How big a boost to long run growth can countries expect from the ICT revolution? I use the results of growth accounting and the insights from a two-sector growth model to answer this question. The use of a two-sector rather than a one-sector model is required because of the very rapid rate at...

A reduction in income tax rates generates substantial dynamic responses within the framework of the standard neoclassical growth model. The short-run revenue loss after an income tax cut is partly - or, depending on parameter values, even completely - offset by growth in the long-run, due to the...

A two-country model with monopolistic competition and price stickiness is employed to investigate the implications for macroeconomic stability and the welfare properties of three international policy arrangements: (a) cooperative, (b) non-cooperative and (c) monetary union. I characterize the...

We revisit Western Europe’s record with labor-productivity convergence, and tentatively extrapolate its implications for the future path of Eastern Europe. The poorer Western European countries caught up with the richer ones through both higher rates of physical capital accumulation and...

This paper analyzes the welfare benefits from falling relative prices of IT (information technology) goods across a wide range of countries. We find, using two separate methodologies and datasets, that welfare benefits mainly accrue to users of IT, not their producers, because of falling...

This paper uses a model of growth and imperfect capital mobility across multiple economies to characterize the dynamics of (cross-country) in- come distributions. This allows convenient study of the convergence hypothesis, and reveals, where appropriate, polarization and clumping within...

In this paper we distinguish different “qualities” of FDI to re-examine the relationship between FDI and growth. We use ‘quality’ to mean the effect of a unit of FDI on economic growth. However this is difficult to establish because it is a function of many different country and project...

Median voter theory applied to trade policy predicts positive tariffs in capital-abundant countries and negative tariffs in labor-abundant countries. Negative tariffs are rare, and this paper reconciles the median voter theory with observed protectionism across countries. By considering large...

We present a model that reproduces two salient facts characterizing the international monetary system: i) Faster growing countries are associated with lower net capital inflows and ii) Countries that grow faster accumulate more international reserves and receive more net private inflows. We...

This paper presents a model of financial resource curse, i.e. episodes of abundant access to foreign capital coupled with weak productivity growth. We study a two-sector, tradable and non-tradable, small open economy. The tradable sector is the engine of growth, and productivity growth is...