Soft budget constraints in a dynamic general equilibrium model

This paper considers an overlapping generations model in which capital investment is financed in a credit market with adverse selection. Lenders’ inability to commit ex-ante not to bailout ex-post, together with a wealthy position of entrepreneurs gives rise to the soft budget constraint syndrome, i.e. the absence of liquidation of poor performing firms on a regular basis. This problem arises endogenously as a result of the interaction between the economic behavior of agents, without relying on political economy explanations. We found the problem more binding along the business cycle, providing an explanation to creditors leniency during booms in some LatinAmerican countries in the late seventies and early nineties.

Asymmetrically fair rules for an indivisible good problem with a budget constraint

We study a particular restitution problem where there is an indivisible good (land or property) over which two agents have rights: the dispossessed agent and the owner. A third party, possibly the government, seeks to resolve the situation by assigning rights to one and compensate the other. There is also a maximum amount of money available for the compensation. We characterize a family of asymmetrically fair rules that are immune to strategic behavior, guarantee minimal welfare levels for the agents, and satisfy the budget constraint.

Forms of participatory democracy: an analytical framework based on the experiences of Bolivia, brazil and Colombia

Based on the experiences of Colombia, Brazil and Bolivia, the paper proposes a general analytical framework for participatory mechanisms. The analysis is oriented to detect the incentives in each system and theethics and behavior sustaining them. It investigates about the sustainability of participatory democracy, in the face of tensions with representative democracy. The article presents a theoretical framework built from theseexperiences of institutional design and political practice, and confronts it against the theoretical conceptualizationsof participatory democracy in Bobbio, Sartori, Elster and Nino, among others. In this context, different waysin which those schemes can be inserted in the political systems become apparent, along with the variables thatresult from combining elements of direct, representative and participatory democracy”