This paper shows that dynamic inefficiency can occur in dynamic general equilibrium models with fully optimizing, infinitely-lived households even in a situation with underinvestment. We identify necessary conditions for such a possibility and illustrate it in a standard R&D-based growth model....

To gain insights into the mechanisms that shape the interaction between economic growth and climate change, we analyze the simplified DICE through the lens of growth theory. We analytically show that this model exhibits a continuum of saddle-point stable steady states, a property that carries...

Does international financial integration boost economic growth? The question has been discussed controversially for a long time. As of yet, robust evidence for a positive impact is lacking (Edison et al., 2002). However, there is substantial narrative evidence from economic history that...

The paper revisits the debate on trickle-down growth in view of the widely discussed evolution of the earnings and income distribution that followed a massive public expansion of higher education. We propose a dynamic general equilibrium model to dynamically evaluate whether economic growth...

The upward sloping trend of rents and house prices has initiated a debate on the consequences of surging housing costs for wealth inequality and welfare. We employ a frictionless two-sectoral macroeconomic model with a housing sector to investigate the dynamics of wealth inequality and the...