In this paper we develop a new methodology for finding optimal government policies in economies with heterogeneous agents. The methodology is solely based on three classes of equilibrium conditions from the government’s and individual agent’s optimization problems: 1) the first order...

In this paper we develop a general methodology for solving models with heterogeneous agents by projection methods. Our approach is solely based on the functional forms of agents’ optimal policy rules and on a functional condition on the endogenous stationary distribution. Solving...

In this paper we develop a new methodology for finding optimal government policies in economies with heterogeneous agents. The methodology is solely based on three classes of equilibrium conditions from the government's and individual agent's optimization problems: 1) the first order conditions;...

The paper analyses a two-sector model of endogenous growth with two common features of economic development: stages of sustained growth and underdevelopment traps. The model also demonstrates the transitional issues of a temporary underdevelopment trap, seemingly sustainable growth, and a...

In transition economies, there may be a significant mismatch between the types of skills that workers possess and the types of skills that the new economy demands. We consider this problem of human capital mismatch along the dimensions of training type (holding the level) and occupation. We...

For US postwar data, the paper explains central consumption, labor, investment and output correlations and volatilities along with output growth persistence by including a human capital investment sector and a variable physical capital utilization rate. Strong internal "amplication" results from...