Publicly held debt to GDP ratio in the U.S. is estimated to be 72% in 2011 and is expected to continue rising. Many proposals regarding the ways to curb the government deficit and the resulting debt are being discussed. In this paper we incorporate these different policy proposals in a fully...

In this paper, we develop a dynamic politico-economic theory of social security to address two questions. First, how is social security sustained? Second, how does inequality affect the size of social security, and can the theoretical predictions be consistent with the observed puzzling...

Our results indicate that despite the large demographics changes that took place, medium term fluctuations in hours worked are hardly impacted by them.

The Chilean economy experienced a decade of sustained growth in aggregate output and productivity after the 1982 financial crisis. This paper analyzes the role of resource allocative efficiency on total factor productivity (TFP) of the manufacturing sector by applying the methodology of Hsieh...

In this paper, we show that news on future technological improvement can trigger an immediate economic expansion in a model with heterogenous productive efficiency. The key element in our model is financial friction on allocating capital from less productive to more productive projects. The...

Online appendix for the Review of Economic Dynamics article

This paper explores the importance of investment-specific technology changes in anticipated TFP fluctuations. To this end, we identify two types of news shocks with the maximum forecast error variance approach: news shocks to TFP and news shocks to the relative price of investment. We show in a...

This paper provides a theory of financial frictions as a transmission mechanism for news shocks to drive aggregate TFP fluctuations. We show that in an economy calibrated to U.S. data, variations in financial frictions on capital allocation in response to news about future technology can...