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Liquidity and Inefficient Investment / Oliver D. Hart, Luigi Zingales.
- Format:
- Book
- Author/Creator:
- Hart, Oliver D.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w19184.
- NBER working paper series no. w19184
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2013.
- Summary:
- We study the role of fiscal policy in a complete markets model where the only friction is the nonpledgeability of human capital. We show that the competitive equilibrium is constrained inefficient, leading to too little risky investment. We also show that fiscal policy following a large negative shock can increase ex ante welfare. Finally, we show that if the government cannot commit to the promised level of fiscal intervention, the ex post optimal fiscal policy will be too small from an ex ante perspective.
- Notes:
- Print version record
- June 2013.
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