An important incentive problem for the design of unemployment insurance is the fraudulent collection of unemployment benefits by workers who are gainfully employed. We show how to efficiently use a combination of tax/subsidy and monitoring to prevent such fraud. The optimal policy monitors the...

In this paper we show that price equalization does not imply zero barriers to trade. There are many barrier combinations that deliver price equalization, but each combination implies a different volume of trade. We demonstrate this first theoretically in a simple two-country model and then...

Almost 80 percent of capital goods production in the world is concentrated in 10 countries. Poor countries import most of their capital goods. We argue that international trade in capital goods has quantitatively important effects on economic development through two channels: (i) capital...

We develop a theory of labor quality based on (i) the division of the labor force between unskilled and skilled workers and (ii) investments in skilled workers. In our theory, countries differ in two key dimensions: talent and total factor productivity (TFP). We measure talent using the observed...

This paper deals with a classic development question: how can the process of economic development – transition from stagnation in a traditional technology to industrialization and prosperity with a modern technology – be accelerated? Lewis (1954) and Rostow (1956) argue that the pace of...

We compare a uniform voucher regime against the status quo mix of public and private education, focusing on the distribution of welfare gains and losses across house-holds by income. We argue that the topping-up option available under uniform vouchers is not sufficiently valuable for the poorer...