In this paper we illustrate the possible normative relevance of the links between human capital and financial assets via an example related to growth. When the financial structure is complete, growth is indeterminate because individual allocations between human capital and a tradable asset are...

When the production of high quality needs the employment of qualified labour, firms' decisions concerning quality are affected by the extent to which skills are abundant. By means of a comparison between monopoly and perfect competition, we show how market power in such a context may entail a...

Voting games are characterized by the emergence of dominated strategies, that would be iteratively deleted by rational players. In this note we show, via an example, how applying iterated dominance retricts the set of equilibrium outcomes in Besley and Coate (1997) citizen-candidate model of...

We incorporate equilibrium unemployment due to imperfect matching into a model of trade in intermediate inputs (Ethier (1982)). Firms are assumes to be price takers and their size is given by technology. Firms enter the market as long as expected profits cover the search cost they incur...

This paper analyses the role fiscal policy plays during banking crises in supporting short-term GDP growth and the growth potential. Using a database covering 56 advanced and emerging economies for the period 1970-2008, it is found that fiscal policy, whether it is expansionary or...

While according to the so-called “Brussels-Frankfurt consensus” sound fiscal policies and structural reforms support each other, it is often claimed that the EU fiscal framework, by reducing the budgetary room of manoeuvre and the political capital of governments, may deter reforms. The aim...

The effect of labour costs on industry profits, employment and labour income is at the heart of the current European debate on industry competitiveness. High wages paid in European countries such as Germany are generally considered harmful for industry profitability. Although, high wages also...

We investigate the role of skill heterogeneity in explaining location patterns induced by pecuniary externalities (Krugman (1991)). In our setting, sellers with higher skills perform better in the marketplace, and their sales are larger. Selling to distant locations leads to lower sales because...