According to Ljungqvist and Sargent (1998), high European unemployment since the 1980s can be explained by a rise in economic turbulence, leading to greater numbers of unemployed workers with obsolete skills. These workers refuse new jobs due to high unemployment benefits. In this paper we...

This paper develops a model according to which the costs of business cycles are nontrivial because they reduce the average level of output. The reason is an interaction between job creation costs and an agency problem. The agency problem triggers separations during economic downturns even though...

We document the cyclical behavior of debt, equity, and retained earnings for different firm categories using firm-level Canadian data. There is evidence of both procyclical equity and debt issuance for all firm categories but the timing differs. In particular, there is strong evidence that...

This paper examines a class of contractual relationships with specific investment, a non-durable trading opportunity, and renegotiation. Trade actions are modeled as individual and trade-action-based option contracts ("non-forcing contracts") are explored. The paper introduces the distinction...

We study contracting and costly renegotiation in settings of complete, but unverifiable information, using the mechanism-design approach. We show how renegotiation activity is best modeled in the fundamentals of the mechanism-design framework, so that noncontractibility of renegotiation amounts...

This paper examines a general model of contract in multi-period settings with both external and self-enforcement. In the model, players alternately engage in contract negotiation and take individual actions. A notion of contractual equilibrium, which combines a bargaining solution and individual...

We employ a comprehensive matched employer-employee data set for Brazil to analyze wage determinants and compare results to Abowd, Kramarz, Margolis and Troske (2001) for French and U.S. manufacturing. Returns to education and experience in Brazilian manufacturing exceed those of the other...

We introduce a model of the retail firm in which consumers and active firms benefit collectively from coordination of sales at fewer firms. Using this model, we show that ostensibly uninformative advertising plays a key role in bringing about coordination economies, by directing consumer search...

We show that when avoidable fixed costs are introduced into the capacity-and-entry model of Dixit(1980) and Ware(1984), there arises a coordination problem in selecting among postentry Nash equilibria. Elimination of weakly dominated strategies makes it possible for the entrant to us a...

This paper considers pricing, cost-reducing investment and dissipative advertising by firms when consumers acquire price information via two information channels, observation of advertising and sequential price search. We find that advertising guides consumers to the lowest prices in the market,...