Paper #843

Títol:

Aggregate consequences of limited contract enforceability

Autors:

Thomas Cooley, Ramon Marimon i Vicenzo Quadrini

Data:

Juny 1999

Resum:

We study a general equilibrium model in which entrepreneurs finance investment with optimal financial contracts. Because of enforceability problems, contracts are constrained efficient. We show that limited enforceability amplifies the impact of technological innovations on aggregate output. More generally, we show that lower enforceability of contracts will be associated with greater aggregate volatility. A key assumption for this result is that defaulting entrepreneurs are not excluded from the market.

Paraules clau:

Innovation, enforcement, aggregate fluctuations, development, financing innovation

Codis JEL:

E10, O11, O16, O40

Àrea de Recerca:

Macroeconomia i Economia Internacional

Publicat a:

Journal of Political Economy, 2004, v.112(4), 817 - 847

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