We model censorship as a dynamic game between an agent and an evaluator. Two types of public news, good and bad news, are informative about the agent’s ability. However, the agent can hide bad news from the evaluator, at some cost, and will do so if and only if this secures her a significant increase in tenure. Thus, the evaluator faces a bandit problem with endogenous news processes. When bad news is conclusive, the agent always censors when the public belief is sufficiently high, but below a threshold, she entirely or partially stops censoring. The possibility of censorship hurts the evaluator and the good agent, and it may also hurt the bad agent. However, when bad news is inconclusive, we show that the good agent censors bad news more aggressively than the bad agent does. This improves the quality of public information and may benefit all players.

We study the effect of interest rates on top wealth inequality. While lower rates decrease the average growth rate of existing fortunes, they increase the growth rate of new fortunes by making it cheaper to raise capital. We develop a sufficient statistic approach to express the effect of interest rates on the Pareto exponent of the wealth distribution: it depends on the average equity issuance and leverage of individuals reaching the top. Quantitatively, we find that the secular decline in real interest rates has been a major contributor to the rise in top wealth inequality in the U.S.

Is increasing political competition good for voters? We study this question in the political career concerns framework. Our results show that the relationship between political competition, viewed as the cost of challenging incumbent politicians, and the politicians’ incentive to behave in the voters’ interest is undetermined. The same holds for the relationship between political competition and voter welfare, where selection of politicians into office also matters. In particular, voter welfare need not be maximized when challenging incumbent politicians is costless. So, unlike in economy markets, where increased competition is beneficial, in political markets increased competition can have adverse effects.

We examine how deep agreements affect global welfare when such agreements are influenced by producer lobbies. We find that international cooperation on product standards can decrease welfare, and this is more likely to happen when producer lobbies are stronger. On the other hand, international cooperation on production regulations tends to enhance welfare when lobbying pressures are strong. Key to the welfare impact of deep agreements is whether the interests of producer lobbies in different countries are aligned or in conflict: the former situation tends to occur with product standards, while the latter tends to occur with production regulations.

Do mandatory spending rules improve society’s welfare? To answer this, we analyze an infinitehorizon dynamic political-economy model with two parties which disagree on how to split a fixed budget between public and private goods. We study the welfare implications of introducing two types of budget rules, mandatory spending on public goods and entitlement programs, the latter imposing constraints on the private goods’ allocations that can be implemented. We model budget rules following the literature on legislative bargaining with an endogenous status quo. Under a mandatory spending rule on public goods, expenditures are governed by criteria determined by enacted law. In particular, previous year’s spending bill is applied in the current year unless explicitly changed by a majority of policymakers. Entitlement programs, on the other hand, impose restrictions on the provision of private transfers through eligibility rules and generosity formulas that can only be modified with bi-partisan support. We find that entitlement programs induce over-provision of private goods and under-provision of public goods, whereas the opposite is true under a mandatory spending rule on public goods. We show that mandatory spending rules are typically associated with larger welfare gains than entitlement programs. The desirability of the rule, however, depends on the degree of political turnover: (i) with high enough political turnover, both budget rules are better than discretion, but (ii) entitlement programs can generate welfare losses when political persistence is large. This happens because entitlement rules actually increase the volatility of private and public consumption, and reduce public goods’ provision significantly. Finally, we describe conditions under which budget rules would arise in a bargaining equilibrium.

We propose a novel, and simple, Bayesian estimation and model selection procedure for crosssectional asset pricing. Our approach, that allows for both tradable and non-tradable factors, and is applicable to high dimensional cases, has several desirable properties. First, weak and spurious factors lead to diffuse, and centered at zero, posteriors for their market price of risk, making such factors easily detectable. Second, posterior inference is robust to the presence of such factors. Third, we show that flat priors for risk premia lead to improper marginal likelihoods, rendering model selection invalid. Therefore, we provide a novel prior, that is diffuse for strong factors but shrinks away useless ones, under which posterior probabilities are well behaved, and can be used for factor and (non necessarily nested) model selection, as well as model averaging, in large scale problems. We apply our method to a very large set of factors proposed in the literature, and analyse 2.25 quadrillion possible models, gaining novel insights on the empirical drivers of asset returns.