This paper shows that a two-tiered production structure with both traded and non-traded intermediate goods and non-traded final goods can generate a cost of capital adjustment that is very similar to the quadratic adjustment cost often assumed in single good macroeconomic models. This implies...

This paper constructs a large scale overlapping generations model with heterogeneity across the lifecycle and over earnings ability types. The model is calibrated to the U.S. economy and includes realistic demographics, earnings distribution, taxes, and mortality risk. We consider the effects of...

This paper considers whether expected utility maximizers who have incorrect beliefs can survive as controllers of a significant portion of market wealth in the long run. Unlike infinitely-lived agent models, where this is not the case, we consider a model with successive generations of...

This paper explores the merits of a DSGE model incorporating Schumpeterian type growth into an otherwise standard RBC model similar to the one in Phillips and Wrase (2006). We consider a model with two exogenous shocks. The first is a standard productivity shock. The second is an aggregate shock...

The overlapping generations (OLG) model is an important framework for analyzing any type of question in which age cohorts are affected differently by exogenous shocks. However, as the dimensions and degree of heterogeneity in these models increase, the computational burden imposed by rational...

This paper examines Thomas Piketty's thesis that there are no natural limits on accumulation of wealth. We undertake our examination in the context of a simple general equilibrium model with infintely-lived dynasties. We show that extreme wealth accumulation does not happen in general...

There is considerable evidence that real wages have become more procyclical over time in the U.S. A novel explanation for this phenomenon has been recently offered by Huang, Liu, and Phaneuf (2004), HLP. They develop a model to show that, as the input-output structure of an economy becomes more...

Economists have long investigated the cyclical behavior of real wages in order to draw inferences regarding the relative stickiness of prices and wages. Recent studies have adopted techniques intended to identify monetary shocks and examined the response of real wages and output or employment to...