We propose a rational theory of momentum and reversal based on delegated portfolio management. A competitive investor can invest through an index fund or an active fund run by a manager with unknown ability. Following a negative cashflow shock to assets held by the active fund, the investor...

We build an occupational-choice general-equilibrium model of an economy with the non-profit sector financed through private warm-glow donations. Lack of monitoring on the use of funds implies that an increase of funds of the non-profit sector (because of a higher income in the for-profit sector,...

We develop a framework for optimal taxation when agents can earn their income both in traditional activities, where private and social products coincide, and in rent-seeking activities, where private returns exceed social returns either because they involve the capture of pre-existing rents or...

We develop a unifying framework for optimal income taxation in multi-sector economies with general patterns of externalities. Agents in this model are characterized by an N-dimensional skill vector corresponding to intrinsic abilities in N potentially externality-causing activities. The private...

This paper analyzes Pareto optimal non-linear taxation of profits and labor income in a private information economy with endogenous firm formation. Individuals differ in both their skill and their cost of setting up a firm, and choose between becoming workers and entrepreneurs. I show that a tax...

We consider optimal redistribution in a model where individuals can self-select into one of several possible sectors based on heterogeneity in a multidimensional skill vector. We first show that when the government does not observe the sectoral choice or underlying skills of its citizens, the...

We propose a theory of monetary policy and macroprudential interventions in financial markets. We focus on economies with nominal rigidities in goods and labor markets and subject to constraints on monetary policy, such as the zero lower bound or fixed exchange rates. We identify an aggregate...

Delays at the border for customs clearance are seemingly a central feature of the trade regime in the CIS states. Here, we argue that with queuing costs being endogenously determined in such circumstances tariff liberalization (even in the small economy case) can be welfare worsening since...

Theories featuring multiple equilibria are now widespread across many fields of economics. Yet little empirical work has asked if such multiple equilibria are salient features of real economies. We examine this in the context of the Allied bombing of Japanese cities and industries in WWII. We...

We study a general equilibrium model where agents' preferences, productivity and labour endowments depend on their health status, and occupational choices affect individual health distributions. Efficiency typically requires agents of the same type to obtain different expected utilities if...