Commitment is therefore more valuable when quality is known more precisely. Incentives then are easier to provide because the agent has less room to manipulate the beliefs of the principal. Moreover, in contrast to results under one-period commitment, wage volatility declines as experience...

This paper documents several facts on the real effects of economic uncertainty. First, higher uncertainty is associated with a more dispersed distribution of output growth. Second, the relation is highly asymmetric: A rise in uncertainty is associated with a sharp decline in the lower tail of...

In a model with multiple Pareto-ranked equilibria we add trade in assets that pay based on the realization of a sunspot. Asset trading restricts the equilibrium set in a way that raises welfare by eliminating equilibria with a high likelihood of disasters. When the probability of a disaster is...

Producer services such as managerial and engineering consulting can provide domestic firms with the substantial benefits of specialized knowledge that would be costly in terms of both time and money for domestic firms to develop on their own. These intermediate services are often non-traded, or...

The structure of a multinational firm, that is how its affiliates relate to one another, is critical for understanding where multinationals locate, how policy affects them, and their resilience to localized shocks. Here, we review the two main structures: horizontal investments which replicate...

The prospect of capital obsolescence inhibits investment. Investors thus become more optimistic when the obsolescence of their capital slows down. We propose a model with no fixed costs of investment, and random technological progress that induces obsolescence of capital in place. Spikes occur...

We study the effects of parameter uncertainty prompted by structural breaks. In our model, agents respond differently to uncertainty prompted by regime shifts in shock processes than they react to comparable perceived increases in shock volatility. The magnitude of the response to an increase in...

We study private equity in a dynamic general equilibrium model and ask two questions: (i) Why does the investment of venture funds respond more strongly to the business cycle than that of buyout funds? (ii) Why are venture funds returns higher than those of buyout? On (i), venture brings in new...