This note develops a simple model to illustrate formally why ungoverned spaces are an economic puzzle. It would be surprising for a social welfare maximizing government to leave space ungoverned (i.e., with no local public good provision) because we think of public goods as efficient. Yet if public goods are efficient enough for a responsive government to provide them, even a kleptocrat would p...

Portions of this paper are based on joint work with co-authors. Section 2 draws heavily on Lucio Baccaro and Marco Simoni, “Policy Concertation in Europe: Explaining Government Choice” (unpublished ms., 2006); the parts on Korea in Section 3 draw heavily on Lucio Baccaro and SangHoon Lim, “Social Pacts as Coalitions of the Weak and Moderate: Ireland, Italy, and South Korea in Comparative Perspe...

The comparative study of social policy in developing countries is of recent vintage.1 Yet the middle-income countries of Latin America, East Asia, and Eastern Europe have welfare systems that originated in the early post­ war period. The questions posed by these systems are the same as those that motivate the literature on the advanced welfare state: Why did gov­ ernments undertake the provisio...

This paper is an empirical analysis of the likelihood of failure of inflation stabilization programs. Logit models are estimated on a dataset of 39 programs implemented in 10 countries since the late 1950s, in order to determine which economic and political variables affect the probability of failure of stabilizations. Besides the well-known effects of real exchange rate appreciation, decreasin...

To what extent does the federal structure of policymaking in the United States mitigate or exacerbate national political conflict? We develop a model of two-level governance in a federal system in the presence of interstate preference heterogeneity and cross-state externalities. The key underlying intuition is that states with high demand for public spending or regulation are better positioned ...

'What's the point of a street of fifty houses all going to work to earn money to each buy a separate lawnmower, if you could work shorter hours, earn less money, then buy one lawnmower for the whole street to take turns to share it?'

We present a theory of endogenous fiscal policy and growth. Fiscal policy — debt, income tax, spending on local public goods and public investment — is determined through legislative bargaining. Economic growth depends directly on public investment, private investment in human capital and, via learning-by-doing, labor supply. The model predicts that the economy converges to a balanced growth pa...

 This essay challenges claims by economists and management scholars that ‘offshoring’ is simply another form of trade with mutual benefits. I argue that reducing wages through offshoring leads to wealth creation for shareholders but not necessarily for countries and employees, and that many displaced workers have difficulty ‘trading up’ to higher skilled jobs. Offshoring is a new phenom...

Recognizing that inflation and the macroeconomic policies that affect it can emanate from distributional conflicts in society, we examine the deep determinants of several nominal pathologies and related policy variables from a distributional perspective. We develop new instruments and use well-established existing instruments for these deep determinants and find that two deep determinants-socie...