We argue that strategic interactions between firms in an oligopoly can explain the puzzling lack of high-powered incentives in executive compensation contracts written by shareholders whose objective is to maximize the value of their shares. We derive the optimal compensation contracts for...

Do firms systematically over- or underinvest as a result of agency problems? We develop a contracting model between shareholders and managers in which managers have private benefits or private costs of investment. Managers overinvest when they have private benefits and underinvest when they have...

The principal-agent model of executive compensation is of central importance to the modern theory of the firm and corporate governance, yet the existing empirical evidence supporting it is quite weak. The key predication of the model is that the executive's pay-performance sensitivity is...

Empirical research on executive compensation has focused almost exclusively on the incentives provided to chief executive officers. However, firms are run by teams of managers, and a theory of the firm should also explain the distribution of incentives and responsibilities for other members of...

The social security payroll tax has become the largest tax paid by the majority of American households. Although, the statutory marginal social security tax rate is the same for all those with wage and salary income up to the maximum level, the complex rules linking social security taxes and...

Approximately 10 percent of school-age children in the United States are enrolled in private schools, relieving the financial burden on public school systems, and the taxpayers who support them, of the cost of their education. At present, the tax code does not allow families who provide this...

In this paper, we analyze the relationship between age and portfolio structure for households in the US. We focus on both the probability that households of different ages own particular portfolio assets and the fraction of their net worth allocated to each asset category. We distinguish between...

Recent federal legislation has linked the price paid for health insurance benefits to current income. Under the Patient Protection and Affordable Care Act of 2010, individuals and families with income as high as 400 percent of the federal poverty level are eligible for premium tax credits that...

This paper analyzes changes in the progressivity of the Social Security benefit formula as a means of lessening the risk inherent in investment-based Social Security reform. Focusing on a single cohort of workers, it simulates the distribution of benefits subject to both earnings and financial...

We estimate consumers%u2019 valuation of disability insurance using a stochastic lifecycle framework inwhich disability is modeled as permanent, involuntary retirement. We base our probabilities of worklimiting disability on 25 years of data from the Current Population Survey and examine the...