This paper measures the vulnerability of households in rural India, based upon the ICRISAT panel survey. We employ both ex ante and ex post measures of vulnerability. The latter are decomposed into aggregate and idiosyncratic risks and poverty components. Our decomposition shows that idiosyncratic risks account for the largest share, followed by poverty and aggregate risks. Despite some degree ...

This paper aims to introduce issues that relate regulation and innovation in the telecommunications industry. We try to address the following question: which types of regulatory schemes are likely to promote innovation in a fast-growing telecommunications industry? The first section analyses ex ante control by sector specific regulation and ex post control by competition policies. The second se...

Borrowing from multiple creditors exposes firms to liquidation risks due to coordination problems among creditors, but it also improves the firms’ repayment incentives, thereby increasing pledgeability. Based on this trade-off, I develop a dynamic debt rollover model to analyze the evolution of creditor dispersion. Consistent with empirical findings, firms optimally increase the number of credi...

Periodic elections are the main instrument through which voters can hold politicians accountable. From this perspective term limits, which restrict voters’ ability to reward politicians with re-election, appear counterproductive. We show that despite the disciplining effect of elections, term limits can be ex ante welfare improving from the perspective of voters. By reducing the value of holdin...

The paper investigates how ex-ante uncertainty about a government policy with redistributive consequences will influence the proportion of agents in favor of it, if agents can trade policy contingent securities. If a subset of agents can insure against policy uncertainty, support for redistributive policies is always smaller than in a case where no insurance is available. Both the relation betw...

This paper investigates consumer inertia in health insurance markets, where adverse selection is a potential concern. We leverage a major change to insurance provision that occurred at a large firm to identify substantial inertia, and develop and estimate a choice model that also quantifies risk preferences and ex ante health risk. We use these estimates to study the impact of policies that nud...

This paper analyzes inspection and closure policies of a bank, and the strategic reaction of its managers/shareholders when they can (costly) manipulate the information available to the regulator. We derive optimal intervention policy, and analyze its effect on managerial strategies. Regulatory intervention may induce shareholders to manipulate the information available to the regulator in orde...

Preventive policy measures such as bailouts often pass parliament very narrowly. We present a model of asymmetric information between politicians and voters which rationalizes this narrow parliamentary outcome. A successful preventive policy impedes the verifi cation of its own necessity. When policy intervention is necessary but voters disagree ex-ante, individual politicians have an incentive...

This paper presents a simple classroom game in which students are randomly designated as either employers, purple workers, or green workers. This environment may generate “statistical” discrimination if workers of one color tend not to invest because they anticipate poor job assignments, and these beliefs are self-confirming as employers learn that it is more profitable to assign workers of tha...

The paper examines the allocation of macroeconomic risks a stochastic growth model with overlapping generations. For several standard models with CRRA preferences, I find laissez faire ex ante inefficient in the direction of imposing too little productivity risk on the old and too much risk on the young and on future generations. Governments commonly issue safe debt and promise safe public pens...