This Paper develops a model with multiple steady states (low tax and low unemployment versus high tax and high unemployment) in which equilibrium selection is not conditioned on a sunspot variable. Instead, large temporary shocks initiate unavoidable transitions from one steady state to another....

Pareto-improving economic reforms that also simultaneously achieve efficiency can be implemented through a strategy of ‘dual-track’ liberalization. Its success requires the feasibility of the original plan and its continued enforcement by the state. The Chinese experience demonstrates that...

We develop a simple model to analyse the ‘dual-track’ approach to transition to a market economy as a mechanism for implementing efficient Pareto-improving economic reform, that is, reform achieving efficiency without creating losers. The approach, based on the continued enforcement of the...

The relationship between our general equilibrium model with multimember households and club models with multiple private goods is investigated. The main distinction in the definitions consists of the equilibrium concepts. As a rule, competitive equilibria among households where no group of...

In this Paper, we show that with international externalities, different country sizes, imperfect competition and trade costs, tax competition for mobile firms is efficiency enhancing with respect to the free market outcome. Nonetheless, while the latter entails too many firms in the larger...

The direct impact of local public goods on welfare is relatively easy to measure from land rents. However, the indirect effects on home and job location, on land use, and on agglomeration benefits are hard to pin down. We develop a spatial general equilibrium model for the valuation of these...

We introduce labour market imperfections (i.e. unions and the existence of a wage floor) in a finance-constrained monetary economy with heterogenous agents and increasing returns to scale due to labour and capital productive externalities. We find that indeterminacy emerges for empirically...

We discuss the effects of unions in the labour market on steady-state multiplicity and welfare, and on the occurrence of local indeterminacy, local bifurcations and (stochastic and deterministic) endogenous fluctuations driven by self-fulfilling expectations. We consider an overlapping...

This paper considers a general class of nonlinear rational-expectations models in which policymakers seek to maximize an objective function that may be household expected utility. We show how to derive a target criterion that is: (i) consistent with the model's structural equations, (ii) strong...

The theory of monotone comparative statics and supermodular games is presented as the appropriate tool to model complementarities. The approach, which has not yet been fully incorporated into the standard toolbox of researchers, makes the analysis intuitive and simple, helps in deriving new...