We analyze an economy where firms undertake both innovation and adoption of technologies from the world technology frontier. The selection of high-skill managers and firms is more important for innovation than for adoption. As the economy approaches the frontier, selection becomes more important. Countries at early stages of development pursue an investment-based strategy, which relies on exist...

We consider a portfolio optimization problem which is formulated as a stochastic control problem. Risky asset prices obey a logarithmic Brownian motion, and interest rates vary according to an ergodic Markov diffusion process. The goal is to choose optimal investment and consumption policies to maximize the infinite horizon expected discounted HARA utility of consumption. A dynamic programming ...

The study of memory for event duration in pigeons has, for the most part, centered on an unusual behavioral phenomenon and an interesting theoretical explanation for it. A typical experiment on memory for event duration involves trials initiated by a sample stimulus that is either short or long in duration (e.g., 2 vs. 10 sec of houselight) and that is later followed by the simultaneous present...

We develop a model of retirement and human capital investment to study the effects of tax and retirement policies. Workers choose the supply of raw labor (career length) and also the human capital embodied in their labor. Our model explains a significant fraction of the US-Europe difference in schooling and retirement. The model predicts that reforms of the European retirement policies modeled ...

A portfolio optimization problem on an infinite time horizon is considered. Risky asset price obeys a logarithmic Brownian motion, and the interest rate varies according to an ergodic Markov diffusion process. Moreover, the interest rate fluctuation is correlated with the risky asset price fluctuation. The goal is to choose optimal investment and consumption policies to maximize the infinite ho...

In the climate change issue, the environmental irreversibility (risk of an acceleration of mitigation policies if the worse happen) has to be balanced with the investment irreversibility (risk of over-cautious policies). To explore this balance, we define an option value for a precautionary climate policy. Using the simplest decision-making model, we expose how option value relates to the expec...

Why do so many African governments consistently impose high tax rates and make little investment in productive public goods when alternative policies could yield greater tax revenues and higher national income? We posit and test an intertemporal political economy model in which the government sets tax and R&D levels while investors respond with production. Equilibrium policy and growth rates de...

Th is paper analyses the nature and causes of the patterns of inequality and poverty in India. Since the economic liberalization in the early 1990s, the evidence suggests increasing inequality (in both spatial and vertical terms) as well as persistent poverty. Th e macroeconomic policies possibly responsible for these trends include—fi scal tightening, regressive tax policies and expenditure cu...

We consider a stochastic control model in which an economic unit has productive capital and also liabilities in the form of debt. The worth of capital changes over time through investment, and also through random Brownian fluctuations in the unit price of capital. Income from production is also subject to random Brownian fluctuations. The goal is to choose investment and consumption controls wh...