This paper shows that the firm markup, capital and the expected rate of capacity utilisation depend on its financial structure (debt/equity ratio) when irreversible investment faces uncertainty and when there is asymmetric information between the entrepreneur and lenders. Mark-up depends...

This paper develops a model of endogenous growth where innovation can take two forms, namely radical and incremental. The latter type of innovation means that a new intermediate good is introduced in the production of the final good, thus raising productivity in a Ethier-Romer-type way. A...

To explain the existence of "stop-loss" rules in financial institutions, we develop a principal/agent model, where an investment firm relies on a trader to invest in a risky asset like a future contract. When the trader faces a limited liability constraint, the investment firm may increase its...