We consider the effect of excluding government investment from the deficit subject to the limits of the European Stability and Growth Pact. In the model we consider, residents of a given country discount future costs and benefits of government spending more than efficiency would dictate, because...

We study the competitive equilibria of a two-country endogenous growth model in which the source of growth is the linearity of technology in reproducible inputs. We begin by showing that in a model with no externalities there is a unique equilibrium; however, there are multiple ways in which the...

This paper investigates whether technological shocks, constructed to be consistent with the observed cross-country income dispersion, are also capable of accounting for development regularities related to capital accumulation. This question is approached via a quantitative theoretical analysis...

In this paper we study the decline of West Bengal relative to Maharashtra, historically two of the most important states of India. In 1960, West Bengal's per capita income exceeded that of Maharashtra, the third richest state at the time. By 1993, it had fallen to just 69 percent of...

This paper analyzes the effects of intergenerational conflict on capital and labor income tax rates, transfers, and government spending in a model of multidimensional policy choice. The different nature of tax liabilities for the young and the old can explain why the old receive large gross...

In this paper, we investigate the relationship between public capital spending and population dynamics at the state level. Empirically, we document two robust facts. First, states with faster population growth do not spend more (per capita) to accommodate the needs of their growing population....

We study the effects of credit shocks in a model with heterogeneous entrepreneurs, financing constraints, and a realistic firm-size distribution. As entrepreneurial firms can grow only slowly and rely heavily on retained earnings to expand the size of their business, we show that, by reducing...