What are the micro and macro implications of a credit crunch? We study this question in a model where heterogeneous entrepreneurs can finance their investment by borrowing subject to collateral constraints and/or by using internal funds. We discipline our theory by requiring that the size...

Individuals are born into families that differ in size and managerial skill endowment. Each member of a family has the option to (i) work as a manager in the family firm; (ii) work as a manger in a non-family firm; or (iii) supply non-managerial labor for a wage. We consider two alternative...

by conditional first moments.

2. Allowing entrepreneurs to move across borders. We find that entrepreneurs who are highly-talented but financially constrained in the financially less developed country migrate to the more developed country to take advantage of better financial markets. We interpret this outcome as brain...

Why are financial crises associated with a sustained rise in unemployment? We develop a tractable model with frictions in both credit and labor markets to study the aggregate andmicro-level implications of a credit crunch---i.e., a sudden tightening of collateral constraints. When we simulate a...

Market failures provide a rationale for policy intervention. But policies are often hard to alter once in place. We argue that this inertia can result in well-intended policies having sizable negative long-run effects on aggregate output and productivity. In our theory, financial frictions...

We study the effect of alternative monetary policies during a credit crunch, modeled as a shock to collateral constraints. We consider a model with entrepreneurs that are heterogeneous in their productivity and net worth, face collateral constraints that limit their investment, and whose...

This paper quanties the role that increases in the demand for skill intensive goods and services, the ecient scale of production of services, and female labor supply have in explaining the growth of services. We extend the model in Buera and Kaboski (2012a,b) to a two-person household model,...

This paper examines the role of the market for high-skilled labor in explaining variation in the levels and dynamics of the service share, home production time, and market labor across countries. We establish and extend key facts for a cross-section of countries. First, growth in the total share...

We provide a tractable theory of innovation and diffusion of technologies to explore the role of international trade and foreign direct investment (FDI). We model innovation and diffusion as a process involving the combination of new ideas with insights from other industries or countries. We...