In this paper we propose a simple extension to the panel case of the covariate-augmented Dickey Fuller (CADF) test for unit roots developed in Hansen (1995). The extension we propose is based on a p-values combination approach that takes into account cross-section dependence. We show that the...

Starting a firm with expansive potential is an option for educated and high-skilled workers. This option serves as an insurance against unemployment caused by labor market frictions and hence increases the incentives for education. We show within a matching model that reducing the start-up costs...

The origins of fiscal capacity have traditionally been linked to warfare and democratization. However, non-democratic states also invest in fiscal capacity, even in times of peace. In fact, the majority of income taxes-a cornerstone of government finance-were introduced by non-democratic states...

What is the relationship between inequality and growth? This question has occupied and fascinated social scientists for more than a century. This article critically reviews the recent empirical and theoretical literature on the complex interplay between inequality and economic growth. Inequality...

We investigate cross-country fiscal policy spillovers through the integration of capital markets in a currency union and allow capital use in production to differ across countries. Following empirical evidence, we assume that production exhibits capital-skill complementarity. Using a...

The debate on whether democracy and inequality increase the level of redistribution is ongoing. We construct a model that predicts higher probability of redistribution in democracies than autocracies through social transfers. Higher inequality leads to more redistribution in democracies but not...