We investigate how discretionary investments in general and specific human capital are affected by the possibility of layoffs. After investments are made, firms may have to lay off workers, and will do so in inverse order of the profit that each worker generates. Greater skill investments,...

Creditors do not generally honor human capital as collateral. This paper demonstrates how long term wages contracts between workers and firms can circumvent the capital market imperfection. Generation of firm specific skills creates an economic bond between worker and firm. This bond enables the...

We develop a dynamic general equilibrium model of economics development with altruism in which the evolution of the extent of entrepreneurship, the rate of rural-urban migration, the scale and structure of production and the degree of income and wealth inequality are endogenously determined. The...

A standard presumption of market microstructure models is that competition between risk neutral market makers inevitably leads to prices schedules that leave market makers zero expected profits conditional on the order flows. This paper shows that this result does not hold when traders can split...

The conditions under which money is essential to support a Pareto optimum, those where loan mechanisms suffice, and those such that both are essential is examined. In the absence of a coincidence of wants, loans and/or money are necessary to facilitate exchange. In a large economy with a limited...

Electoral platform convergence is perceived unfavorably by both the popular press and many academic scholars. This paper provides a formal account of these perceived negative effects. We show that when parties do not know voters’ preferences perfectly, voters prefer some platform divergence to...

Hedge fund managers differ in ability and investors want to distinguish good ones from bad. Via the design of their investment strategies, better fund managers want to ease this inference problem while worse fund managers want to complicate it. We impose only the minimal restrictions on the...

We consider a parole board that learns about inmates' rehabilitation statuses from observing actions in prison. We show why a board would release one inmate, but not otherwise observationally identical inmates with longer sentences: greater parole board discretion makes additional information...

We develop a dynamic repeated election model in which citizen candidates are distinguished by both their ideology and valence. Voters observe an incumbent's valence and policy choices but only know the challenger's party. Our model provides a rich set of novel results. In contrast to existing...