This paper develops a dynamic theory that accounts for the evolution of trade policy, underlying internal class conflicts, and output growth performance over the last few centuries. By analyzing political responses to the distributional effects of international trade, it finds a prominent...

We develop a macroeconomic model with a moral hazard problem between financial intermediaries and households, which causes inefficient resource allocation, to make us reconsider the financial regulation according to financial development, and individual and aggregate economic activities in the...

This paper constructs a two-country model of international trade to study how labor market frictions affect industry location patterns, unemployment rates, and fully endogenous productivity growth. We show that when the larger country offers subsidies to labor search costs or reduces...

In recent years firms have started to offshore their innovation activities to emerging economies. This paper investigates the implications of innovation offshoring for productivity growth in a two-country framework that features a tension between access to technical knowledge and low-cost...

This paper studies how national research subsidies affect productivity growth and national welfare through adjustments in the geographic location of research and development (R&D) across countries. Our two-country framework features a tension in the firm-level innovation location decision...

The Keynesian multiplier effect is reinterpreted and several issues that may have misled assessments of the effect of fiscal spending are discussed. It is shown that even in the textbook Keynesian framework some transfer policy ‘reduces’ aggregate demand and that public works spending may...

Although the Keynesian multiplier effect of public works is criticized for lack of a microeconomic foundation, it is still taught in most undergraduate courses and believed to be useful for policy makers. However, it has a serious fallacy even if we accept the consumption function. This note...

We propose a microeconomic foundation of the multiplier effect and that of the consumption function using a dynamic optimization model that explains a shortage of aggregate demand and unemployment. We show that government purchases boost aggregate demand through a multiplier-like process but...

In a Diamond-type overlapping-generations setting public debt issuance places no burden on future generations including those who repay the debt if prices and wages are fixed and unemployment occurs in the periods in which public bonds are issued and repaid. Whether the collected fund is spent...