This paper explores the interaction between centralized monetary policy and decentralized fiscal policy in a monetary union. Discretionary monetary policy suffers from a failure to commit. Moreover, decentralized fiscal policymakers impose externalities on each other through the influence of...

Employed technologies differ vastly across countries. Within countries many technologies that would obviously improve firms' efficiency are not adopted. This paper explains these observations by emphasizing that a new technology positively affects workers by lowering prices and increasing their...