Generalizing essentiality of inputs from traditional Solow model to the augmented one, this paper relaxes assumption of strict concavity of production function per effective labor in the proof of existence and uniqueness of steady state in the augmented Solow model

Following the introduction of the one-child policy in China, the capital-labor (K/L) ratio of China increased relative to that of India, and, simultaneously, FDI inflows relative to GDP for China versus India declined. These observations are explained in the context of a simple neoclassical OLG...

Lucas (1990) argues that the neoclassical adjustment process fails to explain the relative paucity of FDI inflows from rich to poor countries. In this paper we consider a natural experiment: using China as the treated country and India as the control, we show that the dynamics of the relative...

This paper investigates whether imperfect foresight affects intertemporal choice using three experiments. We study the effects of both exogenously introduced and naturally occurring (i.e., summer vacation) forecasting difficulties, as well as the effects of increasing internal forecasting...

Existing work on investor heterogeneity in corporate bond markets mainly focuses on the shares of different types of investors. We find that investor concentration also plays an important role in corporate bond pricing dynamics and secondary market liquidity, even after controlling the shares of...

We propose a model of asset management in which benchmarking arises endogenously, and analyze its unintended welfare consequences. Fund managers’ portfolios are unobservable and they incur private costs in running them. Conditioning managers’ compensation on a benchmark portfolio’s...

Corporate bond market participants are increasingly worried about liquidity. However, bid-ask spreads and other standard measures indicate liquidity has not deteriorated significantly. This paper proposes a potential reconciliation. We show the sensitivity of credit yields to bid-ask spreads...

The modern financial system features complicated financial intermediation chains, with each layer performing a certain degree of credit/maturity transformation. We develop a dynamic model in which an entrepreneur borrows from overlapping-generation households via layers of funds, forming a...

We argue that a common practice of evaluating portfolio managers relative to a benchmark has real effects. Benchmarking generates additional, inelastic demand for assets inside the benchmark. This leads to a "benchmark inclusion subsidy:" a firm inside the benchmark values an investment project...

We propose a model of asset management in which benchmarking arises endogenously, and analyze its unintended welfare consequences. Fund managers' portfolios are unobservable and they incur private costs in running them. Conditioning managers' compensation on a benchmark portfolio's performance...