There is a growing interest in multi-sector models that combine aggregate balanced growth, consistent with the well-known Kaldor facts, with systematic changes in the relative importance of each sector, consistent with the Kuznets facts. Although variations in the income elasticity of demand...

This paper studies the effects of an increase in risk on welfare and optimal policies in a stochastic dynamic model of global pollution. In a first step, we focus on the case of a single decision maker, and make use of an approach pioneered by Kimball (2014) for studying the impact of a marginal...

This paper presents a simple model of a common access fishery where fishermen care about relative performance as well as absolute profits. Our specification captures the idea that status (which depends on relative performance) in a community infuences a person's well-being. We consider two...

We build an overlapping generations model of endogenous growth driven by human capital formation. Young people differ in their innate abilities, but these differences are not known even by the individuals themselves when they are going through the process of education, so that there are no...

This paper examines how trade liberalization affects the innovation incentives of firms, and what this implies for industry productivity and social welfare. For this purpose we develop a reciprocal dumping model of international trade with heterogeneous firms and endogenous R&D. We identify two...