We test for the existence of poverty traps and distribution-dependent growth using a nonlinear dynamic panel data model of household incomes allowing for endogenous attrition. Our estimates for Hungary and Russia in the 1990s reveal significant nonlinearity in the dynamics, consistent with the...

Economists long considered money illusion to be largely irrelevant. Here we show, however, that money illusion has powerful effects on equilibrium selection. If we represent pay-offs in nominal terms, choices converge to the Pareto inefficient equilibrium; however, if we lift the veil of money...

Economists long considered money illusion to be largely irrelevant. Here we show, however, that money illusion has powerful effects on equilibrium selection. If we represent payoffs in nominal terms, choices converge to the Pareto inefficient equilibrium; however, if we lift the veil of money by...

We develop a growth model with unemployment due to imperfections in the labor market. In this model, wage inertia and balanced budget rules cause a complementarity between capital and employment capable of explaining the existence of multiple equilibrium paths. Hysteresis is viewed as the result...

Economists long considered money illusion to be largely irrelevant. Here we show, however, that money illusion has powerful effects on equilibrium selection. If we represent payoffs in nominal terms, choices converge to the Pareto inefficient equilibrium; however, if we lift the veil of money by...

This paper derives a complete characterization for the equilibrium properties of a binary choice interaction model with a finite number of agents - in particular the correspondence between the interaction strength, the number of agents, and the set of equilibria. For the class of games...