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Title:
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Aggregate Consequences of Limited Contract Enforceability
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Author:
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Cooley, Thomas F.; Marimón, Ramon; Quadrini, Vincenzo
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Other authors:
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Universitat Pompeu Fabra. Departament d'Economia i Empresa |
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Abstract:
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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. |
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Publication date:
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2005-09-15 |
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Subject(s):
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Innovation, enforcement, aggregate fluctuations, development, financing innovation |
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Rights:
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Aquest document està subjecte a una llicència d'ús de Creative Commons, amb la qual es permet copiar, distribuir i comunicar públicament l'obra sempre que se'n citin l'autor original, la universitat i el departament i no se'n faci cap ús comercial ni obra derivada, tal com queda estipulat en la llicència d'ús (http://creativecommons.org/licenses/by-nc-nd/2.5/es/) |
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Document type:
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Working Paper |
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