This paper studies a two-country production economy with complete and frictionless financial markets and international trade of final goods in which competition in R&D leads to endogenous new firm creation and economic growth. Current monopolists ("incumbents") and potential new firms...

We develop an endogenous growth model to quantify how permanent structural policy changes that enhance the fiscal policy mix, markets' functioning, and public institutions' quality affect long-term growth and welfare. The reforms include increased public investment, reduced market power through...

We study the effect of a declining labor force on the incentives to engage in labor-saving technical change and ask how this effect is influenced by institutional characteristics of the pension scheme. When labor is scarcer it becomes more expensive and innovation investments that increase labor...

Empirical research based on the Bhaduri/Marglin-variant of the Kaleckian model has recently shown that aggregate demand in many medium-sized and large open economies tends to be wage-led in the medium to long run, even in a period of increasing globalisation. In this paper we extend this type of...

We study the effect of a declining labor force on the incentives to engage in labor-saving technical change and ask how this effect is influenced by institutional characteristics of the pension scheme. When labor is scarcer it becomes more expensive and innovation investments that increase labor...

This paper shows that dynamic inefficiency can occur in dynamic general equilibrium models with fully optimizing, infinitely-lived households even in a situation with underinvestment. We identify necessary conditions for such a possibility and illustrate it in a standard R&D-based growth model....

This paper develops an open economy growth model in which firm heterogeneity increases the gains from trade. Technology spillovers from incumbent firms to entrants cause the productivity threshold for firm survival to grow over time as competition becomes tougher. By raising the profits of...

We investigate the impact of incremental trade liberalization in a dynamic model of endogenous growth with heterogeneous firms and costly trade. Growth originates from horizontal specialization and the steady state productivity growth rate is positive. Innovations require costly R&D and are...

We construct a simple endogenous growth model to analyse the relationship between the composition of fiscal policy, economic growth and employment. The government sets different tax rates on labour income, capital income, and private consumption to finance productive expenditures,...

Labor's share of income has attracted interest in recent years reflecting its apparent decline. These falls, witnessed across many countries, are usually deemed undesirable. Any such assertion, however, begs the question of what is the socially optimal labor share. We address this question using...