Principal-agent models take outside options, determining participation and incentive constraints, as given. We construct a general equilibrium model where workers' reservation wages and the maximum punishment acceptable before workers quit are instead determined endogenously. We simultaneously...

We characterize the evolution over time of a network of credit relations among financial agents as a system of coupled stochastic processes. Each process describes the dynamics of individual financial robustness, while the coupling results from a network of liabilities among agents. The average...

"How does the lack of legitimacy of property rights affect the dynamics of the creation of the rule of law? We investigate the demand for the rule of law in post-Communist economies after privatization under the assumption that theft is possible, that those who have "stolen" assets cannot be...

A significant amount of the increase in the wealth income ratio in recent decades is due to an increase in the value of land. We present a series of models that explain why land prices may have increased. These models help us understand the increase in both the wealth income ratio and wealth...

A second extension analyzes the effects of land. We ask whether land holding displaces the holding of capital, resulting in workers being worse off. A tax on land, while reducing the value of land, leaves unchanged the capital-labor ratio, output per capita, and wages. But the tax reduces the...

Among the key results are: (i) The magnitude of wealth inequality does not, in general depend on the difference between the rate of interest (r) and the rate of growth (g); the former is itself an endogenous variable that needs to be explained. In the standard generalization of the Solow model,...

Explaining why the concepts of "capital" and "wealth" are distinct, we show that appropriately defined aggregates for wealth may be (and in the case of some countries appear to be) moving in opposite directions

This paper analyzes equilibrium, dynamics, and optimal decisions on the factor bias of innovation in a model of induced innovation. In a model with full employment, we show that (a) if the elasticity of substitution is always less than or greater than unity, there is a unique steady state...