This paper develops a model to assess the quantitative effects of barriers to entry and financial frictions on cross-country income and TFP differences. The main focus is on the interaction between barriers to entry and financial frictions. The model is calibrated to match the firm level statistics for the U.S. economy assuming a perfect financial market. The quantitative analysis shows that ba...

This issue is devoted in large part to summaries of the sessions of our conference on “Financial Frictions and Segmented Asset Markets.” Different approaches have been used to incorporate financial market imperfections into tractable general equilibrium models, emphasizing different frictions in asset markets: lack of commitment in financial contracts, limited participation and market segmentat...

We develop a tractable infinite horizon model of bubbles and unemployment. Our theoretical analysis proves that stimulate capital accumulation, reduce unemployment, increase consumption. then numerically investigate the impacts credit constraints, labor market conditions, redistribution policy on welfare. numerical investigations show social welfare in bubbly steady state is always greater than...

We develop a two-sector search-matching model of the labor market with imperfect mobility of workers, augmented to incorporate a housing market and a frictional goods market. Homeowners use home equity as collateral to …nance idiosyncratic consumption opportunities. A …nancial innovation that raises the acceptability of homes as collateral raises house prices and reduces unemployment. It also t...