This paper investigates the efficiency wage hypothesis and derives a tractable expression for the profit loss incurred by deviations from the efficiency wage. The extent of the wage deviation can be inferred from production function parameters. The resulting profit loss shown to depend upon the...

This paper shows that, with (partial) irreversibility, higher uncertainty reduces the impact effect of demand shocks on investment. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed both numerically for a model with a rich mix...

Disadvantaged groups tend also to constitute population minorities. One consequence of this is that the policies implemented by electorally accountable governments often fail to reflect minority interests. A policy solution is to enhance the political power of minority groups as a vehicle for...

Nonparametric regression is developed for data with both a temporal and a cross-sectional dimension. The model includes additive, unknown, individual-specific components and allows also for cross-sectional and temporal dependence and conditional heteroscedasticity. A simple nonparametric...

A dynamic panel data model is considered that contains possibly stochastic individual components and a common stochastic time trend that allows for stationary and nonstationary long memory and general parametric short memory. We propose four different ways of coping with the individual effects...

This paper reviews the cross-country record of economic growth, using as organizing framework how economic theory has guided that empirical analysis. The paper argues that recent studies of economic growth—both empirical and theoretical—distinguish from previous work in three distinct...

Per capita incomes across European regions are not equal and do not stay constant; regional income distributions uctuate over time. Such a process could have many possible limiting outcomes: complete equal- ity (convergence), stratication, and continually increasing inequality are but three...

This paper uses a model of growth and imperfect capital mobility across multiple economies to characterize the dynamics of (cross-country) in- come distributions. This allows convenient study of the convergence hypothesis, and reveals, where appropriate, polarization and clumping within...

Convergence concerns the poor catching up with the rich|if not instan- taneously, then at least having a tendency to do so. When poor and rich here refer to entire economies, then whether convergence occurs is traditionally viewed as just a side consequence of a more central ques- tion, namely...

Uncertainty appears to vary strongly over time, temporarily rising by up to 200% around major shocks like the Cuban Missile crisis, the assassination of JFK and 9/11. This paper offers the first structural framework to analyze uncertainty shocks. I build a model with a time varying second...