Timothy Besley's research while affiliated with The London School of Economics and Political Science and other places

Publications (247)

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We examine the two-way interplay between organizational cultures and organizational design, where culture is modeled as the prevailing social identities among workplace groups that can affect project choices. In a setting where cultural dynamics depend on the expected relative payoffs of holding different identities, we investigate how tribalism an...
Article
In recent years, there has been increasing interest in whether and how bureaucratic effectiveness contributes to development. Just what makes for an effective bureaucracy and what are the building blocks of state capacity remain subject to debate. This article reviews the arguments connecting contemporary research using administrative data and fiel...
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We study changes in social distancing and government policy in response to local outbreaks during the COVID-19 pandemic. Using aggregated county-level data from approximately 20 million smartphones in the United States, we show that social distancing behaviors have responded to local outbreaks: a 1% increase in new cases (deaths) is associated with...
Article
This paper argues that a distinctive form of capitalism, cohesive capitalism, emerged in the post-war period supporting the wellbeing of its citizens through building state capacities alongside open and democratic forms of government. The paper identifies a range of threats that this model now faces and speculates on what it would take, particularl...
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This paper studies individual and social motives in tax evasion. We build a simple dynamic model that incorporates these motives and their interaction. The social motives underpin the role of norms and is the source of the dynamics that we study. Our empirical analysis exploits the adoption in 1990 of a poll tax to fund local government in the UK,...
Chapter
This chapter discusses issues that arise in building an effective fiscal state and relates this to debates about causes and consequences of state fragility. It argues that the lack of capacity to raise revenue is symptomatic of a wider range of issues that lie at the heart of state fragility, including a weak private sector, a lack of legitimacy an...
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Setting macroeconomic policy is especially difficult in fragile states. Political legitimacy concerns are heightened, raising issues such as who the policymakers are, what incentives move them, and how the process of policymaking is likely to work under limited legitimacy and high uncertainty both about the macroeconomic environment and about polic...
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This paper suggests an approach to analysing policies relating to the COVID-19 pandemic. It discusses the formulation of policy and sketches how the approach can be applied to different specific challenges as policy-makers try to make difficult choices for managing the pandemic and protecting the economy and society.
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Firms in tradable sectors are more likely to be subject to external competition to limit market power while non-tradable firms are more dependent on domestic poli- cies and institutions. This paper combines an antitrust index available for multiple countries with firm-level data from Orbis covering more than 10 million firms from 90 countries, cove...
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This paper explores the role of civic culture in expanding fiscal capacity by developing a model based on reciprocal obligations: citizens pay their taxes and the state provides public goods. Civic culture evolves over time according to the relative payoff of civic‐minded and materialist citizens. A strong civic culture manifests itself as high tax...
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This paper develops a framework to study environmentalism as a cultural phenomenon, namely as reflecting a process of social identification with certain values. The model is used to explain how the shares of environmentalists and materialists in society can coevolve with taxes on emissions to protect society against damages caused by environmental...
Article
This paper builds a model of the two-way interaction between democratic values and institutions to bridge sociological research, focusing on values, with economics research, which studies strategic decisions. Some citizens hold values that make them protest to preserve democracy with the share of such citizens evolving endogenously over time. There...
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In this paper we present a simple model for assessing the willingness to pay for reductions in the risk associated with catastrophic climate change. The model is extremely tractable and applies to a multiregion world but with global externalities and has five key features: (i) Neither the occurrence nor the costs of a catastrophic event in any one...
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This review explores the role of incentives in providing goods and services that have significant social returns not captured in private returns, and where outcomes and performances are not easy to measure. We discuss how the presence of prosocial motivation among agents involved in the provision of these goods and services changes the design of in...
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With public services such as health and education, it is not straightforward for consumers to assess the quality of provision. Many such services are provided by monopoly not-for-profit providers and there is concern that for-profit providers may increase profit at the expense of quality. This paper explores the implications of entry by for-profit...
Chapter
This paper considers how public resources are distributed across groups and how this depends on the institutional environment. It shows how executive constraints and openness should matter to this and argues that a key role for institutions is to protect politically excluded groups. It develops an approach to judging political institutions based on...
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Countries with strong executive constraints have lower growth volatility but similar average growth to those with weak constraints. This paper argues that this may explain the relationship between executive constraints and inflows of foreign investment. It uses a novel dataset of Dutch sector-level investments between 1983 and 2012 to explore this...
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We develop a model where party leaders choose the competence of politicians on the ballot to trade off electoral success against their own survival. The predicted correlation between the competence of party leaders and followers is strongly supported in Swedish data.We use a novel approach, based on register data for the earnings of the whole popul...
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When social benefits cannot be measured, an organization that selects managers based on pro-social motivation can be used to balance profits with a social purpose. This paper develops a model of social enterprise based on selection of citizen-managers to run firms with flexible missions. We analyze organizational choice between social enterprise, f...
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This paper studies the consequences of predation when firms deploy guard labor as a means of protecting themselves. We build a simple model and combine it with data for 144 countries from the World Bank enterprise surveys which ask about firm-level experiences with predation and spending on protection. We use the model to estimate the output loss c...
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Hereditary leadership has been an important feature of the political landscape throughout history. This paper argues that hereditary leadership is like a relational contract which improves policy incentives. We assemble a unique dataset on leaders between 1874 and 2004 in which we classify them as hereditary leaders based on their family history. T...
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Strengthening executive constraints is one of the key means of improving political governance. This paper argues that resilient leaders who face a lower probability of being replaced are less likely to reform institutions in the direction of constraining executive power. We test this idea empirically using data on leaders since 1875 using two proxi...
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In standard approaches to the political economy of inequality, the income distribution and the preferences of households are taken as fixed when studying how incomes are determined within and between nations. This paper makes the income distribution endogenous by supposing that aspirational parents can socialize children into having aspirational pr...
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Angus Deaton was awarded the 2015 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for his analysis of consumption, poverty, and welfare. This article reviews his contributions to economics. This article reviews his contributions to economics.
Article
Agricultural tenancy reforms have been widely enacted, but evidence on their long-run impact remains limited. In this paper, we provide such evidence by exploiting the quasi-random assignment of linguistically similar areas to different South Indian states that subsequently varied in tenancy regulation policies. Given imperfect credit markets, the...
Article
The importance of a well-functioning legal and regulatory system in creating an effective market economy is now widely accepted. One flagship project that tries to measure the environment in which businesses operate in countries across the world is the World Bank's Doing Business project, which was launched in 2002. This project gathers quantitativ...
Article
Low-income countries typically collect taxes of between 10 to 20 percent of GDP while the average for high-income countries is more like 40 percent. In order to understand taxation, economic development, and the relationships between them, we need to think about the forces that drive the development process. Poor countries are poor for certain reas...
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This paper exploits the 2008-09 stamp duty holiday in the United Kingdom to estimate the incidence of a transaction tax on housing. The average reduction in the after-tax sale price is found to be around $900 against the backdrop of an average tax reduction of about $1500. While we estimate an increase in transactions of properties affected by the...
Article
In spite of general agreement that establishing the rule of law is central to properly functioning economies, little is known about the cost of law and order breakdowns. This paper studies a specific context of this by estimating the effect of Somali piracy attacks on shipping costs using data on shipping contracts in the dry bulk market. To estima...
Article
Three important aspects of development—per capita income, state capabilities, and (the absence of) political violence—are correlated with each other at the country level. This article discusses the causes of such development clusters and highlights two explanations: common economic, political, and social drivers and complementarities (twoway positi...
Article
The central question in taxation and development is: "how does a government go from raising around 10% of GDP in taxes to raising around 40%"? This paper looks at the economic and political forces that shape the way that fiscal capacity is created and sustained. As well as reviewing the literature and evidence, it builds an overarching framework to...
Article
'The fiscal history of a people is above all an essential part of its general history. An enormous influence on the fate of nations emanates from the economic bleeding which the needs of the state necessitates, and from the use to which the results are put.' Joseph Schumpeter, "The Crisis of the Tax State", 1917/18, page 100. The above quote is fro...
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This essay will discuss the criticisms of the economic approach to markets offered by Michael Sandel's What Money Can't Buy. After reviewing the main arguments, the essay looks at these from three main angles. First, it relates them to different traditions of thinking about markets and their achievements that have been developed by economists. Seco...
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This paper argues that the possibility of bailouts to financial intermediaries distorts the supply price of capital and creates an argument for taxing financial bonuses separately from other sources of income. We develop a model of financial contracting where intermediaries compete for workers whose actions affect productivity and risk-taking in th...
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Efforts to increase female political representation are often thought to be at odds with meritocracy. This paper develops a theoretical framework and an empirical analysis to examine this idea. We show how the survival concerns of a mediocre male party leadership can create incentives for gender imbalance and more incompetent men in office. The pre...
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While the regulation of tenancy arrangements is widespread in the developing world, evidence on how such regulation influences the long-run allocation of land and labor remains limited. To provide such evidence, this paper exploits quasi-random assignment of linguistically similar areas to different South Indian states and historical variation in l...
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There is a great deal of interest in the causes and consequences of conflict in Africa, one of the poorest areas of the world where only modest economic progess has been made. This paper asks whether post-colonial conflict is, at least in part, a legacy of historical conflict by examining the empirical relationship between conflict in Africa since...
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This paper explores the consequences of improving property rights to facilitate the use of fixed assets as collateral, popularly attributed to the influential policy advocate Hernando de Soto. We use an equilibrium model of a credit market with moral hazard to characterize the theoretical effects and also develop a quantitative analysis using data...
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The question of how much governments should spend on social programs generally, or safety nets in particular, is of great obvious interest to policymakers but is extremely difficult to address empirically. The approach in this paper differs from others by assuming that what governments can potentially do in terms of spending on social programs is g...
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This paper uses a simple dynamic model where a government performs three functions: taxation, public spending and contract enforcement to study pathologies in resource allocation by government. A key feature of the approach is that states may invest in their future capacities to raise taxes and protect property rights. Three types of state are show...
Article
This paper provides a summary of the conclusions and recommendations of the Mirrlees Review of the UK tax system. The characteristics that a good tax system should possess are described and used to assess the current UK system. A package of reforms for the UK system which will move it closer to the ideal is proposed. Issues related to transition an...
Chapter
This chapter sums up and takes stock of the present findings. The entire project in this book is theory-driven with a core model at the heart of the approach. It ties together three different, but related, facets of development: breaking out of poverty, building a state strong enough to support markets and provide public goods, and putting an end t...
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This chapter takes some steps toward integrating endogenous political reform into the core model. A general finding is that forces that lead to political stability generally reduce the motives of ruling groups to undertake political reforms toward greater cohesiveness. It sketches some micropolitical foundations for the main macropolitical paramete...
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This chapter summarizes the lessons from Chapter 4 in the form of a function that describes endogenous political turnover. This preliminary allows us to study equilibrium investments in fiscal and legal capacity in the comprehensive core model. Section 5.2 develops the model by adding private capital formation along the same lines as in Section 3.2...
Chapter
This chapter attempts to integrate two different strands of research on political violence, developing a theoretical model to analyze the common roots of repression and civil war. Under specific assumptions about the conflict technology, it shows that peace, repression (one-sided violence), and civil war (two-sided violence) become ordered states d...
Chapter
This chapter focuses on the productive role of government in improving the environment for doing business. Improvements in the performance of government are measured as total factor productivity and differences in income across countries can be explained by differences in the quality of their economic institutions. This makes it essential to unders...
Chapter
This chapter explores the implications of the analytical approach for the design of development assistance. The model suggests a number of margins on which we would expect such assistance to have an effect. The results illustrate the difficulties faced by external donors and actors who are trying to improve the situation in developing countries, pa...
Book
“Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.” So wrote Adam Smith a quarter of a millennium ago. Using the tools of modern political economics and combining eco...
Chapter
This chapter first sets out the book's purpose, which is to offer an approach to studying weak or fragile states, taking a first step toward bringing them into mainstream economic analyses. It proceeds by using more-or-less standard ideas and methods to study the basics of state building. A key issue is to understand what creates effective states....
Chapter
This chapter explores the forces that shape investments in fiscal capacity. It sets out a core model that shows how this aspect of state building is influenced by economic and political factors, such as common interests and political institutions. A key feature of the model has been to delineate the types of states that can emerge in equilibrium. I...
Article
This article offers a unified approach for studying political violence whether it emerges as repression or civil war. We formulate a model where an incumbent or opposition can use violence to maintain or acquire power to study which political and economic factors drive one-sided or two-sided violence (repression or civil war). The model predicts a...
Article
"Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things." So wrote Adam Smith a quarter of a millennium ago. Using the tools of modern political economics and combining eco...
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This article uses data on more than 1,000 political leaders between 1875 and 2004 to investigate whether having a more educated leader affects the rate of economic growth. We use an expanded set of random leadership transitions because of natural death or terminal illness to show, following an earlier paper by Jones and Olken (2005), that leaders m...
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The articles in this Feature are selected from among those presented at a conference held in honour of Angus Deaton in September 2009. The conference brought together current and former colleagues, co-authors and students. These participants had in common their shared admiration of Angus and his contributions to economics
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This paper tests whether education levels di¤er between leaders selected in autocracies and democracies. We use a unique data set on over 1300 world leaders between 1848 and 2004 and exploit within country variation from transitions to and from democracy to show that democracies pick more highly educated leaders. The results are ro- bust to a wide...
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We explore the consequence for taxation and regulation of bonus pay when investors are protected by taxpayers from downside risk. The paper develops a model where workers in financial sector firms make decisions about effort and risktaking which are influenced by the structure of bonus pay. Bailouts lead to too little effort, too much risk-taking a...
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This paper analyzes the economic role and performance of a type of financial institution which is observed worldwide: rotating savings and credit associations (Roscas). Using a model in which individuals save for an indivisible durable consumption good, we study Roscas which distribute funds using random allocation and bidding. Each type of Rosca a...
Article
It is widely recognized that fragile states are key symptoms of under-development in many parts of the world. Such states are incapable of delivering basic services to their citizens and political violence is commonplace. As of yet, mainstream development economics has not dealt in any systematic way with such concerns and the implications for deve...
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This paper studies the determinants of MPs' expense claims and of their attendance at Parliamentary meetings. Using a multiple regression framework, we correlate the expenses with three sets of variables: constituency characteristics, political variables, and individual characteristics. We then look at the ratio of parliamentary expenses claimed to...
Book
What is good government? Why do some governments fail? How do you implement political accountability in practice? What incentives do you need to put in place to ensure that politicians and public servants act in the public interest and not their own? These questions and many more are addressed in Timothy Besley's intriguing Lindahl lectures. Econom...
Article
This paper develops a simple model to analyse how a lack of political competition may lead to policies that hinder economic growth. We test the predictions of the model on panel data for the US states. In these data, we find robust evidence that lack of political competition in a state is associated with anti-growth policies: higher taxes, lower ca...
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This paper analyses Labour's record on monetary policy and the record of the MPC which it created. The paper begins by discussing the conceptual framework and institutions behind inflation targeting as it operates in the UK. We then discuss the successes that it enjoyed up to 2007 and debate the lessons that are being learned as a consequence of th...
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We exploit differences in historical war casualties to estimate the impact of fiscal capacity on economic performance. In the past, states fought different amounts of external conflicts, of various lengths and magnitudes. To raise the revenues to wage wars, states made fiscal innovations, which persisted and helped to shape current fiscal instituti...
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The question of who guards the guards is intimately connected with broader questions of state capacity and the establishment of a monopoly of violence in society, something which is often viewed as the defining feature of the modern state. But to establish such a monopoly, civilian rulers need not only to build an effective military, but also to co...
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The goal of the Mirrlees Review has been to identify what makes a good tax system for an open developed economy in the 21st century and to suggest how the UK tax system could be reformed to move in that direction. As an integral part of the Review, this volume brings together thirteen studies of different dimensions of tax design, plus associated c...
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Investments in fiscal capacity — economic institutions for tax compliance — are an important feature of economic development. This paper develops a dynamic model to study such investments and their evolution over time. We contrast a social planner’s investment path with paths where political constraints are important. Three types of states emerge i...
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This paper uses a unique data set on more than 600,000 mortgage contracts to estimate a credit supply function which allows for risk-heterogeneity. Non-linearity is modeled using quantile regressions. We propose an instrumental variable approach in which changes in the tax treatment of housing transactions are used as an instrument for loan demand....
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The absence of state capacities to raise revenue and to support markets is a key factor in explaining the persistence of weak states. This paper reports on an ongoing project to investigate the incentive to invest in such capacities. The paper sets out a simple analytical structure in which state capacities are modeled as forward looking investment...
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This article exploits data on the pattern of violence across regions and over time to estimate the impact of the peace process in Northern Ireland on house prices. After establishing a negative correlation between killings and house prices, we estimate the parameters of a Markov switching model with conflict and peace as latent states. We use the m...
Article
This paper explores the consequences of creating and improving property rights so that fixed assets can be used as collateral. This has become a cause célèbre of Hernando de Soto whose views are influential in debates about policy reform concerning property rights. Hence, we refer to the economic impact of such reforms as the de Soto effect. We exp...
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Perhaps the crowning achievement of mature democracies is the peaceful acceptance of the ballot box as the primary instrument for deciding who should hold power in society. We do not have to go far back in the history of most democratic states, however, to find a distinct role for political violence. Moreover, many inhabitants of the globe still re...
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This chapter develops a unified analytical framework, drawing on and extending the existing literature on the subject, for studying the role of property rights in economic development. It addresses two fundamental and related questions concerning the relationship between property rights and economic activity. (i) What are the mechanisms through whi...
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This paper studies the incidence of civil war over time. We put forward a canonical model of civil war, which relates the incidence of conflict to circumstances, institutions and features of the underlying economy and polity. We use this model to derive testable predictions and to interpret the cross-sectional and times-series variations in civil c...
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Improving accountability in public services has been a central objective of many public sector reforms in recent years. Chief among these have been efforts to generate observable performance measures as a basis for monitoring performance. This paper examines a natural experiment in regimes applied to waiting list targets for hospital admissions in...
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Economists generally assume that the state has sufficient institutional capacity to support markets and levy taxes. This paper develops a framework where "policy choices" in market regulation and taxation are constrained by past investments in legal and fiscal capacity. It studies the economic and political determinants of such investments, demonst...
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The role of citizens' initiatives figures prominently in contemporary debates on constitutional change. It is widely believed that permitting initiatives should improve the congruence between citizen preferences and policy outcomes across the spectrum of issues on which initiatives may be placed. This paper investigates the theoretical basis for th...
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This paper uses mortgage data to construct a measure of terms on which households access to external finance, and relates it to consumption at both the aggregate and cohort levels. The Household External Finance (HEF) index is based on the spread paid by risky borrowers in the mortgage market. There is evidence that the terms of access to external...
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This paper uses mortgage data to construct a measure of terms on which households access to external finance, and relates it to consumption at both the aggregate and cohort levels. The Household External Finance (HEF) index is based on the spread paid by risky borrowers in the mortgage market. There is evidence that the terms of access to external...
Article
The article builds a simple model to investigate how different types of armed conflict shape fiscal capacity: the state's ability to raise revenue from taxes. It starts from the simple observation that external war tends to generate common interests across groups in society, whereas internal, civil war entails deep conflicting interests across grou...
Article
The article builds a simple model to investigate how different types of armed conflict shape fiscal capacity: the state's ability to raise revenue from taxes. It starts from the simple observation that external war tends to generate common interests across groups in society, whereas internal, civil war entails deep conflicting interests across grou...
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The paper introduces status as reflecting an agent's claim to recognition in her work. It is a scarce resource: increasing an agent's status requires that another agent's status is decreased. Higher status agents are more willing to exert effort in exchange for money; better-paid agents would exert a higher effort in exchange for an improved status...
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This paper looks at the voting patterns of internal and external members of the MPC to investigate how far there are differences between insiders and outsiders. We make three contributions. First, we assess the extent to which the Bank of England internally generated forecasts explain the MPC members' voting decisions. This is important as generati...
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In this speech, Professor Tim Besley, a member of the Monetary Policy Committee, reports on research on the relationship between consumption growth and access to finance for UK households. Professor Besley argues that improved access to financial markets over the past 20 years has allowed consumers to smooth expenditures associated with purchases o...
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In advanced economies, collateralization of fixed assets plays a key role in supporting arms-length trade. But effective collateral requires secure property rights so that assets can be pledged against default. Otherwise, trade is restricted to relational contracting within networks which use social collateral. This paper develops a model of contra...