The paper presents a model of educational production which tries to make sense of recent evidence on effects of institutional arrangements on student performance. In a simple principal-agent framework, students choose their learning effort to maximize their net benefits, while the government...

Although Holmstrom’s informativeness criterion provides a theoretical foundation for the controllability principle and interfirm relative performance evaluation, empirical and field studies provide only weak evidence on such practices. This paper refines the traditional informativeness...

Differential taxation implies the existence of different tax rates or tax bases for different types of investments. We analyze the effects of differential taxation on managerial effort and risk taking in a moral-hazard model of the LEN type. The agent selects a portfolio of a high-risk and a...

We analyse a simple model of dynamic moral hazard in which there is a clear and tractable trade-off; between static and dynamic incentives. In our model, a principal wants an agent to complete a project. The agent undertakes unobservable effort, which affects in each period the probability that...

In the 'Knightian' theory of entrepreneurship, entrepreneurs provide insurance to workers by paying fixed wages and bear all the risk of production. This paper endogenizes entrepreneurial risk by allowing for optimal insurance contracts as well as the occupational self-selection. Moral hazard...