We use an extended Barro-Becker model of endogenous fertility, in which parents are heterogeneous in their labor productivity, to study the efficient degree of consumption inequality in the long run. In our environment a utilitarian planner allows for consumption inequality even when labor...

We analyze the extent to which reputational concerns may overcome moral hazard problems in credit markets. In such markets, loan contracts are common, and with loan contracts, borrowers have incentives to take on high levels of risk if lenders cannot observe the types of projects in which...

Financial Crises are typically associated with a loss of confidence in financial intermediaries. This loss of confidence often manifests itself in a sharp fall in the prices of securities issued by financial intermediaries. We focus on the market for asset-backed securities issued by banks and...

Third, there is no general way to Pareto rank the equlibria.