Client relationships create value, which employees may try to wrest from their employers by establishing their own firms. If an employer and worker cannot contract on the output and profits of the worker�s prospective new firm, at the beginning of their relationship the employer induces the worker to sign a contract that prohibits him from competing or soliciting the current client in …

We document evidence of corruption in Chinese state asset sales. These sales involved stakes in partially privatized firms, providing a benchmark�the price of publicly traded shares�to measure underpricing. Underpricing is correlated with deal attributes associated with misgovernance and corruption. Sales by �disguised� owners that misrepresent their state ownership to e…

To what extent do politicians reward voters who are members of their own ethnic or racial group? Using data from large cities in the United States, we study how black employment outcomes are affected by changes in the race of the cities� mayors between 1973 and 2004. We find that relative to whites, black employment and labor force participation rise, and the black unemployment rate fa…

This article provides an experimental investigation of third parties� sanctioning behavior, in order to understand whether public officials (e.g., judges, politicians, or regulators), when deciding about top-down interventions aimed at punishing wrongdoers, are sensitive to bottom-up pressure on the part of ordinary citizens, who are the major victims of wrongdoers� behavior. We s…

We show that nonbinding law can have a constraining effect on political leaders, because legal compliance is a costly signal to imperfectly informed voters that the leader is unbiased. Moreover, nonbinding law can also have a liberating effect, enabling some leaders to take action when they otherwise would have done nothing. In addition, we illustrate how voters may face a trade-off between…

This article investigates a repeated employment relationship between a principal and a team of agents hired to solve a series of problems. With non-verifiable output, rewarding agents based on team performance can relax the principal�s credibility constraint by smoothing bonus payments over time. Team incentives also induce free-riding, but the principal prefers them to individual ince…

This article develops a theory of contracting among founders of a new firm. It asks at what stage founders agree to commit to each other, how they structure optimal founder contracts, and how this affects team formation, ownership, incentives, and performance. The article derives a trade-off between upfront contracting, which can result in teams with ineffective founders, versus delayed co…

When individuals trade with strangers, there is a temptation to renege on agreements. If repeated interaction or exogenous enforcement is unavailable, societies often solve this problem via institutions that rely on group, rather than individual, reputation. Groups can employ two mechanisms to uphold reputation that are unavailable to individuals: information sharing and in-group punishment. …

Using a newly assembled dataset, we empirically investigate the effects of subcontracting on procurement auction prices in Italy. In this setting, the prequalifications required for firms aiming to bid on public contracts determine the firms� different subcontracting formats. We find that fully qualified firms in a position to choose whether to subcontract generally offer lower prices t…

How does a court�s policy-making authority shape the nature of judicial behavior? We argue that judicial systems that limit policy-making authority also discourage the politicization of courts, encouraging judges to think narrowly about the interests of litigating parties. In contrast, granting a court high policy-making authority�affecting potentially thousands of cases and othe…