This paper develops a tractable general equilibrium with endogenous firm capital structure decisions driven by changes in economic uncertainty. The model enables a critical assessment of standard paradigms of corporate finance in order to highlight empirically important directions for...

This paper presents evidence that firms choose conservative financial policies partly to mitigate workers' exposure to unemployment risk. We exploit changes in state unemployment insurance laws as a source of variation in the costs borne by workers during layoff spells. We find that higher...

Entrepreneurs face significant non-diversifiable business risks. We build a dynamic incomplete markets model of entrepreneurial finance to demonstrate the important implications of nondiversifiable risks for entrepreneurs' interdependent consumption, portfolio allocation, financing, investment,...