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Empowerment of disadvantaged groups of population is a key issue in development. One major difficulty in implementing progressive legal reforms arises from the persistent and contrary influence of custom. In this paper, we present a simple theoretical framework that analyzes how customary rules evolve under the impact of a change in formal law. This(More)
Randomized controlled trials (RCT) have become a dominant empirical tool in applied economics. The internal validity of RCTs crucially depends on the (implicit) assumption that the procedure assigning subjects to treatment and control groups has no effect on behavior. We show theoretically that this assumption is violated when people are motivated by(More)
We build a simple model to show why the unemployed vote for employment protection. An unemployed individual who nds a job might face a credit constraint: the bank fears that the individual might lose his job and not repay the loan. Credit constraints for newly employed individuals become more severe as employment protection decreases. A decrease in(More)
addresses political, economic and ecological development problems. ZEF closely cooperates with national and international partners in research and development organizations. For information, see: www.zef.de. ZEF – Discussion Papers on Development Policy are intended to stimulate discussion among researchers, practitioners and policy makers on current and(More)
We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of traders revise their price expectations in each period. The price at which the asset is traded is public information. The(More)
We study the dynamics of public opinion in a model where agents change their opinions as a result of random binary encounters if the opinion difference is below their individual thresholds that evolve over time. We ground these thresholds in a simple individual cost-benefit analysis with linear benefits of diversity and quadratic communication costs. We(More)
We consider redistributional taxation between people with and without human capital if education is endogenous and if individuals differ in their perceptions about own ability. Those who see their ability as low like redistributive taxation because of the transfers it generates. Those who see their ability as high may also like redistributive taxation(More)
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