In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We develop a two-sector new-Keynesian model to evaluate different inflation targeting rules in economies with financial frictions. We conclude that, in the presence of financial frictions, a welfaremaximizing central bank should adopt flexible head...

The paper studies the optimal distribution of business and residential land in a circular city. Once the optimum is characterized, we analyze the effect of changes in commuting costs and externality parameters. We also propose policies like labor subsidies, land taxes and zoning restrictions that can implement the efficient allocation as an equilibrium, or close the gap between the optimal and ...

Do husbands and wives have the same view of the family’s financial situation? This research shows that when couples are asked separately about finances, very different views emerge of income and wealth. Quantifying the gap between husbands’ and wives’ financial statements shows half of all couples provide family income values that differ by more than 10% and net worth values that differ by more...

Why do some men father children outside of marriage without providing support? Why do some women have children outside of marriage when they receive little support from fathers? Why is this behavior more common among blacks than whites? We estimate a dynamic equilibrium model of marriage, employment, fertility, and child support decisions. We consider the extent to which low earnings, marriage ...

We compare the rationality of choice under risk – utility maximization, stochastic dominance, and expected-utility maximization – of students from one of the best universities in the US and one of the best universities in Africa. The US subjects came nearer to consistency with utility maximization and the dominance principle, but there are no differences between the two samples in consistency w...

Using data from representative population surveys in 17 countries, we find that the lower rate of female business ownership is primarily due to women’s lower propensity to start businesses rather than to differences in survival rates across genders. We show that women are less confident in their entrepreneurial skills, have different social networks and exhibit higher fear of failure than men. ...

This paper provides a unified explanation for why blacks commit more crime, are located in poorer neighborhoods and receive lower wages than whites. If everybody believes that blacks are more criminal than whites -even if there is no basis for thisthen blacks are offered lower wages and, as a result, locate further away from jobs. Distant residence increases even more the black-white wage gap b...

The paper analyzes the gender pay gap in private-sector management positions based on German panel data and using fixed-effects models. It deals with the effect of occupational sex segregation on wages, and the extent to which wage penalties for managers in predominantly female occupations are moderated by firm size. Drawing on economic and organizational approaches and the devaluation of women...

In Brazil, different employers often report different racial classifications for the same worker. We use this variation in employer-reported race to identify wage discrimination. Workers whose reported race changes from non-white to white receive a wage increase; those who change from white to non-white realize a symmetric wage decrease. As much as 40 percent of the raw racial wage gap is expla...

We derive the optimal crowdfunding contract of a financially constrained monopolist and analyze its implications for production, investment and welfare. Crowdfunding contracts may serve as a price-discrimination mechanism, forcing pivotal consumers to pay a premium above the future spot price, thus increasing profits. When raising funds is costly, entrepreneurs balance the benefits from price d...