anticipated international environmental agreements abstract consider a situation in which countries anticipate an international environmental agreement iea to be in effect sometime in the future what is the impact of the future iea on current emissions after its announcement we show that the answer to this question is ambiguous we examine four types of ieas that aim to reduce pollution stock in the environment iea type 1 sets a level of emissions iea type 2 and iea type 3 set a percentage and a uniform cut vis a vis the business as usual policy respectively iea type 4 sets the policy that maximizes future joint benefits of the signatories we show that all of these agreements reach their goal in the long run but the intended benefits of these ieas can potentially be offset by the anticipatory non cooperative response of the signatories leading to an environmental degradation in the short run which iea is preferable depends on the targeted level emissions during the phase of cooperation when this target is above a certain threshold welfare under iea type 1 is larger than under iea type 2 which is larger than under iea type 3 moreover the highest level of welfare that can be attained under iea type 1 is above the highest level of welfare achieved by any one of the other three ieas

trickle down consumption financial deregulation inequality and indebtedness over the last thirty years the u s experienced a surge in income inequality coupled with increasing levels of borrowing we model an olg economy populated by two types of household that care about how their consumption compares to that of their peers in this framework individual debt to income ratios decrease with income increases in consumption of rich households lead to increases in consumption of the rest and aggregate borrowing increases with income inequality we calibrate our model to evaluate the welfare implications of the process of nancial liberalization that began in the 1980s our analysis suggests that some of the nancial developments that lead to the recent expansion of credit may have decreased rather than increased welfare

creative destruction and firm specific performance heterogeneity traditional u s industries with higher firm specific stock return and fundamentals performance heterogeneity use information technology it more intensively and post faster productivity growth in the late 20 th century we argue that this mechanically reflects a wave of schumpeter s 1912 creative destruction disrupting a wide swath of industries with successful it adopters unpredictably undermining established firms this validates endogenous growth theory models of creative destruction e g aghion and howitt 1992 and suggests intensified creative destruction as explaining findings associating greater firm specific performance variation with higher per capita gdps economy growth rates accounting standards financial system development and property right protection

on the relationship between firm size and export intensity export marketing literature supports the view that firm size is positively related to export intensity although the empirical findings have been mixed a number of theoretical arguments are used to support this proposition i e international marketing economies of scale limited managerial and financial resources of small firms decisionmaker s risk perception based on a large survey of the italian manufacturing industry the article falsifies the proposition and challenges some widely held assumptions in export marketing literature

credit and identity theft abstract the quintessential crime of the information age is identity theft the malicious use of personal identifying data in this paper we model identity and its use in credit transactions various types of identity theft occur in equilibrium including new account fraud existing account fraud and friendly fraud the equilibrium incidence of identity theft represents a tradeoff between a desire to avoid costly or invasive monitoring of individuals on the one hand and the need to control transactions fraud on the other our results suggest that technological advances will not eliminate this tradeoff

on the coexistence of money and higher return assets and its social role this paper adopts mechanism design to investigate the coexistence of at money and higherreturn assets we consider an economy with pairwise meetings where at money and riskfree capital compete as means of payment as in lagos and rocheteau 2008 the trading mechanism in pairwise meetings is chosen among all individually rational renegotiation proof mechanisms to maximize society s welfare we show that in any stationary monetary equilibrium capital commands a higher rate of return than at money

secondary currency an empirical analysis abstract many cases exist of multiple currency usage throughout history as two leading examples secondary currencies were widespread during both the great depression in the united states and the 2002 recession in argentina what are the determinants of multiple currency usage and what is the effect on economic activity both issues are empirically addressed using individual level surveys collected by the authors in argentina during 2002 and 2003 the evidence supports the theoretically predicted determinants of secondary currency acceptability put forth in monetary theory in particular findings show that the acceptability of the secondary currency increases when the supply of national currency is low the relative transaction cost of the secondary currency is low and the individual trading technologies are less effective moreover the acceptability of the secondary currency has real effects on economic activity among those who use the secondary currency the monthly income gain is more than 15 of the average argentine s monthly income excluding trades of used goods this amounts to a 0 6 increase in gdp

riskiness endogenous productivity dispersion and business cycles abstract in the data cross sectional productivity dispersion is countercyclical at both the plant level and the firm level see e g bloom 2009 i incorporate a firm s choice of risk level into a model of firm dynamics with real business cycle features to explain this empirical finding both qualitatively and quantitatively in the model in every period each firm chooses the investment amount and the risk level associated with a production project every period all projects available to each firm have the same expected flow return determined by the aggregate and idiosyncratic shocks to the firm s productivity and differ from one another only in their risk the endogenous option of exiting the market and the limited funding for new investment jointly play an important role in motivating firms risk taking behavior the model predicts that in each period relatively small firms are more likely to take risk and hence exhibit a higher exit rate and that the cross sectional productivity dispersion measured as the standard deviation of the realized individual component of productivity is larger in recessions

search bargaining money and prices the goal of this paper is to extend existing search theoretic models of fiat money which until now have assumed that the price level is exogenous by explicitly incorporating bilateral bargaining this allows us to determine the price level endogenously and leads to additional insights concerning the role of money for example we find that monetary equilibria are generally inefficient in the sense that output and prices differ from the solution to a social planner s problem although the difference can become small as the discount rate or search friction vanishes we also find that there exist nonstationary inflationary equilibria

the relationship between firm growth size and age estimates for 100 manufacturing industries this study uses a sample of all firms operating in 100 manufacturing industries to examine some aspects of firm dynamics it finds that firm growth the variability of firm growth and the probability that a firm will fail decrease with firm age it also finds that firm growth decreases at a diminishing rate with firm size even after controlling for the exit of slow growing firms from the sample gibrat s law therefore fails although the severity of the failure decreases with firm size copyright 1987 by blackwell publishing ltd

productivity and employment dynamics of us manufacturing plants abstract this study estimates the plant level dynamics of productivity and employment in the united states we use the annual survey of manufactures from the us census bureau for the period 1972 1997 applying the system generalized method of moments estimation developed by blundell and bond 1998 we find that productivity and employment processes are both strongly persistent

coexistence of money and interest bearing securities abstract a random matching model with money is used to study the nominal yield on small denomination bearer safe discount securities issued by the government there is always one steady state with matured securities circulating at par and for some parameters another with them circulating at a discount in the former a necessary and sufficient condition for a positive nominal yield on not yet matured securities is exogenous discriminatory treatment of them by the government in the latter the post maturity discount on securities induces a deeper pre maturity discount even without such discriminatory treatment

cross sectoral variation in the volatility of plant level idiosyncratic shocks we estimate the volatility of plant level idiosyncratic shocks in u s manufacturing we measure the variation in revenue total factor productivity not explained by either industry or economy wide factors or by establishments characteristics we find that idiosyncratic shocks are much larger than aggregate shocks accounting for about 80 of the overall uncertainty faced by plants plants in the most volatile sector are subject to about six times as much idiosyncratic uncertainty as plants in the least volatile we provide evidence suggesting that idiosyncratic risk is higher in industries where the extent of creative destruction is likely to be greater

entry exit and investment specific technical change using european data this paper finds that i industry entry and exit rates are positively related to industry rates of investment specific technical change istc and ii the sensitivity of industry entry and exit rates to cross country differences in entry costs depends on industry rates of istc the paper con structs a general equilibrium model in which the rate of istc varies across industries and new investment specific technologies can be introduced by entrants or by incumbents in the calibrated model equilibrium behavior is consistent with stylized facts i and ii provided the cost of technology adop tion is increasing in the rate of istc jel g31 li 1 031 033 entry and exit rates differ significantly across industries over the period 1963 1982 timothy dunne mark j roberts and larry samuelson 1988 find that five year entry rates in us manu facturing data range from 21 percent in tobacco to 60 percent in scientific instruments high entry industries are high exit industries suggesting that entry and exit are largely due to the same industry specific factors at the same time little is known about what these factors might be this paper finds a strong positive link between industry entry and exit rates and the pace of technical progress in the capital goods that the industry uses the rate of investment specific technical change istc a significant fraction of entry and exit thus represents the introduction and replacement of capital embodied technologies istc is also positively related to the proportion of enterprises in each industry that displays large investment outlays in a given year that investment often occurs in spikes has been known since at least mark doms and dunne 1998 and the results link this pattern to the replacement of new capital embodied technologies by incumbents furthermore the decision of whether or when to exit appears sensitive to policy in countries in which the cost of entry is high rates of entry and exit are disproportionately suppressed in industries with high rates of istc to analyze these findings the paper develops a general equilibrium model in which chang ing the vintage of capital used by a particular enterprise is costly in the model this vintage is termed a technology and an enterprise is a technology manager pair the manager accumu lates expertise with a given technology over time and at any date may choose to upgrade to a newer technology at the expense of accumulated expertise as in boyan jovanovic and yaw

money and credit redux do we need both money and credit in models with explicit roles for payment instruments we show the answer is no if credit is easy money is useless if credit is tight money can be essential but then credit is irrelevant and changes in debt limits are neutral real balances respond endogenously to leave total liquidity constant this is true for exogenous or endogenous policy and debt limits secured or unsecured credit and fairly general preferences and pricing mechanisms while we also show how to overturn some results the benchmark model suggests credit conditions matter less than some people think

generalized search theoretic models of monetary exchange abstract virtually all simple search models of money assume agents with money cannot produce and so everyone has either 0 or 1 units of money in steady state we alternatively assume agents can always produce and simply restrict money inventories to 0 or 1 this seems better for many issues for example in the standard model it is difficult to interpret increases in the money supply because increasing the fraction of agents holding money decreases the economy s productive capacity our model avoids these problems and thus delivers more natural and simpler implications in many contexts we compare results on existence multiplicity and welfare across models

the essentiality of money in environments with centralized trade abstract lagos and wright 2005 introduced an influential model of monetary exchange in which trade alternates between centralized and decentralized markets and money is essential a limitation of their model and of the literature that follows is that they do not provide a microfoundation for the process of exchange in the centralized market in this paper we show that how one models exchange in the centralized market matters for the essentiality of money by describing the centralized market as a strategic market game and studying conditions under which money is essential

another example of a credit system that co exists with money we study an economy in which exchange occurs pairwise there is no commitment and anonymous agents choose between random monetary trade or deterministic credit trade to accomplish the latter agents can exploit a costly technology that allows limited record keeping and enforcement an equilibrium with money and credit is shown to exist if the cost of using the technology is sufficiently small anonymity record keeping and enforcement limitations also permit some incidence of default in equilibrium

viewpoint a microfoundation of monetary economics in this lecture i explain what the microfoundations of money are about and why they are necessary for monetary economics then i review recent developments of a particular microfoundation of money commonly known as the search theory of money finally i outline some unresolved issues dans cette presentation l auteur explique ce que sont les microfondations de la monnaie et pourquoi elles sont necessaires a l economie monetaire ensuite il passe en revue certains developpements recents d une microfondation particuliere de la monnaie connue sous le nom de theorie de la recherche de la monnaie enfin l auteur fait le tour d un ensemble de problemes qui restent sans solution pour le moment

lack of recall and centralized monetary trade we introduce lack of recall of past transactions as an alternative assumption to anonymity in a model where trade is centralized in environments where there is an intertemporal lack of double coincidence of wants problem and lack ofcommitment lack of recall can give rise to monetary equilibria that dominate nonmonetary outcomes in terms of welfare

on money as a medium of exchange we analyze economies in which individuals specialize in consumption and production and meet randomly over time in a way that implies that trade must be bilateral and quid pro quo nash equilibria in trading strategies are characterized certain goods emerge endogenously as media of exchange or commodity money depending both on their intrinsic properties and on extrinsic beliefs there are also equilibria with genuine fiat currency circulating as the general medium of exchange we find that equilibria are not generally pareto optimal and that introducing fiat currency into a commodity money economy may unambiguously improve welfare velocity acceptability and liquidity are discussed

existence of steady states with positive consumption in the kiyotaki wright model we prove the general existence of steady states with positive consumption in an n goods and fiat money version of the kiyotaki wright model by admitting mixed strategies we also show that there always exists a steady state in which everyone accepts a least costly to store object in particular if fiat money is one such object then there always exists a monetary steady state we also establish some other properties of steady states and comment on the relationship between steady states and incentive feasible allocations

a theory of financing constraints and firm dynamics there is widespread evidence supporting the conjecture that borrowing constraints have important implications for firm growth and survival in this paper we model a multiperiod borrowing lending relationship with asymmetric information we show that borrowing constraints emerge as a feature of the optimal long term lending contract and that such constraints relax as the value of the borrower s claim to future cash flows increases we also show that the optimal contract has interesting implications for firm dynamics in agreement with the empirical evidence as age and size increase mean and variance of growth decrease and firm survival increases

competition imitation and growth with step by step innovation is more intense product market competition and imitation good or bad for growth this question is addressed in the context of an endogenous growth model with step by step innovations in which technological laggards must first catch up with the leading edge technology before battling for technological leadership in the future in contrast to earlier schumpeterian models in which innovations are always made by outsider firms who earn no rents if they fail to innovate and become monopolies if they do innovate here we find first that the usual schumpeterian effect of more intense product market competition pmc is almost always outweighed by the increased incentive for firms to innovate in order to escape competition so that pmc has a positive effect on growth second that a little imitation is almost always growth enhancing as it promotes more frequent neck and neck competition but too much imitation is unambiguously growth reducing the model thus points to complementary roles for competition anti trust policy and patent policy

surprise surprise measuring firm level investment innovations abstract using the ifo investment survey for the german manufacturing sector we construct a forty year panel of firm level investment innovations surprises we document the cross sectional and time series properties of this panel and our main findings are the cross sectional dispersion of investment surprises is countercyclical as is their average within firm time series volatility and both are highly correlated this justifies in part strategies in the literature to use cross sectional moments for the calibration of heteroscedasticity at the same time the cross sectional dispersion of investment is procyclical suggesting a nonsmooth capital adjustment friction at the micro level there is substantial dispersion in within firm volatility a feature consistent with a recent literature on information frictions at the firm level finally the aforementioned second moments of investment innovations are granger caused by recessions but not vice versa rendering simple exogenous uncertainty shocks less plausible as drivers of business cycles

money and prices a model of search and bargaining abstract this paper makes commodities divisible and incorporates bargaining into the search theoretic model of money to determine the purchasing power of money or price it is shown that two monetary equilibria always coexist where fiat money is universally accepted the two equilibria differ in price output welfare and the velocity of money sunspot monetary equilibria exist in which money is universally accepted in all states of the economy multiplicity has novel implications on the effectiveness of currency substitution and exchange market intervention journal of economic literature classification numbers c78 e40

incomplete record keeping and optimal payment arrangements abstract we study a random matching absence of double coincidence environment in which people cannot precommit and in which there are two imperfect ways to keep track of what other people have done in the past money and a public record of all past actions that is updated with an average lag we study how the magnitude of that lag affects the allocations that are optimal from among allocations that are stationary and feasible and that satisfy incentive constraints which arise from the absence of commitment and the imperfect ways of keeping track of what others have done in the past journal of economic literature classification numbers e40 c73 d82

nonparticipation or misspecification the impacts of nonparticipation on dichotomous choice contingent valuation dichotomous choice or referendum contingent valuation surveys have become the predominate choice for valuing goods and services otherwise not valued in a standard market nonmarket goods and services a number of researchers have recently recommended that dichotomous choice contingent valuation studies include a follow up question to all no responses to determine whether the no response is a result of unwillingness to pay or nonparticipation if the goal of the study is to investigate the impact of covariates on either mean willingness to pay or the probability of nonparticipation simple identification of indifferent individuals will not suffice a simulation study shows that existing econometric models designed to account for nonparticipation are extremely sensitive to misspecification bias accurate identification of the probability of nonparticipation is hampered by potential misspecification of the distribution of willingness to pay

money is memory abstract this paper examines the sets of feasible allocations in a large class of economic environments in which commitment is impossible following myerson 8 the standard definition of feasibility is adapted to take account of the lack of commitment the environments feature either memory or money memory is defined as knowledge on the part of an agent of the full histories of all agents with whom he has had direct or indirect contact in the past money is defined as an object that does not enter utility or production functions and is available in fixed supply the main proposition is that any allocation that is feasible in an environment with money is also feasible in the same environment with memory depending on the environment the converse may or may not be true hence from a technological point of view money is equivalent to a primitive form of memory journal of economic literature classification numbers e40 c73 d82

investor protection optimal incentives and economic growth does investor protection foster economic growth to assess the widely held affirmative view we introduce investor protection into a standard overlapping generations model of capital accumulation better investor protection implies better risk sharing because of entrepreneurs risk aversion this results in a larger demand for capital this is the demand effect a second effect the supply effect follows from general equilibrium restrictions better protection i e higher demand increases the interest rate and lowers the income of entrepreneurs decreasing current savings and next period s supply of capital the supply effect is stronger the tighter are the restrictions on capital flows our model thus predicts that the positive effect of investor protection on growth is stronger for countries with lower restrictions cross country data provide support for this prediction as does the detailed examination of the growth experiences of south korea and india

cyclical changes in firm volatility we estimate changes in the volatility of firm level sales earnings and employment growth of us firms our method differs from existing measures for firm level sales and employment volatility in that it not only captures longer run changes in volatility but also measures cyclical changes in firm volatility we detect substantial cyclical variation in firm specific volatility around trend firm specific volatility was low in the early 1990s rose in the mid and late 1990s and was high around 2000 our results are consistent with the hypothesis deduced from models with financial frictions that rising idiosyncratic volatility before 2001 contributed to the coincident rise in the external finance premium and to the 2001 recession endogenous pricing models imply that price adjustment is less frequent and disinflation more costly when firm specific volatility is low consistent with endogenous pricing models we find that the output cost of disinflation was three times larger in the early 1990s than in the early 2000s

idiosyncratic shocks and the role of nonconvexities in plant and aggregate investment dynamics we examine a model of lumpy investment wherein establishments face persistent shocks to common and plant specific productivity and nonconvex adjustment costs lead them to pursue generalized s s investment rules we allow persistent heterogeneity in both capital and total factor productivity alongside low level investments exempt from adjustment costs to develop the first model consistent with available evidence on establishment level investment rates reassessing the implications of lumpy investment for aggregate dynamics in this setting we find that they remain substantial when factor supply considerations are ignored but are quantitatively irrelevant in general equilibrium the substantial implications of general equilibrium extend beyond the dynamics of aggregate series while the presence of idiosyncratic shocks makes the time averaged distribution of plant level investment rates largely invariant to market clearing movements in real wages and interest rates we show that the dynamics of plants investments differ sharply in their presence thus model based estimations of capital adjustment costs involving panel data may be quite sensitive to the assumption about equilibrium our analysis also offers new insights about how nonconvex adjustment costs influence investment at the plant when establishments face large and weakly persistent idiosyncratic productivity shocks consistent with existing estimates we find that nonconvex costs do not cause lumpy investments but act to eliminate them