The MIT Faculty has made this article openly available. Please share how this access benefits you. Your story matters. Abstract How does financial integration impact capital accumulation, current-account dynamics, and crosscountry inequality? This paper investigates this question within a two-country, general-equilibrium, incomplete-markets model that focuses on the importance of idiosyncratic ...

We consider a homogenization problem for highly anisotropic conducting fibres embedded into an isotropic matrix. For a ‘double porosity’-type scaling in the expression of high contrast between the conductivity along the fibres and the conductivities in the transverse directions, we prove the homogenization theorem and derive two-scale homogenized equations using a version of the method of two-s...

In order to credibly "sell" legitimate children to their spouse, women must forego more attractive mating opportunities. This paper derives the implications of this observation for the pattern of matching in marriage markets, the dynamics of human capital accumulation, and the evolution of the gene pool. A key consequence of the trade-off faced by women is that marriage markets will naturally t...

We first construct a theoretical model of a regional economy with two sectors. One sector uses physical and creative capital—in the sense of Florida (The rise of creative class. Basic Books, New York, NY, 2002)—to produce a knowledge good that is traded. The other sector uses physical and social capital to produce a good that is not traded. Second, we provide the first formal analysis of the cr...

In this paper we identify conditions under which the introduction of a pay-as-you-go social security system is ex-ante Pareto-improving in a stochastic overlapping generations economy with capital accumulation and land. We argue that these conditions are consistent with many calibrations of the model used in the literature. In our model financial markets are complete and competitive equilibria ...

Investigating the entropy distance between the Wiener measure,Wt0,τ , and stationary Gaussian measures, Qt0,τ on the space of continuous functions C[t0 − τ, t0 + τ ], we show that in some cases this distance can essentially be computed. This is done by explicitly computing a related quantity which in effect is a valid approximation of the entropy distance, provided it is sufficiently small; thi...

Online platforms are prone to abuse and manipulation from strategic parties. For example, social media and review websites suffer from the presence of opinion spam and fake reviews. Applying the economic concept of rational expectation equilibrium (REE), we explore the impact of manipulation on consumer welfare in a Twitter-like environment. We argue that the REE outcome can be decomposed into ...

This paper uses the framework of an OLG economy for an analysis of the dynamic interaction between the precision of information about individual skills, investment in education, human capital accumulation and social welfare. The human capital of an individual depends on both his (subjectively) random ability and his investment in education. Individual investment in education is financed through...

This paper presents necessary and sufficient conditions for unambiguous changes in wage inequality in a dual economy, based on analysis of the entire Lorenz curve. These conditions are then used to analyze the distributional consequences of various types of economic growth. In particular, it is shown that capital accumulation or technical progress in agriculture is likely to reduce wage inequal...

This paper analyzes the interaction between intergenerational wealth transmission, human capital investments under uninsurable labor income risk, and economic growth in a small open overlapping-generations economy with heterogeneous agents. It demonstrates how the role of the personal income distribution for an economy’s process of development through risky human capital accumulation depends on...