We study a finite horizon optimal contracting problem with limited commitment. A risk-neutral principal enters into an insurance contract with a risk-averse agent who receives a stochastic income stream and is unable to make commitment to keep the contract. This problem involves an infinite...

We study an optimal long-term labor contract that provides disability insurance benefits under two frictions: the agent cannot commit to a long-term contract and the disability shock is private information. We predict that a job with a high risk of disability should provide a higher level of...