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Institutional Barriers and World Income Disparities
Why have the income disparities between fast-growing economies and development laggards widened over the past five decades? How important is the role played by institutional barriers with relation to technology adoption? Using cross-country analysis, we find that more-severe institutional barriers in several representative lag-behind countries actually hinder the process of structural transformation and economic development, causing these countries to fall below a representative group of fast-growing economies despite having similar or even better initial states five decades ago. We also find ...
Eggs in One Basket: Security and Convenience of Digital Currencies
Digital currencies store balances in anonymous electronic addresses. We analyze the trade-offs between safety and convenience of aggregating balances in addresses, electronic wallets and banks. In our model agents balance the risk of theft of a large account with the cost to safeguarding a large number of passwords of many small accounts. Account custodians (banks, wallets and other payment service providers) have different objectives and tradeoffs on these dimensions; we analyze the welfare effects of differing industry structures and interdependencies, and in particular the consequences ...
Should the central bank issue e-money?
Should a central bank take over the provision of e-money, a circulable electronic liability? We discuss how e-money technology changes the tradeoff between public and private provision, and the tradeoff between e-money and a central bank's existing liabilities like bank notes and reserves. The tradeoffs depend on i) the technological setup of the e-money system (as a token or an account; centralized or decentralized); ii) the potential improvement in the implementation and transmission of monetary policy; iii) the risks to safety and privacy from cyber attacks; and iv) the uncertain impact on ...