This paper studies optimal taxation of entrepreneurial capital and financial assets in economies with private information. Returns to entrepreneurial capital are risky and depend on entrepreneurs' effort, which is not observed. The presence of idiosyncratic risk in capital returns implies that...

This paper solves the pricing problem of an merging market debt contract in which the borrower’s economy is subject to rare event risk. Our model combines elements of a reduced form and a structural model of debt pricing. Rare event risk is modeled as a sudden event in fundamentals, and...

The emergence of medieval markets has been seen in the literature as hampered by lack of contract enforcement and institutions like merchants’ communal responsibil-ity. Merchants traveling to a different marketplace could be held liable for debts in-curred by any merchant from their...

The question we ask is: within the set of a three-period-lived OLG economies with a stochastic endowment process, a stochastic dividend process, and sequentially complete markets, under what set of conditions may a set of government transfers dynamically Pareto dominate the laissez faire...

We study the eciency property of responsive pricing, a scheme that proposes to increase prices as a function of the level of capacity utilization in environments where traditional allocation schemes (e.g. competitive markets, auctions) cannot be implemented in practice. We show that although...

This paper provides a theory of government intervention, such as government ownership, regulation, mandatory public schooling, subsidies, and industrial policy, as an optimal policy response due to the inability to commit not to expropriate private investment or bail agents out. If the...

We study the volatility of growth rates and find that it differs systematically across countries. Our empirical investigation reveals that there is a high correlation between disparity in political regimes across countries and differences in volatility. This is not the case for some of the...