Essays on moral hazard

Braido, Luis Henrique Bertolino

     This thesis is composed of two articles that contribute to the literature on moral hazard. The first article models a general equilibrium economy with moral hazard and endogenous financial markets. The model allows any individual to open a clearinghouse and issue competitive securities. Issuers have some control over trades in their clearinghouses, but do not observe transactions in the securities issued by others. Typically, the equilibrium presents endogenously incomplete financial markets. The second article uses tenancy data from India to study a classical example of moral hazard: the landlord-tenant relationship. I propose a test methodology that distinguishes between hidden and non-monitored actions. Sharecropping and fixed-rent tenants are found equally productive, but less productive than owners. Tenants crop lower-quality lands and use less of other inputs. Controlling for observable inputs, the contract form has no effect on the expected output. Next, I test if sharecroppers' input choices respect profit-maximization conditions. The evidence does not support the existence of missing incentives.

Chiappori, Pierre-Andre