Essays on the microeconomic foundations of macroeconomic behavior

Durable goods markets with transaction costs . The paper uses a dynamic model of durable goods with transaction costs to determine the holding pattern for durables in a general equilibrium setting. For each good, we determine the number and identities of its owners, ages when it changes hands and all aftermarket prices. The equilibrium holding pattern exhibits new product differentiation and peaks of resale. This is consistent with the data, but could not be explained by frictionless or partial equilibrium models. When applied to the US pick-up truck market, the model is shown to explain holding patterns for trucks for 1995 and 1990. Optimal adoption of complementary technologies ( with Boyan Jovanovic ). When a production process requires two extremely complementary inputs--Leontief, say--conventional wisdom holds that a firm would always upgrade them simultaneously. We show, however, that if upgrading each input involves a fixed cost, the firm may upgrade them at different dates, "asynchronously." This insight helps us understand why productivity rises with the age of a plant, why investment in structures is more spiked than equipment investment, and why plants have spare capacity. The bigger point of the paper is that complementarity does not necessarily imply comovement--not even for a single decision-maker. Ignorance is bliss (with Boyan Jovanovic ). Technology choice can be an effective way of binding our future actions. Choosing an inferior technology allows to spend more time investing in the human capital of our children. When discounting is hyperbolic, this can be an effective way of raising human capital investment. This may explain some development gaps. We show that technological choice cycles between the frontier and inferior technologies. Thus, the paper may also explain some leapfrogging, and some development "miracles" and "disasters." The periodic choice of inferior technologies arises in the model because we assume that agents cannot commit directly to investing in human capital.