Parametric aggregation of heterogeneous micro production technologies is discussed. A four-factor Cobb-Douglas function with normally distributed firm specific coefficients and with log-normal inputs (which agrees well with the available data) is speciffied. Since, if the number of micro units...

Regulating an export firm (or a homogeneous industry) with private information about emission technology is analysed, when the firm, owned partly by foreigners, has an option to bypass domestic regulation through costly relocation. If the firm chooses to relocate, it will set up a new plant in a...

We show that, in a minimum effort game with incomplete information where player types are independently drawn, there is a largest and smallest Bayesian equilibrium, leading to the set of equilibrium payoffs (as evaluated at the interim stage) having a lattice structure. Furthermore, the range of...

It is a widely held view that efficient environmental policies regulating transboundary pollution will be adopted only if there is interjurisdictional coordination. Efficient policies can be adopted as a result of interstate treaties or mandated by a central authority. However, if the policies...

Consider a contract between two players, describing the payment an agent obtains from the principal, in exchange for a good or service supplied. At each point in time, either player may unilaterally demand a renegotiation of the contract, involving renegotiation costs for both players....

Dornbusch’s exchange rate overshooting hypothesis is a central building block in international macroeconomics. Yet, empirical studies of monetary policy have typically found exchange rate effects that are inconsistent with overshooting. This puzzling result has developed into a “styled...

The Kyoto Agreement is the result of international negotiations over many years. However, because of a number of weaknesses, different sorts of climate agreement have been suggested: for example, coordinated R&D activities that reduce abatement costs for all firms. We will compare an agreement...

I derive an explicit solution for the saddle path in a Ramsey growth model. The existence of a closed form expression greatly simpliÞes the analysis of how the parameters of the utility function affects investments and growth.

The paper considers alternative monetary policy regimes within a calibrated macroeconomic model with a traded and a non-traded sector. Two classes of regimes are considered; inflation targeting and exchange rate targeting. When the target variable is completely stabilized, both rules have poor...