We analyze the joint determination of income redistribution and migration flows across fiscally independent regions. In our model, regional governments lack commitment so their policy announcements must be credible, and redistribution between skilled and unskilled workers is bounded by...

A monetary authority can be committed to pursuing an inflation, price-level, or nominal output target yet systematically fail to achieve the specified goals. Constrained by the zero lower bound on the policy rate, the monetary authority is unable to implement its objectives when private-sector...

Given the importance of international trade for economic growth, why in any given year do few U.S. firms export their wares, and why are most U.S. goods not traded with most countries? Roc Armenter presents some intriguing evidence suggesting the U.S. does export most of its products to most...

Many of the facts about the extensive margin of trade—which firms export, and how many products are sent to how many destinations—are consistent with a surprisingly large class of trade models because of the sparse nature of trade data. We propose a statistical model to account for sparsity,...

Cross-country income gaps are large in the data. Can observed investment prices account for these gaps? Our model adds an extensive margin to the neoclassical growth model by allowing for entry of firms. When combined with a “returns to variety” effect, our model provides an amplification...

Over the past few decades, several developed economies have experienced large changes in how much households and firms save. In fact, a sharp increase in firms’ savings behavior has changed the net position of the (nonfinancial) corporate sector vis-à-vis the rest of the economy. ; Why have...

Summarizing, unless admissibility constraints rule out the eventual implementation of the first best, all intertemporal distortions must be transitional. Hence, only settings in which first best allocations are unattainable, such as private information economies, can provide a normative basis...

Sample zeros---products available that do not register positive revenues due to the finite sample period---introduce several biases in the computation of the import price index developed by Feenstra (1994). We model sample zeros by considering the discrete choice model of Anderson, De Palma and...

This paper studies the long-run properties of intertemporal distortions in a broad class of second-best economies. Our unified framework encompasses and extends many well-known models, such as variants of the Ramsey taxation model with aggregate or idiosyncratic risk, and economies with...

This paper argues that there is a normative case for delaying policy reform. Policy design in dynamic economies typically faces a trade-off between the policy effects in the short and long term, and possibly across future states of nature. When the economy is in an atypical state or available...