What are the micro and macro implications of a credit crunch? We study this question in a model where heterogeneous entrepreneurs can finance their investment by borrowing subject to collateral constraints and/or by using internal funds. We discipline our theory by requiring that the size...

This paper provides a quantitative evaluation of the aggregate and distributional impacts of economy-wide microfinance or other credit programs targeted toward small-scale entrepreneurs. In our analysis, we find that the redistributive impacts of microfinance are stronger in general-equilibrium,...

In our model, short-sighted policy-makers choose to subsidize productive entrepreneurs to relax their limited commitments. In the short-run, this policy reallocates capital from unproductive towards productive entrepreneurs, and boosts per-capita income, TFP and capital accumulation. Over time,...

We study how perfectly anticipated inflation affects allocations and prices in a new-monetarist model with a home-production sector. Inflation taxes market production but not home production, since cash is essential for some market transactions but is not necessary to enjoy home-produced goods....

A currency union’s ability to increase international trade is one of the most debated questions in international macroeconomics. This paper studies the dynamics of these trade effects. As empirical motivation, we find that the extensive margin of trade (entry of new firms or goods) in the...

A fundamental puzzle for productivity driven business cycle theories is that labor productivity and hours are negatively correlated. I refine the empirical puzzle and provide a theory to account for it. I emphasize that hours per worker and individual hours relative to usual hours move counter...

Reverse mortgages allow elderly homeowners with limited income or financial wealth to borrow against their housing wealth without downsizing or selling out and becoming a renter. Although the proportion of elderly homeowners using reverse mortgages has been increasing rapidly, only 1.4 percent...

Consider the following facts. In 1950 rich countries attained an average of 8.1 years of schooling whereas poor countries attained 1.3 years --a 6-fold difference. By 2005, the difference in schooling declined to 2-fold even though the per-capita income gap did not decrease. What explains...

We estimate a nested logit discrete choice model using a remarkable dataset that includes market shares, characteristics, expected usage, and transaction price microdata for all new and used vehicles available between 1999 and 2008. To address simultaneity bias, we introduce a new instrument for...