This paper uses a structural approach to examine who matches with whom. A two-sided matching model that allows for marital sorting in response to marriage market flexibility and agents' preferences is utilized. Estimation is based on imbedding the numerical solution of a matching model within a...

As Posner (1997) has observed, when individuals in a relationship can commit to imposing costs upon each other then efficient behavior in the absence of law is possible. The question is whether efficient norms of behavior evolve endogenously in a population. We show that in a standard hold up...

As recent research has shown one of the most important impediments to a successful conduct of monetary policy arises from the measurement error associated with output and inflation observations and the uncertainty regarding estimates of unobservables such as potential output. (See, for example,...

Using threshold autoregressive specifications, this paper develops new parametric tests for level asymmetries. It proposes bootstrap likelihood ratio statistics to test the symmetric adjustment null against sign and amplitude asymmetries or a combination of both. Monte Carlo simulations show...

This paper investigates optimal monetary policy in an economy, in which the output-inflation trade off faced by the central bank is influenced by two important forces: (i) the presence of uncertain and possibly changing parameters, and (ii) private sector expectations regarding the central...

Sometimes numerical failure of an econometric software package is quite stark: a nonlinear procedure fails to converge; illegal arguments to a function cause an abnormal end; matrices cannot be inverted. Other times a package fails without warning, and these types of failures are particularly...

In this study, we ask whether the presence of precautionary savings substantially reduces the optimal replacement rate in an economy characterized by equilibrium unemployment and moral hazard. In line with previous studies, the optimality criterion based on comparisons of steady states leads to...

This paper considers the cross-sectional aggregation of nonlinear decision rules derived from intertemporal optimization problems under uncertainty, examining in particular (i) the role of aggregation across decision rules of heterogeneous decision makers as a source of variation and persistence...

We evaluate the stability of risk-sharing contracts in the presence of moral hazard. Contracts are rules for sharing output among producers and affect the extent of private investments in production. Organizations, which are identified with the contracts they offer, compete for membership....

Consider a simple world populated with two kinds of individuals, those who work and create wealth (peasants) and those who survive by taking the property of others (bandits). The presence of bandits creates an incentive for peasants to seek protection, to defend their property. But protection is...