Labour contracts which establish performance-related pay are afflicted with the firm's moral hazard problem because of the difficulty in the verifiability of performance by an external authority. Some models have explored the possibility that such contracts could be enforced through a mechanism...

We study a general equilibrium model in which entrepreneurs finance investment with optimal financial contracts. Because of enforceability problems, contracts are constrained efficient. We show that limited enforceability amplifies the impact of technological innovations on aggregate output....

Many new blockchain applications rely on the “stake-and-slash” mechanism to align incentives. We point out that the design of such “contracting” problems can not be detached from the details of the decentralized consensus formation process. To illustrate our theoretical argument, we...

We argue that the narrative of variety-induced gains from trade in differentiated goods needs revision. If producing differentiated varieties of a good requires differentiated skills and if the work force is heterogeneous in these skills, then firms are likely to have monopsony power. We show...

We derive a simple equation for the welfare gains from trade when tariffs are liberalized or iceberg trade costs fall. Covering various one-sector trade models that may or may not feature extensive margins and imperfect competition, we generalize the analysis of Arkolakis, Costinot and...