We examine the evolution of the distributions of wealth and income in a Ramsey model in which agents differ in their initial capital endowment and where the labor supply is endogenous. The assumption that the utility function is homogeneous in consumption and leisure implies that the...

Empirical evidence suggests (i) that the real exchange rates of developing economies show less persistence than do those of more advanced economies and (ii) that the elasticity of substitution between capital and labor tends to increase from below unity for less developed economies to above one...

Recent research in growth theory has established the importance of the non-scale growth model, a key advantage of which is that they are consistent with balanced growth under quite general production structures. Indeed, if the knife-edge restriction that generates traditional endogenous growth...

This paper contrasts the effects of tied and untied foreign aid programs on the welfare and macroeconomic performance of a small open economy. We show that the acceptance of tied aid inevitably obligates the recipient economy to undertake certain internal structural adjustments, and the...

Stochastic models with economy-wide shocks imply that the welfare costs of aggregate volatility are negligible and contribute little to explaining the equity premium puzzle. Motivated by this failure, this paper introduces idiosyncratic shocks. Drawing on empirical evidence suggesting that the...