A growth model of a developing economy facing an upward sloping supply curve of debt is analyzed. Equilibrium is characterized by transitional dynamics in which consumption, capital, and debt converge to a common growth rate. The adjustment is through the debt-capital ratio, which drives the...

This paper examines the link between foreign aid, economic growth, and welfare in a small open economy. External transfers impinge on the recipient's macroeconomic performance by affecting resource allocation decisions and relative prices. The endogeneity of the labor-leisure choice and the...

This paper examines the link between foreign aid, economic growth, and welfare in a small open economy. External transfers impinge on the recipient's macroeconomic performance by affecting resource allocation decisions and relative prices. The endogeneity of the labor-leisure choice and the...

The paper develops a theoretical framework for understanding the mechanism through which foreign aid affects macroeconomic performance. The authors find that the long-run impact of an aid program and the nature of the transitional dynamics it generates depend crucially on (i) the elasticity of...

This paper develops a theoretical framework for understanding the mechanism through which foreign aid affects macroeconomic performance. We find that the long-run impact of an aid program and the nature of the transitional dynamics it generates depend crucially on (i) the elasticity of...

We contrast the effects of a transfer tied to investment in public infrastructure from a traditional pure transfer. The latter has no growth or dynamic consequences; it is always welfare improving, the gains increasing with the stock of government debt and the benefits of debt reduction. A tied...

This paper explores the relationship between aggregate and relative congestion, returns to scale and economic growth. Aggregate congestion reduces the effective productivity of capital; relative congestion reduces the effective productivity of labour. Both forms of congestion adversely affect...

We construct a unified overlapping-generations (OLG) framework of equilibrium growth that includes the Blanchard “perpetual youth” model, the Samuelson model, and the infinitely-lived representative agent growth model as limit specifications of a “realistic,” two-parameter survivorship...

This paper explores the relationship between aggregate and relative congestion, returns to scale and economic growth. Aggregate congestion reduces the effective productivity of capital; relative congestion reduces the effective productivity of labour. Both forms of congestion adversely affect...

This paper examines the sensitivity of the growth-inequality tradeoff to the progressivity of the tax structure. Using an endogenous growth model calibrated to approximate the US tax structure, we simulate a 5% reduction in the economy-wide average tax rate attained by alternative combinations...