What is the long-run effect of dividend taxation on aggregate capital accumulation? To address this question, we build a dynamic general equilibrium model in which there is a continuum of firms subject to idiosyncratic productivity shocks. We show that at any point in time, a firm may lie in one...

To study the long-run effect of dividend taxation on aggregate capital accumulation, we build a dynamic general equilibrium model in which there is a continuum of firms subject to idiosyncratic productivity shocks. We find that a dividend tax cut raises aggregate productivity by reducing the...

This paper studies whether the Rietz–Barro “disaster” model, extended for a time-varying probability of disaster, can match the empirical evidence on predictability of stock returns. It is shown that when utility is CRRA, the model cannot replicate this evidence, regardless of parameter...

I use a putty-clay technology to explain several asset market facts. The key mechanism is as follows: a one percent increase in revenues leads to a more-than-one percent increase in profits, since labor costs don’t move one-for-one. This amplification is greater for plants with low...

Many economic decisions can be described as an option exercise or optimal stopping problem under uncertainty. Motivated by experimental evidence such as the Ellsberg Paradox, we follow Knight (1921) and distinguish risk from uncertainty. To afford this distinction, we adopt the multiple-priors...

This paper studies consumption/saving problem under Knightian uncer- tainty in a two period setting. The multiple-priors utility model is adopted. The e®ects of income uncertainty and capital uncertainty on optimal savings are analyzed by deriving closed form solutions.

What is the long-run effect of dividend taxation on aggregate capital accumulation? To address this question, we build a dynamic general equilibrium model in which there is a continuum of firms subject to idiosyncratic productivity shocks. This firm heterogeneity generates a cross-sectional...