We demonstrate how capital account and trade account liberalizations help reduce inefficiencies associated with the fluctuations in the output gap, relative to the inefficiencies associated with the fluctuations in inflation. With capital account liberalization the representative household is...

This paper asks how well Okun's Law fits short-run unemployment movements in the United States since 1948 and in twenty advanced economies since 1980. We find that Okun's Law is a strong and stable relationship in most countries, one that did not change substantially during the Great Recession....

We develop a dynamic political-economic theory of welfare state and immigration policies, featuring three distinct voting groups: skilled workers, unskilled workers, and old retirees. The essence of inter- and intra-generational redistribution of a typical welfare system is captured with a...

In this paper, we review three branches of theoretical literature on financial crises. The first one deals with banking crises originating from coordination failures among bank creditors. The second one deals with frictions in credit and interbank markets due to problems of moral hazard and...

This paper provides overview of recent work on migration and welfare state tax policies: 1. I survey the literature on the tax burden of migration. 2. I empirically identify the differential effect of the generosity of the welfare state on the skill composition of immigrants across the two...

We develop a stylized EU-type model of a union consisting of rich, capital-abundant and high productivity countries, and poor, capital-scarce and low productivity countries. We address two main issues: the efficiency of tax competition and the effect of factor mobility on the size of the welfare...

The global financial crisis which erupted in the United States instantaneously swept across Europe. Like the United States, the European Monetary Union (EMU) was ripe for a crash. It had its own real estate bubble, specifically in Ireland and Spain, indulged in excessive deficit spending,...

Over the years, there emerged two key policy differences between Europe and America, both welfare and migration-states. The former has more generous welfare state and more liberal migration policies than the latter. In this paper we attempt to provide a political-economy explanation for these...

Data show that better creditor protection is correlated across countries with lower average stock market volatility. Moreover, countries with better creditor protection seem to have suffered lower decline in their stock market indexes during the current financial crisis. To explain this...

The paper develops a model of foreign direct investments (FDI) and foreign portfolio investments (FPI).The model describes an information-based trade off between direct investments and portfolio investments. Direct investors are more informed about the fundamentals of their projects. This...