On news of a takeover, the sum of the stock market values of the firms involved often falls, and the value of the acquirer almost always does. Does this mean that takeovers do not raise the values of the firms involved? Not necessarily. We set up a model in which the equilibrium number of...

This paper models growth via on-the-job learning when firms and workers are heterogeneous. It is an overlapping generations model in which young agents match with the old. More efficient assignments lead to faster long-run growth, more inequality, and less turnover in the distribution of human...

When a production process requires two extremely complementary inputs, conventional wisdom holds that a firm would always upgrade them simultaneously. We show, however, that if upgrading each input involves a fixed cost, the firm may upgrade them at different dates, "asynchronously." This...

Early entry has the advantage of higher revenues per unit of output early on. Late entry has the benefit of learning from the experience of earlier entrants, and hence lower production costs. The advantages are balanced off in a continuous-time, perfect-foresight equilibrium. Competition...

We develop a dynamic model with knowledge spillovers in production. The model contains two opposing forces. Imitation of other firms helps followers catch up with leaders, but the prospect of doing so makes followers want to free ride. The second force dominates and creates permanent inequality....

This paper tackles two puzzles: the high empirical elasticity of aggregte output with respect to the measured capital input and the seemingly high variability of growth rates over countries in the medium run. We find that one need not invoke increasing returns or externalities to capital to...

Why did the stock market decline so much in the early 1970s and remain low until the early 1980s? We argue that it was because information technology arrived on the scene and the stock-market incumbents of the day were not ready to implement it. Instead, new firms would bring in the new...