Market imperfections may lead to underinvestment in dynamic general equilibrium models. An interesting but unexplored question is whether policy interventions which attenuate underinvestment gaps necessarily imply that consumption will initially decline. By employing a calibrated version of a...

A fast growing empirical literature identifies an important role of entrepreneurs for productivity growth. This paper develops a simple overlapping-generations framework with endogenous occupational choice and productivity-enhancing entrepreneurial innovation. It shows that introducing these...

This paper examines the implications of human capital risk for the relationship between inequality and economic development. It argues that due to missing insurance markets for human capital risk, the initial distribution of family wealth may play an important role for an economy's process of...