To explain the fact that government spending and tax policy are procyclical in emerging and developing countries, we develop a model for the joint behavior of optimal tax rates and government spending over the business cycle. Our set-up relies on financial frictions, which have been shown to be...

We contribute to the debate on the macroeconomic effects of fiscal stimuli by showing that the impact of government expenditure shocks depends crucially on key country characteristics, such as the level of development, exchange rate regime, openness to trade, and public indebtedness. Based on a...

It is well-known by now that government spending has typically been countercyclical in industrial countries and procyclical in developing economies. Most of this literature has focused on analyzing aggregate government spending or discretionary spending categories such as government consumption...

Ideological debates on the role of government in development have focused on two contrasting prescriptions: one calling for large scale government interventions to solve problems of massive market failures, the other for the unfettering of markets, with the dynamic forces of capitalism naturally...

This paper explores the causes and consequences of the more important market failures which impede the development of LOCs, and explains why the non-market institutions which often ameliorate the effects of market failures in developed countries are less effective- in doing so in LOCs. This...

This paper explores the implications for less developed countries the hypothesis that workers' productivity depends on the wages they receive. In particular, we show that this hypothesis may explain the high urban wages and unemployment found in many such countries. The market equilibrium is...

Progress in artificial intelligence and related forms of automation technologies threatens to reverse the gains that developing countries and emerging markets have experienced from integrating into the world economy over the past half century, aggravating poverty and inequality. The new...

This paper analyzes the role of real exchange rate (RER) policies in promoting economic development. Markets provide a suboptimal amount of investment in sectors characterized by learning spillovers. We show that a stable and competitive RER policy may correct for this externality and other...

This volume brings together some of the most influential scholars in development economics to explore how to improve the well-being of the poor, how to design effective structures and institutions for poverty reduction and what the role of economic, political and social dimensions are (and...