This paper deals with credit market imperfections and idiosyncratic risks in a twosector heterogeneous agent dynamic general equilibrium model of occupational choice. We focus especially on the effects of tightening financial constraints on macroeconomic performance, entrepreneurial risktaking,...

This paper deals with credit market imperfections and idiosyncratic risks in a two–sector heterogeneous agent dynamic general equilibrium model of occupational choice. We focus especially on the effects of tightening financial constraints on macroeconomic performance, entrepreneurial...

This paper develops a theory of international trade in which financial development and factor endowments jointly determine comparative advantage. We apply the financial contract model of Holmstrom and Tirole (1998) to the Heckscher-Ohlin-Samuelson (HOS) model in which firms' dependence on...

When does trade become a one-way relationship? We study bilateral trade balances for a sample of 18 European countries over the period from 1948 through 2008. We find that, with the introduction of the euro, trade imbalances among euro area members widened considerably, even after allowing for...

This paper investigates the link between patterns of trade and modes of foreign direct investment (FDI) by utilizing exports, imports, and inward FDI data for China over the period 1998 to 2007. We construct a modified gravity equation to find the main modes of inward FDI into China with...

Development is a process that is full of uncertainties, and even more so is the process of economic transition. Because of uncertainties and country specificity, development must be a process of learning, selective adaptation, and industrial upgrading. This paper attempts to distill lessons from...

This paper studies the impact of the level and volatility of the commodity terms of trade on economic growth, as well as on the three main growth channels: total factor productivity, physical capital accumulation, and human capital acquisition. We use the standard system GMM approach as well as...

We develop a small, open economy, two-sector model with heterogeneous agents and endogenous participation in a labor matching market. We analyze the implications of asymmetric market entry costs for the patterns of international trade and underemployment. Furthermore, we examine the welfare...