The paper models international rivalry between a domestic firm that is going through a learning-by-doing phase, and a mature foreign rival. It is shown that the optimal production subsidy for the domestic firm depends on the degree of strategic sophistication of the foreign firm. Optimal...

The authors examine the role of strategic interactions among a small number of financial intermediaries who know that the current financial regime is subject to change. The current financial regime offers protection to the intermediaries against bad outcomes. Each financial intermediary's...

Recent work has documented declines in the labor income share in the United States and beyond. This paper documents that these trends differ between manufacturing and services in the U.S. and in a broad set of other industrialized economies, and shows that a model where the degree of...

There is a growing interest in multi-sector models that combine aggregate balanced growth, consistent with the well-known Kaldor facts, with systematic changes in the sectoral allocation of resources, consistent with the Kuznets facts. Although variations in the income elasticity of demand...

Given its significance in practice, piecewise linear taxation has received relatively little attention in the literature. This paper offers a simple and transparent analysis of its main characteristics. We fully characterize optimal tax parameters for the cases in which budget sets are convex...