TY  - JOUR
AU  - Hart,Oliver
AU  - Moore,John
TI  - A Theory of Debt Based on the Inalienability of Human Capital
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3906
PY  - 1995
Y2  - April 1995
UR  - http://www.nber.org/papers/w3906
L1  - http://www.nber.org/papers/w3906.pdf
N1  - Author contact info:
Oliver D. Hart
Department of Economics
Littauer Center 220
Harvard University
Cambridge, MA 02138
Tel: 617/496-3461
Fax: 617-495-7730
E-Mail: ohart@harvard.edu

John Moore
William Robertson Building
Edinburgh
Scotland, EH8 9JY
U.K.
E-Mail: j.h.moore@ed.ac.uk
AB  - Consider an entrepreneur who needs to raise funds from an investor, but cannot commit not to withdraw his human capital from the project. The possibility of a default or quit puts an upper bound on the total future indebtedness from the entrepreneur to the investor at any date. We characterize the optimal repayment path and show how it is affected both by the maturity structure of the project return stream and by the durability and specificity of project assets. Our results are consistent with the conventional wisdom about what determines the maturity structure of (long-term) debt contracts.
ER  -