Community and class antagonism

We investigate how vertical unity within a community interacts with horizontal class divisions of an unequal income distribution. Community is conceptualized in terms of a public good to which all those in the community have equal access, but from which outsiders are excluded. We formulate the idea of redistributive tension, or class antagonism, in terms of the costs that poorer individuals would be willing to impose on the rich, to achieve a given gain in personal income. Our conclusion is that the nominal distribution of income could give a misleading picture of tensions in society, both within and across communities. Ideologies of community solidarity may well trump those of class solidarity because of the implicit sharing of community resources brought about by community-specific public goods. Greater economic mobility of particular types may actually exacerbate class tensions instead of attenuating them. We illustrate our theoretical results with a discussion of a number of historical episodes of shifting class tensions and alliances.     

Evaluating Projects and Assessing Sustainable Development in Imperfect Economies

We are interested in three related questions:(1) How should accounting prices be estimated?(2) How should we evaluate policy change in animperfect economy? (3) How can we check whetherintergenerational well-being will be sustainedalong a projected economic programme? We do notpresume that the economy is convex, nor do weassume that the government optimizes on behalfof its citizens. We show that the same set ofaccounting prices should be used both forpolicy evaluation and for assessing whether ornot intergenerational welfare along a giveneconomic path will be sustained. We also showthat a comprehensive measure of wealth,computed in terms of the accounting prices, canbe used as an index for problems (2) and (3)above. The remainder of the paper is concernedwith rules for estimating the accounting pricesof several specific environmental naturalresources, transacted in a few well knowneconomic institutions.     

Learning and knowledge diffusion in a global economy

I develop a dynamic general equilibrium model to understand how multinationals affect host countries through knowledge diffusion. Workers in the model learn from their managers and knowledge diffusion takes place through worker mobility. Unlike in a model without learning, I present a novel mechanism through which an integrated equilibrium represents a Pareto improvement for the host country. I go on to explore other dynamic consequences of integration. The entry of multinationals makes the lifetime earning profiles of host country workers steeper. At the same time, if agents learn fast enough, integration creates unequal opportunities, thereby widening inequality. The ex-workers of foreign multinationals also found new firms which are, on average, larger than the largest firms under autarky.     

Dynamic coordination with individual learning

We study coordination in dynamic global games with private learning. Players choose whether and when to invest irreversibly in a project whose success depends on its quality and the timing of investment. Players gradually learn about project quality. We identify conditions on temporal incentives under which, in sufficiently long games, players coordinate on investing whenever doing so is not dominated. Roughly speaking, this outcome occurs whenever players? payoffs are sufficiently tolerant of non-simultaneous coordination. We also identify conditions under which players coordinate on the risk-dominant action. We provide foundations for these results in terms of higher order beliefs.