We characterize the long run outcome of a dynamic private information economy with public capital accumulation. The economy is typical of those assumed in the new dynamic public finance literature. We establish that almost all agents converge to misery or luxury and bound the fraction who are...

We develop a method for identifying and quantifying the fiscal channels that help finance government spending shocks. We define fiscal shocks as surprises in defense spending and show that they are more precisely identified when defense stock data are used in addition to aggregate macroeconomic...

This paper considers optimal social insurance in a dynamic moral hazard economy. The existing literature has focussed on environments in which a planner and a population of agents share the same discount factor. A key finding is that agents are then almost surely immiserated; their welfare is...

We consider a dynamic moral hazard economy inhabited by a planner and a population of privately informed agents. We assume that the planner and the agents share the same discount factor, but that the planner cannot commit. We show that optimal allocations in such settings solve the problems of...

There are two important rules in a patent race: what an innovator must accomplish to receive the patent and the allocation of the benefits that flow from the innovation. Most patent races end before R&D is completed and the prize to the innovator is often less than the social benefit of the...

We analyze optimal fiscal and monetary policy in an economy with distortionary labor income taxes, nominal rigidities and nominal debt of various maturities. Optimal policy prescribes the exclusive use of long term debt. Such debt mitigates the distortions associated with hedging fiscal shocks...

This paper investigates the likelihood of factor-price equalization under the simple assumptions of Heckscher-Ohlin Theory. Factor-price equalization is also directly related to whether countries specialize or not in the global market. A full-equilibrium in the world requires not only the...

Recursive game theory provides theoretical procedures for computing the equilibrium payoff sets of repeated games and the equilibrium payoff correspondences of dynamic games. In this paper, we propose and implement outer and inner approximation methods for value correspondences that naturally...