An overlapping-generations model where agents choose whether to become educated when young is presented. Education enhances productivity, but needs to be financed by borrowing. Because of the possibility of default, lenders may ration credit. We characterize the steady-state equilibrium with and...

An overlapping-generations model where agents choose whether to become educated when young is presented. Education enhances productivity, but needs to be financed by borrowing. Because of the possibility of default, lenders may ration credit. We characterize the steady-state equilibrium with and...

An overlapping-generations model where agents choose whether to become educated when young is presented. Education enhances productivity, but needs to be financed by borrowing. Because of the possibility of default, lenders may ration credit. We characterize the steady-state equilibrium with and...

type="main" <p>A model where a dictator decides on both the level of public-sector capital and whether to democratize is constructed. Under dictatorship the labour market is monopsonistic; democratization involves instituting a competitive labour market. Workers sometimes have a credible threat of...</p>

We develop a two-period model where a risk-averse entrepreneur decides on the size of an investment project and how to finance it. He can use debt and/or equity finance; an incentive compatibility constraint limits the extent to which the project can be financed with equity. With debt, he may, in...

This paper studies the effects of tariffs in a two-period, two-good, macroeconomic model. The first period is characterized by unemployment and either nominal or real wage rigidities. In the second period, all prices are flexible and markets clear. Consumer behavior is based on intertemporal...