Within a hierarchical firm structure, this paper details how the composition of a worker's skills and the non-observability of a worker's ability affect wage and promotion paths. Promotion-based compensation schemes derive naturally from the worker's asymmetrically observed ability. Promotion takes place over time and is inefficient since employers strategically exploit their knowledge of an able worker's ability. Conversely, employers may be unable to efficiently demote and retain bad managers without paying bonuses. Employers are led to promote educated employees before their equally or more able, but uneducated, counterparts. Explanations for fast-track promotions plans, and other empirical regularities are provided.

Agents expect to trade with each other infinitely often, but face a temporal absence of a coincidence of wants when they meet. Only loans and/or money can facilitate exchange. In small close-knit economies, enduring trade relationships are valued and loans are optimal. In larger economies, with limited communication, information concerning repayment of loans diffuses too slowly to deter agents from reneging unless loans are severely restricted in magnitude. Money has no such redeemability problems, but if Clower constraints bind, loans help supplement money purchases so that both become essential. Roles of various institutions and the historical evolution of media of exchange are explained.

We develop a dynamic repeated election model in which citizen candidates are distinguished by both their ideology and valence. Voters observe an incumbent's valence and policy choices but only know the challenger's party. Our model provides a rich set of novel results. In contrast to existing predictions from static models, we prove that dynamic considerations make higher-valence incumbents more likely to compromise and win re-election, even though they compromise to more extreme policies. Consequently, we find that the correlation between valence and extremist policies rises with office-holder seniority. This result may help explain previous empirical findings. Despite this result, we establish that the whole electorate gains from improvements in the distribution of valences. In contrast, fixing average valence, the greater dispersion in valence associated with a high-valence political elite always benefits the median voter but can harm a majority of voters when voters are sufficiently risk averse. We then consider interest groups (IGs) or activists who search for candidates with better skills. We derive a complete theoretical explanation for the intuitive conjectures that policies are more extreme when IGs and activists have more extreme ideologies, and that such extremism reduces the welfare of all voters.