(with Joan Esteban), American Economic Review 101, 1345–1374, 2011.
Summary. In this paper we study a behavioral model of conflict that provides a basis for choosing certain indices of dispersion as indicators for conflict. We show that a suitable monotone transform of the equilibrium level of conflict can be proxied by a linear function of the Gini coefficient, the Herfindahl-Hirschman fractionalization index, and a specific measure of polarization due to Esteban and Ray.
(with Garance Genicot), Journal of Development Economics 79, 398-412, 2006.
Summary. In a credit market with enforcement constraints, we study the effects of a change in the outside options of a potential defaulter on the terms of the credit contract, as well as on borrower payoffs. The results crucially depend on the allocation of “bargaining power” between the borrower and the lender. We prove that there is a crucial threshold of relative weights such that if the borrower has power that exceeds this threshold, her expected utility must go up whenever her outside options come down. But if the borrower has less power than this threshold, her expected payoff must come down with her outside options. These disparate findings within a single model permit us to interpret existing literature on credit markets in a unified way.
(with Anindita Mukherjee), Journal of Development Economics 47, 207-239, 1995.
Summary. The co-existence of seasonal fluctuations in income and imperfect credit markets suggests that tied contracts should dominate rural labor markets. However, empirical observation from India suggests that this is far from being the case, and indeed, that there is a declining trend in labor tying. In our model, casual labor markets are always active despite the presence of seasonality, and a variety of implications are derived that link economic growth, changing information flows, and the decline of labor tying over time.