Search Results

Showing results 1 to 10 of approximately 17.

(refine search)
Author:Zhang, Yuzhe 

Working Paper
Unemployment insurance fraud and optimal monitoring

The most prevalent incentive problem in the U.S. unemployment insurance system is that individuals collect unemployment benefits while being gainfully employed. We show how the unemployment insurance authority can efficiently use a combination of tax/subsidy and monitoring to prevent such fraud. The optimal policy monitors the unemployed at fixed intervals. Employment tax is nonmonotonic: it increases between verifications but decreases after a verification. Unemployment benefits are relatively flat between verifications but decrease sharply after a verification.
Working Papers , Paper 2012-024

Working Paper
Optimal Contracts with Reflection

In this paper, we show that whenever the agent's outside option is nonzero, the optimal contract in the continuous-time principal-agent model of Sannikov (2008) is reflective at the lower bound. This means the agent is never terminated or retired after poor performance. Instead, the agent is asked to put zero effort temporarily, which brings his continuation value up. The agent is then asked to resume effort, and the contract continues. We show that a nonzero agent's outside option arises endogenously if the agent is allowed to quit and find a new firm (after a random search time of finite ...
Working Paper , Paper 16-14

Working Paper
Market-based incentives

We study optimal incentives in a principal-agent problem in which the agent's outside option is determined endogenously in a competitive labor market. In equilibrium, strong performance increases the agent's market value. When this value becomes sufficiently high, the threat of the agent's quitting forces the principal to give the agent a raise. The prospect of obtaining this raise gives the agent an incentive to exert effort, which reduces the need for standard incentives, like bonuses. In fact, whenever the agent's option to quit is close to being "in the money," the market-induced ...
Working Paper , Paper 13-05

Working Paper
Optimal Liquidity Regulation With Shadow Banking

We study the impact of shadow banking on optimal liquidity regulations in a Diamond-Dybvig maturity mismatch environment. A pecuniary externality arising out of the banks' access to private retrade renders competitive equilibrium inefficient. Shadow banking provides an outside option for banks, which adds a new constraint in the mechanism design problem that determines the optimal allocation. A tax on illiquid assets and a subsidy to the liquid asset similar to the payment of interest on reserves (IOR) constitute an optimal liquidity regulation policy in this economy. During expansions, i.e., ...
Working Paper , Paper 15-12

Working Paper
Optimal Incentive Contracts with Job Destruction Risk

We study the implications of job destruction risk for optimal incentives in a long-term contract with moral hazard. We extend the dynamic principal-agent model of Sannikov (2008) by adding an exogenous Poisson shock that makes the match between the firm and the agent permanently unproductive. In modeling job destruction as an exogenous Poisson shock, we follow the Diamond-Mortensen-Pissarides search-and-matching literature. The optimal contract shows how job destruction risk is shared between the rm and the agent. Arrival of the job-destruction shock is always bad news for the rm but can be ...
Working Paper , Paper 17-11

Working Paper
Dynamic contracting, persistent shocks and optimal taxation

In this paper I develop continuous-time methods for solving dynamic principal-agent problems in which the agent?s privately observed productivity shocks are persistent over time. I characterize the optimal contract as the solution to a system of ordinary differential equations, and show that, under this contract, the agent?s utility converges to its lower bound?immiseration occurs. I also show that, unlike in environments with i.i.d. shocks, the principal would like to renegotiate with the agent when the agent?s productivity is low?it is not renegotiation-proof. I apply the theoretical ...
Working Papers , Paper 640

Working Paper
Stochastic optimal growth with a non-compact state space

This paper studies the stability of a stochastic optimal growth economy introduced by Brock and Mirman [J. Econ. Theory 4 (1972)] by utilizing stochastic monotonicity in a dynamic system. The construction of two boundary distributions leads to a new method of studying systems with non-compact state space. The paper shows the existence of a unique invariant distribution. It also shows the equivalence between the stability and the uniqueness of the invariant distribution in this dynamic system.
Working Papers , Paper 639

Working Paper
Optimal auditing and insurance in a dynamic model of tax compliance

We study the optimal auditing of a taxpayer?s income in a dynamic principal- agent model of hidden income. Taxpayers in our model initially have low income and stochastically transit to high income that is an absorbing state. A low-income taxpayer who transits to high income can underreport his true income and evade his taxes. With a constant absolute risk-aversion utility function and a costly and imperfect auditing technology, we show that the optimal auditing mechanism in our model consists of cycles. Within each cycle, a low-income taxpayer is initially unaudited, but if the duration of ...
Working Papers , Paper 2011-020

Journal Article
Wealth Effects with Endogenous Retirement

In this article, we study wealth effects, i.e., the response of consumption to exogenous changes in wealth. We use a consumption-saving model with endogenous retirement to show that the endogenous response of the value of a worker's human capital to changes in her wealth helps to account for the weak wealth effects observed in the data.
Economic Quarterly , Issue 3Q , Pages 173-200

Journal Article
Cyclical Properties of Bank Margins: Small versus Large Banks

We study cyclical properties of the net interest margin (NIM) in the US banking sector in the aggregate as well as separately for small and large banks. In the aggregate and among large banks, NIM is countercyclical. Among small banks, however, NIM is procyclical. Further, we find that this result is driven by differences in the cyclical dynamics of small and large banks' funding costs rather than asset yields.
Economic Quarterly , Issue 1Q , Pages 1-33



FILTER BY Content Type


Grochulski, Borys 9 items

Ravikumar, B. 6 items

Fuller, David L. 5 items

Schwam, Daniel 2 items

Steelman, Aaron 1 items

show more (2)

FILTER BY Jel Classification

D86 2 items

C61 1 items

D82 1 items

J26 1 items

M52 1 items