We build a dynamic political economy model with a two-class society: workers and the elite. A key feature of the model is that the formation of the elite, the rate of innovation, taxes and public spending are endogenous. Differently from most of the literature on institutions and growth which...

We consider an economy, in which the elite controls the means of production. The private incentives of each elite member contradict the interests of the elite as a whole. While each member of the elite would benefit from engaging into new productive activities, the byproduct of such activities...

A defining feature of business cycles is the comovement of inputs at the sectorial level with aggregate activity. Standard models cannot account for this phenomenon. This paper develops and estimates a two-sector dynamic general equilibrium model which can account for this key regularity. My...

Entry costs vary dramatically across countries. To assess their impact we construct a model with endogenous entry and operation decisions by firms and calibrate it to match the U.S. distribution of firms by age and size. Higher entry costs lead to greater misallocation of productive factors and...

A defining feature of business cycles is the comovement of inputs at the sectoral level with aggregate activity. Standard models cannot account for this phenomenon. This paper develops and estimates a two-sector dynamic general equilibrium model that can account for this key regularity. My model...