This paper develops a model of investment decisions in which uncertainty about a one-time change in tax policy induces the firm to temporarily stop investing--to adopt a wait-and-see policy. After the uncertainty is resolved, the firm exploits the tabled projects, generating a temporary...

In this paper we analyze an aggregative general equilibrimi model in which the use of money is motivated by a cash-in-advance constraint, applied to purchases of a subset of consumption goods. The system is subject to both real and monetary shocks, which are economy-wide and observed by all. We...

Recent estimates of the potential growth effects of tax reform vary widely, ranging from zero (Lucas 1990) to eight percentage points (Jones, Manuelli, and Rossi 1993). Using an endogenous growth model, we assess which model features and parameter values are important for determining the...

Tournaments, reward structures based on rank order, are compared with individual contracts in a model with one risk-neutral principal and many risk-averse agents. Each agents' output is a stochastic function of his effort level plus an additive shock term that is common to all the agents. The...

A growth model is developed in which finite-lived individuals invest in human capital, and investments have a positive external effect on the human capital of later cohorts. Heterogeneous labor is the only factor of production, and higher-quality labor produces higher-quality goods. Stationary...

Using a calibrated growth model, the dynamic effects of NAFTA on Mexican development are studied. Two scenarios are analyzed. In the first, NAFTA is assumed to stimulate inflows of physical capital into Mexico. These inflows reduce the interest rate and raise the wage rates for both skilled and...

Many countries run substantial inflations. They do this despite the overwhelming theoretical arguments (and empirical evidence?) showing that price stability (or even mild deflation) is "better." This paper provides a simple model in which a government sometimes uses the inflation tax because it...

This paper studies the interaction between technology, which flows in from abroad, and human capital, which is accumulated domestically, as the twin engines of growth in a developing economy. Technology inflows are modeled as a pure external effect, with the rate of inflow governed by a policy...