Borrowing from Employees: Wage Dynamics with Financial Constraints

Borrowing from employees: Wage dynamics with financial constraints∗ Claudio Michelacci CEMFI and CEPR

We analyze how the financial conditions of the firm affect the compensation structure of workers, the size of the firm, and its dynamics. Firms that are financially constrained offer long-term wage contracts characterized by an increasing wage profile, that is, they pay lower wages today in exchange of higher future wages, effectively borrowing from their employees. Because constrained firms al...

Tax compliance with borrowing constraints

This paper considers a simple dynamic model of tax compliance in which people may face binding borrowing constraints. The model leads to much different conclusions and policy recommendations than static models. In particular, the government cannot generate full compliance by setting the expected value of cheating to be negative. Also, it is possible for the government to set penalties in a way ...

Financial Aid, Borrowing Constraints and College Attendance: Evidence from Structural Estimates

Financial Constraints and Firm Dynamics

The short run effects of financial constraints (FCs) on the expected growth rate of firms and their long-term implications on the evolution of the firm size distribution have been recently investigated by several scholars. In this paper we extend the analysis to a wider and largely unexplored range of possible FCs effects, including the autoregressive and heteroskedastic structure of the firm g...

Fluctuations in Uncertainty, Efficient Borrowing Constraints and Firm Dynamics∗

This paper quantifies the importance of aggregate fluctuations in microeconomic uncertainty for firm dynamics over the business cycle in an economy with endogenously frictional financial markets. To begin, I provide evidence on asymmetric response across age and size groups of firms in the U.S. to the changes in aggregate economic conditions. I argue that age rather than size is a relevant marg...