effects and make international redistribution politically feasible the authors analyze these two mechanisms and present novel empirical results on the determinants of preferences for fiscal integration and international redistribution in the aftermath of the eurocrisis

preferences for international redistribution the divide over the eurozone bailouts why do voters agree to bear the costs of bailing out other countries despite the prominence of public opinion in the ongoing debate over the eurozone bailouts voters preferences on the topic are poorly understood we conduct the first systematic analysis of this issue using observational and experimental survey data from germany the country shouldering the largest share of the eu s financial rescue fund testing a range of theoretical explanations we find that individuals own economic standing has limited explanatory power in accounting for their position on the bailouts in contrast social dispositions such as altruism and cosmopolitanism robustly correlate with support for the bailouts the results indicate that the divide in public opinion over the bailouts does not reflect distributive lines separating domestic winners and losers instead the bailout debate is better understood as a foreign policy issue that pits economic nationalist sentiments versus greater cosmopolitan affinity and other regarding concerns

what determines individual trade policy preferences abstract this article provides new evidence on the determinants of individual trade policy preferences using individual level survey data for the united states there are two main empirical results first we find that factor type dominates industry of employment in explaining support for trade barriers second we find that home ownership also matters for individuals trade policy preferences independent of factor type home ownership in counties with a manufacturing mix concentrated in comparative disadvantage industries is correlated with support for trade barriers this finding suggests that in addition to current factor incomes driving preferences as in standard trade models preferences also depend on asset values

extending renegotiation proofness to infinite horizon games abstract this paper extends the concept of a pareto perfect equilibrium to infinite horizon games and offers a definition that covers both finitely and infinitely repeated games an equilibrium is said to be pareto perfect if admitted by a pareto perfect social norm a pareto perfect norm admits an equilibrium if and only if it cannot be profitably renegotiated in a norm observing manner at a future contingency the defined concept is compared to concepts that other writers have proposed it departs from other concepts by insisting that nonviable equilibria be defeated through renegotiation by viable ones and by not imposing a stationarity assumption

individual preferences for political redistribution what drives people s support of governmental reduction of income inequality we employ data from a large international survey in order to evaluate the explanatory power of three competing forces referred to as the homo oeconomicus effect the public values effect and the social rivalry effect the empirical analysis reveals that at the aggregate level all three effects play a significant role in shaping individual preferences for political redistribution attitudes of citizens in formerly socialist countries turn out to differ from those of western citizens in a systematic way 2002 elsevier science b v all rights reserved

renegotiation proof relational contracts abstract we study infinitely repeated two player games with perfect monitoring and assume that each period consists of two stages one in which the players simultaneously choose an action and one in which they can transfer money to each other in the first part of the paper we derive simple conditions that allow a constructive characterization of all pareto optimal subgame perfect payoffs for all discount factors in the second part we examine different concepts of renegotiation proofness and extend the characterization to renegotiation proof payoffs

the economics of earnings manipulation and managerial compensation this article examines managerial compensation in an environment where managers may take a hidden action that affects the actual earnings of the firm when realized these earnings constitute hidden information that is privately observed by the manager who may expend resources to generate an inflated earnings report we characterize the optimal managerial compensation contract in this setting and demonstrate that contracts contingent on reported earnings cannot provide managers with the incentive both to maximize profits and to report those profits honestly as a result some degree of earnings management must be tolerated as a necessary part of an efficient agreement

justifying the first order approach to principal agent problems it is of interest to know when the incentive compatibility conditio n in principal agent problems can be replaced by the condition that the agent s expected utility be stationary in effort the mirrlees rogerson conditions do not work if the principal can observe more than one observable statistic also the mirrlees rogerson assumption that the distribution function of output is convex in the agent s action is unsatisfactory even in the context of the basi c model it is too restrictive the paper presents a suite of conditio ns that are applicable to the multistatistic case and replaces the objectionable convex distribution function assumption copyright 1988 by the econometric society

ideology and voter preferences as determinants of financial globalization we propose that the global spread of ideas affects international economic openness policies and that to omit ideology as an explanatory variable for economic globalization is to risk omitted variable bias using voting data we create measures of global ideology regarding economic openness and propose that changes in both global and domestic ideology influence how open or closed to international finance an economy is we also test other influences on liberalization including proposed state centered diffusion mechanisms using pcsts and system gmm models we estimate the determinants of change in international capital account regulation for 82 countries 1955 to 1999 we thereby examine diffusion of both liberalizations 1950s and 1990s and closures 1960s and 1970s changes in both global and domestic ideology robustly influence liberalization and closure the capital account policies of neighboring countries positively and of the leading economies negatively also influenced a country s capital account liberalization

the politics of trade offs studying the dynamics of welfare state reform with conjoint experiments welfare state reform in times of austerity is notoriously difficult because most citizens oppose retrenchment of social benefits governments thus tend to combine cutbacks with selective benefit

democracy and financial crisis existing scholarship attributes various political and economic advantages to democratic governance these advantages may make more democratic countries prone to financial crises democracy is characterized by constraints on executive authority accountability through free and fair elections protections for civil liberties and large winning coalitions these characteristics bring important benefits but they can also have unintended consequences that increase the likelihood of financial instability and crises using data covering the past two centuries i demonstrate a strong relationship between democracy and financial crisis onset on average democracies are about twice as likely to experience a crisis as autocracies this is an empirical regularity that is robust across a wide range of model specifications and time periods

educated preferences explaining attitudes toward immigration in europe recent studies of individual attitudes toward immigration emphasize concerns about labor market competition as a potent source of anti immigrant senti ment in particular among less educated or less skilled citizens who fear being forced to compete for jobs with low skilled immigrants willing to work for much lower wages we examine new data on attitudes toward immigration available from the 2003 european social survey in contrast to predictions based on conventional argu ments about labor market competition which anticipate that individuals will oppose immigration of workers with similar skills to their own but support immigration of workers with different skill levels we find that people with higher levels of educa tion and occupational skills are more likely to favor immigration regardless of the skill attributes of the immigrants in question across europe higher education and higher skills mean more support for all types of immigrants these relationships are almost identical among individuals in the labor force that is those competing for jobs and those not in the labor force contrary to the conventional wisdom then the connection between the education or skill levels of individuals and views about immigration appears to have very little if anything to do with fears about labor market competition this finding is consistent with extensive economic research show ing that the income and employment effects of immigration in european economies are actually very small we find that a large component of the link between educa tion and attitudes toward immigrants is driven by differences among individuals in cultural values and beliefs more educated respondents are significantly less racist and place greater value on cultural diversity than do their counterparts they are also more likely to believe that immigration generates benefits for the host economy as a whole

repeated shocks and preferences for redistribution abstract a society that believes wealth to be determined by random luck rather than by merit demands more redistribution we present evidence of this behavior by exploiting a natural experiment provided by the l aquila earthquake in 2009 which hit a large area of central italy through a series of destructive shakes over eight days matching detailed information on the ground acceleration registered during each shock with survey data about individual opinions on redistribution we show that the average intensity of the shakes is associated with subsequent stronger beliefs that for a society to be fair income inequalities should be leveled by redistribution the shocks however are not all alike we find that only the last three shakes occurred on the fourth and the eighth day of the earthquake have a statistically significant impact overall we find that the timing and repetition of the shocks play a role in informing redistributive preferences

economic hardship and policy preferences in the eurozone periphery evidence from spain what is the impact of economic suffering on support for euro membership and austerity policies in the eurozone periphery this article uses original public opinion and firm surveys conducted in spain in the midst of the great recession to describe the structure of preferences toward the euro as a common currency and austerity policies focusing on the specific impact of crisis exposure we find that in spite of the depth and the duration of the economic crisis support for spain s membership in the eurozone is strong however while economic suffering divides the electorate on support for the euro and austerity it does not do so for firms surprisingly individuals who have suffered due to the crisis in terms of higher income loss are more skeptical of tax and spend programs but are more critical of the euro moreover individuals who are skeptical of the euro and austerity are demographically distinct groups of people one implication of our joint individual and firm level findings is that a coalition t

why are people more pro trade than pro migration i analyze individual attitudes towards trade and immigration in comparative terms i find that individuals are on average more pro trade than pro immigration across several countries i identify a key source of this difference the cleavage in trade preferences absent in immigration attitudes between individuals working in traded as opposed to non traded sectors

government spending and public support for trade in the oecd an empirical test of the embedded liberalism thesis according to the embedded liberalism thesis governments committed to free trade provide insurance and other transfers to compensate those who lose economically from expanded trade the goal of this spending is to maintain public support for trade liberalization we provide a micro level test of the critical assumption behind the embedded liberalism thesis that government programs designed to protect individuals harmed by imports reduce opposition to free trade our micro results have important implications for the macro relationship between trade and government spending which we also test we find empirical support for the embedded liberalism thesis in both our micro and macro level analyses earlier versions of this article were presented at the midwest political science association s 2002 meeting and at the university of illinois during summer 2003 we thank the respective panel and seminar participants for their feedback in addition we want to acknowledge valuable comments from william bernhard rebecca blank kerwin charles alan deardorff john dinardo john freeman brian gaines jim granato nathan jensen william keech layna mosley robert pahre ken scheve marina whitman two anonymous reviewers and lisa martin they of course are not responsible for any errors

a complete solution to a class of principal agent problems with an application to the control of a self managed firm this paper considers a class of principal agent problems which have the following features 1 there is adverse selection because the principal ignores the value of one parameter of the agent s true characteristics 2 leaving aside the information parameter the principal s welfare as well as the agent s welfare depend on two types of variables observable to both of them the first ones possibly multidimensional are called action variable s and the second one which is one dimensional has in general the meaning of a money transfer 3 the principal is a stackelberg leader of the two person game he can commit himself to decision rules which are admissible on informational grounds he optimizes within the adequate class taking into account besides the agent s reaction one constraint which has generally the meaning of an individual rationality constraint and sometimes of a feasibility constraint the optimization is limited to the class of non stochastic mechanisms 4 the problem can also receive an alternative interpretation the principal faces a continuum of agents of unknown characteristics the distribution being known however stylized principal agent problems of this type have often been considered in the economic literature in particular the reader will later be able to recognize that the standard income tax model a la mirrlees 1971 the quality or quantity choice model of the monopolist a la mussa and rosen 1978 or maskin and riley 1982 and the model of government regulation of the private monopolist of baron and myerson 1982 all belong to

a model of redistribution under social identification in heterogeneous federations abstract redistribution of resources to accommodate income heterogeneity within a federation is often fiercely debated e g belgium germany or the european union to help elucidate potential drivers behind such debates this article builds on social identity theory to develop a theoretical framework linking jurisdictional identification and preferences towards intra federation redistributive financial flows we show that federal rather than local identification can lead individuals to shift their redistribution preferences against their narrowly defined personal economic interest in contrast to predictions of standard models the sign and strength of this effect depends crucially not only upon individuals characteristics but also upon the social groups i e regions to which they belong we furthermore illustrate that federal rather than regional identification should be more widespread in poorer and or more populous regions within a federation but less common in regions which are very homogeneous internally or very dissimilar from the rest of the federation

optimal contracts under costly state falsification we examine an exchange economy with two agents one risk neutral with a certain endowment and a second risk averse with a random endowment the realization of the endowment is public but can be falsified by the second agent at a cost for a broad class of falsification cost functions the optimal no falsification contract is noncontingent on a left hand interval and strictly increasing with a slope strictly less than one on a right hand interval under a mild further restriction optimal no falsification contracts are in addition piece wise linear optimal contracts may in general require falsifying the state but for a set of the highest endowment realizations there is no falsification we find simple conditions under which the optimal contract is a no falsification contract the model has applications that include financial insurance and employment contracts and tax policy

who supports global economic engagement the sources of preferences in american foreign economic policy in this article we bring together opposing international relations theories to better understand u s foreign policy in particular foreign trade and aid using votes in the u s house of representatives from 1979 2004 we explore different theoretical predictions about preferences for foreign economic policy we assess the impact of domestic factors namely political economy and ideological preferences versus foreign policy pressures our three main results highlight the differential effect of these factors in the two issue areas first aid preferences are as affected by domestic political economy factors as are trade preferences second trade preferences but not economic aid ones are shaped by the president s foreign policy concerns for economic aid domestic political economy factors matter more than foreign policy ones third aid preferences are shaped more by ideological factors than are trade ones but ideology plays a different substantive role in each different constituencies support aid and trade this finding has implications for foreign policy substitutability the internationalist coalition in u s foreign policy statist theories of foreign policy and the connection between public opinion and legislative voting

preferences for redistribution in the land of opportunities this paper explores how individual preferences for redistribution depend on future income prospects in addition to estimating the impact of individuals socioeconomic background and of their subjective perceptions of future mobility we employ panel data to construct dobjectivet measures of expected gains and losses from redistribution for different categories of individuals we find that such measures have considerable explanatory power and perform better than dgeneral mobilityt indexes we also find that preferences for redistribution respond to individual beliefs on what determines one s position in the social ladder ceteris paribus people who believe that the american society offers equal opportunities are more averse to redistribution d 2004 published by elsevier b v

the optimal degree of cooperation in the repeated prisoners dilemma with side payments abstract in the infinitely repeated prisoners dilemma with side payments we characterize the pareto frontier of the set of subgame perfect equilibrium payoffs for all possible combinations of discount factors play paths implementing pareto dominant equilibrium payoffs are uniquely determined in all but the first period full cooperation does not necessarily implement these payoffs even when it maximizes total stage game payoffs rather when the difference in players discount factors is sufficiently large pareto dominant equilibrium payoffs are implemented by partial cooperation supported by repeated payments from the impatient to the patient player when both players are sufficiently patient such payoffs while implemented via full cooperation are supported by repeated payments from the impatient to the patient player we characterize conditions under which public randomization has no impact on the pareto dominant equilibrium payoffs and conditions under which such payoffs are robust to renegotiation

renegotiation in repeated games with side payments abstract we consider repeated games with side payments players have an endowment of wealth in each period in which transfers can be made we show that if endowments are large enough and the common discount factor high enough then a strongly renegotiation proof equilibrium srp in the sense of farrell and maskin exists as the discount factor goes to 1 the set of srp payoffs converges to the set of efficient individually rational payoffs these results provide a justification for the efficiency principle when agreements are not enforceable journal of economic literature classification numbers c73 d23 l14

the theory of moral hazard and unobservable behaviour part i principal agent models are studied in which outcomes conditional on the agent s action are uncertain and the agent s behaviour therefore unobservable for a model with bounded agent s utility conditions are given under which the first best equilibrium can be approximated arbitrarily closely by contracts relating payment to observable outcomes for general models it is shown that the solution may not always be obtained by using the agent s first order conditions as constraint general conditions of lagrangean type are given for problems in which contracts are finite dimensional 1 the moral hazard situation

is there a link between executive equity incentives and accounting fraud we compare executive equity incentives of firms accused of accounting fraud by the securities and exchange commission sec during the period 1996 2003 with two samples of firms not accused of fraud we measure equity incentives in a variety of ways and employ a battery of empirical tests we find no consistent evidence that executive equity incentives are associated with fraud these results stand in contrast to assertions by policy makers that incentives from stock based compensation and the resulting equity holdings increase the likelihood of accounting fraud

why are some people and countries more protectionist than others we analyze two cross country data sets that contain information on attitudes toward trade as well as a broad range of socio demographic and other indicators we nd that pro trade preferences are signi cantly and robustly correlated with an individual s level of human capital in the manner predicted by the factor endowments model preferences over trade are also correlated with the trade exposure of the sector in which an individual is employed individuals in non traded sectors tend to be the most pro trade while individuals in sectors with a revealed comparative disadvantage are the most protectionist third an individual s relative economic status has a very strong positive association withpro trade attitudes finally non economic determinants in the form of values identities and attachments play an important role in explaining the variation in preferences over trade high degrees of neighborhood attachment and nationalism patriotism are associated withprotectionist tendencies c

attitudes toward highly skilled and low skilled immigration evidence from a survey experiment past research has emphasized two critical economic concerns that appear to generate anti immigrant sentiment among native citizens concerns about labor market competition and concerns about the fiscal burden on public services we provide direct tests of both models of attitude formation using an original survey experiment embedded in a nationwide u s survey the labor market competition model predicts that natives will be most opposed to immigrants who have skill levels similar to their own we find instead that both low skilled and highly skilled natives strongly prefer highly skilled immigrants over low skilled immigrants and this preference is not decreasing in natives skill levels the fiscal burden model anticipates that rich natives oppose low skilled immigration more than poor natives and that this gap is larger in states with greater fiscal exposure in terms of immigrant access to public services we find instead that rich and poor natives are equally opposed to low skilled immigration in general in states with high fiscal exposure poor rich natives are more less opposed to low skilled immigration than they are elsewhere this indicates that concerns among poor natives about constraints on welfare benefits as a result of immigration are more relevant than concerns among the rich about increased taxes overall the results suggest that economic self interest at least as currently theorized does not explain voter attitudes toward immigration the results are consistent with alternative arguments emphasizing noneconomic concerns associated with ethnocentrism or sociotropic considerations about how the local economy as a whole may be affected by immigration

corporate tax evasion with agency costs this paper examines corporate tax evasion in the context of the contractual relationship between the shareholders of a firm and a tax manager who possesses private information regarding the extent of legally permissible reductions in taxable income and who may also undertake illegal tax evasion using a costly state falsification framework we characterize formally the optimal incentive compensation contract for the tax manager and in particular how the form of that contract changes in response to alternative enforcement policies imposed by the taxing authority the optimal contract may adjust to offset at least partially the effect of sanctions against illegal evasion and we find a new and policy relevant non equivalence result penalties imposed on the tax manager are more effective in reducing evasion than are those imposed on shareholders

is honesty the best policy curtailing insurance fraud through optimal incentive contracts an incentive contracting approach is used to characterize optimal contracts when insured individuals possess private information about their losses and are able to misrepresent permanently their loss magnitudes by engaging in the falsification of claims we demonstrate that efficient agreements necessarily induce some falsification but that the extent of such claims inflation is mitigated partially by an indemnification schedule that overcompensates small losses while overpaying larger ones the differential costs of generating insurance claims through falsification provide an avenue by which the heterogencous insureds can credibly signal their underlying losses and are exploited in an optimal contract to implement loss contingent insurance payments

support for free trade self interest sociotropic politics and out group anxiety although it is widely acknowledged that an understanding of mass attitudes about trade is crucial to the political economy of foreign commerce only a handful of studies have addressed this topic these studies have focused largely on testing two models both of which emphasize that trade preferences are shaped by how trade affects an individual s income the factor endowments or heckscher ohlin model posits that these preferences are affected primarily by a person s skills the specific factors or ricardo viner model posits that trade preferences depend on the industry in which a person works we find little support for either of these models using two representative national surveys of americans the only potential exception involves the effects of education initial tests indicate that educational attainment and support for open trade are directly related which is often interpreted as support for the heckscher ohlin model however further analysis reveals that education s effects are less representative of skill than of individuals anxieties about involvement with out groups in their own country and beyond furthermore we find strong evidence that trade attitudes are guided less by material self interest than by perceptions of how the u s economy as a whole is affected by trade