In this paper we are concerned with the equilibrium dynamics of a two-sector model of endogenous growth with distortionary taxes. We show that for certain parameters values and tax schemes every equilibrium orbit--except the steady state solution--is non-interior; i.e., there are times in which...

This paper offers a general proof of consistency for the simulated moments estimator in a parameterized family of stochastic models with monotone dynamics. Models with this monotonicity property are frequently encountered in economic applications. The proof of consistency of the estimator draws...

This paper presents a methodology for the formulation and testing of economic growth models. The model selected includes two production sectors with physical and human capital accumulation. These capital stocks are associated with spillover effects in the production of the physical good and in...

In this paper we are concerned with the performance of stock option contracts in the provision of managerial incentives. In our simple framework, we restrict the space of contracts available to the principal to those conformed by a fixed payment and a package of call options on the firm's stock....

This paper presents some examples of regular dynamic economies with externalities and taxes that either lack existence of a Markov equilibrium or such equilibrium is not continuous. These examples pose further challenges for the analysis and computation of these economies. JEL Classification:...

We consider the effect of information on the average risk-free rate and the average equity premium in a standard two-period exchange economy with complete markets and a representative agent. We show that information always increases the average risk-free rate. Clearly, perfect information...

In an intertemporal general equilibrium framework, we compare a Cournot equilibrium to the Walras equilibrium. The Cournot agents trade and invest less than the Walras agents. This generates an ineffciency which does not vanish as the number of Cournot agents tends to infinity. A larger number...

This paper analyzes the movement of market-clearing prices in an intertemporal general equilibrium framework and, in particular, proves the existence of a stationary temporary equilibrium. A model of a competitive economy is developed which consists of several 'small' countries engaged in...

We introduce the possibility of trade in dynamic models with externalities and evaluate the consequences on the capital accumulation process, the market-clearing prices and policy making. We consider mixed economies characterized by a blend of strategic and nonstrategic sectors. An equilibrium...

In their seminal paper on the principal-agent model with moral hazard, Grossman and Hart (1983) show that the loss to the principal from being unable to observe the agent’s action is increasing in the agent’s degree of absolute risk aversion. Their proof is restricted to the case where the...