We present a model in which households facing income and housing-price shocks use long-term mortgages to purchase houses. Interest rates on mortgages reflect the risk of default. The model accounts for observed patterns of housing consumption, mortgage borrowing, and defaults. We use the model...

We study the roles private information and capital accumulation play in the structure of partnerships. Partnerships are ventures formed with capital contributions from two members who initially share ownership of a business. Each period, profit is either invested or paid to the partners...