This paper generalizes the business cycle model in Jovanovic (2006) along two important and meaningful dimensions: i) more general utility function; ii) more realistic distribution properties of the productivity shocks. Unlike the original model, I assume the power utility function of the...

In this article I demonstrate the relationship between research and development expenditure and firm productivity. Using data envelopment, I construct a measure of the firm-level distance from the industry-wide productivity frontier. Firms <italic>ex ante</italic> further from the productivity frontier invest...

Without sacrificing tractability, we analyze the effect of fat-tailed events such as catastrophes on the optimal compensation contract between a principal and an agent. The optimal contract depends on all the moments and not just the variance.

An average machine lags in terms of productivity and technological advancement behind a cutting-edge machine. This lag was first defined by Cummins and Violante (2002) as the technology gap. Using the vector error correction model, I show that the technology gap is cointegrated with human...