The first-order approach (FOA) to principal agent problems is very convenient and mathematically tractable. However, existing results show that the FOA is valid only for additively separable utility functions. This is somewhat limiting. In this article sufficient conditions are identified that...

In an environment in which effort is private information to the worker, agreements between a risk-neutral principal and a risk-a verse agent are likely to be risk-sharing and information-revealing m echanisms. It is shown that principal-agent contracts have significan t implications for both...

This paper examines income convergence across U.S. regions for the period 1929-2002 using unit root and cointegration techniques. The findings suggest it is difficult to reject non-convergence in per capita incomes across regions even when endogenous breakpoints are included. Interestingly, we...

This exposition addresses three reasonable departures from fully maximizing behavior that exhibit important Keynesian features. These departures involve inertial, imitative, and error-conscious behaviors. A simple general framework is used to model the three departures in an otherwise fully...

This paper integrates near-rationality/menu cost ideas with strategic complementarity and real rigidity. It is shown that both strategic complementarity and real rigidity aggravate nominal rigidity and make monetary nonneutrality more potent. Also, real rigidity causing nominal rigidity is...

Summary In this paper we use data from a unique survey conducted in the aftermath of the 1998 floods in Bangladesh to examine how the household shock-child labor relationship is affected by credit receipts of households. Adopting the ratio of assets lost due to the floods as a likely exogenous...

Standard results in the area of unemployment insurance suggest that experience rating is beneficial because it confronts firms with layoff costs and reduces unem ployment. This article presents a different perspective, suggesting that experience rating may increase involuntary unemployment. A...