The paper explores an endogenous growth model in which scale effects asymptotically vanish and an economy grows without population growth. The key mechanism behind these features is substitution between investing in capital and in knowledge when firms face growing uncompensated knowledge...

In this paper I evaluate the contribution of R&D investments to productivity growth. The basis for the analysis are the free entry condition and the fact that most R&D innovations are embodied. Free entry yields a relationship between the resources devoted to R&D and the growth rate of...

Keynes (1936) said that shortage of money caused by hoarding or failure to invest led to unemployment, but Lucas (1972) said that money does not affect unemployment. The tables have now turned. Gani (2003) produced a model of indirect trade in which money is necessary as a means of payment....

This paper explores whether habit formation in the representative agent’s preferences can explain two failures of the standard permanent income model: the sensitivity to lagged consumer sentiment, and to predictable changes in income. I show that in a habit formation model, the sensitivity of...

A simple framework is constructed and extended to consider the theory of investment. It shows that there exists in industrialized economies a certain structure that determines the balance curve, which relates the rates of inflation and capital accumulation if demand and productive capacity are...

Two results showing the limitations of the “as if” methodology are proved under relatively mild assumptions. In an interpretation of the results, a competitive market cannot simulate the outcome of a market M in which the single price assumption does not hold. In a second interpretation, the...

Agent heterogeneity has been used in recent economic literature to justify nonlinear dynamics for the time paths of aggregate economic variables. In this paper, the mechanism through which heterogeneous agents leads to chaotic motion is explained. Adding to a system with initial behavior...

The precedent for solving expectational difference equations has been to solve converging equations backwards and diverging equations forward by assuming the solution is bounded. This precedent often leads to incorrect solutions and has less than rigorous foundations. More rigorous procedures...

This paper studies a closed economy with a continuum of agents and moral hazard. Economic agents in the economy operate a stochastic production technology with capital and labor inputs in which the latter is private information. I characterize efficient allocations of capital, labor, and...

Die Heckscher-Ohlin-Modellierung mit den Faktoren nieder- und höherqualifizierte Arbeitskraft und Arbeitslosigkeit beziehungsweise einem Minimallohn wird einer genaueren Analyse unterzogen und erfährt dabei deutliche Kritik. Anschließend wird ein Ansatz zur Remodellierung der von ihr...