This paper provides a theory of government intervention, such as government ownership, regulation, mandatory public schooling, subsidies, and industrial policy, as an optimal policy response due to the inability to commit not to expropriate private investment or bail agents out. If the...

Incentive compensation induces correlation between the portfolio of managers and the cash flow of the firms they manage. This correlation exposes managers to risk and hence gives them an incentive to hedge against the poor performance of their firms. We study the agency problem between...

This paper develops a dynamic model of the capital structure based on the need to collateralize loans with tangible assets. The model provides a unified theory of optimal firm financing in terms of the optimal capital structure, investment, leasing, and risk management policy. Tangible assets...

This paper studies the role of leasing of productive assets. When capital is leased (or rented), it is more easily repossessed and hence leasing has higher debt capacity and relaxes financing constraints. However, leasing gives rise to an agency problem with regard to the care with which the...

Behavioral economics presents a "paternalistic" rationale for government intervention. Current literature focuses on benevolent government. This paper introduces politicians who may indulge/exploit these behavioral biases. We present an analysis of the novel features that arise when the...

multiplier) at equilibrium of a class of static economies (complete and incomplete information and with different social structures, eg. overlapping groups, simple networks) of social interactions, derive comparative statics analysis of such properties and study identification with respect to...

We study the wealth distribution in Bewley economies with idiosyncratic capital income risk (entrepreneurial risk). We find, under rather general conditions, a unique ergodic distribution of wealth which displays fat tails (a Pareto distribution in the right tail).

We consider a generic environment with (potentially) multiple equilibria and analyze conditions for identification of the structural parameters. We then study conditions that allow for the estimation of both the structural parameters and the “selected equilibriumâ€. We focus on a...

In this paper we study theoretically the dynamics of the distribution of wealth in an Overlapping Generation economy with bequest and various forms of redistributive taxation. We characterize the transitional dynamics of the wealth distribution and as well as the stationary distribution. We show...