NBER Publications by Karla Hoff

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers onlyInformation about this author at RePEc

Working Papers and Chapters

March 2010Equilibrium Fictions: A Cognitive Approach to Societal Rigidity
with Joseph E. Stiglitz: w15776
This paper assesses the role of ideas in economic change, combining economic and historical analysis with insights from psychology, sociology and anthropology. Belief systems shape the system of categories ("pre-confirmatory bias") and perceptions (confirmatory bias), and are themselves constrained by fundamental values. We illustrate the model using the historical construction of racial categories. Given the post-Reformation fundamental belief that all men had rights, colonial powers after the 15th century constructed ideologies that the colonized groups they exploited were naturally inferior, and gave these beliefs precedence over other aspects of belief systems. Historical work finds that doctrines of race came into their own in the colonies that became the US after, not before, sla...

Published: Karla Hoff & Joseph E. Stiglitz, 2010. "Equilibrium Fictions: A Cognitive Approach to Societal Rigidity," American Economic Review, American Economic Association, vol. 100(2), pages 141-46, May. citation courtesy of

November 2005The Creation of the Rule of Law and the Legitimacy of Property Rights: The Political and Economic Consequences of a Corrupt Privatization
with Joseph E. Stiglitz: w11772
How does the lack of legitimacy of property rights affect the dynamics of the creation of the rule of law? We investigate the demand for the rule of law in post-Communist economies after privatization under the assumption that theft is possible, that those who have "stolen" assets cannot be fully protected under a change in the legal regime towards rule of law, and that the number of agents with control rights over assets is large. We show that a demand for broadly beneficial legal reform may not emerge because the expectation of weak legal institutions increases the expected relative return to stripping assets, and strippers may gain from a weak and corrupt state. The outcome can be inefficient even from the narrow perspective of the asset-strippers.
October 2002After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies
with Joseph E. Stiglitz: w9282
When Russia launched mass privatization, it was widely believed that it would create a powerful constituency for the rule of law. That didn't happen. We present a dynamic equilibrium model of the political demand for the rule of law and show that beneficiaries of mass privatization may fail to demand the rule of law even if it is the Pareto efficient rule of the game.' The reason is that uncertainty about the legal regime can lead to asset stripping, and stripping can give agents an interest in prolonging the absence of the rule of law.

Published: Hoff, Karla and Joseph E. Stiglitz. "After The Big Bang? Obstacles To The Emergence Of The Rule Of Law In Post-Communist Societies," American Economic Review, 2004, v94(3,Jun), 753-763. citation courtesy of

February 1994Non-Leaky Buckets: Optimal Redistributive Taxation and Agency Costs
with Andrew B. Lyon: w4652
Economists have generally argued that income redistribution comes at a cost in aggregate incomes. We provide a counter-example in a model where private information gives rise to incentive constraints. In the model, a wage tax creates the usual distortion in labor-leisure choices, but the grants that it finances reduce a distortion in investment in human capital. We prove that simple redistributive policies can yield Pareto improvements and increase aggregate incomes. Where higher education is beyond the reach of the poor, the wage tax- transfer policy is under most circumstances more effective than targeted credit taxes or subsidies in increasing over-all efficiency.

Published: Journal of Public Economics, Vol. 58, no. 3 (1995): 365-390. citation courtesy of

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers onlyInformation about this author at RePEc

NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us