NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Alessandro Lizzeri

Department of Economics
New York University
19 West 4th Street
New York, NY 10012
Tel: 212/998-8907

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NBER Program Affiliations: POL
NBER Affiliation: Research Associate

NBER Working Papers and Publications

August 2016The Political Economy of Debt and Entitlements
with Laurent Bouton, Nicola Persico: w22570
This paper presents a dynamic political-economic model of total government obligations. Its focus is on the interplay between debt and entitlements. In our model, both are tools by which temporarily powerful groups can extract resources from groups that will be powerful in the future: debt transfers resources across periods; entitlements directly target the future allocation of resources. We prove five main results. First, debt and entitlement are strategic substitutes in the sense that constraining debt increases entitlements (and vice versa). Second, if entitlements are unconstrained, it is sometimes welfare-improving to relax debt constraints, even in the absence of shocks that require smoothing. This is because borrowing constraints lead to higher entitlement spending and reduces overa...
January 2000The Role of Commitment in Dynamic Contracts: Evidence from Life Insurance
with Igal Hendel: w7470
We look at the life insurance industry to study the properties of long term contracts in a world where consumers cannot commit to a contract. The main issue is how contracts are designed to deal with classification risk. We present a model that captures the main features of this industry. The data is especially suited for a test of the theory since it includes information on the entire profile of future premiums. The lack of commitment by consumers shapes contracts in the way predicted by the theory. All types of contracts involve front-loading. This generates a partial lock-in of consumers. Contracts that are more front-loaded have a lower present value of premiums over the period of coverage. This is consistent with the idea that more front-loaded contracts retain better risk pools. The ...

Published: Hendel, Igal and Alessandro Lizzeri. "The Role Of Commitment In Dynamic Contracts: Evidence From Life Insurance," Quarterly Journal of Economics, 2003, v118(1,Feb), 299-327. citation courtesy of

May 1998The Role of Leasing under Adverse Selection
with Igal Hendel: w6577
Leasing contracts specify a rental rate and an option price at which the used good can be bought at the termination of the lease. This option price cannot be controlled when the car is sold. We show that in a world with symmetric information this additional control variable is useless; equilibrium allocations and profits to lessors are unaffected by the option prices. In contrast, under adverse selection, leasing contracts affect equilibrium allocations in a way that matches observed behavior in the car market. We show that a social planner can use leasing contracts to improve welfare but they are imperfect tools; they cannot generally achieve first best while other mechanisms can. We also show that a producer with market power can benefit from leasing contracts for two reasons: better...

Published: Hendel, Igal and Alessandro Lizzeri. "The Role Of Leasing Under Adverse Selection," Journal of Political Economy, 2002, v110(1,Feb), 113-143. citation courtesy of

September 1997Adverse Selection in Durable Goods Markets
with Igal Hendel: w6194
An undesirable feature of Akerlof style models of adverse selection is that ownership of" used cars is independent of preferences and is therefore ad hoc. We present a dynamic model" that incorporates the market for new goods. Consumers self-select into buying new or used" goods making ownership of used goods endogenous. We show that, in contrast with Akerlof and" in agreement with reality, the used market never shuts down and that the volume of trade can be" quite substantial even in cases with severe informational asymmetries. By incorporating the" market for new goods, the model lends itself to a study of the effects of adverse selection on" manufacturers' incentives. We find that manufacturers may gain from adverse selection. We" also give an example in which the market allocatio...

Published: American Economic Review, Vol. 89, no. 5 (December 1999): 1097-1115. citation courtesy of

 
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