The paper develops a general equilibrium model of migration, assimilation and trade, using a random matching framework of culture and trade. The market equilibrium and the social planner’s solution are contrasted and policy implications are given. The model predicts that the presence of...

The effect of financial liberalization on private saving is theoretically ambiguous, not only because the link between interest rate levels and saving is itself ambiguous, but also because financial liberalization is a multi-dimensional and phased process, sometimes involving reversals. Some...

This paper investigates the benefits of allowing households to compensate the portfolio distortion due to their housing consumption through investments in housing price derivatives. Focusing on the London market, we show that a major loss from over-investment in housing is that households are...

This paper establishes the existence and efficiency of equilibrium in a local public goods economy with spatial structures by formalizing Hamilton's (1975 Urban Studies) elaboration of Tiebout's (1956 JPE) tale. We use a well-known equilibrium concept from Rothschild and Stiglitz (1976, QJE) in...

This paper develops a small open economy, sticky-price model with a role for current account dynamics in the transmission of shocks. I solve the stationarity problem of incomplete markets, open economy models by adopting an overlapping-generations structure. I model nominal rigidity by assuming...

Price advertisement by retail stores is pervasive. If there exist non-negligible costs of consumer search, a retailer can increase the number of consumers visiting its location by advertising a low price, thus increasing consumers' expected utilities from search. If the increase in the number of...

This paper studies the soft budget constraint problem in a principal-agent model. The agent screens projects of and makes initial investment in the projects that have passed the screening. He then finds the types of the funded projects and decides to close some of the ex post inefficient ones...

I construct an economy with heterogeneous agents that mimics the time-series behavior of the earnings distribution in the United States from 1963 to 2003. Agents face aggregate and idiosyncratic shocks and accumulate real and financial assets. I estimate the shocks that drive the model using...

This paper tests for the motives for private income transfers. We consider two motives: altruism and exchange. The question of private-transfer motives is important because such motivation can influence the effects of public income transfers on the distribution of income. Using a household...

We propose a decomposition of social welfare when consumers' preferences are described by quasi-linear utility functions. In our decomposition, social welfare is expressed as the sum of consumers' gross utilities and trade surplus of non-numeraire goods, whose consumption enters utility...