money and prices under uncertainty we study whether monetary economies display nominal indeterminacy equivalently whether monetary policy determines the path of prices under uncertainty in a simple stochastic cash in advance economy we find that indeterminacy arises and is characterized by the initial price level and a probability measure associated with state contingent nominal bonds equivalently monetary policy determines an average but not the distribution of inflation across realizations of uncertainty the result does not derive from the stability of the deterministic steady state and is not affected essentially by price stickiness nominal indeterminacy may affect real allocations in cases we identify our characterization applies to stochastic monetary models in general and it permits a unified treatment of the determinants of paths of inflation copyright 2005 wiley blackwell

intrinsic motivation in public service theory and evidence from state supreme courts abstractthis paper provides a theoretical and empirical analysis of the intrinsic preferences of state appellate court judges we construct a panel data set using published decisions from all state supreme courts from 1947 to 1994 we estimate the effects of changes in judges employment conditions on a number of measures of judicial performance the results are consistent with the hypothesis that judges are intrinsically motivated to provide high quality decisions and that at the margin they prefer quality over quantity when judges face less time pressure whether from the introduction of an intermediate appellate court the weakening of electoral demands or an increased salary they write more well researched opinions that are cited more often by other judges these effects are strongest when judges have more discretion to select their portfolios of cases

is the secularization hypothesis valid a panel data assessment for taiwan the secularization thesis is based on the idea that a country becomes more secular as it becomes richer and more industrialized in order to investigate whether this hypothesis is valid we examine the relationship between religion in taiwan and economic development across 23 counties by adopting the panel data approach for the period 1998 to 2003 we select six religious activity proxy variables and five economic development variables in a cross county panel data framework the evidence indicates that the ratio of females to males has a significantly positive effect and that the literacy rate and population density each have a significantly negative effect on the religious variables finally except for the christian culture the unemployment rate has a positive effect on the religious variables our findings thus support the view that the religious secularization hypothesis is valid in taiwan

nation building through compulsory schooling during the age of mass migration why did america introduce compulsory schooling laws at a time when financial investments in education and voluntary school attendance were high we provide qualitative and quantitative evidence that states adopted compulsory schooling laws as a nation building tool to instil civic values to the culturally diverse migrants during the age of mass migration between 1850 and 1914 we show the adoption of compulsory schooling laws occurred significantly earlier in states that hosted european migrants with lower exposure to civic values in their home countries using cross county data we show that these migrants had significantly lower demand for american schooling pre compulsion

the structure of financial equilibrium with exogenous yields the case of incomplete markets1 this paper presents an analysis of the structure of competitive equilibrium in a model whose principal feature is incomplete financial markets formulated in the spirit of arrow specifically the overall payoffs or returns from financial instruments are assumed to be fixed or predetermined independently of the operation of the economy and these instruments are assumed to be fewer in number than required to span all potential spot markets for commodities our main result establishes that market incompleteness generates a corresponding degree of allocation indeterminateness suppose there are n 1 spot markets but only 0 m n linearly independent financial instruments so that the deficiency in financial markets is 0 n n m n then subject to some relatively innocuous technical qualifications the set of equilibrium allocations contains a smooth n dimensional submanifold we also indicate how real indeterminacy may increase when returns for example the market price and promised interest on an ordinary bond are treated as variables rather than parameters

contracting in the shadow of the law economic models of contract typically assume that courts enforce obligations based on verifiable events corresponding to the legal rule of specific performance as a matter of law this is not the case this leaves open the question of optimal contract design given the available remedies used by the courts this article shows that american standard form construction contracts can be viewed as an efficient mechanism for implementing building projects given existing legal rules it is shown that a central feature of these contracts is the inclusion of governance covenants that shape the scope of authority and regulate the ex post bargaining power of parties our model also implies that the legal remedies of mistake impossibility and the doctrine limiting damages for unforeseen events developed in the case of hadley v baxendale are efficient solutions to the problem of implementing complex exchange

patenting in the shadow of competitors this article empirically examines the patenting behavior of new biotechnology firms that have different litigation costs i show that firms with high litigation costs are less likely to patent in subclasses with many other awards particularly those of firms with low litigation costs this pattern is consistent with the literature on costly litigation which suggests that firms that have high litigation costs will take greater precautions to avoid litigation these results are robust to a variety of control variables and modifications that seek to test alternative explanations

the resolution of financial distress most models of financial structure embody an assumption about financial distress that causes debt to be costly to the issuing firm this approach has been criticized on the grounds that the assumed costs could be avoided by a costless financial reorganization in this article we show that despite the possibility of costless reorganization it may be rational for firms to incur significant costs in the resolution of financial distress the main assumptions that give rise to our results are the existence of asymmetric courts to impose a reorganization on the claimants of a firm article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

can markets stimulate rights on the alienability of legal claims the alienability of legal claims holds the promise of increasing access to justice and fostering development of law i develop a principal agent framework where litigation funders provide expertise in reducing uncertainty in agents disutility of production the model leads to the counterintuitive prediction that litigation funders prefer cases with novel issues and social surplus is positively correlated with legal uncertainty consistent with the model court backlog court expenditures and a slowing in average time to completion are associated with third party funding cases with third party funding receive more citations and are reversed less often than comparable cases without such arrangements

currencies and the allocation of risk the welfare effects of a monetary union in a general equilibrium model with incomplete asset markets nominal securities and mean variance preferences a monetary union is desirable when the gain from eliminating excess volatility of nominal variables exceeds the cost of reducing the number of currencies with which to hedge risks copyright 1998 by american economic association

political decentralization economic growth and regional disparities in the oecd ezcurra r and rodriguez pose a political decentralization economic growth and regional disparities in the oecd regional studies recent scholarly work has addressed whether decentralization affects economic growth and regional disparities by typically resorting to fiscal decentralization while disregarding political decentralization indices this article covers this gap by investigating the association between different political decentralization indices with two measures of economic performance changes in gross domestic product gdp per capita and in territorial inequalities the results suggest a lack of statistical relationship between political decentralization and economic growth regardless of how political decentralization is measured in the case of regional disparities the results depend on the index used and range from the absence of a link to a positive association between both factors ezcurra r and rodriguez pose a oecd

prices asset markets and indeterminacy abstract competitive equilibrium allocations are indeterminate when the net trades in commodities are constrained while the asset market is incomplete the model encompasses economies with deferred payment for commodities economies with nominal assets and economies with bundling of commodities and assets journal of economic literature classification numbers d50 d52

skill distribution and comparative advantage a comparison of china and india summary this paper empirically examines the different comparative advantages of china and india in relation to their different skill distribution patterns by utilizing industry export data on china and india from 1983 to 2000 we find that a country with a greater dispersion of skills i e india especially in the earlier years has higher exports in industries with shorter production chains while a country with a more equal dispersion of skills i e china especially in the later years has higher exports in industries with longer production chains the causal relationship is fairly robust and skill sorting mechanism seems to work behind

printing and protestants an empirical test of the role of printing in the reformation the causes of the protestant reformation have long been debated this paper seeks to revive and econometrically test the theory that the spread of the reformation is linked to the spread of the printing press i test this theory by analyzing data on the spread of the press and the reformation at the city level an econometric analysis that instruments for omitted variable bias with a city s distance from mainz the birthplace of printing suggests that cities with at least one printing press by 1500 were at minimum 29 percentage points more likely to be protestant by 1600

religion and work micro evidence from contemporary germany abstract using micro data from contemporary germany this paper studies the connection between protestantism and modern day labor market outcomes to address the endogeneity in self declared religion i exploit a provision in a sixteenth century peace treaty which determined the geographic distribution of catholics and protestants reduced form and instrumental variable estimates provide no evidence of an effect of protestantism on hourly wages however relative to their catholic counterparts protestants do appear to work longer hours the patterns in the data are difficult to reconcile with explanations based on institutional factors or religious differences in human capital acquisition religious differences in individuals values however can account for most of the estimated effects

adopting a new religion the case of protestantism in 16th century germany using a dataset of territories and cities of the holy roman empire in the sixteenth century this article investigates the determinants of adoption and diffusion of protestantism as a state religion a territory s distance to wittenberg the city where martin luther taught is a major determinant of adoption this finding is consistent with a theory of strategic neighbourhood interactions introducing the reformation was a risky enterprise for territorial lords and had higher prospects of success if powerful neighbouring states committed to the new faith the actual spatial and temporal patterns of expansion of protestantism are analysed in a panel dataset

the importance of brand and competition in defining u s religious markets author affiliation brian goff department of economics 1906 college heights boulevard western kentucky university bowling green ky 42101 usa brian goff wku edu corresponding authormichelle w trawick dagger department of economics 1906 college heights boulevard western kentucky university bowling green ky 42101 usa michelle trawick wku edu acknowledgment the authors thank bob tollison colleagues participating in the economics workshop at wku and two anonymous reviewers for comments any remaining flaws are the authors responsibility 1 introductionover the past 40 years economists have vastly expanded their study of behavior in markets where there is no explicit trade of goods or services one of the most fundamental and ubiquitous of these markets is that of religious behavior where economists and other social scientists have explored a variety of influences on religious participation at the outset of this research program economic models of religious choice borrowed from long used choice theoretic concepts such as the law of demand or the cost of time more recent contributions have included household production models taking account of human capital or the role of market level forces particularly religious competition prior empirical research has resulted in the identification of a variety of determinants of religious participation these include income education race and the degree of monopolization or competitiveness in the religious market as the empirical application and testing of these models has proceeded researchers have been aware of problems in measuring various aspects of religious choice such as religious participation or religiosity at the most general level religiosity may imply a difference in a secular versus religious worldview at the level of actual observation it often measures how frequently one attends church while some of the basic measurement issues related to religious choice and behavior may be beyond the power of researchers to investigate one important aspect is not but has largely been overlooked that is the type or brand of religious choice by and large empirical research has skirted this important definitional issue and treated different types or brands of religious choice much like one would treat different brands of carbonated soft drinks using such a broad homogeneous definition of the religious product implicitly assumes that economic and demographic characteristics exert similar influences on different types or brands of religious participation and thereby assumes that such branding is not of empirical significance in defining religious markets and behavior within them 1 moreover some tension has existed in prior empirical work as to whether religious competition is an exogenous factor the common assumption or whether it helps to define the choice variable 2our central question is whether the same processes are driving religiosity across brands we ask do consumers of religion respond differently to key economic variables such as income religious competition or other factors based on the brand of religion being consumed likewise do some economic variables exert their influence independently of brand an important part of our investigation centers on how to measure brand we first rely on two indicators of brand broad denominational categories and intensity of participation in religious activity the denominational categories are mainline protestant evangelical protestant and catholic the intensity breakdown is based on geographic regions of low moderate and high religious participation in addition we also examine whether the degree of religious competition itself helps to define brand in the next section we develop theoretical explanations for variation in overall religious participation as well as by brand and discuss prior empirical work in this area

equilibria with options existence and indeterminacy abstract this paper studies an economy in which trading takes place in spot commodity markets and incomplete futures markets for assets of various types there are real assets stocks or commodity futures options on real assets and a riskless nominal bond we show that for a generic set of economies parametrized by consumers endowments and structure of real assets there exists an equilibrium moreover we show that generically the set of equilibrium allocations of commodities contains a manifold of a high dimension even if the market structure is potentially complete i e the number of assets including options equals or exceeds the number of states of nature and the arrow debreu equilibrium can be achieved through sequential trading in spot and futures markets there are multiple inefficient equilibria without full rank of the asset payoff matrix

stationary monetary equilibria in overlapping generations models with incomplete markets abstract the objective of this paper is to study the stationary monetary equilibria of a stochastic overlapping generations model with a general incomplete asset structure it is proved that a stationary equilibrium with a nonzero price of money generically exists and is locally isolated when there is outside money for an open set of economies there is an equilibrium with positive money prices in all states the equilibrium is also given a neat characterisation in terms of the properties of the underlying state prices with only inside money there will instead be a continuum of equilibria journal of economic literature classification numbers d52 d90 e40

the protestant fiscal ethic religious confession and euro skepticism in germany during the european sovereign debt crisis most countries that ran into fiscal trouble had catholic majorities whereas countries with protestant majorities were able to avoid fiscal problems we find that christian conservative members of the german parliament from constituencies with higher shares of protestants were more likely to vote against a third bailout for greece survey data show that views on the euro differ between german protestants and non protestants at the individual level too among protestants concerns about the euro have compared to non protestants increased during the crisis we show that this increase in concern is linked to a reduction of protestants subjective well being we use the timing of survey interviews and news events in 2011 to account for the endogeneity of euro concerns emphasis on moral hazard concerns in protestant theology may thus still shape economic preferences jel d72 e00 i31 z12

good bye lenin or not the effect of communism on people s preferences preferences for redistribution as well as the generosities of welfare states differ significantly across countries in this paper we test whether there exists a feedback process of the economic regime on individual preferences we exploit the experiment of german separation and reunification to establish exogeneity of the economic system from 1945 to 1990 east germans lived under a communist regime with heavy state intervention and extensive redistribution we find that after german reunification east germans are more in favor of redistribution and state intervention than west germans even after controlling for economic incentives this effect is especially strong for older cohorts who lived under communism for a longer time period we further find that east germans preferences converge towards those of west germans we calculate that it will take one to two generations for preferences to converge completely

a formalization and test of the religious economies model the religious economies argument maintains that religious pluralism promotes religious participation although this theory has been much debated by sociologists of religion evaluation has been hindered by the lack of a formal model this paper offers a formalization that builds on the product differentiation framework from industrial organization economics the model suggests a new measure of religious competition and a new empirical test one religious market may be regarded as more competitive than another religious market if the set of denominations present in the first contains the set of denominations present in the second given this partial order on the set of religious markets the model predicts that more competitive markets will have higher religious participation this prediction is examined for two data sets previously considered in the literature new york towns in 1865 and u s counties in 1990 although the analysis highlights an important theoretical ambiguity regarding the strategic interdependence of denominational effort choices and reports a negative empirical finding that more competitive u s counties tend to have lower religious participation the paper proceeds constructively attempting to identify viable directions for future research within the religious economies paradigm

political decentralization and corruption evidence from around the world abstract how does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials previous empirical studies using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization have suggested conflicting conclusions in search of more precise findings we combine and explore two new data sources an original cross national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms concrete experiences with bribery in countries with a larger number of government or administrative tiers and given local revenues a larger number of local public employees reported bribery was more frequent when local or central governments received a larger share of gdp in revenue bribery was less frequent overall the results suggest the danger of uncoordinated rent seeking as government structures become more complex

the institutional foundations of religious politics evidence from indonesia this paper explores the foundations of religious influence in politics and society we show that an important islamic institution fostered the entrenchment of islamism at a critical juncture in indonesia the world s largest muslim country in the early 1960s rural elites transferred large amounts of land into waqf inalienable charitable trusts in islamic law to avoid expropriation by the state regions facing a greater threat of expropriation exhibit more prevalent waqf land and islamic institutions endowed as such including mosques and religious schools these endowments provided conservative forces with the capital needed to promote islamist ideology and mobilize against the secular state we identify lasting effects of the transfers on the size of the religious sector electoral support for islamist parties and the adoption of local sharia laws these effects are shaped by greater demand for religion in government but not by greater piety among the electorate waqf assets also impose costs on the local economy particularly in agriculture where these endowments are associated with lower productivity overall our findings shed new light on the origins and consequences of islamism

economic and security consequences of supreme values islamic societies have in contemporary times lagged western societies in income growth and human development indicators the supreme values of radical islam further de prioritize economic achievement and impose self deprivation on own populations this paper investigates the reasons for economic outcomes under islam contemporary illustrations are also provided of the self deprivation predicted from pursuit of the supreme value objectives of radical islam the self deprivation is placed in a rent seeking context

the structure of sunspot equilibria the role of multiplicity this paper examines the structure of sunspot equilibria in a standard two period exchange economy with real assets we show that for a generic choice of utility functions and endowments there exists an open set of real asset structures whose payoffs are independent of sunspots such that the economy with this asset structure has a regular sunspot equilibrium an important implication of our result is that the multiplicity of non sunspot equilibria is not necessary for the existence of sunspot equilibria our technique is general and can be applied to show the existence of sunspot equilibria in other frameworks this paper analyses the structure of sunspot equilibria in a standard two period competitive exchange economy with more than one consumption good in each period and a real asset which pays a bundle of commodities there is no uncertainty except for sunspots we show that for an open and dense subset of the set of utility functions and endowments there exists an open set of real asset structures with payoffs independent of sunspots such that the resulting economy with an asset structure in this set has a regular sunspot equilibrium we also show that this result is tight in the space of utility functions endowments and asset structures there is in fact an open set of economies for which sunspot equilibria do not exist moreover our argument provides a systematic method which allows us to find generically all the sunspot equilibria of a given economy thus it can be used as a tool for studying the global structure of the set of sunspot equilibria not just the existence of a sunspot equilibrium the dependence of the existence of sunspot equilibria on the particular specification of the payoff of the asset provides an interesting contrast with the fact that the set of equilibrium allocations of the underlying certainty economy does not depend on the asset structure recall that when markets are complete preferences and endowments completely determine the set of competitive equilibria in our setting markets are complete in the underlying certainty economy so if payoffs change the price of the asset will change accordingly but there is no effect on the equilibrium consumption of the certainty economy thus the fundamentals of the certainty economy are the distribution of endowments and preferences among consumers and our result implies that the existence of sunspot

an empirical test of the comparative and contributory negligence rules in accident law scholars in the field of law and economics have developed an extensive theoretical literature on the effects of liability rules in accident law but have done little testing of their theoretical models in this article i develop an empirically testable model of the incentives for injurers and victims to avoid accidents under both the older contributory negligence rule and the newer rule of comparative negligence the model takes account of the fact that in the automobile accident context drivers do not know in advance with whom they will be involved in an accident and whether they will be the injurer or the victim or both it also allows for uncertainty in legal decision making the model is tested using a data set of rear end automobile accidents litigated in court the results suggest first that incentives to take care to avoid accidents are stronger under the contributory negligence rule than under the newer rule of comparative negligence and second the incentives set up by the comparative negligence rule for drivers to avoid accidents are weaker than is economically efficient

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

the evolution of common law we present a model of lawmaking by appellate courts in which judges influenced by policy preferences can distinguish precedents at some cost we find a cost and a benefit of diversity of judicial views policy motivated judges distort the law away from efficiency but diversity of judicial views also fosters legal evolution and increases the law s precision we call our central finding the cardozo theorem even when judges are motivated by personal agendas legal evolution is on average beneficial because it washes out judicial biases and renders the law more precise our paper provides a theoretical foundation for the evolutionary adaptability of common law

learning while setting precedents a decision maker dm must address a series of problems over time each period a random case arises and the dm must make a yes or no decision which we call a ruling she is uncertain about the correct ruling until she conducts a costly investigation a ruling establishes a precedent which may be costly to violate in the future we compare the dm s incentive to acquire information the evolution of standards and the social welfare under two institutions nonbinding precedent and binding precedent under nonbinding precedent the dm is not required to follow previous rulings but under binding precedent she must follow previous rulings where applicable we find that compared to nonbinding precedent the incentive for information acquisition is stronger under binding precedent in earlier periods when few precedents exist but as more precedents are established over time the incentive for information acquisition becomes weaker under binding precedent even though erroneous rulings may be perpetuated under binding precedent social welfare can be higher because of the more intensive investigation conducted early on

the extent of the market and the supply of regulation we present a model in which setting up and running a regulatory institution takes a fixed cost as a consequence the supply of regulation is limited by the extent of the market we test three implications of this model first jurisdictions with larger populations affected by a given regulation are more likely to have it second jurisdictions with lower incremental fixed costs of introducing and administering new regulations should regulate more this implies that regulation spreads from higher to lower population jurisdictions and that jurisdictions that build up transferable regulatory capabilities should regulate more intensely consistent with the model we find that higher population u s states have more pages of legislation and adopt particular laws earlier in their history than do smaller states we also find that the regulation of entry the regulation of labor and the military draft are more extensive in countries with larger populations as well as in civil law countries where we argue that the incremental fixed costs are lower

a general equilibrium analysis of option and stock market interactions the traditional pricing methodology in finance values derivative securities as redundant assets that have no impact on equilibrium prices and allocations this paper demonstrates that when the market is incomplete primary and derivative asset markets generically interact the valuation of derivative and primary security prices depend on the contractual characteristics of the derivative assets available in a version of the mossin mean variance model the authors analyze an equilibrium in which a call option derivative asset is traded and the equilibrium stock price primary asset increases when the options market is opened copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

stochastic equilibria with incomplete financial markets abstract we demonstrate the existence of equilibria with incomplete financial markets for stochastic economies whose information structure is given by an event tree restricting attention to purely financial securities those paying in units of account e g dollars financial markets may be incomplete some consumption streams may be impossible to obtain by any trading strategy securities may be individually precluded from trade at arbitrary states and dates sufficient conditions for the existence of stochastic equilibria are continuous convex strictly monotonic preferences and strictly positive aggregate endowments these conditions are weakened a corollary states that any regime of security prices precluding arbitrage can be embedded in an equilibrium

inflation stabilization risk in economies with incomplete asset markets abstract in economies with high inflation nominal financial markets disappear in the context of a general equilibrium model with incomplete asset markets this paper shows that this phenomenon can be explained by an inflation process characterized by a high expected inflation coupled with a low probability of a stabilization of the price level and that the disruption of trade in nominal contracts is socially costly

the church versus the mall what happens when religion faces increased secular competition recently economists have begun to consider the causes and consequences of religious participation an unanswered question in this literature is the effect upon individuals of changes in the opportunity cost of religious participation in this paper we identify a policy driven change in the opportunity cost of religious participation based on state laws that prohibit retail activity on sunday known as blue laws many states have repealed these laws in recent years raising the opportunity cost of religious participation we use a variety of data sets to show that when a state repeals its blue laws religious attendance falls and that church donations and spending fall as well these results do not seem to be driven by declines in religiosity prior to the law change nor do we see comparable declines in membership in or giving to nonreligious organizations after a state repeals its laws we then assess the effects of changes in these laws on drinking and drug use behavior in the nlsy we find that repealing blue laws leads to an increase in drinking and drug use and that this increase is found only among the initially religious individuals who were affected by the blue laws the effect is economically significant for example the gap in heavy drinking between religious and nonreligious individuals falls by about half after the laws are repealed

dynamic models of religious conformity and conversion theory and calibrations abstract this paper develops overlapping generations models to explain and simulate changes in the proportion of secular and religious people the church is modeled as generating an externality associated with conformity enhancing education observed changes in the number of nonbelievers are explained by different birth rates among secular and religious parents and the relative proportion of young nonconformists calibrations for the conformity rates among secular and religious people show that the observed long run increase in the difference between percentage of secular people in europe and the united states can be attributed to lower conformity rates prevailing in europe

the role of dispute settlement procedures in international trade agreements although disputes are typically treated as synonymous with concerns about enforcement in economic models of trade agreements in reality most wto disputes seem to concern the interpretation of vague provisions or instances where the agreement is silent and some have suggested that the wto s dispute settlement body dsb could usefully grant exceptions to rigid contractual obligations these activist dsb roles could help complete an incomplete contract but how activist should the dsb be should dsb rulings set precedent we address these questions by characterizing the optimal choice of contract form and dsb mandate under various contracting conditions jel codes d02 d78 d86 f13 k12 k33

long lasting effects of socialist education abstract political regimes influence the content of education and criteria used to select and evaluate students we study the impact of a socialist education on the likelihood of obtaining a college degree and on several labor market outcomes by exploiting the reorganization of the school system in east germany after reunification our identification strategy uses cutoff birth dates for school enrollment that lead to variation in the length of exposure to the socialist education system within the same birth cohort an additional year of socialist education decreases the probability of obtaining a college degree and affects longer term labor market outcomes for men

the invisible hand plays dice multiple equilibria in sects markets religious participation is much more widespread in the united states than in europe while europeans tend to view sects more suspiciously than americans we propose an explanation for these patterns without assuming differences in preferences or market fundamentals we study a religious market where both demand and supply of spiritual services are endogenous such markets may have multiple equilibria further equilibria with more sects result in higher welfare and lower membership costs as secular societies tend to host on average more demanding sects

litigation liability and incentives for care abstract in this paper potential injurers are subject to a negligence standard and differ in cost of taking care in the event of accident the injurer s degree of care is private information in litigation that follows award of damages for pain and suffering will lead to a general increase in care and hence reduce the likehood of accident a tighter negligence standard will lead some potential injurers to take more care and others to take less adoption of a rule under which the loser at trial must pay the litigation costs of the winner will reduce the pressure for punitive damages

the state socialization and private schooling when will governments support alternative producers abstractunderstanding the institutional features that can improve learning outcomes and reduce inequality is a top priority for international and development organisations around the world economists appear to have a good case for support to non governmental alternatives as suppliers of schooling however unlike other policy domains freer international trade or privatisation economists have been remarkably unsuccessful in promoting the adoption of this idea we develop a general positive model of why governments typically produce schooling which introduces the key notion of the lack of verifiability of socialisation and instruction of beliefs which makes third party contracting for socialisation problematic we use the model to explain variations around the world in levels of private schooling we also predict the circumstances in which efforts to promote the different alternatives to government production like charter voucher and scholarship are likely to be successful

church state separation and redistribution we analyze how religion affects voting and redistribution our model directs attention away from the particular faith belief or risk attitudes of religious individuals and emphasizes instead how organized religion opens the door to standard group based distributive politics we argue that organized religion makes it possible for the rich and the religious poor to form electoral coalitions in favor of low taxes and limited redistribution such electoral coalitions form out of simple material self interest and they occur at the expense of the secular poor however the material reward to the religious poor from supporting such electoral coalitions depends on the institutional context as state support for religion increases poor religious voters have greater incentives to vote with poor secular voters in favor of parties that support high taxes the analysis therefore highlights the possibilities of understanding how religion affects politics without asserting that religious individuals differ systematically from secular ones in their values or preferences

religion and economy religion has a two way interaction with political economy with religion viewed as a dependent variable a central question is how economic development and political institutions affect religious participation and beliefs with religion viewed as an independent variable a key issue is how religiosity affects individual characteristics such as work ethic honesty and thrift and thereby influences economic performance in this paper we sketch previous studies of this two way interaction but focus on our ongoing quantitative research with international data

equilibrium in economies with incomplete financial markets abstract this paper analyses an exchange economy in the absence of arrow debreu complete markets it is assumed that trading takes place in the sequence of spot markets and futures markets for securities payable in units of account unlimited short selling in securities is allowed a general equilibrium in such an economy is a set of current and future prices contingent on uncertain events and a set of individual plans such that all markets are cleared the existence of such an equilibrium is proved under usual assumptions this is in contrast to the case of futures markets for contingent futures commodities where an equilibrium may not exist the optimality of equilibrium allocations is also discussed

legal realism for economists abstract economists have made great progress in understanding the incentives and behavior of actors who operate outside of traditional economic markets including voters legislators and bureaucrats the incentives and behavior of judges however remain largely opaque do judges act as neutral third party enforcers of substantive decisions made by others are judges ordinary policymakers who advance whatever outcomes they favor without any special consideration for law as such emerging recent scholarship has started to explore more nuanced conceptions of how law facts and judicial preferences may interact to influence judicial decisions this work develops a perspective on judging that can usefully be understood as the modern manifestation of american legal realism a jurisprudential movement of lawyers judges and law professors that flourished in the early twentieth century the purpose of this essay is to introduce in simplified form the realist account of judicial decision making to contras

every catholic child in a catholic school historical resistance to state schooling contemporary private competition and student achievement across countries nineteenth century catholic doctrine strongly opposed state schooling we show that countries with larger shares of catholics in 1900 but without a catholic state religion tend to have larger shares of privately operated schools even today we use this historical pattern as a natural experiment to estimate the causal effect of contemporary private competition on student achievement in cross country student level analyses our results show that larger shares of privately operated schools lead to better student achievement in mathematics science and reading and to lower total education spending even after controlling for current catholic shares

efficient liability rules for an economy with non identical individuals abstract this paper is about accident situations involving two risk neutral parties both parties engage in activities that are profitable but affect the magnitude of possible bilateral accidents we analyse how the activity choices can be decentralized by liability rules that assign the costs to the two parties to an accident we show that rules which share damages are superior to rules where one party bears the entire accident costs

luther and suleyman this paper emphasizes that the evolution of religious institutions in europe was influenced by the expansionary threat posed by the ottoman empire between the mid 15th century and the early 17th century various historical accounts have suggested that the ottomans rise helped the protestant reform movement as well as its various offshoots such as zwinglianism anabaptism and calvinism survive their infancy and mature utilizing a comprehensive dataset on violent conflicts for the period between 1451 and 1650 i find strong empirical support for the idea that ottoman military engagements in continental europe lowered the number and extent of violent conflicts among and within the european states ottomans influence in europe extended to the feud between the protestant reformers and the catholic establishment during the time between the birth of lutheranism and the end of the thirty years war the likelihood and timing of military engagements between the protestant reformers and the counter reformation forces depended negatively and statistically significantly on ottomans military activities in europe

equilibrium indeterminacy in a model of constrained financial markets i present a general equilibrium model with incomplete markets in which assets pay in units of a numeraire good in this economy agents are constrained to negotiate the same amount of assets in different states of the world different from the standard result of economies with real assets equilibrium indeterminacy can arise depending on the structure of the financial markets equilibrium fails to be unique when it is not possible to transfer wealth between states in which consumers trade a pair of assets that face the same restriction

why has regional income convergence in the u s declined the past thirty years have seen a dramatic decrease in the rate of income convergence across states and in population flows to wealthy places these changes coincide with 1 an increase in housing prices in productive areas 2 a divergence in the skill specific real returns to living in productive places 3 a redirection of low skilled migration and 4 diminished human capital convergence due to migration we develop a model where falling housing supply elasticity and endogenous labor mobility generates these patterns using a new panel measure of housing supply regulations we demonstrate the importance of this channel income convergence continues in less regulated places while it has stopped in more regulated places

economic growth and the separation of church and state the french case i introduction historically the decision to establish or forsake a state religion was seldom democratic it resulted from the political leaders willingness to consolidate their hold on power and did not reflect the people s attitudes toward a state religion even in a democracy like the united states the separation of church and state did not result from a popular vote but was derived from the first amendment of the u s constitution and subsequently reaffirmed by the supreme court france is actually one of the few countries where citizens had a say in the separation between church and state in 1905 the democratically elected french representatives adopted a bill that separated religion from the state the bill abolished the concordat which had been instituted by napoleon bonaparte in 1801 so as to govern the relationship between the french state and the roman catholic church under this arrangement the members of the catholic clergy were paid by the french state which in return had a say in their appointment the 1905 bill ended state subsidies for the church but also governmental interventions in the appointment of the church s personnel the passing of the 1905 bill illustrates the progressive rejection of the church in french politics it occurred at a time when france remained an agricultural country even though a growing share of the population worked in industrial activities in addition because primary education had been made compulsory in 1881 for both boys and girls illiteracy was decreasing nevertheless there remained many disparities between the different french departements 1 for instance the share of the french army s conscripts who were illiterate substantially varied between the different departements from 0 32 in haute savoie to 16 89 in morbihan in the academic literature economists have shown that religious laws have consequences on economic growth and human capital for example kuran 2003 botticini and eckstein 2005 hillman 2007 but they still debate the causal relationship between a nation s actual degree of religious observance and economic development there are indeed two major theories of religiosity the religion market model and the secularization hypothesis the religion market model developed by iannaccone 1991 iannaccone and stark 1994 iannaccone finke and stark 1994 and gill 1999 among others argues that religious participation is mainly supply driven in other words the government s intervention such as the establishment of state religion is a major determinant of religiosity however following weber 1905 proponents of the secularization hypothesis such as chaves 1994 and bruce 2001 argue that religious participation is demand driven they consider that economic development which includes industrialization an increase in literacy and wealth and a decrease in fertility rates entails a decline in religiosity this secularization process supposedly leads individuals to define themselves as less religious and decreases the influence of religion on social and political institutions as a matter of fact mccleary and barro 2006 find in a study of religiosity in 68 countries that economic development has an overall negative effect on religiosity urbanization also makes individuals less observant but education and the presence of children are positively correlated with religiosity still studies by finke and stark 1992 iannaccone and stark 1994 and stark 1999 among others argue that there is no empirical evidence to support secularization theories in particular the secularization hypothesis predicts that the separation between religion and state should become widespread as countries become richer but barro and mccleary 2005 cannot find any link between wealth measured by a country s gross domestic product gdp and the current existence of a state religion

litigation and settlement under two sided incomplete information this paper deals with a simple game of litigation and settlement with incomplete information parties are assumed to have the choice between settling their dispute out of court or resorting to costly litigation the set of sequential equilibria is characterized and conditions are given under which an efficient equilibrium does exist efficient equilibria however will be ruled out by various tests of refinement a comparative statics analysis is carried out with respect to the quality of private information which parties are assumed to receive before any moves have to be made

real indeterminacy with financial assets abstract it is shown that in a two period general equilibrium securities model where assets pay in money the generic dimension of the set of equilibrium allocations in the incomplete market situation is s 1 where s is the number of assets hence the degree or real indeterminacy is independent of the number of assets this result requires beyond fewer assets than states that the number of traders be larger than the number of securities and that the asset return matrix be in general position the generic dimension for arbitrary returns matrix is also obtained it is argued in addition that the presence of real or mixed assets does not by itself lower the degree of indeterminacy

why did the netherlands develop so early the legacy of the brethren of the common life this research establishes a link between the brethren of the common life bcl a religious community founded by geert groote in deventer in the late fourteenth century and the early economic development of the netherlands the bcl stimulated human capital accumulation the historical analyses show that the bcl contributed to the high rates of literacy to the high level of book production and to city growth in the netherlands these findings are supported by a set of ols regressions and further corroborated by 2sls estimates that use distance from deventer as an instrument for the presence of the bcl

was weber wrong a human capital theory of protestant economic history max weber attributed the higher economic prosperity of protestant regions to a protestant work ethic we provide an alternative theory protestant economies prospered because instruction in reading the bible generated the human capital crucial to economic prosperity we test the theory using county level data from late nineteenth century prussia exploiting the initial concentric dispersion of the reformation to use distance to wittenberg as an instrument for protestantism we find that protestantism indeed led to higher economic prosperity but also to better education our results are consistent with protestants higher literacy accounting for most of the gap in economic prosperity

earthquakes religion and transition to self government in italian cities this article presents a unique historical experiment to explore the dynamics of institutional change in the middle ages we have assembled a novel data set where information on political institutions for northern central italian cities between 1000 and 1300 is matched with detailed information on the earthquakes that occurred in the area and period of interest exploiting the panel structure of the data we document that the occurrence of an earthquake retarded institutional transition from autocratic regimes to self government the commune in cities where the political and the religious leaders were the same person episcopal see cities but not in cities where political and religious powers were distinct non episcopal see cities such differential effect holds for destructive seismic episodes and for events that were felt by the population but did not cause any material damage to persons or objects ancillary results show that seismic events provoked a positive and statistically significant differential effect on the construction and further ornamentation of religious buildings between episcopal and non episcopal see cities our findings are consistent with the idea that earthquakes interpreted in the middle ages as manifestation of the will and outrage of god represented a shock to people s religious beliefs and as a consequence enhanced the ability of political religious leaders to restore social order after a crisis relative to the emerging communal institutions this interpretation is supported by historical evidence

asset pricing and the role of money in an intergenerational economy this note is an attempt to check the robustness of money in the utility function miuf models the parametrization of the utility of money is an ad hoc constraint on the economic model which does not reveal its underlying relation to the parameters of the environment such as tastes technology and endowments from which it arises in particular the various parametrizations do not suggest any interpretation in terms of different roles for money in the exchange process it thus appears that the usefulness of miuf models in economic theory depends critically on the issue of whether or not their qualitative properties are sensitive to the specification of money in the utility function we show that important qualitative conclusions hinge critically on the time specification of the monetary variables which are included in the utility function in particular the ability of common stocks to provide protection against inflation resulting from monetary and real shocks respectively depends sensitively on the way the liquidity services of money are parametrized in the individual preferences

which countries have state religions among 188 countries 72 had no state religion in 2000 1970 and 1900 58 had a state religion throughout and 58 had 1 or 2 transitions we use a hotelling spatial competition model to analyze the likelihood that the religion market would be monopolized similar forces influence a government s decision to establish a state religion consistent with the model the probability of state religion in 1970 and 2000 is increasing with the adherence rate to the main religion has a nonlinear relation with population and has little relation with per capita gdp the probability of state religion decreases sharply under communism but lagged communism has only a weak effect with costly adjustment for institutions the probability of state religion in 1970 or 2000 depends substantially on the status in 1900 this persistence is much stronger for countries with no major regime change than for countries with such a change

no win no fee some economics of contingent legal fees mark up in different types of case is to be issued after consultation with professional bodies american style share contracts whereby the lawyer is paid a proportion of the award if the case is won and nothing if it is lost will continue to be unenforceable at law and prohibited by the professional bodies the introduction of contingency fees in england and wales has been discussed in a number of official and semi official reports without any consensus emerging 3 we use a formal model of the litigation process to analyse the implications of contingent fees under both english and united states cost shifting rules in the model potential defendants can take care to avoid accidents which impose losses on potential plaintiffs if an accident occurs the defendant is sued by the plaintiff and makes a settlement offer if the plaintiff rejects the offer the case proceeds to trial plaintiffs who win at trial are awarded damages and under english rules costs against the defendant lawyer client contracts can be evaluated by the extent to which they a compensate plaintiffs after an accident by making it easy to sue and obtain redress b induce settlements rather than costly trials and c provide

using the law to change the custom the custom often acts as a powerful hindrance to equity increasing changes in this paper we present a simple model of legal dualism in which a progressive legal reform can under certain conditions shift the conflicting custom in the direction intended by the legislator formal law then acts as an outside anchor that exerts a magnet effect on the custom we also characterize the conditions under which a moderate reform performs better than a radical one in improving the welfare of the disadvantaged sections of the population we illustrate our insights using examples on inheritance marriage and divorce in sub saharan africa and india

a test of racial bias in capital sentencing this paper proposes a test of racial bias in capital sentencing based upon patterns of judicial errors in lower courts we model the behavior of the trial court as minimizing a weighted sum of the probability of sentencing an innocent and that of letting a guilty defendant free we de ne racial bias as a situation where the relative weight on the two types of errors is a function of defendant and or victim race the key prediction of the model is that if the court is unbiased ex post the error rate should be independent of the combination of defendant and victim race we test this prediction using an original dataset that contains the the race of the defendant and of the victim s for all capital appeals that became nal between 1973 and 1995 we nd robust evidence of bias against minority defendants who killed white victims in direct appeal and habeas corpus the probability of error in these cases is 3 and 9 percentage points higher respectively than for minority defendants who killed minority victims

endogenous cases and the evolution of the common law i develop a dynamic model of judge made law in which the ideal legal rule is unknown but can be learned in contrast to existing articles the flow of cases heard by the court is affected by the court s prior decisions the model highlights the significance of this feedback in explaining when and why the court will write broader or narrower opinions and the long run properties of common law in equilibrium the law settles endogenously because the incentives to make legally controversial choices disappear as the law evolves settled law exhibits residual uncertainty and ambiguity and potentially implements inefficient outcomes

portfolio choice exchange rates and indeterminacy consider an exchange economy under uncertainty the asset market is incomplete there are fewer assets a than states of nature s assets are nominal and are denominated in n distinct currencies competitive equilibria are distinct if the associated allocations are distinct an economy displays k degrees of indeterminacy if the set of distinct competitive equilibria contains a k dimensional open set generically the economy displays ns a n 1 n degrees of indeterminacy

voluntary product safety certification this paper describes the incentives for firms to seek voluntary product safety certifications we consider a firm that makes the decision of whether or not to seek certification prior to selling the product we show that even when the firm and the consumers have the same beliefs about the product s safety there are incentives for the firm to seek safety certification the main analysis investigates the role of consumer moral hazard and shows that it can lead to greater incentives for voluntary certification when inherent product safety and effort are substitutes but smaller incentives when they are complements the analysis of consumer moral hazard provides a nuanced perspective on the so called risk compensation or the peltzman effect phenomenon which postulates higher levels of accidents for safer products in our paper products that are successfully certified can end up with a higher incidence of accidents we also uncover an interesting nonmonotonic relationship between effectiveness of consumer

legal efficiency and consistency abstract we analyze the efficiency and consistency of court decisions under common and civil law as a leading example we study the enforcement of property rights judges are of two types some are conservative and follow the precedent or the statute while others maximize social welfare when courts intervene ex post after the relevant economic choices have been made welfare maximizing courts face a commitment problem such an ex post bias has implications on the relative consistency and efficiency of each legal system surprisingly we find that court decisions are more consistent under common law than under civil law the welfare comparison between the two systems is instead ambiguous however in changing economic environments common law is more likely to dominate civil law because of its greater adaptability

perils of unconventional monetary policy abstract unconventional monetary policy by relaxing restrictions on the composition of the balance sheet of the central bank compromises control over the stochastic path of inflation or in open economies over the stochastic path of exchange rates if the composition of the balance sheet is unrestricted then the path of inflation is indeterminate this is the case under pure quantitative easing where the target is the size of real money balances in contrast credit easing policies restrict the composition of the portfolio by targeting a specific expansion in the maturity profile of bonds bought and thus can implement a determinate path of inflation the composition of the portfolios traded by monetary fiscal authorities also determines premia in asset and currency markets

revolt on the nile economic shocks religion and political power using centuries of nile flood data i document that during deviant nile floods egypt s highest ranking religious authority was less likely to be replaced and relative allocations to religious structures increased these findings are consistent with historical evidence that nile shocks increased this authority s political influence by raising the probability he could coordinate a revolt i find that the available data provide support for this interpretation and weigh against some of the most plausible alternatives for example i show that while nile shocks increased historical references to social unrest deviant floods did not increase a proxy for popular religiosity together the results suggest an increase in the political power of religious leaders during periods of economic downturn publication abstract

financially constrained lawyers an economic theory of legal disputes abstract financial constraints reduce the lawyer s ability to file lawsuits and bring cases to trial as a result access to justice for victims pretrial bargaining and potential injurers precaution might be affected we study civil litigation using a model that allows for asymmetric information financially constrained lawyers third party lawyer lending and a continuum of plaintiff s types we contribute to the economic analysis of law by generalizing seminal models of litigation bebchuk 1984 bebchuk 1988 katz 1990 offering the first formal definition of access to justice and presenting comprehensive social welfare analysis of relevant public policy we provide complete equilibrium characterization and identify necessary conditions for the existence of the mixed and pure strategy pbe access to justice is denied to some victims under the mixed strategy equilibrium we then study the social welfare effects of policies aimed at relaxing lawyers financial constraints and identify a necessary and sufficient condition for a welfare enhancing effect

endogenous price fluctuations in an optimizing model of a monetary economy this paper demonstrates that an optimizing model of a monetary economy can produce perfect foresight equilibria in which the price level fluctuates forever cyclically or chaotically fluctuating equilibria are more likely to exist when the rate of money supply growth is high furthermore the set of equilibrium prices may have a complicated topological structure which poses a more serious problem concerning the validity of comparative statics method than any sort of indeterminacy previously discussed in the literature copyright 1991 by the econometric society

stationary equilibria with incomplete markets and overlapping generations recent work on general equilibrium models with incomplete financial markets has demonstrated that when assets pay off in units of account equilibrium prices and allocations are indeterminate the equilibria in such models are also generically constrained suboptimal a central planner can typically reallocate assets in such a way as to pareto dominate the competitive equilibrium in this paper the authors consider an overlapping generations model with incomplete markets in which one asset is fiat money they show that when outside money has value in equilibrium the stationary equilibrium prices and allocations are both locally isolated and constrained optimal copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association