What happens when employers would like to screen their employees but only observe a subset of output? We specify a model in which heterogeneous employees respond by producing more of the observed output at the expense of the unobserved output. Though this substitution distorts output in the...

Advantageous (or propitious) selection occurs when an increase in the premium of an insurance contract induces high-cost agents to quit, thereby reducing the average cost among remaining buyers. Hemenway (1990) and many subsequent contributions motivate its advent by differences in risk-aversion...

During the period 1996-2000, the coverage of VAT in Pakistan rose by twenty times in terms of the number of firms in the tax net and by ten times in terms of the volume of transactions subject to it. This paper leverages this staggered introduction of VAT in the country to estimate its...

Various forms of social learning and network effects are at work on crowdfunding platforms, giving rise to informational and payoff externalities. We use novel entrepreneur-backer data to study how these externalities shape funding dynamics, within and across projects. We find that backers...

How does uncertainty affect the costs of raising finance in the bond market and via bank loans? Empirically, this paper finds that heightened uncertainty is accompanied by an increase in corporate bond yields and a decrease in bank lending rates. This finding can be explained with a model that...

We suggest an explanation for the existence of “mission drift”, the tendency for Microfinance Institutions (MFIs) to lend money to wealthier borrowers rather than to the very poor. We focus on the relationship between MFIs and external funding institutions. We assume that both the MFIs and...

This paper studies mechanism design with limited commitment where agents have persistent correlated types over the infinite horizon. The mechanism designer now faces the informed-principal problem in addition to usual issues with i.i.d. types. With an infinite horizon and nondurable good, there...

Unlike standard auctions, we show that competitive procurement may optimally limit competition or use inefficient allocation rules that award the project to a less efficient firm with positive probability. Procurement projects often involve ex post moral hazard after the competitive process is...

Why does individual performance pay seem to prevail in human capital intensive industries? We present a model that may explain this. In a repeated game model of relational contracting, we analyze the conditions for implementing peer dependent incentive regimes when agents possess indispensable...