University of Mannheim
Department of Economics
L7 3-5 68131
Institutional Affiliation: University of Mannheim
NBER Working Papers and Publications
|January 2020||Political Activism and the Provision of Dynamic Incentives|
with Russell Cooper: w26654
This paper studies the determination of income taxes in a dynamic setting with human capital accumulation. The goal is to understand the factors that support an outcome without complete redistribution, given a majority of relatively poor agents. In the analysis, the internal dynamics of income are not sufficient to prevent complete redistribution under majority rule without commitment. However, a political influence game across the population limits the support for expropriatory taxation and preserves incentives. In some cases, the outcome of the game corresponds with the optimal allocation under commitment.
|October 2014||Monetary Policy and Debt Fragility|
with Russell Cooper: w20650
The valuation of government debt is subject to strategic uncertainty, stemming from investors' sentiments. Pessimistic lenders, fearing default, bid down the price of debt. This leaves a government with a higher debt burden, increasing the likelihood of default and thus confirming the pessimism of lenders. This paper studies the interaction of monetary policy and debt fragility. It asks: do monetary interventions mitigate debt fragility? The answer depends in part on the nature of monetary policy, particularly the ability of the monetary authority to commit to future state contingent actions. With commitment to a state contingent policy, the monetary authority can indeed overcome strategic uncertainty. Under discretion, debt fragility remains unless reputation effects are sufficiently stro...