We characterize optimal taxation of foreign capital and optimal sovereign debt policy in a small open economy where the government cannot commit to policy, seeks to insure a risk averse domestic constituency, and is more impatient than the market. Optimal policy generates long-run cycles in both...

Patent-holding pharmaceutical companies are shown to be imperfectly able to charge differential prices for AIDS drugs due to the potential for black market exchange. Thus, greater segmentation in the international market through additional barriers to smuggling would induce firms to charge lower...

We develop a model in which a worker’s skills determine the worker’s current wage and sector. The market and the worker are initially uncertain about some of the worker’s skills. Endogenous wage changes and sector mobility occur as labor market participants learn about these...

We consider two kinds of ‘outside opportunity’ that a seller of an indivisible good might have: selling to a different buyer and consuming the good herself. In both models the seller is uncertain about the buyer's valuation, and becomes more pessimistic over time. When the seller...

This essay examines how repugnance sometimes constrains what transactions and markets we see. When my colleagues and I have helped design markets and allocation procedures, we have often found that distaste for certain kinds of transactions is a real constraint, every bit as real as the...

This paper examines the impact on agricultural development from the introduction of barbed wire fencing to the American Plains in the late 19th century. Without a fence, farmers risked uncompensated damage by others’ livestock. From 1880 to 1900, the introduction and near universal...

This paper offers empirical evidence that real exchange rate volatility can have a significant impact on long-term rate of productivity growth, but the effect depends critically on a country’s level of financial development. For countries with relatively low levels of financial...

It is difficult to resolve the global warming free-rider externality problem by negotiating n different quantity targets. By contrast, negotiating a single internationally binding minimum carbon price (the proceeds from which are domestically retained) counters self-interest by incentivizing...

Lucas (1987, 2003) estimates that the cost of economic fluctuations is low; a social planner would pay no more than 0.1% of (permanent) consumption to eliminate all future business cycle fluctuations. The current paper extends Lucas’ calculations by studying the costs of fluctuations...