Development accounting exercises based on an aggregate production function find technology is biased in favor of a country's abundant production factors. We provide an explanation to this finding based on the Heckscher-Ohlin model. Countries trade and specialize in the industries that use...

A reduction in income tax rates generates substantial dynamic responses within the framework of the standard neoclassical growth model. The short-run revenue loss after an income tax cut is partly -- or, depending on parameter values, even completely -- offset by growth in the long-run, due to...

Recent empirical evidence suggests a negative relationship between trade integration and income per capita convergence. We show that moderate reductions in trade posts can generate sizable increases in income per capita divergence in a neoclassical two-country model of trade and growth. The...

We construct and numerically solve a dynamic Heckscher-Ohlin model in which the initial distribution of production factors in the world makes world-wide factor price equalization impossible, and leads countries to group in two diversification cones. We study the dynamics of income components and...

This paper introduces Heckscher-Ohlin trade features into a two-country DSGE model, and studies how productivity shocks propagate through trade in goods. In comparison with standard models, (i) transitory shocks to productivity have permanent effects on country-level aggregate variables; (ii)...

The The standard Real Business Cycle literature mainly focuses on Walrasian models designed to fit the US institutional framework. Differences between the US and Europe, mostly evident in the labor market, suggest that a purely Walrasian model may be inappropriate to study European business...

Severe economic downturns, characterized by deleverage, are typically preceeded by phenomena of debt overhang. This evidence suggests that large recessions may not be the result of large shocks, but, rather, of the interaction between typical shocks and the current state of the economy. We study...

Recent applications to the modeling of emission permit markets by means of stochastic dynamic general equilibrium models look into the relative merits of different policy mechanisms under uncertainty. The approach taken in these studies is to assume the existence of an emission constraints that...

This paper is the first attempt, to the best of our knowledge, to study the impact of a carbon tax by means of a heterogeneous agents model. The objectives of the paper are two: i) To assess how the results of a representative agent model compare to those coming from a model accounting for...

The recent crisis has emphasized the role of financial - macroeconomic interactions, and international trade in goods and services, in the transmission of the shocks. Both phenomena, closely related to the higher degree of globalization, are very relevant for small open economies, and...