This paper studies the optimal level of discretion in policymaking. We consider a fiscal policy model where the government has time‐inconsistent preferences with a present bias toward public spending. The government chooses a fiscal rule to trade off its desire to commit to not overspend...

This paper studies the optimal level of discretion in policymaking. We consider a fiscal policy model where the government has time-inconsistent preferences with a present-bias towards public spending. The government chooses a fiscal rule to trade off its desire to commit to not overspend...

This paper studies the optimal level of discretion in policymaking. We consider a fiscal policy model where the government has time-inconsistent preferences with a present-bias towards public spending. The government chooses a fiscal rule to trade off its desire to commit to not overspend...

We study a dynamic agency problem with two-sided moral hazard: the worker chooses whether to exert effort or shirk; the manager chooses whether to invest in an attention technology to recognize worker performance. In equilibrium the worker uses past recognition to infer managerial attention. An...

type="main" <p>A principal can make an investment anticipating a repeated relationship with an agent, but the agent may appropriate the returns through ex post bargaining. I study how this holdup problem and efficiency depend on the contracting environment. When investment returns are observable,...</p>

Financial crises affect income distribution by way of different channels. The authors argue that financial transfers are an important channel which has been overlooked by the literature. They study the role of financial transfers by analyzing some of the most severe Latin American crises during...

This article studies optimal relational contracts when the value of the relationship between contracting parties is not commonly known. I consider a principal-agent setting where the principal has persistent private information about her outside option. I show that if the principal has the...

Financial crises affect income distribution via different channels. We argue that financial transfers is an important channel, which has been overlooked by the literature. By analyzing data from the Mexican (1994-1995) and Argentine (2001-2002) crises, we investigate two types of financial...

This paper analyzes the optimal level of discretion in policymaking. Our application is a dynamic fiscal policy model in which the government has a present-bias towards public spending. Society trades off its desire to allow the government to react to its private information about the state of...

This paper characterizes optimal policy when a government uses indirect control to exert its authority. We develop a dynamic principal-agent model in which a principal (a government) delegates the prevention of a disturbance--such as riots, protests, terrorism, crime, or tax evasion--to an agent...