Using Hansen's (1999) threshold estimation technique and Panel Study of Income Dynamics (PSID) data set for the waves of 2001, 2003 and 2005, we estimate the effects of the fluctuations in financial wealth on the consumption behaviour of households for different endogenously determined income...

Galor and Moav (2004) argue that in the early stages of development, physical capital accumulation is the primary source of economic growth. Thus, inequality enhances growth by channeling resources towards individuals whose marginal propensity to save is higher. In later stages of development,...

The Heckscher-Ohlin model predicts that trade openness causes the skill premium to increase in skill-abundant developed countries, and to decrease in skill-scarce developing countries. Empirical evidence, however, shows that the skill premium declined in some developing countries, while others...

This paper utilizes the geometric techniques developed in Khan and Mitra (2005, 2007) to analyze the optimal intertemporal allocation of water resources in a dynamic setup without discounting. The framework features two sectors: the first uses labor to purify water, while the second uses labor...

This paper investigates the impact of income inequality on economic growth. A two-period overlapping generations model is developed where agents are heterogeneous in innate abilities and inheritance. In the first period, they receive their inheritance and their abilities are revealed. There are...

This paper attempts to estimate the housing wealth effect of households in different income levels. To endogenously split the sample by income levels, we use the threshold estimation technique, developed in Hansen (1999), for non-dynamic panels with individual-specific fixed effects. The data...

This paper presents a complete characterization of the optimal policy in a two sector undiscounted growth model. The model is an extension of the Leontief two sector model, which analyzes the optimal allocation of capital and labor to a consumption good sector and an investment good sector. The...

This paper investigates the impact of imposing conditionality covenants on the performance of the signatories to a sovereign credit contract. A two period model is developed in which creditors provide a loan to a sovereign conditional upon the implementation of investments. Commitment to these...