As part of the series of the "Finance Research Seminar", VGSF welcomes William Fuchs from University of Texas at Austin McCombs School of Business to present his research paper.
Self-enforcing Contracts with Persistence
The use of self-enforcing contracts in an environment with persistent shocks rationalizes why countries with limited legal enforcement exhibit: (i) higher aggregate TFP / GDP volatilities, (ii) larger dispersion of firm-level productivity, and (iii) greater wage inequality. We also provide suggestive evidence consistent with the model’s predictions. Finally, we relate the model’s firm-level implications to existing empirical findings.