We propose a model of coordination failures for business cycles in which agents learn to coordinate over time. The economy features an aggregate demand externality that leads to multiple equilibria under complete information. Under incomplete information, a group of informed agents receive...

The recent financial crisis in 2007-2008 suggests that financial shocks, the aggregate disturbances that originate directly in the financial sector, can play an important role as a source of business cycle fluctuations. In this paper, we explore the impact of aggregate shocks to the cost of...

In this paper I document occupational mobility comparing the experiences of cohorts living one century apart: those captured in the Panel Study of Income Dynamics from 1968 to 2000 and a longitudinal census sample of individuals observed between 1880 and 1930. Considering different levels of...

We propose three key features of Chinese capitalism over the last two decades. First, power is held by about 3000 local governments (instead of the central government). Second, local governments have substantial capacity to provide public goods and face little accountability. Third, local...

Are optimism shocks an important source of business cycle fluctuations? Are deficit-financed tax cuts better than deficit-financed spending to increase output? These questions have been previously studied using SVARs identified with sign and zero restrictions and the answers have been positive...

We study the welfare implications of different market structures in a model of adverse selection. In particular, we contrast a competitive exchange, where the informed agents can trade simultaneously with multiple principals with an íover-the-counterí setting characterized by search frictions...

Peck and Shell (2003) show that equilibrium bank runs are possible in the Diamond and Dybvig (1983)environment. We show that their result is an artifact of their restriction to direct mechanisms. That is, their bank contract is not an optimal one. We show that an indirect mechanism eliminates...

We present evidence that fraudulent collection of unemployment benefits by workers who are gainfully employed is the most relevant incentive problem for the design of unemployment insurance. We show how to efficiently use a combination of tax/subsidy and monitoring to prevent such fraud. The...

Cyclical fluctuations in the U.S. labor market and output exhibit a significant asymmetry. In this paper, I develop a search-and-matching model with endogenous job destruction and permanently heterogeneous workers (in skill/productivity) that accounts for this asymmetry while also generating (i)...

Reallocation of inputs in production and substitution across them, are mechanisms through which the economy adjusts to changes in relative efficiency in production across sectors. When input productivity moves along relative prices, cost shares are constant and the input output structure of the...