We develop a new general equilibrium model of trade with heterogeneous firms, variable demand elasticities and endogenously determined wages. Trade integration favors wage convergence, intensifies competition, and forces the least efficient firms to leave the market, thereby affecting aggregate...

We (a) propose an implementable innovation index, (b) relate it to existing innovation definitions and (c) show whole-economy and industry-specific results for the UK market sector, 2000-2005. Our innovation measure starts by observing that we could get more GDP without innovation by simply...

"We present a dynamic two-region model with overlapping generations. There are two types of public expenditure, education and infrastructure funding, and governments decide optimally on budget size (tax rate) and its allocation across the two outlays. Productivity of government infrastructure...

Pressure on public finances has increased scrutiny of public support for innovation. We examine two particular issues. First, there have been many recent calls for the (relatively new) UK R&D subsidy to be extended to other “research” activities, such as software. Second, argument still...

We use disaggregated data on Chilean plants, and the Chilean input-output table to examine the impact of agglomeration spillovers on total factor productivity (TFP). In common with previous studies, we find evidence of intra-industry spillovers, but no evidence of cross-industry spillovers in...

The world is replete with spatial frictions. Shipping goods across cities entails trade frictions. Commuting within cities causes urban frictions. How important are these frictions in shaping the spatial economy? We develop and quantify a novel framework to address this question at three...

Using comprehensive data for German establishments (1999-2008), we estimate plant-level production functions to analyze if "cultural diversity" affects total factor productivity. We distinguish diversity in the establishment's workforce and in the aggregate regional labor force where the plant...