We introduce firm and worker heterogeneity into a model of innovation-driven endogenous growth. Individuals who differ in ability sort into either a research sector or a manufacturing sector that produces differentiated goods. Each research project generates a new variety of the differentiated...

This paper surveys major empirical regularities concerning changes in earnings inequality in Europe and the US over the past 25 years. Next, it indicates which of these regularities can be explained within the competitive demand-supply framework of analysis and what is left unexplained. Finally,...

Do legal institutions governing financial contracts affect the nature of real investments in the economy? We develop a simple model and provide evidence that the answer to this question is yes. We consider a levered firm's choice of investment between innovative and conservative technologies, on...

It has been argued that concave models exhibit less ‘endogeneity of growth’ than models with increasing returns to scale. Here we study a simple model of factor saving technological improvement in a concave framework. Capital can be used either to reproduce itself, or, at some additional...

The paper evaluates the potential gains from labour immigration for the European Union. After a review of the East-West migration problem and recent western migration policies, governmentally controlled labour immigration is studied in a framework with unions, unemployment and heterogenous...

The ‘fractal’ nature of the rise in earnings dispersion is one of its key features and remains a puzzle. This paper offers a new perspective on the causes of changes in earnings dispersion, focusing on the role of labour reallocation. Once we drop the assumption that all firms pay a given...

This paper analyses capital export controls under majority voting. It is shown that individuals vote according to their factor endowment ratio. An individual’s optimal restriction is tighter, the lower their capital-labour ratio and the larger the country; it is also tighter if unemployment...

Switzerland has experienced a substantial influx of immigrants over the 50 years since World War II, to the extent that it now has one of the highest share of foreigners in population among OECD countries. This paper analyses Switzerland’s experience of migration, centring on two main issues:...

Economists tend to agree that international trade liberalization brings significant gains from trade to countries engaging in such a process. At the same time however, public opinion is much less optimistic and there is a widespread concern that the current sharing of the gains from trade is...

This paper employs a multi-country large scale Overlapping Generations model with uninsurable labour productivity and mortality risk to quantify the impact of the demographic transition towards an older population in industrialized countries on world-wide rates of return, international capital...