We present a model of optimal government policy when policy choices may exacerbate socio-political instability (SPI). We show that optimal policy that takes into account SPI transforms a standard concave growth model into a model with both a poverty trap and endogenous growth. The resulting...

Can a growing welfare state induce a regime switch in the growth rate of an econ-omy? This paper constructs a dynamic political economy model of economic growth and the welfare state in which both variables are non-linearly related and jointly en-dogenous. Using a Markov switching framework over...

We study the effect of capital controls on the level of investment in human capital and the resulting growth path of an economy. The economy consists of two groups of agents based on the ownership of factors of production. One type of agents - called workers - own human capital and bequeath...

This paper constructs a heterogenous agent model of endogenous distribution and growth. When the labor leisure choice of agents is exogenous, the factor holding ratios of households converges to a mass point that is independent of the initial distribution of capital in the steady state. There is...

This paper generalizes the analysis of distributive conflict, politics, and growth developed by by Alesina-Rodrik (1994). We construct a heterogenous-agent framework in which both growth and the distribution of wealth are endogenous. Due to adjustments in the distribution of wealth, the...

The ratio of Indian to US per capita output over the past 45 years has displayed a distinctive "V"-shaped pattern. We show that a strikingly similar V-shaped pattern is visible not just in aggregate output .figures, but also as the primary determinant of long-term movements in the...

This paper addresses the issue of estimating and forecasting productivity growth trends in the US and Germany from the perspective of a business cycle researcher who wants to use the available information in time series of aggregate labor productivity to derive a model for short- and/or...

Following Keen and Marchand (1997), the paper analyses the effect of fiscal competition on the composition of public spending in a model where capital and skilled workers are mobile while low skilled workers are immobile. Taxes are levied on capital and labour. Each group of workers benefits...

In developing and transition economies, microlending has become an effective instrument for providing micro businesses with the necessary financial resources to launch operations. In the industrialized countries, with their highly developed banking systems, however, there has been ongoing debate...