This paper develops a political economy model to evaluate how inequality affects policies via the political process. The model is an extension of Krusell and Rios-Rull (1999) to incorporate uninsured idiosyncratic risk to income. Using this framework, we evaluate the response of social insurance...

and productivity shocks similar to the assumptions in Chatterjee, Corbae, Nakajima, and Rios-Rull (2007, Econometrica).

business cycles, and borrower default frequencies. The model is parameterized to match a set of key aggregate and cross-sectional statistics for the U.S. banking industry. As in the data, the model generates countercyclical interest rates on loans, bank failure rates, borrower default...

the main business cycle regularities of emerging economies.

This is a theory of endogenous volatility over the business cycle based on firm-level intangible expenditures. We propose a firm dynamics model with endogenous market participation. Firms that incur higher intangible expenses are able to serve more markets and diversify market-specific demand...

productivity differences between the US and developing economies.

This paper explores the role of bank balance sheets, sovereign default risk, and capital adequacy requirements in amplifying aggregate fluctuations. The paper, first, proposes a unified model of defaultable sovereign debt and bank balance sheets to capture regularities on bank credit to firms,...

We develop a model of banking industry dynamics to study the quantitative impact of capital requirements on bank risk taking, commercial bank failure, and market structure. We propose a market structure where big, dominant banks interact with small, competitive fringe banks. The paper extends...

In this paper we document the relationship between idiosyncratic risk and non productive expenditures at the rm level from the Kauman Firm Survey. We then propose a model of entrepreneurial activity subject to nancial constraints where rms engage in borrowing to nance capital and wages, but also...

We develop a theory of total factor productivity with heterogeneous firms, to explain differences in human capital across countries. In our model, firms operate in an economy with capital markets imperfections and costs of creating and operating in the formal sector. These distortions give rise...