This paper computes the welfare costs of inflation in an estimated dynamic stochastic general equilibrium model of the U.S. economy. Both steady state and transitional welfare results are reported. I find that a 10 percent inflation entails a steady state welfare cost of 1.9 % of annual...

Rivers and Vuong (2002) develop a very general framework for choosing between two competing dynamic models. Within their framework, inference is based on a statistic that compares measures of goodness of fit between the two models. The null hypothesis is that the models have equal measures of...

Should a firm favor insiders (handicap outsiders) when selecting a CEO? One reason to do so is to take advantage of the contest to become CEO as a device for providing current incentives to employees. An important reason not to do so is that this can reduce the ability of future CEOs and, hence,...

This paper compares relative performance evaluation via tournaments to absolute performance evaluation via piece rates when agents are heterogeneous ex post, to make the point that agent heterogeneity compromises the insurance function of tournaments. In particular, we show that the more...