We study the welfare implications of uncertainty in business cycle models. In the modern business cycle literature, multiplicative real shocks to production and/or preferences play an important role as the impulses that produce aggregate fluctuations. Introducing shocks in this way has the...

This paper studies the political sustainability of the existing pay-as-you-go social security system in the face of recent demographic patterns. We analyze different approaches to privatizing the system and consider what it would require for them to be politically implementable. The analysis is...

We study the problem of an investor that buys an equity stake in an entrepreneurial venture, under the assumption that the former cannot monitor the latter's operations. The dynamics implied by the optimal incentive scheme is rich and quite different from that induced by other models of repeated...

We characterize the optimal sequential choice of monetary policy in economies with either nominal or indexed debt. In a model where nominal debt is the only source of time inconsistency, the Markov-perfect equilibrium policy implies the progressive depletion of the outstanding stock of debt,...

This paper examines entrepreneurship in order to analyze, first, the degree to which the opportunity to start or own a business affects the household's saving behavior and the implication of this behavior for the distribution of wealth and, second, the relationship between the extent of...

In Italy, as in many other countries, the years immediately after 1929 were characterized by a major slowdown in economic activity. We argue that the depth and duration of the crisis cannot be explained solely by productivity shocks. We present a model in which trade restrictions together with...