This paper contributes to the debate about fiscal multipliers by studying the impacts of government investment in conventional neoclassical growth models. The analysis focuses on two dimensions of fiscal policy that are critical for understanding the effects of government investment:...

We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulation lead to institutional improvement. We find that most indicators of institutional quality used to establish the proposition that institutions cause...

We examine the relationship between urban characteristics in 1960 and urban growth (income and population) between 1960 and 1990. Our major findings are that income and population growth move together and both types of growth are (1) positively related to initial schooling, (2) negatively...

The degree of geographic concentration of individual manufacturing industries in the U.S. has declined only slightly in the last twenty years. At the same time, new plant births, plant expansions, contractions and closures have shifted large quantities of employment across plants, firms, and...

Will improvements in information technology eliminate face-to- face interactions and make cities obsolete? In this paper, we present a model where individuals make contacts and choose whether to use electronic or face-to-face meetings in their interactions. Cities are modeled as a means of...

Dynamic rational expectations models imply that the real value of debt in the hands of the public must be equal to the expected present-value of surpluses. We impose this equilibrium condition on an identified VAR and characterize the way in which the present-value support of debt varies across...

The conventional wisdom is (i) that fiscal austerity was the main culprit for the recessions experienced by many countries, especially in Europe, since 2010 and (ii) that this round of fiscal consolidation was much more costly than past ones. The contribution of this paper is a clarification of...

Every economy faces a "fiscal limit" that delivers the maximum government debt-GDP ratio that can be sustained without appreciable risk of default or higher inflation. But governments in advanced economies issue substantial nominal debt and nominal debt is a commitment to repay in nominal units....

The present paper argues that the correct experiment to evaluate the effects of a fiscal adjustment is the simulation of fiscal plans rather than of individual fiscal shocks. The simulation of the fiscal plans adopted by 16 OECD countries over a 30-year period supports the hypothesis that the...

Increases in government spending trigger substitution effects--both inter- and intra-temporal--and a wealth effect. The ultimate impacts on the economy hinge on current and expected monetary and fiscal policy behavior. Studies that impose active monetary policy and passive fiscal policy...