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Moussa P. Blimpo, Admasu Asfaw Maruta, and Josephine Ofori Adofo

Well-functioning institutions are essential for stable and prosperous societies. Despite significant improvement during the past three decades, the consolidation of coherent and stable institutions remains a challenge in many African countries. There is a persistent wedge between the de jure rules, the observance of the rules, and practices at many levels. The wedge largely stems from the fact that the analysis and design of institutions have focused mainly on a top-down approach, which gives more prominence to written laws. During the past two decades, however, a new strand of literature has emerged, focusing on accountability from the bottom up and making institutions more responsive to citizens’ needs. It designs and evaluates a mix of interventions, including information provision to local communities, training, or outright decentralization of decision-making at the local level. In theory, accountability from the bottom up may pave the way in shaping the institutions’ nature at the top—driven by superior localized knowledge. The empirical findings, however, have yielded a limited positive impact or remained mixed at best. Some of the early emerging regularities showed that information and transparency alone are not enough to generate accountability. The reasons include the lack of local ownership and the power asymmetry between the local elites and the people. Some of the studies have addressed many of these constraints at varying degrees without much improvement in the outcomes. A simple theoretical framework with multiple equilibria helps better understand this literature. In this framework, the literature consists of attempts to mobilize, gradually or at once, a critical mass to shift from existing norms and practices (inferior equilibrium) into another set of norms and practices (superior equilibrium). Shifting an equilibrium requires large and/or sustained shocks, whereas most interventions tend to be smaller in scope and short-lived. In addition, accountability at the bottom is often neglected relative to rights. If norms and practices within families and communities carry similar features as those observed at the top (e.g., abuse of one’s power), then the core of the problem is beyond just a wedge between the ruling elite and the citizens.


Jeanet Sinding Bentzen

Economics of religion is the application of economic methods to the study of causes and consequences of religion. Ever since Max Weber set forth his theory of the Protestant ethic, social scientists have compared socioeconomic differences across Protestants and Catholics, Muslims, and Christians, and more recently across different intensities of religiosity. Religiosity refers to an individual’s degree of religious attendance and strength of beliefs. Religiosity rises with a growing demand for religion resulting from adversity and insecurity or a surging supply of religion stemming from increasing numbers of religious organizations, for instance. Religiosity has fallen in some Western countries since the mid-20th century, but has strengthened in several other societies around the world. Religion is a multidimensional concept, and religiosity has multiple impacts on socioeconomic outcomes, depending on the dimension observed. Religion covers public religious activities such as church attendance, which involves exposure to religious doctrines and to fellow believers, potentially strengthening social capital and trust among believers. Religious doctrines teach belief in supernatural beings, but also social views on hard work, refraining from deviant activities, and adherence to traditional norms. These norms and social views are sometimes orthogonal to the general tendency of modernization, and religion may contribute to the rising polarization on social issues regarding abortion, LGBT rights, women, and immigration. These norms and social views are again potentially in conflict with science and innovation, incentivizing some religious authorities to curb scientific progress. Further, religion encompasses private religious activities such as prayer and the particular religious beliefs, which may provide comfort and buffering against stressful events. At the same time, rulers may exploit the existence of belief in higher powers for political purposes. Empirical research supports these predictions. Consequences of higher religiosity include more emphasis on traditional values such as traditional gender norms and attitudes against homosexuality, lower rates of technical education, restrictions on science and democracy, rising polarization and conflict, and lower average incomes. Positive consequences of religiosity include improved health and depression rates, crime reduction, increased happiness, higher prosociality among believers, and consumption and well-being levels that are less sensitive to shocks.


Łukasz Balbus, Kevin Reffett, and Łukasz Woźny

In dynamic choice models, dynamic inconsistency of preferences is a situation in which a decision-maker’s preferences change over time. Optimal plans under such preferences are time inconsistent if a decision-maker has no incentive to follow in the future the (previously chosen) optimal plan. A typical example of dynamic inconsistency is the case of present bias preferences, where there is a repeated preference toward smaller present rewards versus larger future rewards. The study of dynamic choice of decision-makers who possess dynamically inconsistent preferences has long been the focal point of much work in behavioral economics. Experimental and empirical literatures both point to the importance of various forms of present-bias. The canonical model of dynamically inconsistent preferences exhibiting present-bias is a model of quasi-hyperbolic discounting. A quasi-hyperbolic discounting model is a dynamic choice model, in which the standard exponential discounting is modified by adding an impatience parameter that additionally discounts the immediately succeeding period. A central problem with the analytical study of decision-makers who possess dynamically inconsistent preferences is how to model their choices in sequential decision problems. One general answer to this problem is to characterize and compute (if they exist) constrained optimal plans that are optimal among the set of time consistent sequential plans. Time consistent plans are those among the set of feasible plans that will actually be followed, or not reoptimized, by agents whose preferences change over time. These are called time consistent plans or policies (TCPs). Many results of the existence, uniqueness, and characterization of stationary, or time invariant, TCPs in a class of consumption-savings problems with quasi-hyperbolic discounting, as well as provide some discussion of how to compute TCPs in some extensions of the model are presented, and the role of the generalized Bellman equation operator approach is central. This approach provides sufficient conditions for the existence of time consistent solutions and facilitates their computation. Importantly, the generalized Bellman approach can also be related to a common first-order approach in the literature known as the generalized Euler equation approach. By constructing sufficient conditions for continuously differentiable TCPs on the primitives of the model, sufficient conditions under which a generalized Euler equation approach is valid can be provided. There are other important facets of TCP, including sufficient conditions for the existence of monotone comparative statics in interesting parameters of the decision environment, as well as generalizations of the generalized Bellman approach to allow for unbounded returns and general certainty equivalents. In addition, the case of multidimensional state space, as well as a general self generation method for characterizing nonstationary TCPs must be considered as well.