Documento de Trabajo

Implementation with renegotiation when preferences and feasible sets are state dependent

In this paper, we present a model of implementation where infeasible allocations are converted into feasible ones through a process of renegotiation that is represented by a reversion function. We describe the maximal set of Social Choice Correspondences that can be implemented in Nash Equilibrium in a class of reversion functions that punish agents for

Optimal resource extraction contracts under threat of expropriation

The government contracts with a foreign firm to extract a natural resource that requires an upfront investment and which faces price uncertainty. In states where profits are high, there is a likelihood of expropriation, which generates a social cost that increases with the expropriated value. In this environment, the planner’s optimal contract avoids states with

Evaluación de estrategias de desarrollo para alcanzar los objetivos del Milenio en América Latina. El caso de Chile

Soft budgets and Renegotiations in Public-Private Partnerships

Public-private partnerships (PPPs) are increasingly used to provide infrastructure services. Even though PPPs have the potential to increase efficiency and improve resource allocation, contract renegotiations have been pervasive.We show that existing accounting standards allow governments to renegotiate PPP contracts and elude spending limits. Our model of renegotiations leads to observable predictions: (i) in a competitive

Welfare in models of trade with heterogeneous firms

I illustrate that the welfare improvement property of the Melitz model is due to the shape of the aggregate labor demand curve, which slopes upwards. By slightly changing some assumptions in the model, this curve may have a negative slope. In this case, increases in aggregate productivity result in a reduction in welfare. For example,

Information Asymmetries and an Endogenous Productivity Reversion Mechanism

Several empirical studies suggest that the systematic behavior of lending standards, with laxer (tighter) standards applied during expansions (recessions) are responsible for reverting trends in aggregate productivity. We build a dynamic screening model with informational asymmetries in credit markets that rationalizes the observed dependence of lending standards on economic fundamentals and generates reversion of output

Firm-Provided Training and Labor Market Policies

This paper studies firm-provided training in the presence of the following labor market policies: minimum wages, unemployment benefits, firing costs, and severance payments. I show that in high minimum wage economies, a more intense use of labor market policies reduces firm-provide training, while in low minimum wage economies, this may result in more training. The

Emerging Markets Variance Shocks: Local or International in Origin?

We examine the source of permanent shocks to the variance of a set of emerging and developed markets. By using the ICSS algorithm, Bai-Perron (2003)’s test for structural breaks in mean level, and wavelets, and analyzing weekly data for 18 countries over the January 1996 – April 2006 period, we find significant numbers of variance

Economic performance, creditor protection and labor inflexibility

We present a static general equilibrium model of an economy with agents with heterogeneous wealth and endogenous credit constraints created by partial loan recovery rates. Higher loan recovery rates and better bankruptcy protection increase output and credit penetration, while the former raises the average interest rate spread and the latter decreases it. We also study

Loyalty inducing programs and competition with homogeneous goods

We analyze a market where two firms producing a homogenous good compete by means of two mechanisms: prices and a loyalty bonus. We assume that firms act simultaneously when posting their loyalty bonus and prices. Consumers who purchase from a firmin the first period must return the bonus in case they switch providers in the

Local social capital and geographical mobility. A theory

In this paper, we attempt to understand the determinants of mobility by introducing the concept of local social capital. Investing in local ties is rational when workers anticipate that they will not move to another region. Reciprocally, once local social capital is accumulated, incentives to move are reduced. Our model illustrates several types of complementarity leading

On the planner’s loss due to lack of information in bayesian mechanism design

In this paper we study a large class of resource allocation problems with an important complication, the utilization cost of a given resource is private information of a profit maximizing agent. After reviewing the characterization of the optimal bayesian mechanism, we study the informational cost introduced by the presence of private information. Our main result