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We advance quantitative-theoretic models of sovereign debt by proving the existence of a downward sloping equilibrium price function for long-term debt and implementing a novel method to accurately compute it. We show that incorporating long-term debt allows the model to match Argentina's average external debt-to-output ratio, average spread on external debt, the standard deviation of spreads, and simultaneously improve upon the model's ability to account for Argentina's other cyclical facts. We also investigated the welfare properties of maturity length and showed that if the possibility of self-fulfilling rollover crises is taken into account, long-term debt is superior to short-term debt.

Participants in student loan programs must repay loans in full regardless of whether they complete college. But many students who take out a loan do not earn a degree (the dropout rate among college students is between 33 and 50 percent). We examine whether insurance, in the form of loan forgiveness in the event of failure to complete college, can be offered, taking into account moral hazard and adverse selection. To do so, we develop a model that accounts for college enrollment and graduation rates among recent U.S. high school graduates. In our model, students may fail to earn a degree because they either fail college or choose to leave voluntarily. We find that if loan forgiveness is offered only when a student fails college, average welfare increases by 2.40 percent (in consumption equivalent units) without much effect on either enrollment or graduation rates. If loan forgiveness is offered against both failure and voluntary departure, welfare increases by 2.15 percent, and both enrollment and graduation are higher.

A sovereign's inability to commit to a course of action regarding future borrowing and default behavior makes long-term debt costly (the problem of debt dilution). One mechanism to mitigate this problem is the inclusion of a seniority clause in debt contracts. In the event of default, creditors are to be paid off in the order in which they lent (the \"absolute priority\" or \"first-in-time\" rule). In this paper, we propose a modification of the absolute priority rule suited to sovereign debts contracts and analyze its positive and normative implications within a quantitatively realistic model of sovereign debt and default.

We document that postwar U.S. elections show a strong pattern of “incumbency disadvantage”: if a party has held the presidency of the country or the governorship of a state for some time, that party tends to lose popularity in the subsequent election. We show that this fact can be explained by a combination of policy inertia and unpredictability in election outcomes. A quantitative analysis shows that the observed magnitude of incumbency disadvantage can arise in several different models of policy inertia. Normative and positive implications of policy inertia leading to incumbency disadvantage are explored.

An analytically tractable city model with external increasing returns is presented. The equilibrium city structure is either monocentric or decentralized. Regardless of which structure prevails, intracity variation in endogenous variables displays exponential decay from the city center, where the decay rates depend only on parameters. Given population, the equilibrium of the model is generically unique. Tractability permits explicit expressions for when a central business district (CBD) will emerge in equilibrium, how external increasing returns affect the steepness of downtown rent gradients, and how wages and welfare vary with population. An application to urban growth boundary is presented.

Continuous and pulse TIG arc treatment of MIG-based wire arc additive manufactured (WAAM-MIG) parts has been investigated. A hybrid method is proposed for selective surface hardening applications. It presents an opportunity for immediate heat treatment in the WAAM process, thereby enhancing overall workflow effectiveness. The influence of peak current, base current, and pulse frequency was studied on surface hardness, depth of hardened region, and cooling rate. A maximum hardness of 428 HV was achieved, yielding an increase of ~ 71% from ~ 250 HV of as-deposited low alloy steel. As the yielded hardness increased, its depth was observed to decrease, e.g., the depth of the hardened region was limited within the range of 0.2–0.5 mm at maximum hardness. Similarly, a 1 mm hardened depth limited the surface hardness to ~ 350 HV. Hardness improvement could be attributed to martensite microstructure formation and showed a strong dependency on the mode of operation and associated cooling rate.

We study, theoretically and quantitatively, the general equilibrium of an economy in which households smooth consumption by means of both a riskless asset and unsecured loans with the option to default. The default option resembles a bankruptcy filing under Chapter 7 of the U.S. Bankruptcy Code. Competitive financial intermediaries offer a menu of loan sizes and interest rates wherein each loan makes zero profits. We prove the existence of a steady-state equilibrium and characterize the circumstances under which a household defaults on its loans. We show that our model accounts for the main statistics regarding bankruptcy and unsecured credit while matching key macro-economic aggregates, and the earnings and wealth distributions. We use this model to address the implications of a recent policy change that introduces a form of \"means testing\" for households contemplating a Chapter 7 bankruptcy filing. We find that this policy change yields large welfare gains.

We present a theory of entry through spinoffs where workers generate ideas and possess private information concerning their quality. Because quality is privately observed, adverse selection implies that the market can only offer a price that reflects the average quality of ideas sold. Only workers with good ideas decide to spin off, whereas workers with mediocre ideas sell them. Existing firms pay a price for ideas sold in the market that implies zero expected profits. Hence, firms' project selection is independent of firm size, which can lead to scale-independent growth. This mechanism results in invariant firm-size distributions that resemble the data.