This paper considers the problem of optimal unemployment insurance in a moral hazard framework. Unlike existing literature, unemployed workers can secretly participate in a hidden labor market; as a consequence, an endogenous lower bound for promised utility preventing "immiserization" arises....

Providing unemployment insurance is particularly problematic in countries with high informality because workers can claim unemployment benefits and work in the informal sector at the same time. This paper proposes a method to evaluate alternative schemes to provide insurance for unemployed...

How does technological progress in financial intermediation affect the economy? To address this questiona costly-state verification framework is embedded into a standard growth model. In particular, financialintermediaries can invest resources to monitor the returns earned by firms. The...

How does technological progress in financial intermediation affect the economy? To address this question a costly-state verification framework is embedded into a standard growth model. In particular, financial intermediaries can invest resources to monitor the returns earned by firms. The...

"How important is financial development for economic development? A costly state verification model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as intermediation spreads and the firm-size distribution for...