In this paper we show that in a two sector economy with heterogeneous agents and competitive markets, in a steady state the optimal capital income tax rate is in general different from zero. The optimal tax policy in this setting depends on the relative price difference. In a two sector economy...

We develop a dynamic general equilibrium model of imperfect competition where a sunk cost of creating a new product regulates the type of entry that dominates in the economy: new products or more competition in existing industries. Considering the process of product innovation is irreversible,...

This dictionary entry defines the development of new Keynesian macroeconomics (NKM) since the 1980s. I argue that the key defining feature NKM is the introduction of imperfect competition, making price and/or wage setting endogenous and hence allowing for a rigorous understanding of nominal...

This paper investigates the relationship between human capital and economic growth in Pakistan with time series data. Estimated with the Johansen (1991) approach, the aggregate production function rejects one version of the endogenous growth formulation. But the fitted model indicates that the...

Calvo contracts, which are the basis of the current generation of New Keynesian models, widely include indexation to general inflation. We argue that the indexing formula should be expected inflation rather than lagged inflation. This is likely to optimise the welfare of the representative agent...

Recent research has suggested that in deriving optimal policy under discretion, policymakers should react as if there were no structural inflation persistence in order to improve welfare. This paper considers whether such a strong result extends to an inflation targeting central bank with a more...

The analysis of migration in Findlay (1982) is extended by adding external economies of scale to the Ricardian model as in Ethier (1982). With external economies, the larger country always gains from trade but the smaller country may lose from trade unless the external economies of scale are...

Given the large amount of interaction between research on monetary policy and its practice, this paper examines whether some simple monetary policy rules that have been proposed in the academic literature, part of which has originated from within central banks, provide a reasonable...

This paper investigates the relationship between human capital and economic growth in Pakistan with time series data. Estimated with the Johansen (1991) approach, the aggregate production function rejects one version of the endogenous growth formulation. But the fitted model indicates that the...

Freeman (2006) suggested that auctioning immigration visas and redistributing the revenue to native residents in the host country would increase migration from low-income to high-income countries. The effect of the auctioning of immigration visas, in the Ricardian model from Findlay (1982), on...