We provide a model that links the high return to venture equity to the impatience of the VCs. VCs are scarce, and hence, they have market power and a high return on their investments. As a result, VCs are eager to terminate non-performing ventures so they can move on to new ones. The scarcity of...

We ask what level of migration would maximize world welfare. We find that skill-neutral policies are never optimal. An egalitarian welfare function induces a policy that entails moving mainly unskilled immigrants into the rich countries, whereas a welfare function skewed highly towards the rich...

Most industries go through a "shakeout" phase during which the number of producers in the industry declines. Industry output generally continues to rise, however, which implies a reallocation of capacity from exiting firms to incumbents and new entrants. Thus shakeouts seem to be classic...

Electricity and Information Technology (IT) are perhaps the two most important general purpose technologies (GPTs) to date. We analyze how the U.S. economy reacted to them. The Electricity and IT eras are similar, but also differ in several important ways. Electrification was more broadly...

Stock-market crashes tend to follow run-ups in prices. These episodes look like bubbles that gradually inflate and then suddenly burst. We show that such bubbles can form in a Zeira-Rob type of model in which demand size is uncertain. Two conditions are sufficient for this to happen: A declining...

We study the relation between IPO investment and the rate of interest. We model the IPO timing decision and show that the implied relation between interest rates and investment is non-monotonic, and the data support the implication. At low rates of interest firms delay their IPOs. This happens...

We argue that takeovers have played a major role in speeding up the diffusion of new technology. The role that they play is similar to that of entry and exit of firms. We focus on and compare two periods: 1890-1930 during which electricity and the internal combustion engine spread through the...

When a takeover is announced, the sum of the stock-market values of the firms involved often falls, and the value of the acquirer almost always does. Does this mean that takeovers do not raise the values of the firms involved? Not necessarily. We set up a model in which the equilibrium number of...

We model Moore's Law as efficiency of computer producers that rises as a by-product of their experience. We find that (1) Because computer prices fall much faster than the prices of electricity-driven and diesel-driven capital ever did, growth in the coming decades should be very fast, and that...

The Q-theory of investment says that a firm's investment rate should rise with its Q. We argue here that this theory also explains why some firms buy other firms. We find that 1. A firm's merger and acquisition (M&A) investment responds to its Q more -- by a factor of 2.6 -- than its direct...