The effects of an intercountry transfer of purchasing power were first prominently discussed by Keynes (1929) and Ohlin (1929) in a debate concerning the secondary effects of such a transfer. In subsequent years several economists, including Pigou (1932), Metzler (1942), Samuelson (1952, 1954) and Johnson (1955), joined the debate. Throughout this debate, these writers all agreed that the trans...

This paper analyzes the role of production distortion for income redistribution in an international trade model. In particular, this paper examines the role of the Stolper and Samuelson effect (Stolper and Samuelson 1941) on efficient income redistribution. It first shows that production inefficiency can be a part of a Pareto-efficient tax system when there is an asymmetric information problem ...

Consider an economy in which various types of labor are used to produce consumption, but not all types of labor are useful for upgrading the stock of organization capital—that is, for replacing old projects with more productive new projects. When news induces consumers to want to save more, low-quality projects are destroyed across all sectors of the economy, even though the economy is set to i...

Revealed preference theory was initiated by Samuelson [8] as a way of defining the rational behaviour of a consumer in terms of a preference relation associated with a demand function. This topic has been axiomatically treated by Arrow (1959), Richter (1966), Sen (1971) and many others. Papers Banerjee (1995), Georgescu (2004; 2005) attempt at developing a theory of revealed preference for fuzz...

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In the last lecture, we saw an example of reputation analysis in repeated interaction (a sequential entry game) with one long-lived player and many short-lived players, where the short-lived players are unsure of the long-lived player’s type. In this lecture, we generalize that analysis by giving an overview of the key results on reputation in repeated games with one long-lived player and many ...

The first edition of Gregory Mankiw’s Principles of Economics (1997) textbook has not only made the book’s author rich and famous, but has also gained notoriety for textbook authors in general and for the discipline of economics in particular. The author reportedly received $1 million in advance, the largest advance ever paid to a textbook author. The press reported that the publisher, no doubt...

Consider two agents who learn the value of an unknown parameter by observing a sequence of private signals. Will the agents commonly learn the value of the parameter, i.e., will the true value of the parameter become approximate common-knowledge? If the signals are independent and identically distributed across time (but not necessarily across agents), the answer is yes (Cripps, Ely, Mailath, a...

We examine markets in which agents make investments and then match into pairs, creating surpluses that depend on their investments and that can be split between the matched agents. In general, each of the matched agents would “own”part of the surplus in the absence of interagent transfers. Most of the work in the large bargaining-andmatching literature ignores this initial ownership of the surp...

Economists have long been fascinated by the sources of variations in the stock market. By the early 1970’s a consensus had emerged among …nancial economists suggesting that stock prices could be well approximated by a random walk model and that changes in stock returns were basically unpredictable. Fama (1970) provides an early, de…nitive statement of this position. Historically, the ‘random wa...