Harberger triangles are used to calculate the efficiency costs of taxes, government regulations, monopolistic practices, and various other market distortions. This paper considers the historical development of Harberger triangles, the associated theoretical controversies, and the contribution of...

One of the most important developments in the growth literature of the last decade is the enhanced appreciation of the role that the misallocation of resources plays in helping us understand income differences across countries. Misallocation at the micro level typically reduces total factor...

We develop a dynamic model of trading and investment with limited aggregate resources to study investment cycles. Unverifiable idiosyncratic investment opportunities imply market prices to play a role of rent distribution, distorting private investment incentives from a social point of view....

This paper is structured in three parts. The first part outlines the methodological steps, involving both theoretical and empirical work, for assessing whether an observed allocation of resources across countries is efficient. The second part applies the methodology to the long-run allocation of...

This paper analyzes pharmaceutical pricing between and within countries to achieve second best static and dynamic efficiency. We distinguish countries with and without universal insurance, because insurance undermines patients' price sensitivity, potentially leading to prices above second-best...

Health insurance markets face two forms of adverse selection problems. On the demand side, adverse selection leads to plan price distortions and inefficient sorting of consumers across health plans. On the supply side, adverse selection creates incentives for plans to inefficiently distort...

In a simple model of capital budgeting in a diversified firm where headquarters has limited power, we show that funds are allocated towards the most inefficient divisions. The distortion is greater the more diverse are the investment opportunities of the firm's divisions. We test these...

In medicine, the reasons for variation in treatment rates across hospitals serving similar patients are not well understood. Some interpret this variation as unwarranted, and push standardization of care as a way of reducing allocative inefficiency. An alternative interpretation is that...