Common wisdom suggests that a fully-funded actuarially fair social security system must increase welfare when households face longevity risk and annuity markets are missing. This wisdom is based on the observation that social security pays benefits as life annuities and therefore appears to...

This paper analyzes how access to imported inputs affects firms in developing countries, where domestically produced high-quality inputs are relatively costly. We build an O-Ring type model with quality complementarity across input tasks, ranking tasks by their quality sensitivity. Because...

This paper introduces endogenous credit constraints in a search model of unemployment. These constraints generate multiple equilibria supported by self-fulfilling beliefs. A stock market bubble exists through a positive feedback loop mechanism. The collapse of the bubble tightens the credit...

According to the results, the interest rate rules responding to house prices have contributed more to inflation stability and output stability, than those that do not respond to house prices. As the central bank started to gradually emphasize the importance of output stability, the interest rate...

Inequality is shaped by complementarities between worker characteristics and the characteristics of technology, capital, firms, and industries. International trade affects the state of technology, the stocks of different types of capital, and the allocation of labor across firms and industries....

We study the integration process of the North and South Korean economies. Our model incorporates elements that are necessary for explaining closely-related transition experiences (i.e., the growth miracles of East Asia and the post-communist transitions of Eastern Europe). We calibrate the model...

In this paper we analyze analytically, quantitatively, and empirically a framework where labor supply has three distinct roles. First, as usual, it increases contemporaneous earnings. Second, because of incomplete asset markets, it provides some partial insurance for idiosyncratic labor...

We develop a model in which asymmetric information gives rise to both problems of adverse selection and costly state verification. Under the separating equilibrium in the credit market, some borrowers are credit rationed. We consider three types of government subsidies: interest rate subsidy,...

We analyze, in the context of a small open economy, the welfare effects of a monetary rule in which the central bank targets the nominal exchange rate. We show that, if the uncovered interest parity (UIP) holds, this rule is equivalent to the standard Taylor rule in terms of impulse responses to...

Attention is scarce and reading details of applications for a job, a flat rental, or a school admission is a matter of choice. We study how the knowledge of ethnicity impacts the level of attention to an individual and how that can give rise to discrimination. We show that the choices of...