We document an almost perfect negative correlation between the returns to experience and the average experience per worker in the labor market. We provide a model that rationalizes this finding. We consider workers as providing two distinct productive services - physical effort, or ``labor,''...

A Positive Theory of Capital Taxation

I use a non-separable utility function with non-housing consumption and consumption of housing services, which generates an intertemporal composition risk, besides the traditional consumption growth risk. The composition risk has effects for the valuation of cash flow growth fluctuations far...

We show that aggregate investment is generally higher under the party that sets higher tax rates, since private firms pay out lower dividends and carry more working capital, leading to higher investment. Furthermore, both parties bias their tax rates upwards (beyond the rates that they would set...

This paper formalizes and solves the problem of a central bank which has a fully structural model (assumed to be true), observes a large number of noisy indicators, and seeks to (1) extract from these indicators estimates of the relevant shocks and state variables of the economy, and (2) conduct...

Two-sided communication is different from sender-receiver games since both parties possess private information, have opportunities to communicate it, and have the ability to influence the chosen alternative. It is also different from cheap-talk games as the messages have payoff-relevant...

expectancy observed during the period accounts for almost none of the change in educational attainment.

This paper investigates whether extensions of the Calvo and menu-cost models that include idiosyncratic technology shocks are consistent with key features of individual consumer price adjustment. The comparison of the models focuses on three facts pertaining to the impact of inflation on the...

This paper seeks to answer two questions: in models of executive compensation how important is hidden information relative to moral hazard, and how biased are empirical measures of moral hazard in econometric models that do not account for hidden information. An analytical stage of this paper...