| Chapter 2: This chapter studies the emergence of middlemen (intermediation) and its consequences for welfare and redistribution. In Rubinstein and Wolinsky's seminal model on intermediation, middlemen only create value when they have an exogenous advantage in their search speed. I show that this result depends critically on the restriction that middlemen can only carry indivisible quantities of goods. Taking into account the intensive margin of production and allowing them to carry divisible quantities, middlemen with comparatively high bargaining power can create value even when they have a disadvantage in their search cost. While the presence of middlemen can improve welfare, equilibria remain suboptimal due to search and participation externalities. I describe a multi-instrument tax-subsidy scheme that controls participation levels by producers and middlemen and restores efficiency.;Chapter 3: This chapter studies the relationships between money and middlemen both serving as critical market institutes to facilitate trades with frictions. Focusing on the middlemen who are good at enforcing repayment from buyers, I find that money and middlemen can be substitutes and complements: when credit condition is poor in retail market for trades between sellers and buyers, middlemen and money become substitutes and inflation encourages the use of repayment; when credit condition is poor in the wholesale market for trades between sellers and middlemen, middlemen and money become complements and inflation discourages repayment. While the existence of middlemen with advantage at enforcing repayment mitigates buyers' payment friction in retail market, buyers can be better or worse off with middlemen depending on the level of inflation.;Chapter 4: This chapter studies long-run effect of inflation on employment and investment in a new monetarist model with a frictional labor market, and a frictional goods market with different market structures. Higher inflation leads to higher unemployment, less capital accumulation and fewer firm entry. These effects are robust to goods market structures. It is shown that unemployment benefits lead to more unemployment, less rm entry and less capital. However, depending on the market structure, active firms may become larger or smaller. The model is tractable and delivers many analytic results. |
