Documento de Trabajo

Motivating with Simple Contracts

In practice, incentive schemes are rarely tailored to the specific characteristics of contracting parties. However, according to economic theory, optimal contracts should be highly dependent on individual conditions. We reconcile these observations in the context of a principal-agent model with both moral hazard and adverse selection. Motivating an agent could be increasingly costly to the

Economic Performance, Wealth Distribution and Credit Restrictions with Continuous Investment

We study a simple model where entrepreneurs require capital for investment. They have heterogenous wealth and face lending constraints. Agents with little wealth cannot fund their projects, those with intermediate wealth can fund inefficiently sized projects. Only wealthy entrepreneurs attain the efficient firm size. We examine the effects of redistribution. These depend on the aggregate

Do High-Wage Jobs Attract more Applicants? Directed Search Evidence from the Online Labor Market

Are workers applying more to high-wage jobs? To what extent do job seekers guide their search using information posted by employers? In the theoretical literature, workers directing search to jobs offering higher wages has strong implications for labor market efficiency, but the evidence supporting this behavior is scarce and murky. We provide strong evidence of

Take-it-or-leave-it contracts in many-to-many matching markets

We study a class of sequential non-revelation mechanisms where hospitals make simultaneous take-it-or-leave-it offers to doctors that either accept or reject them. We show that the mechanisms in this class are equivalent. They (weakly) implement the set of stable allocations in subgame perfect equilibrium. When all preferences are substitutable, the set of equilibria of the

Inequality, Finance, and Growth

This paper investigates the relationship between income inequality, financial development and economic growth from both a theoretical and an empirical perspective. This paper introduces a simple model in which the effect of inequality on growth depends on the degree of development of the domestic financial market. The model predicts that greater inequality reduces growth in

Soft Budgets and Renegotiations in Public-Private Partnerships: Theory and Evidence

Public-private partnerships (PPPs) are an increasingly popular organizational form of providing public infrastructure. They can increase efficiency and improve resource allocation, yet pervasive contract renegotiations cast doubts on whether they should be preferred over public provision.Renegotiating a PPP contract allows the present government to extract resources from future governments in exchange for current infrastructure spending

The Inequality-Credit Nexus

This paper explores the inequality-credit nexus from both a theoretical and an empirical perspective. The paper develops an overlapping generation model in which the effect of income inequality on private credit depends on the countries’ per capita income and on the quality of laws protecting creditor rights. The model predicts that greater inequality leads to

Banking Competition and Economic Stability

We study banking competition and stability in a 2-period economy. Firms need loans to operate, and in case of a real shock, a fraction of firms default. Banks bound by capital adequacy constraints lend less and amplify the initial shock. The magnification depends on the intensity of bank competition. The model admits prudent and imprudent

Longevity, Human Capital and Domestic Investment

This article explores the interaction between aggregate initial human capital, life expectancy and domestic investment. The article introduces a simple model that predicts that the positive effect of life expectancy on the domestic investment rate is mitigated in economies with a higher level of initial human capital. Using a large panel of countries over the

On the welfare cost of bank concentration

We build a model of bank concentration. Banks and entrepreneurs meet in a credit market characterized by search frictions and negotiate repayment rates à la Nash. Banks are large in the sense that they allocate credit to more than one entrepreneur through branches and there is bank heterogeneity in terms of their cost structure. Banks

(Group) Strategy-proofness and stability in many-to many matching markets

We study strategy-profness in many-to many matching markets.  We prove that when firms have acyclical preferences over workers and both firms and workers have responsive preferences, the worker-optimal stable mechanism is group strategy-proof and Pareto optimal. Absent any assumption on workers’ references, an Adjusted Serial Dictatorship among workers is stable, group strategy-proof and Pareto optimal

The Joy of Flying: Efficient Airport PPP contracts

We examine optimal contracts for PPPs which receive revenue from user fees as well as ancillary commercial revenue, for example from commercial space in the case of airports. We assume that demand for the project is exogenous. Ancillary revenue is observable and requires effort by the concessionaire. If this additional revenue is proportional to demand