The Macroeconomics of Delegated Management
AbstractWe are interested in the macroeconomic implications of the separation of ownership and control. We propose an alternative decentralized interpretation of the stochastic growth model, one where shareholders hire a self-interested manager who is in charge of the firmâ€™s hiring and investment decisions. Under imperfect monitoring and incomplete contracting, delegation is seen to give rise to a generic conflict of interests between shareholders and managers. This conflict fundamentally results from the different income base of both types of agents, once aggregate market clearing conditions are taken into account. We derive the dynamic consequences of this divergence in intertemporal marginal rates of substitution and discuss the likelihood that appropriate incentive contracts offered the manager will mitigate the consequences of this divergence
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 289.
Date of creation: 2004
Date of revision:
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
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business cycles; delegated management; contracting;
Other versions of this item:
- Jean-Pierre Danthine & John B. Donaldson, 2003. "The Macroeconomics of Delegated Management," FAME Research Paper Series rp88, International Center for Financial Asset Management and Engineering.
- Danthine, Jean-Pierre & Donaldson, John B, 2003. "The Macroeconomics of Delegated Management," CEPR Discussion Papers 4008, C.E.P.R. Discussion Papers.
- Jean-Pierre DANTHINE & John B. DONALDSON, 2003. "The Macroeconomics of Delegated Management," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 03.12, Université de Lausanne, Faculté des HEC, DEEP.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-02 (All new papers)
- NEP-DGE-2004-08-02 (Dynamic General Equilibrium)
- NEP-MAC-2004-08-02 (Macroeconomics)
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