A paradigm is presented where both the extent of financial intermediation and the rate of economic growth are endogenously determined. Financial intermediation promotes growth because it allows a higher rate of return to be earned on capital, and growth in turn provides the means to implement...

We develop an endogenous growth model with heterogeneous firms facing financial frictions, where misallocation emerges explicitly as a crucial endogenous state variable and plays a significant role in driving economic growth through the valuation channel. The model illustrates that transient...

This paper characterizes the transition dynamics of a continuous-time neoclassical production economy with capital accumulation in which households face idiosyncratic income risk and cannot commit to repay their debt. Therefore, even though a full set of contingent claims that pay out...

In the long run, we are all dead. Nonetheless, when studying the short-run dynamics of economic models, it is crucial to consider boundary conditions that govern long-run, forward-looking behavior, such as transversality conditions. We demonstrate that machine learning (ML) can automatically...

In this paper we disentangle the sources of public sector inefficiency using 1982-1995 panel data on manufacturing firms in Indonesia. We consider two leading hypotheses: (1) public sector enterprises are inefficient due to monitoring problems and (2) public sector enterprises are inefficient...

The paper studies budgetary, financial and monetary policy evaluationand design using a comprehensive wealth or permanent income accounting framework. A set of stylized balance sheets and permanent income accountsis constructed for the public, private and overseas sectors.These are then...

Politicians may use disguised' redistributive policies in order to circumvent opposition to explicit tax-transfer schemes. First, we present a theoretical model that formalizes this hypothesis; then we provide evidence that in US cities, politicians use public employment as such a redistributive...

Excessive levels of government employment is one of the most frequent complaints made about public-sector governance in developing economies. The explanation typically offered is that governments have used public-sector employment as a tool for generating and redistributing rents. This paper...