Abstract. I analyze a dynamic optimal taxation problem in a closed economy under in-complete markets allowing for default on the debt. If the government defaults, it will go to temporary financial autarky and it can only exit by paying a given fraction of the defaulted debt. The possibility of paying may not arrive immediately; thus, in the meantime, house-holds trade the defaulted debt in secondary markets. The equilibrium price in this market is used to price the debt during the default period. Households predict the possibility of default, and this generates endogenous debt limits, which hinder the government’s ability to smooth shocks using debt. I characterize the optimal default decision, optimal govern-ment policy, and the set of implementable allocations. Quantitative exercises match various qualitative features observed in the data for emerging economies.

In a dynamic economy, we characterize the fiscal policy of the government when it levies distortionary taxes and issues defaultable bonds to finance its stochastic expen-diture. Households predict the possibility of default, generating endogenous debt limits that hinder the government’s ability to smooth shocks using debt. Default is followed by temporary financial autarky. The government can only exit this state by paying a fraction of the defaulted debt. Since this payment may not occur immediately, in the meantime, households trade the defaulted debt in secondary markets; this device allows us to price the government debt before and during the default.

to thank Carolina Corral and Jinyuan He for their excellent research assistance. Finally, Sutthiphisal acknowledges financial support from Fonds québécois de la recherche sur la société et la culture (FQRSC). The views expressed herein are those of the author(s) 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 They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Abstract.- We set up a dynamic model of firm investment in which liquidity con-straints enter explicitly into the firm’s maximization problem. The optimal policy rules are incorporated into a maximum likelihood procedure to estimate the structural parameters of the model. Investment is positively related to the firm’s internal finan-cial position when the firm is relatively poor. This relationship disappears for wealthy firms, which can reach their desired level of investment. Borrowing is an increasing function of financial position for poor firms. This relationship is reversed as a firm’s financial position improves, and large firms hold little debt. We find that liquidity con-straints matter significantly for the investment decisions of firms. If firms can finance investment by issuing fresh equity, rather than with internal funds or debt, average capital stock is about 6 % higher over a period of 20 years. Transitory interest rate shocks have a sustained impact on capital accumulation, which lasts for several peri-ods.

This paper proposes an approach to proving nonparametric identification for dis-tributions of bidders ’ values in asymmetric second-price auctions. I consider the case when bidders have independent private values and the only available data pertain to the winner’s identity and the transaction price. My proof of identification is con-structive and is based on establishing the existence and uniqueness of a solution to the system of non-linear differential equations that describes relationships between unknown distribution functions and observable functions. The proof is conducted in two logical steps. First, I prove the existence and uniqueness of a local solution. Then I describe a method that extends this local solution to the whole support. This paper delivers other interesting results. I show how this approach can be ap-plied to obtain identification in more general auction settings, for instance, in auc-tions with stochastic number of bidders or weaker support conditions. Furthermore, I demonstrate that my results can be extended to generalized competing risks models. Moreover, contrary to results in classical competing risks (Roy model), I show that

I am especially grateful to my advisor, Lu Zhang, for extensive feedback, helpful

In the 1980s, the Thai government legalized squatters living in public land by issuing certificates that allowed self-cultivation but restricted the sale and rental of the land. Using a differences-in-differences empirical strategy, we compare the differential rental rates between titled and untitled plots in reform and non-reform areas. We find that in reform areas households are more likely to lease titled plots and cultivate untitled plots because owners feared that untitled plots would also be expropriated if leased, although the restrictions only applied to plots with reform certificates. Using land rental rates and prices, we estimate that the rental rate of untitled land in reform areas includes a 4 percent premium due to expropriation risk. In other areas, however, land rights do not influence leasing decisions nor does a risk premium exist.

constant encouragement and special understanding.

Sorensen for his constant encouragement and guidance, to the

Customer preferences for products are drifting over time. Product perception and popularity are constantly changing as new selection emerges. Similarly, customer inclinations are evolving, leading them to ever redefine their taste. Thus, modeling temporal dynamics should be a key when designing