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We analyze the impact of the U.S. skill-biased immigration influx that took place between 2000 and 2009 within a search and matching model that allows for skill heterogeneity, differential search cost, and capital-skill complementarity. We find that although the skill-biased immigration raised the overall net income to natives, it had distributional effects. Specifically, unskilled native workers gained in terms of both employment and wages. Skilled native workers, however, gained in terms of employment but lost in terms of wages. Nevertheless, in an extension where skilled natives and immigrants are imperfect substitutes, even the skilled wage rises.

This paper investigates the impact of an increase in life expectancy on the level and the distribution of income in the presence of skill heterogeneity and automation. It shows analytically that an increase in life expectancy induces the replacement of lowskilled workers by automation capital and high-skilled workers. Moreover, it raises the skill premium and has an ambiguous effect on total income. A simulation exercise, based on US data, shows that an increase in life expectancy raises the level as well as the inequality of income.We consider redistributive policies that can mitigate some of the adverse effects of an increase in life expectancy for low-skilled workers.

This paper characterizes the elasticity of factor substitution in one-sector convex growth models with a general production function. It shows that an elasticity of substitution that is asymptotically greater than unity is a sufficient (but not a necessary) condition for the existence of a lower bound on the marginal product of capital, which in turn can lead to unbounded endogenous growth. Hence, an elasticity of substitution that eventually becomes greater than unity can counteract the role of diminishing returns to capital. This renders factor substitution a powerful engine of growth.

This paper analyzes the welfare effect of illegal immigration on the host country within a dynamic general equilibrium framework and shows that it is positive for two reasons. First, immigrants are paid less than their marginal product, and second, after an increase in immigration, domestic households find it optimal to increase their holdings of capital. It is also shown that dynamic inefficiency may arise, despite the fact that the model is of the Ramsey type. Nevertheless, the introduction of a minimum wage, which leads to job competition between domestic unskilled workers and immigrants reverses all of the above results.

We characterize the class of dynamic models that allow for the most commonly used types of sustained economic growth (balanced and asymptotically balanced). We show that, under a constant returns to scale technology, (asymptotically) constant discount rate and (asymptotically) constant elasticity of marginal felicity are not only necessary but also sufficient conditions for the existence of a(n) (asymptotically) balanced growth equilibrium path. We provide examples of recursive utility models that accept a(n) (asymptotically) balanced growth equilibrium and discuss their implications on cross-country differences in growth rates, as well as on savings behavior and wealth distribution.

In a two-period overlapping-generations model with production, we consider the damaging impact of environmental degradation on health and consequently life expectancy. Despite the presence of social constant returns to capital, which would otherwise generate unbounded growth, when pollution is left unabated, the economy cannot achieve such a path. Instead, it converges either to a stationary level of capital per worker or to a cycle in which capital per worker oscillates permanently. The government's involvement in environmental preservation proves crucial for both short-term dynamics and long-term prospects of the economy. Particularly, an active policy of pollution abatement emerges as an important engine of long-run economic growth. Furthermore, by eliminating the occurrence of limit cycles, pollution abatement is also a powerful source of stabilization.

This paper characterizes the saving rate in the Ramsey–Cass–Koopmans model analytically with a general production function when there exist both exogenous and endogenous growth. It points out conditions involving the share of capital and the elasticities of factor and intertemporal substitution under which the saving rate path to its steady-state value exhibits overshooting or undershooting or is monotonic. Simulations illustrate these interesting dynamics. The paper also identifies the general class of production functions that render the saving rate constant along the entire transition path and hence make the Ramsey–Cass–Koopmans model isomorphic to that of Solow and Swan.

We examine the effects of both tariff-only and coordinated trade-tax reforms on market access, government revenue, and welfare for a small monetary economy, under the assumption that a certain fraction of purchases of each good must be financed with cash held in advance. We show that if the cash requirement ratio in the exportable sector is greater than that in the importable, then, contrary to previous results, (i) a uniform radial reduction of tariffs has ambiguous effects on both welfare and market access, (ii) tariff and consumption tax reforms that leave consumer prices unchanged may be more efficient in improving market access and welfare than a reform that involves only tariffs, and (iii) export and production tax reforms that keep producer prices unchanged may be welfare deteriorating.