Dundee Discussion Papers in Economics 111:Do debtor-favored contracts necessarily benefit the debtor?

We consider a case of security design, where the optimal contract depends on the nature of the future renegotiations game. It is shown that giving the bargaining power to the debtor in the renegotiations game may not always work in his interest

A Theory of Discrimination Based on Signaling and Strategic Information Acquisition

The paper develops a `signaling' based theory of discrimination where workers face different incentives for skill acquisition purely because of their group membership. Workers belonging to the disadvantaged group bear substantial signaling cost. The difference in signaling costs between groups is not due to any unexplained group heterogeneity but discriminatory information policy of the employer. Based on its belief about the group, an employer may not acquire relevant information about the workers of this group, even if such information were costless. It is shown that affirmative action policies can help in the presence of non-convex signaling technology. Factors like co-ordination amongst workers, presence of a 'dynamic' labor market and sub-group formation seem to affect the nature and degree of discrimination.

Corruption and Competition in the Presence of Inequality and Market Imperfections

We analyze the relation between corruption, competition and inequality in a developing economy context where markets are imperfect and there is wealth inequality. We consider an economy where different types of households (efficient and inefficient) choose whether to enter the production sector or not. Due to information asymmetry and wealth inequality, the market fails to screen out the inefficient types. In addition to the imperfect screening in the credit market, the inefficient type's entry is further facilitated by corruption in the product market. We analyze the market equilibrium and look at some of the implications. We show that a rise in inequality can lead to an increase in corruption along with greater competition. By endogenising the types, we also show how in the presence of corruption, initial wealth inequality will distort the incentives of the poor and lead to trap-like situations.Corruption, Competition, Credit Market, Inequality, Screening.

Does Inequality lead to Conflict?

conflict, wealth inequality, Nash bargaining