This paper presents a methodology for the formulation and testing of economic growth models. The model selected includes two production sectors with physical and human capital accumulation. These capital stocks are associated with spillover effects in the production of the physical good and in...

Willig (1976) argues that the change in consumer's surplus is often a good approximation to the willingness to pay for a price change: if the income elasticity of demand is small, or the price change is small, then the percentage error from using consumer's surplus is small. If the price of a...

Using lattice programming methods and order-theoretic fixpoint theory, we are able to provide a first step in describing an ordinal (or qualitative) theory of equilibrium growth under uncertainty for a broad class of accumulation problems. The setting is one where in general the second welfare...

Differential tax treatment of married and single people is a key feature of the tax law in the US and other countries. We develop a matching model with search frictions to analyze the effects these tax provisions have on marriage formation and dissolution. Our main results are the following: (i)...

We ask how barriers to international trade affect TFP when there are monopoly rights in the import-competing industries. Holmes and Schmitz (1995) show that without barriers to trade TFP in these industries is as large as possible. We study the general case of finite barriers to trade. We find...

We study a class of two-sector neoclassical growth models, in which one sector produces consumption goods and the other sector produces the capital goods for both sectors and in which the capital-producing sector has sector-specific externalities. We show analytically that if the capital goods...

The equivalent or compensating variation for a price increase is often calculated using the expenditure function from a statistical (i.e. estimated) demand. If the regression errors are due to unobserved heterogeneity, then the variation from the statistical demand does not generally equal the...

This paper analyzes a model with search frictions, heterogeneous agents, and nontransferable utility, in which each individual observes only a noisy signal of the type of a potential partner. We show that an agent's optimal strategy must take into account not only the realization of the noisy...

One of the most challenging questions in economics is why some countries are so much richer than others. In this paper, we assess the role of cross-country differences in barriers to entry. This is motivated by the recent evidence about both their prevalence in the third world and their harmful...

We analyze a principal-agent model with moral hazard in which the principal has private information about the technology, and the contract offered by her may signal this information to the agent. We characterize Perfect Bayesian Equilibria of the game that possess the following properties that...