Paper Link Michael J. Roberts and Wolfram Schlenker: Identifying Supply and Demand Elasticities of Agricultural Commodities, American Economic Review, October 2013.
Paper Link Miriam Bruhn and Inessa Love: The Real Impact of Improved Access to Finance: Evidence from Mexico, Journal of Finance, June 2014
Paper Link Ronald Lee, Andrew Mason, and members of the NTA network : Is Low Fertility Really a Problem? Science, 10 October 2014.
We synthesize debt and non-debt securities in a production economy in the framework of a security design problem, positing that the investor can acquire costly information (not known to the entrepreneur) on the entrepreneur's project and then screen it through financing decisions. This produces a new informational friction: real production depends on information acquisition, but the two functions are performed separately by entrepreneur and investor. Debt is optimal when the dependence is weak (the friction is not severe), and convertible preferred stock (a combination of debt and equity) is optimal when the dependence is strong (the friction is severe). The optimality of the different types of security in different circumstances constructs new pecking orders for financing private businesses, which are consistent with the empirical facts. Flexible information acquisition characterizes the securities' information sensitivity and the investor's allocation of attention in screening in a state-contingent way. It helps capture the nature of screening and synthesize the two securities. It also allows us to work with arbitrary feasible securities over continuous states and to dispense with any distributional assumptions.
September 18th 2015 3:00-4:15pm: Grace Shim:
School: UC San Diego
Room: Saunders 515