In U.S. data 1981–2012, unsecured firm credit moves procyclically and tends to lead GDP, while secured firm credit is acyclical; similarly, shocks to unsecured firm credit explain a far larger fraction of output fluctuations than shocks to secured credit. In this paper we develop a tractable dynamic general equilibrium model in which unsecured firm credit arises from self-enforcing borrowing co...

In this paper we use panel data on …rms from Brazil and China to investigate the role of …nancial constraints for borrowing and investment. We develop a structural investment model, in which borrowing is costly but sometimes necessary to …nance investment. Structural parameters are estimated by matching simulated model moments to empirical data, using a simulated minimum distance estimator. The...

Mounting evidence suggests that the outcomes of laboratory public goods games, and collective action in firms, communities, and polities, reflect the presence in most groups of individuals having differing preferences and beliefs. We designed a public goods experiment with targeted punishment opportunities to (a) confirm subject heterogeneity, (b) test the stability of subjects’ types and (c) t...

a r t i c l e i n f o JEL classification: C61 D92 Keywords: Price induced technical progress Disembodied technical progress Comparative dynamics Optimal control Testable implications A theory of a wealth maximizing, capital accumulating, price taking firm facing adjustment costs and operating in the presence of disembodied and price-induced technical progress is developed. The testable implicat...

We develop a general model of lending in the presence of endogenous borrowing constraints. Borrowing constraints arise because borrowers face limited liability and debt repayment cannot be perfectly enforced. In the model, the dynamics of debt are closely linked with the dynamics of borrowing constraints. In fact, borrowing constraints must satisfy a dynamic consistency requirement: The value o...

Rural firms have a higher survival rate than urban firms. Over the first 13 years after firm entry, the hazard rate for firm exits is persistently higher for urban firms. While differences in firm attributes explain some of the rural-urban gap in firm survival, rural firms retain a survival advantage 18.5% greater than observationally equivalent urban firms. We argue that in competitive markets...

Using a panel of 9292 UK manufacturing firms over the period 1993-2003, we explore the links between firms’ financial health and their export market participation decisions. We find that exporters exhibit better financial health than non-exporters. Yet, when we differentiate between continuous exporters and starters, we see that this result is driven by the former. Starters generally display lo...

We formulate a dynamic model of voluntary investment in a public project. We distinguish two alternative scenarios. One in which private agents have full knowledge about the accumulated aggregated contributions and one in which each agent only has knowledge about his personal contributions. For both scenarios we investigate whether or not the public project will be efficiently funded by the age...

This short paper resolves an apparent contradiction between Feldman’s (1989) and Riedel’s (2000) equilibrium models of the term structure of interest rates under incomplete information. Feldman (1989) showed that in an incomplete information version of Cox, Ingersoll, and Ross (1985), where the stochastic productivity factors are unobservable, equilibrium term structures are “interior” and boun...

The goal of this paper is to study irreversible investment under incomplete information. We extend McDonald and Siegel’s (1986) model to the case where the expected rate of return of the project cannot be observed but is known to be either low or high. Waiting and observing the realizations of the value of the project provides information to the investor who can update her beliefs about the tru...