We provide a cultural explanation to the phenomenon of corruption in the framework of an overlapping generations model with intergenerational transmission of values. W e show that the economy has two steady states with di erent levels of corruption. The driving force in the equilibrium selection process is the education e ort exerted by parents which depends on the distribution of ethics in the population and on expectations about future policies. We propose some policy interventions which via parents' e orts have long-lasting e ects on corruption and show the success of intensive education campaigns. Educating the young is a key element in reducing corruption successfully.

We provide a cultural explanation to the phenomenon of corruption in the framework of an overlapping generations model with intergenerational transmission of values. W e show that the economy has two steady states with di erent levels of corruption. The driving force in the equilibrium selection process is the education e ort exerted by parents which depends on the distribution of ethics in the population and on expectations about future policies. We propose some policy interventions which via parents' e orts have long-lasting e ects on corruption and show the success of intensive education campaigns. Educating the young is a key element in reducing corruption successfully.

This paper analyzes the problem of abnormally low tenders in the procurement process. Limited liability causes¯rms in a bad¯nancial situation to bid more aggressively than nancially healthy¯rms in the procurement auction. Therefore, it is likely that the winning¯rm is a¯rm in¯nancial di±culties with a high risk of bankruptcy. The paper focuses on the regulatory practice of surety bonds to face this problem. We show that the use of surety bonds reduces and sometimes eliminates the problem of abnormally low tenders. We provide a characterization of the optimal surety bond and show that the US practice of requiring that surety bonds cover over 100% of the contract price can be excessive, implying overinsurance to the problem of abnormally low tenders.

We examine the e ect of unilateral and mutual partner selection in the context of prisoner's dilemmas experimentally. Subjects play s i m ultaneously several nitely repeated two-person prisoner's dilemma games. We nd that unilateral choice is the best system. It leads to low defection and fewer singles than with mutual choice. Furthermore, with the unilateral choice setup we are able to show that intending defectors are more likely to try to avoid a match than intending cooperators. We compare our results of multiple games with single game PD-experiments and nd no di erence in aggregate behavior. Hence the multiple game technique is robust and might therefore be an important tool in the future for testing the use of mixed strategies.

We propose a theoretical model to explain empirical regularities related to the curse of natural resources, which emphasises the behaviour and incentives of politicians. We extend the standard voting model to give voters political control beyond the elections. This gives rise to a new restriction that policies should not give rise to a revolution. Our model clarifies when resource discoveries might lead to revolutions, namely, in countries with weak institutions. It also suggests that for bad political institutions human capital depends negatively on natural resources, while for high institutional quality the dependence is reversed. This finding is corroborated in cross section regressions.Until World War II the economics profession tended to believe that natural resources were an unqualified blessing for the nation that owned them. However, in the post World-War II period, the evidence against this belief started accumulating: many resource rich countries grew very slowly and economists started to talk about the curse of natural resources. There is a large number of empirical papers which find evidence of this curse