The recent fall of labor's share of GDP in numerous countries is well-documented, but its causes are poorly understood. We sketch a “superstar firm” model where industries are increasingly characterized by “winner take most” competition, leading a small number of highly profitable (and...

Financial constraints are an important impediment to the growth of small businesses. We study theoretically and empirically how the financial constraints of agents affect their decisions to exert effort, and, hence the organizational decisions and growth of principals, in the context of...

This paper reconsiders the effects of dividend taxation. Particular attention is paid to the form of the "equity trap", that is, the extent to which cash paid to the shareholders must be taxed as dividends. Our analysis shows that Sinn's (1991) criticism of the well-known King and Fullerton...

The introduction of firm size into labor search models raises the question how wages are set when average and marginal product differ. We develop and analyze an alternative to the existing bargaining framework: Firms compete for labor by publicly posting long–term contracts. In such a...

A puzzling but consistent result in the empirical literature on banking is that firms with close bank ties do not grow faster than bank-independent firms. In this paper, we reconsider the link between relationship lending and firms' growth, distinguishing firms by size and “health”. The idea...

In the large literature on firm performance, economists have given little attention to entrepreneurs. We use deaths of more than 500 entrepreneurs as a source of exogenous variation, and ask whether this variation can explain shifts in firm performance. Using longitudinal data, we find large and...

Increasing wage inequality between similar workers plays an important role for overall inequality trends in industrialized societies. To analyze this pattern, we incorporate directed labor market search into a dynamic model of international trade with heterogeneous firms and homogeneous workers....

Using administrative employee-firm-level data on the entire private sector from 1994 to 2007, we show that the labor market in France has polarized: employment shares of high and low wage occupations have grown, while middle wage occupations have shrunk. During the same period, the share of...

When a principal’s monitoring information is private (non-verifiable), the agent should be concerned that the principal could misrepresent the information to reduce the agent’s wage or collect a monetary penalty. Restoring credibility may lead to an extreme waste of resources - the so-called...