The authors present a stochastic model of two barter economies, with production, linked by free trade in goods and securities, which generates Pareto-efficient international transmissions of business cycle disturbances. Each country is inhabi ted by an infinitely-lived, representative firm and...

Wages subject to continuous renegotiations provide inefficient incentives for the creation of firm-specific human capital if training requires both firm investment and worker effort. Noncontingent career-long, fixed-wage contracts do not induce efficient levels of training because they award all...