Unemployment Insurance under Moral Hazard and Limited Commitment: Public versus Private Provision

This paper analyzes a model of private unemployment insurance under limited commitment and a model of public unemployment insurance subject to moral hazard in an economy with a continuum of agents and an infinite time horizon. The dynamic and steady‐state properties of the optimum private unemployment insurance scheme are established. The interaction between public and private unemployment insurance schemes is examined. Examples are constructed to show that for some parameter values increased public insurance can reduce welfare by crowding out private insurance more than one‐to‐one and that for other parameter values a mix of both public and private insurance can be welfare maximizing.     

Taxes and the Efficiency-Rent Extraction Trade-off

This paper presents an adverse selection model in which progressive taxation enhances productive efficiency by encouraging a principal (buyer) to be less aggressive in contracting with an agent (seller). Wary of padded cost budgets, the buyer employs a hurdle‐rate procurement policy. With a low cost hurdle, the buyer keeps greater profits when transactions are undertaken but trade occurs less often. While the hurdle is unaffected by a flat tax, a progressive tax tilts the buyer's preference: the buyer's benefit from a lower hurdle becomes less pronounced, since the marginal increase in his profits is muted in after‐tax terms. The result is increased trade and the possibility of Pareto improvements.     

Are IPO Allocations for Sale? Evidence from Mutual Funds

Combining data on brokerage commissions that mutual fund families paid for trade execution between 1996 and 1999 with data on mutual fund holdings of initial public offerings (IPOs), I document a robust, positive correlation between commissions paid to lead underwriters and reported holdings of the IPOs they underwrite. Moreover, I find that the correlation is limited to IPOs with nonnegative first‐day returns and strongest for IPOs that occur shortly before mutual funds report their holdings, when the noise introduced by flipping is smallest. Overall, the evidence suggests that business relationships with lead underwriters increase investor access to underpriced IPOs.     

Credit Availability and the Collapse of the Banking Sector in the 1930s

This paper examines the mechanism through which banking sector distress affects the availability of credit using the experience of the United States during the Great Depression. We utilize previously neglected data from a 1934 survey conducted by the Federal Reserve System of both banks and Chambers of Commerce regarding the availability of credit, and examine which aspects of the banking system collapse affected credit availability as indicated by the survey. We find that bank failures had the most dominant impact, but there is also some evidence for the importance of funding constraints from deposit outflows and of protracted bank liquidation.     

A Theory of Congregational Giving

This paper proposes a model to explain a broad range of established empirical facts about giving and attendance rates in religious congregations. We treat the religious service collectively consumed by the congregation as a “participatory” public good, in the sense that while its quality increases in contributions, individual consumption varies by the amount of time devoted toward attendance. The model predicts that lower income individuals will be overrepresented in religious congregations, with giving concentrated among higher income members. Inclusive doctrine is shown to increase membership but reduce average giving and attendance, while “tithing” requirements reduce membership and increase total giving.     

Gatekeeping as Accumulation and Domination: Decentralization and Class Relations in Rural South India

Gatekeeping is taken here to mean the act of channelling formal and informal resources between the state and society for private economic and political gain. Based upon fieldwork in Karnataka, India, this paper argues that whilst traditional forms of control over the labouring class have been eroded, gatekeeping increasingly allows the dominant class to exert a more subtle form of political control, which in turn facilitates processes of accumulation. Rather than equalizing political power and control over public resources, heightened levels of fiscal decentralization to village councils (gram panchayats) have increased levels of gatekeeping, which both provides a significant share of the politically active dominant class's income and forges new patterns of labouring class dependence upon the dominant class. This heightens socio‐economic differentiation and reproduces the latter's political dominance despite the loosening of labour‐related ties. In addition, it is argued that although a minority of gatekeepers are from the labouring class, their inclusion facilitates dominant class accumulation rather than their own upward mobility. The paper stratifies gatekeeping in order to locate it amongst the totality of social relations between and within classes, which collectively produce processes of accumulation, differentiation and domination within society. The paper concludes that although the forms taken by extra‐economic aspects of capital's control over rural labour have been altered during the erosion of traditional forms of dominance, they remain highly significant and are increasingly so in the fieldwork area in a context of decentralized governance.