This paper develops a dynamic two-country neoclassical stochastic growth model with incomplete markets. Short-term credit flows can be excessive and reverse suddenly. The equilibrium outcome is constrained inefficient due to pecuniary externalities. First, an undercapitalized country borrows too...

This paper examines the relationship between family ownership and the quality of labor relations. We find that family ownership is more prevalent in countries in which labor relations are hostile, consistent with the notion that family firms are particularly effective at coping with difficult...

I study the allocation of human capital in an economy with production externalities, financial constraints, and career choices. Agents choose to become entrepreneurs, workers, or financiers. Entrepreneurship has positive externalities but requires the services of financiers. In the second best...