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This paper develops an economic model to study the philosophical problem of evil. God's creation of the world is modeled as a problem of optimal incentives. A principal (God) must choose a world so that the populating agents behave according to his benevolent objective. In a world, the physical environment resembles a contract that determines the rewards and punishments for different choices. The agents' behavioral rule determines how they respond to these incentives. I characterize a contract and a behavioral rule that solve the principal's problem, and evil is evidenced. Specifically, evil endogenously aligns the agents' actions with the principal's objective. Other insights on the origin, cause, and role of evil are also derived from the model. The result of this analysis is a theodicy arisen from an economic model. As a byproduct, this paper shows how an economic model can be used to study philosophical or theological questions. [ABSTRACT FROM AUTHOR]

Using French data collected in 2007 from a sample of about 2,000 elderly people living in nursing homes, this paper investigates the role that individual characteristics play in satisfaction with life and depression. Following psychological studies that have highlighted the benefits of social interactions on individual well-being, I focus in particular on the role played by making friends in the nursing home. Results from random effect ordered Probit models show that both satisfaction with living conditions and feeling of depression are much more influenced by making friends in the institution than by visits from family and relatives or other individual background characteristics. These findings may be interpreted as evidence of a relational return to friendship within nursing homes. [ABSTRACT FROM AUTHOR]

This paper analyzes the impact of a country's level of benefit morale on generosity of sick pay entitlements by means of a political economy model and an empirical investigation. Higher benefit morale reduces the incidence of absence. On the one hand, this makes insurance cheaper with the usual demand side reaction. On the other hand, being absent less often, the voter prefers less insurance. The former effect dominates at lower, the latter at higher levels of benefit morale. We present empirical evidence for both effects in a sample of 31 countries between 1981 and 2010. [ABSTRACT FROM AUTHOR]

Currency unions have been promoted as a means to increase trade, investment and growth. A crucial issue in giving up the domestic currency is the loss of a mechanism to absorb real external shocks. High real exchange volatility between countries considering such a policy would suggest that a currency union could be quite costly in terms of large, persistent misalignment and thus balance of payments imbalances. Von Hagen and Neumann (1994) assessed the readiness of nine European countries for Euro-zone membership by examining real exchange rate variability. In this paper we analyze their predictions, and find them to be quite accurate for Europe. All of the nations which appeared ready for the Euro have joined. Of the three which did not appear prepared, two have retained their own currency, and the third has experienced real appreciation and stagnant exports. Given the prescience of this method, we apply it to nine Latin American nations. A number of countries in this region have begun to form a currency union by unilaterally adopting the U.S. dollar. The Von Hagen-Neumann method finds very high real exchange rate variability between the U.S. and the Latin American nations-indeed much higher than that between Germany and the countries which would later adopt the Euro-so adopting the dollar could cause very painful adjustment in Latin America. [ABSTRACT FROM AUTHOR]

This paper investigates the empirical relation between consumer and expert expectations about macroeconomic conditions in Germany. Using data from the EU Consumer Confidence Survey and the ZEW business expectations, static models and error-correction models are estimated explaining consumer expectations as functions of expert expectations, consumer retrospections, and lagged consumer expectations. It's found that consumer expectations are only weakly related to expert expectations, but strongly influenced by consumers' retrospections. Consumers primarily extrapolate perceptions about current economic conditions in the future. However, during national election campaigns, the relation between consumer and expert expectations is stronger. [ABSTRACT FROM AUTHOR]

This paper provides systematic evidence for both the cross-country and sector-independent validation of political-economic theories used to explain changes in national property rights arrangements. A political-economic model for privatization will be developed and then tested on progress in large-scale and small-scale privatizations in 14 Central and Eastern European transition economies between 1994 and 2000. It will be proven that divergent levels of progress in large-scale privatization can be explained to a large extent by the structural and financial constraints on political decision-makers and varying national interest group constellations. Small-scale privatization is not significantly determined by political constraints and interest group pressure. This finding supports the assumption that the relative merits of different theories to explain changes in property rights arrangements depend crucially on the specific conditions of initial property arrangements. [ABSTRACT FROM AUTHOR]