The world distribution of income (estimated from individual country distributions)

We estimate the world distribution of income by integrating individualincome distributions for 125 countries between 1970 and 1998. Weestimate poverty rates and headcounts by integrating the density functionbelow the $1/day and $2/day poverty lines. We find that poverty ratesdecline substantially over the last twenty years. We compute povertyheadcounts and find that the number of one-dollar poor declined by 235million between 1976 and 1998. The number of $2/day poor declined by 450million over the same period. We analyze poverty across different regionsand countries. Asia is a great success, especially after 1980. LatinAmerica reduced poverty substantially in the 1970s but progress stoppedin the 1980s and 1990s. The worst performer was Africa, where povertyrates increased substantially over the last thirty years: the number of$1/day poor in Africa increased by 175 million between 1970 and 1998,and the number of $2/day poor increased by 227. Africa hosted 11% ofthe world s poor in 1960. It hosted 66% of them in 1998. We estimatenine indexes of income inequality implied by our world distribution ofincome. All of them show substantial reductions in global incomeinequality during the 1980s and 1990s.

The HP-filter in cross-country comparisons

Many empirical studies of business cycles have followed the practise ofapplying the Hodrick-Prescott filter for cross-country comparisons. Thestandard procedure is to set the weight \lambda, which determines the'smoothness' of the trend equal to 1600. We show that if this value isused for against common wisdom about business cycles. As an example, weshow that the long recession occurred inSpain between 1975 and 1985 goesunnotoced by the HP filter. We propose a method for adjusting \lambda byreinterpreting the HP-filter as the solution to a constrained minimizationproblem. We argue that the common practice of fixing \lambda across countriesamounts to chankging the constraints on trend variability across countries.Our proposed method is easy to apply, retains all the virtues of thestandard HP-filter and when applied to Spanish data the results are inthe line with economic historian's view. Applying the method to a numberof OECD countries we find that, with the exception of Spain, Italy andJapan, the standard choice of \lambda=1600 is sensible.

The impact of trade liberalization on skill upgrading. Evidence from Argentina

In this paper I study the effects of a regional free trade agreement on the demand for skill.I start by documenting a series of facts to shed light on the determinants of a steep increasein the relative demand of skilled labor in a panel of Argentinean industrial firms covering thetrade liberalization period. First, this is not explained by labor reallocation across industriesor firms but by skill upgrading within firms. Second, exporters upgrade skill faster than nonexporters. Third, firms upgrading skill also upgrade technology. These findings are consistentwith a model where a reduction in trading partner s tariffs induces the most productive firms(exporters) to adopt skill-intensive production technologies. Indeed, I find that the reduction inBrazil s tariffs induces the most productive Argentinean firms to upgrade skill, while the leastproductive ones downgrade. One third of the increase in the relative demand for skill can beattributed to the reduction in Brazil s tariffs.

Toward a theory of labor market institutions

Standard economic analysis holds that labor market rigidities are harmfulfor job creation and typically increase unemployment. But many orthodoxreforms of the labor market have proved difficult to implement because ofpolitical opposition. For these reasons it is important to explain why weobserve such regulations. In this paper I outline a theory of how they may arise and why they fit together. This theory is fully developed in aforthcoming book (Saint-Paul (2000)), to which the reader is referred forfurther details.

The skill bias of world trade

Under plausible assumptions about preferences and technology, the model in this papersuggests that the entire volume of world trade matters for wage inequality. Therefore,trade integration, even among identical countries, is likely to increase the skill premium.Further, we argue that empirical evidence of a falling relative price of skill-intensive goods can be reconciled with the fast growth of world trade and that the intersectoral mobility of capital exacerbates the effect of trade on inequality. We provide new empirical evidence in support of our results and a quantitative assessment of the skill bias of world trade.

Economic growth with bubbles

We develop a stylized model of economic growth with bubbles. In this model, changes in investorsentiment lead to the appearance and collapse of macroeconomic bubbles or pyramid schemes.We show how these bubbles mitigate the effects of financial frictions. During bubbly episodes,unproductive investors demand bubbles while productive investors supply them. These transfersof resources improve the efficiency at which the economy operates, expanding consumption, thecapital stock and output. When bubbly episodes end, these transfers stop and consumption, thecapital stock and output contract. We characterize the stochastic equilibria of the model and arguethat they provide a natural way of introducing bubble shocks into business cycle models.

A global view of economic growth

This paper integrates in a unified and tractable framework some of the key insights of the field of international trade and economic growth. It examines a sequence of theoretical models that share a common description of technology and preferences but differ on their assumptions about trade frictions. By comparing the predictions of these models against each other, it is possible to identify a variety of channels through which trade affects the evolution of world income and its geographical distribution. By comparing the predictions of these models against the data, it is also possible to construct coherent explanations of income differences and long-run trends in economic growth.

Unemployment in an estimated new Keynesian model

We reformulate the Smets-Wouters (2007) framework by embedding the theory of unemployment proposed in Galí (2011a,b). Weestimate the resulting model using postwar U.S. data, while treatingthe unemployment rate as an additional observable variable. Our approach overcomes the lack of identification of wage markup and laborsupply shocks highlighted by Chari, Kehoe and McGrattan (2008) intheir criticism of New Keynesian models, and allows us to estimate a"correct" measure of the output gap. In addition, the estimated modelcan be used to analyze the sources of unemployment fluctuations.

The economic effects of a Spanish trade boycott against Catalan products

We study the potential consequences of a hypothetical trade boycott against Catalan products organized by some sectors of the Spanish society mainly for political reasons. A symmetric trade boycott would have two effects: a reduction of Catalan exports to Spain and a partial process of import substitution in Catalonia. In order to quantify the economic impact of the boycott, we compare the "actual" Catalan economy, as described in the input-output table for 2005, with a "simulated" Catalan economy that takes into account the effects of a boycott on the trade exchanges between Catalonia and Spain.

Standardized enforcement: Access to justice vs contractual innovation

We model the different ways in which precedents and contract standardization shapethe development of markets and the law. In a setup where more resourceful parties candistort contract enforcement to their advantage, we find that the introduction of astandard contract reduces enforcement distortions relative to precedents, exerting twoeffects: i) it statically expands the volume of trade, but ii) it crowds out the use ofinnovative contracts, hindering contractual innovation. We shed light on the largescale commercial codification occurred in the 19th century in many countries (evenCommon Law ones) during a period of booming commerce and long distance trade.

(Re-) Shaping hatred: Anti-Semitic attitudes in Germany, 1890-2006

In this paper, we assess the determinants of long-run persistence of localculture, and examine the success of policy interventions designed to change attitudes.We analyze anti-Semitic attitudes drawing on individual-level survey results fromGermany s social value survey in 1996 and 2006. On average, we find that historicalvoting patterns for anti-Semitic parties between 1890 and 1933 are powerfulpredictors of anti-Jewish attitudes today. There is evidence that transmission takesplace both vertically (parent to child) and horizontally (among peers). Policy modifiedGerman views on Jews in important ways: The cohort that grew up under the Naziregime shows significantly higher levels of anti-Semitism. After 1945, the victoriousAllies implemented denazification programs in their zones of occupation. We usedifferences in these policies between the occupying powers as a source of identifyingvariation. The US and French zones today still show high anti-Semitism, reflecting anambitious botched attempt at denazification. In contrast, the British and Soviet zones,register much lower levels of Jew-hatred.

Structural unemployment

Structural unemployment is due to mismatch between available jobs and workers.We formalize this concept in a simple model of a segmented labor market with searchfrictions within segments. Worker mobility, job mobility and wage bargaining costsacross segments generate structural unemployment. We estimate the contribution ofthese costs to fluctuations in US unemployment, operationalizing segments as statesor industries. Most structural unemployment is due to wage bargaining costs, whichare large but nevertheless contribute little to unemployment fluctuations. Structuralunemployment is as cyclical as overall unemployment and no more persistent, bothin the current and in previous recessions.

The contribution of schooling in development accounting: Results from a nonparametric upper bound

How much would output increase if underdeveloped economies were toincrease their levels of schooling? We contribute to the development accounting literature by describing a non-parametric upper bound on theincrease in output that can be generated by more schooling. The advantage of our approach is that the upper bound is valid for any number ofschooling levels with arbitrary patterns of substitution/complementarity.Another advantage is that the upper bound is robust to certain forms ofendogenous technology response to changes in schooling. We also quantify the upper bound for all economies with the necessary data, compareour results with the standard development accounting approach, andprovide an update on the results using the standard approach for a largesample of countries.

A model of shadow banking

We present a model of shadow banking in which financial intermediaries originate and trade loans, assemble these loans into diversified portfolios, and then finance these portfolios externally with riskless debt. In this model: i) outside investor wealth drives the demand for riskless debt and indirectly for securitization, ii) intermediary assets and leverage move together as in Adrian and Shin (2010), and iii) intermediaries increase their exposure to systematic risk as they reduce their idiosyncratic risk through diversification, as in Acharya, Schnabl, and Suarez (2010). Under rational expectations, the shadow banking system is stable and improves welfare. When investors and intermediaries neglect tail risks, however, the expansion of risky lending and the concentration of risks in the intermediaries create financial fragility and fluctuations in liquidity over time.