We introduce a neoclassical growth economy with idiosyncratic production risk and incomplete markets. The general equilibrium is characterized in closed form. Uninsurable production shocks introduce a risk premium on private equity and typically result in a lower steady-state level of capital...

The goal of this paper is to propose a simple paradigm for understanding rent seeking and corruption in the growth context. We develop an endogenous growth model where entrepreneurs, as intermediate-good producers, may engage in rent-seeking activities. The latter are defined by the following...

This paper examines how uncertainty and credit constraints affect the cyclical composition of investment and thereby volatility and growth. We develop a model where ï¬rms engage in two types of investment: a short-term one; and a long-term one, which contributes more to productivity...

plausible parametrizations, these effects can be quantitative significant.

Different beliefs about the fairness of social competition and what determines income inequality influence the redistributive policy chosen in a society. But the composition of income in equilibrium depends on tax policies. We show how the interaction between social beliefs and welfare policies...

Does welfare improve when ?firms are better informed about the state of the economy and can better coordinate their decisions? We address this question in an elementary business-cycle model that highlights how the dispersion of information can be the source of both nominal and real rigidity....

We study how the heterogeneity of information impacts the efficiency of the business cycle and the design of optimal fiscal and monetary policy. We do so within a model that features a standard Dixit-Stiglitz demand structure, introduces dispersed private information about the underlying...

This paper develops a novel theory of the origins of fluctuations. This theory dispenses with the dubious notions of exogenous disturbances to technologies, preferences, or mysterious wedges. Instead, it points out the central role that self-fulfilling expectations can play in shaping short-run...