I analyze the implications of moral hazard in dynamic economy with production. In particular, I add agency frictions to a benchmark stochastic growth model, by assuming that firms observe output but hours worked and productivity are unobservable. I cast the problem as a continuous time principal...

This paper studies optimal taxation of entrepreneurial capital and financial assets in economies with private information. Returns to entrepreneurial capital are risky and depend on entrepreneurs' effort, which is not observed. The presence of idiosyncratic risk in capital returns implies that...

This paper studies the long run effects of monetary policy in a micro-founded model with trading frictions and endogenous market segmentation. Agents must pay a fixed cost to participate in a centralized liquidity market. By endogenizing the participation decision, this model endogenizes the...

This paper studies the long-run effects of anticipated inflation on output and welfare within a search-theoretic framework. We allow money-holders to choose the intensities with which they search for trading partners, so the frequency of trades is endogenous. We consider the standard pricing...

In a frictional labor market, when an employee receives an outside offer, his employer is naturally tempted to compete to retain him. Casual observation in the labor market, however, suggests that this type of ex post competition is rare. As a consequence, employers often let valuable employees...

This paper studies repeated moral hazard in teams. Agents' actions are observable to each other but not to the principal. For any given dynamic contract, agents always select their favorite subgame perfect equilibrium in the corresponding dynamic game. The optimal dynamic contract must take that...

This paper exhibits dynamic features of insurance contracts in the empirical analysis of moral hazard. We first show that experience rating implies negative occurrence dependence under moral hazard: individual claim intensities decrease with the number of past claims. We then show that dynamic...

We analyze how the preference structure and the structure of production possibilities in the monetary economy can lead to a variety of distributions of special and standard goods produced in the economy

We introduce learning based on genetic algorithms in a principal-agent model of optimal contracting under moral hazard. Applications of this setting abound in finance (credit under moral hazard), public finance (optimal taxation, information-constrained insurance), development (sharecropping),...