(with Doug Bernheim and Sevin Yeltekin), Econometrica 83 (5), 1877-1911, 2015. Online Appendix. A link to the 1999 version, which only had numerical results.
Summary. Poverty can perpetuate itself by undermining the capacity for self-control. Our main result demonstrates that low initial assets can limit self-control, trapping people in poverty, while those with high initial assets can accumulate indefinitely.
(with J. Esteban), American Economic Review 96, 257–279 (2006). Supplementary Notes.
Summary. This paper describes how wealth inequality may distort public resource allocation. A government seeks to allocate limited resources to productive sectors, but sectoral productivity is privately known by agents with vested interests in those sectors. They lobby the government for preferential treatment. The government—even if it honestly seeks to maximize economic efficiency—may be confounded by the possibility that both high wealth and true economic desirability create loud lobbies. Broadly speaking, both poorer economies and unequal economies display greater public misallocation. The paper warns against the conventional wisdom that this is so because such governments are more “corrupt.”
(with Kyle Hyndman), Review of Economic Studies 74, 1125–1147, 2007.
Summary. We study coalition formation in “real time”, a situation in which coalition formation is intertwined with the ongoing receipt of payoffs. Agreements are assumed to be permanently binding: They can only be altered with the full consent of existing signatories. For characteristic function games we prove that equilibrium processes—whether or not these are history dependent—must converge to efficient absorbing states. For three-player games with externalities each player has enough veto power that a general efficiency result can be established. However, there exist four-player games in which all Markov equilibria are inefficient from every initial condition, despite the ability to write permanently binding agreements. Online Appendix.