We consider a simple dynamic model of environmental taxation that exhibits time inconsistency. There are two categories of firms, Believers, who take the tax announcements made by the Regulator to face value, and Non-Believers, who perfectly anticipate the Regulator's decisions, albeit at a...

In this paper we analyze dynamic incentives of a firm to invest in production facilities in a less developed country with lower wage costs and lower productivity. Foreign investment induces that, due to technological spillovers, productivity of local firms in the foreign country increases. Firms...

In this paper we examine how far the availability of venture capital influences the speed of technological progress in an industrial agglomeration. We consider a model where R\&D efforts of an incumbent firm generates technological know-how embodied in key R\&D employees, who might use this...

Following the lead of Merton (1974), recent research has focused on the relationship of credit risk to firm value. Although this has usually been done for a single firm, the growth of structured finance, which necessarily involves the correlation between included securities, has spurred interest...

The accuracy of the solution of dynamic general equilibrium models has become a major issue. Recent papers, substituting second order for first order approximations, have shown to obtain significant differences in accuracy. Second order approximations have had some considerable success in...

We study the mechanism of inequality due to educational lock-in effects. Recent research on inequality such as Brock and Durlauf (2000a, b) and Durlauf (1999a, b, 2000) has emphasized the fact that the composition and behavior of groups to which a person belongs play an important role for...