We show how realistic occasionally binding collateral constraints increase macroeconomic volatility. Collateral constraints imply that the effect of consumers' choices on the price of collateral feeds back into the set of feasible choices, thus giving rise to multiple equilibria. We characterize...

This paper argues that the effect of openness to trade on process innovations and skill premia importantly depends on the structure of labor markets in developed countries. Openness to trade with less developed countries is often modelled as a fall in the relative price of unskilled-labor...