Dynamic General Equilibruim Theory and Aggregate Phenomena

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This project pursues significant, unresolved questions in dynamic general equilibrium theory. The first part develops convex models of endogenous growth with special emphasis on the following areas: (1) the analysis of the determinants of growth and the possibility of sustained growth; (2) the study of the process of innovation or new product development; and (3) the study of the dynamic effects of taxation. The project explores the connections between these three areas and extends this work into open economy settings. The second part concerns the use of general equilibrium models of imperfect competition to understand aggregate phenomena. In particular, these models are used to study the existence of Keynesian "low output" equilibria and unemployment due to increasing returns and private information. This research should provide new insights into economic growth, technological change and tax policy. Previous work by the investigator tying the literatures on dynamic taxation and the determinants of growth demonstrates that different tax policies and trade policies can generate permanent differences in the growth rates of different countries. This project will extend the past work with special emphasis on the effect of market power, education and different economic policies on sustained economic growth in an open economy.