We analyze the contractual relation between workers and their employers when there is nominal risk. The key feature of the problem is that the consumption deflator is random and observed sometime after the effort is exerted. The worker's effort is not observable, and to induce the agent to work,...

We model Moore's Law as efficiency of computer producers that rises as a by-product of their experience. We find that (1) Because computer prices fall much faster than the prices of electricity-driven and diesel-driven capital ever did, growth in the coming decades should be very fast, and that...

People at the top of an occupational ladder earn more partly because they have spent time on lower rungs, where they have learned something. But what precisely do they learn? There are two contrasting views: First, the Bandit model assumes that people are different, that experience reveals their...

Cyclical patterns in earnings can arise when contracts between firms and their workers are incomplete, and when workers cannot borrow or lend so as to smooth their consumption. Earnings cycles generate occasional large changes in earnings, consistent with some recent empirical findings. At the...

This paper derives an indirect production function that is, in a special case, of a constant elasticity of substitution form. This is not a contribution to the theory of aggregation generally. Instead it is a microfoundation for a specific but popular production function -- the CES -- that helps...

Growth theory offers two plausible explanations of growth. One stresses the supply of productive ideas and holds that the industrial revolution had to wait until we had thought up enough inventions to lift us into the era of modern growth. It says, roughly, that the growth of living standards...

In this survey, I discuss four sources of growth of knowledge: research, schooling, learning by doing, and training. In trying to disentangle what is important, I emphasize the following facts: (1) even the most advanced countries spend far more on adoption of existing technologies than on...

The usual explanation for why the producers of a given product use different technologies involves "vintage-capital": A firm understands the frontier technology, but can still prefer an older, less efficient technology in which it has made specific physical and human capital investments. This...

Was the Great Depression the outcome of a massive coordination failure? Or was it a unique equilibrium response to adverse shocks? More generally, do aggregates fluctuate partly because agents occasionally settle on inferior, low-level equilibria? These questions lie at the heart of the current...

This paper studies how random product innovations affect the time series properties of aggregates. It posits that recurring inventions of new intermediate goods differ in quality, and that their usage spreads gradually through the economy. It examines how fluctuations in per capita GNP are...