This paper presents a simple model that shows the effects of financial liberalization on the credit market of a small, relatively capital poor economy. The empirical evidence regarding the effect of foreign bank entry is mixed. Some studies show that financial liberalization leads to an increase...

We present a static general equilibrium model of an economy with agents with heterogeneous wealth and endogenous credit constraints created by partial loan recovery rates. Higher loan recovery rates and better bankruptcy protection increase output and credit penetration, while the former raises...

This article develops a new rationale for the emergence of pay-for-performance contracts where the labor market is competitive, workers are risk averse, and firms are risk neutral and unaware of workers' productivities. The article shows that the prevalence of pay for performance rises and the...

According to Williamson (1975), a divisionalized and fully decentralized structure, the so called M-form, is the optimal structure via which firms that pursue diversification gain economic benefits from internalizing transactions. However, empirical evidence shows that a centralized,...

In this paper a simple model of mergers in which synergies, private benefits and CEO power play a crucial role is proposed. A merger is modeled as a bargaining process between the acquiring and target board with the gains from a merger divided according to Rubinstein's alternating-offer game...

This paper provides a simple theoretical framework based on a new type of human capital introduced by Gibbons and Waldman (2004), called task-specific training, to understand job design. Mainly, in the presence of task-specific training, promotions might result ex-post in the underutilization of...

This article studies a principal-agent problem with discrete outcome and effort space. The principal and the agent are risk neutral and the latter is subject to limited liability. For a given monitoring technology, we consider the maximum possible ratio between the first best social welfare to...