Culture Values Entrepreneurship and Growth

We integrate a social norm which associates status to accumulation of capital and consumption into a simple model of endogenous growth. We show that societies which place a greater weight of cultural values on stock of accumulated capital as opposed to consumption will experience fast growth. Our results are consistent with those obtained by Baumol (1990) in the context of entrepreneurship and by Fershtman and Weiss (1991).Entrepreneurship;Culture Values;Social Status;Growth

Family Capitalism Corporate Governance Theory

Family firms, which are prevalent around the world both for small organizations and large corporations, are usually more performant than other types of firms. This paper draws on altruism and on the theory of incentives contracting to explain why family firms perform better. Assuming that altruism only exists in family firms, we show that the strength of family ties has an impact on the optimal contract only under asymmetric information. Then, we extend the analysis to the principal-agent supervisor setting and prove that the recruitment of family members may be seen as a device against collusion within a three-tier hierarchy.Family Capitalism; Altruism; Family Ties ;Asymmetric Information;Supervisor Agent Principal; Collusion

Bureaucracy and Corruption Taxation Proof

Using the Principal-Agent-Supervisor paradigm, we examine in this paper how a tax collection agency changes optimal schemes in order to lessen the occurrence of bribery between the tax collector and the taxpayer. The Principal, who maximizes the expected net fiscal revenue, reacts by decreasing tax rates when the supervisor is likely to engage in corrupt transaction with taxpayer. The combat against collusion may explain the greater reliance on indirect taxes than on direct taxes both in developed and developing countriesPrincipal Agent Supervisor;Bureaucracy ;Collusion; Tax evasion

A Theory of Educational Inequality Family and Agency Costs

In this paper, we examine the consequences of imperfect information on the pattern of transfers from parents to children. Drawing on the theory of mechanism design, we consider a model of family contract with two levels of effort. We prove that equal transfers among children are expected under perfect information, while the second-best contract implies risksharing between the two generations, so that poor families experience higher agency costs..Education; Asymmetric Information; Family Financial Incentives; Inequality

Social Security, Endogenous Fertility and the Optimal Family Size

In this paper we analyzed a model of endogenous fertility in presence of financial market assets and social security pensions. Given the children externality and in the absence of corrective policy, the fertility rate chosen in market economy is too low. Indeed, in his optimal choice of family size, the representative household does not take into account of this children externality which leads to a sub optimal demography. We have shown that an optimal demographic allocation exists and can be implemented through a subvention taxation policy if it is availabl

Effective Cost of Brain Drain

In developing countries, remittances and intra-family private transfers sent by household members who migrate to more developed countries constitute a fundamental source of income and capital accumulation. Then, it is important to understand the motives of migrants who decide to remit back to their families. Drawing on the theory of labor migration under asymmetric information, we show that low-skilled workers are expected to provide higher amounts of remittances when remittances are motivated by self-interest. This transfer paradox is explained as follows. Since low skilled workers are likely to return home when informational symmetry is restored, the optimal remittance level is a decreasing function of the migrant's skill level since remittances may be seen as an implicit insurance, whose benefits are received only under migration return.Remittances, asymmetric information, migration

Optimal law enforcement under asymmetric information

In this paper, we focus on the problem created by asymmetric information about the enforcer's (agent's) costs associated to enforcement expenditure. This adverse selection problem affects optimal law enforcement because a low cost enforcer may conceal its information by imitating a high cost enforcer, and must then be given a compensation to be induced to reveal its true costs. The government faces a trade-off between minimizing the enforcer's compensation and maximizing the net surplus of harmful acts. As a consequence, the probability of apprehension and punishment is usually reduced leading to more offenses being committed. We show that asymmetry of information does not affect law enforcement as long as raising public funds is costless. The consideration of costly raising of public funds permits to establish the positive correlation between asymmetry of information between government and enforcers and the crime rate.Fine, probability of detection, asymmetry of information

Dynamic optimal law enforcement with learning

We incorporate the process of enforcement learning by assuming that the agency's current marginal cost is a decreasing function of its past experience of detecting and convicting. The agency accumulates data and information (on criminals, on opportunities of crime) enhancing the ability to apprehend in the future at a lower marginal cost. We focus on the impact of enforcement learning on optimal stationary compliance rules. In particular, we show that the optimal stationary fine could be less-than-maximal and the optimal stationary probability of detection could be higher-than-otherwise.Fine, probability of detection and punishment, learning

Dark Side of Social Capital Social Preferences and Corruption

Using the principal-agent- supervisor paradigm, this paper examines the occurrence of collusion in a setting where the principal has no information about the supervisor and the agent does not necessarily know the supervisor’s preferences. We formally prove the occurrence of collusion is more likely when the agent has information about the supervisor. This result suggests that corruption, which is likely to emerge in long term reciprocal relationships between public officials and potential bribery, may be reduced by the means of staff rotation. Evidence from an experimental study supports this propositio