This paper considers the efficiency of financial intermediation and the propagation of business cycle shocks in a model of long-term relationships between entrepreneurs and lenders lenders may be constrained in their short-run access to liquidity. When liquidity is low, relationships are subject...

Motivated by a characteristic way in which firms in developed countries make their decisions regarding cooperation with potential partners from less developed countries, we design a simple model of a DC firm's search for an LDC partner/supplier and the subsequent relationship between the two...

This paper develops a theoretical framework for analyzing contracting imperfections in long-term employment relationships. We focus chiefly on limited enforceability and limited worker liquidity. Inefficient severance of employment relationships, payment of efficiency wages, the relative...

We develop and quantitatively implement a dynamic general equilibrium model with labor" market matching and endogenous job destruction. The model produces a close match with data on" job creation and destruction. Cyclical fluctuations in the job destruction rate serve to magnify the" effects of...

In most of the contract theory literature, contracting costs are assumed either to be high enough to preclude certain forms of contracting or low enough to permit any contract to be written. Similarly researchers usually treat renegotiation as either costless or prohibitively costly. This...

This paper presents a theory of dynamic trade agreements in which external institutions, such as the WTO, play a central role in supporting credible enforcement. In our model, countries engage in ongoing negotiations, and as a consequence cooperative agreements become unsustainable in the...

This paper explores how the opportunity to recontract affects investment and trade in contractual relationships when it is assumed that renegotiation is costly. In this world, recontracting retains much of the benefit that has been ascribed to it, including the realization of any surplus that is...