This paper develops a theoretical framework for analyzing contracting imperfections in long-term employment relationships. We focus chiefly on limited enforceability and limited worker liquidity. Inefficient severance of employment relationships, payment of efficiency wages, the relative...

This paper develops a macroeconomic model in which investable assets flow to entrepreneurs through long-term relationships with lenders. Low asset flows cause relationships to brak up due to insufficient liquidity. Multiple Pareto ranked steady staes emerge from complementarity between financial...

This paper evaluates a class of endogenous job destruction models based on how well they explain the observed experiences of displaced workers. We show that pure reallocation models in which relationship-specific productivity drifts downward over time are difficult to reconcile with the evidence...

This paper explains the divergent behavior of European and US unemployment rates using a job market model of the labor market with an interaction between shocks and institutions. It shows that a reduction in TFP growth rates, an increase in real interest rates, and an increase in tax rates leads...

This paper presents a theory of dynamic trade agreements in which external institutions, such as the WTO, play a central role in supporting credible enforcement. In our model, countries engage in ongoing negotiations, and as a consequence cooperative agreements become unsustainable in the...

We propose a theory of contracting in long-term relationships, emphasizing the role of social institutions in conditioning players' joint selection of equilibria. Players adopt a social conditioning system in order to place boundaries on their recurrent negotiation and thereby sustain a...

This paper analyzes the role of third party intermediaries, such as courts and arbitrators, in contract enforcement. In our model, intermediaries compel contracted transfers and resolve disputes when requested to do so by the contracting agents. When the verifiability of information is limited,...