We study a dynamic model with positive gross flows between employment and unemployment. There is moral hazard associated with search effort and job-retention effort. A quantitative comparison of the unemployment insurance system currently in place in the United States with an optimal system...

A banking model is constructed where roles for government- provided deposit insurance and discount window lending arise when there are restrictions on branch banking. Banks arise endogenously as an efficient arrangement for sharing risk. Discount window lending permits better risk sharing by...