Recursive Contracts and Endogenously Incomplete Markets

Golosov, Mikhail; Tsyvinski, Aleh; Werquin, Nicolas

doi:10.1016/bs.hesmac.2016.03.007

Cited by 27 publications

(27 citation statements)

References 114 publications

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“…Our approach shares the emphasis on optimal allocations, rather than particular taxes, with the existing work that studies optimal non-linear taxation, following Mirrlees (1971). Our dynamic model shares some features with the work in dynamic public finance, recently surveyed in Golosov, Tsyvinski and Werquin (2016). The key difference between our paper and these large literatures is our focus on firms and financial frictions.…”

Section: Introductionmentioning

confidence: 87%

“…Lastly, our information structure is different from the one usually assumed in dynamic public finance (e.g., Golosov, Tsyvinski and Werquin (2016)), which emphasizes the "Inverse Euler Equation." Capital taxation in those models arises through a Jensen's inequality effect, which requires uncertainty about the household's future type or other relevant variables.…”

Section: Environmentmentioning

confidence: 92%

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Optimal Corporate Taxation Under Financial Frictions

Dávila¹,

Hébert²

2019

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Varas, as well as seminar and conference participants for helpful comments. All remaining errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Section: Introductionmentioning

confidence: 87%

Section: Environmentmentioning

confidence: 92%

Optimal Corporate Taxation Under Financial Frictions

Dávila¹,

Hébert²

2019

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“…Related but distinct is the dual recursive approach developed by Messner, Pavoni, and Sleet (2012) and Pavoni, Sleet, and Messner (2016). Golosov, Tsyvinski, and Werquin (2016) and Ljungqvist and Sargent (2004, Chapters 19 and 20) include comprehensive surveys of the recursive contracts techniques. let u = {u t } t≥1 be a U-valued stochastic process that describes the arrival of projects over time.…”

Section: Modelmentioning

confidence: 99%

The Demand and Supply of Favours in Dynamic Relationships

Forand

Zápal

2017

SSRN Journal

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We characterise the optimal demand and supply of favours in a dynamic principal-agent model of joint production, in which heterogenous project opportunities arrive stochastically and are publicly observed upon arrival, utility from these projects is non-transferable and commitment to future production is limited. Our results characterise the optimal dynamic contract, and we establish that the principal's supply of favours (the production of projects that benefit the agent but not the principal) is backloaded, that the principal's demand for favours (the production of projects that benefit the principal but not the agent) is frontloaded, and that the production of projects is ordered by their comparative advantage, that is, by their associated efficiency in extracting (for demanded projects) and providing (for supplied projects) utility to the agent. Furthermore, we provide an exact construction of the optimal contract when project opportunities follow a Markov process.

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“…This can be seen after changes in variables in (3) from (c, l ) to (u, v ) to make the IC constraints become linear. For more details, see Golosov, Tsyvinski, and Werquin (2016).…”

Section: Inverse Euler Equationmentioning

confidence: 99%

Incentive Compatibility as a Nonnegative Martingale

Chen¹,

Chien²,

Yang³

2015

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This paper considers a dynamic Mirrleesian economy and decomposes agents' lifetime incentive compatibility (IC) constraints into a sequence of temporal ones. We encode the frequency and severeness of these temporal IC constraints by their associated Lagrange multipliers, showing that the accumulation of the Lagrange multipliers on the consumption part is a nonnegative martingale. It is emphasized that, distinct from the extant literature, this martingale property is derived directly from the IC constraints and so is independent of the optimization of the social planning problem. We apply our finding to (i) the characterization of constrained efficient intertemporal wedges in the aggregate, and (ii) the extension of the so-called immiseration to an environment more general than the extant literature.

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Recursive Contracts and Endogenously Incomplete Markets

Cited by 27 publications

References 114 publications

Optimal Corporate Taxation Under Financial Frictions

Optimal Corporate Taxation Under Financial Frictions

The Demand and Supply of Favours in Dynamic Relationships

Incentive Compatibility as a Nonnegative Martingale

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