In the present paper we uncover a novel mechanism through which a minority can gain a disproportionate power in a perfectly functioning democracy, decides on a unique redistributive instrument, the tax rate. We show that a minority characterised by a high degree of social identification may, in...

The present paper is an extension of Ghiglino and Shell [7] to the case of imperfect consumer credit markets. We show that with constraints on individual credit and only anonymous (i.e., non-personalized) lump-sum taxes, strong (or “global”) irrelevance of government budget deficits is not...

Some recent research indicates that the occurrence of indeterminacy in models with externalities may be overstated because these models ignore agents' heterogeneity. We consider a neoclassical two-sector growth model with technological externalities. Agents are heterogeneous with respect to...

In this paper we explore the link between wealth inequality and stability in a two-sector neoclassical growth model with heterogeneous agents. The stability of the steady state depends on the various parameters of the model and in particular on individual preferences. We show that when consumers...

In this paper we propose a mechanism generating innovations with productivity distributed according to a power law. We assume that knowledge creation occurs as new ideas are produced from combinations of existing ideas. The productivity of an innovation is determined by an unobservable intrinsic...

We introduce relative concerns in the form of conspicuous consumption in a standard economic geography model a la Krugman. The primary intuition is that conspicuous consumption imposes a negative externality on some agents and generates a centrifugal force. We show that this is not always the...

We introduce a tractable model of cheap talk among players located on networks. In our model, a player can send a message to another player if and only if he is linked to him. We derive a sharp equilibrium and welfare characterization which reveals two basic insights. In equilibrium, the...