This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation...

This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation...

This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation...

Evidence suggests that unemployed individuals can sometimes affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity only arises for some individuals and the identity of those may be unobservable ex-ante. The problem of...

We investigate the presence of moral hazard and advantageous or adverse selection in a market for supplementary health insurance. For this we specify and estimate dynamic models for health insurance decisions and health care utilization. Estimates of the health care utilization models indicate...

In the 'Knightian' theory of entrepreneurship, entrepreneurs provide insurance to workers by paying fixed wages and bear all the risk of production. This paper endogenizes entrepreneurial risk by allowing for optimal insurance contracts as well as the occupational self-selection. Moral hazard...

I study the constrained efficient allocations of a simple model of risk sharing and capital flows across countries assuming that each country cannot commit to fully repay its contract obligations. In the model, the degree of risk sharing and the amount of investment are interdependent. It is...

Information asymmetries are important in theory but difficult to identify in practice. We estimate the presence and importance of adverse selection and moral hazard in a consumer credit market using a new field experiment methodology. We randomized 58,000 direct mail offers issued by a major...

We base a contracting theory for a start-up firm on an agency model with observable but nonverifiable effort, and renegotiable contracts. Two essential restrictions on simple contracts are imposed: the entrepreneur must be given limited liability, and the investor's earnings must not decrease in...

We study dynamic moral hazard where principal and agent are symmetrically uncertain about job difficulty. Since effort is unobserved, shirking leads the principal to believe that the job is hard, increasing the agent's continuation value. So deterring shirking requires steeper incentives, which...