Working Papers
Unconditional transfers, inequality and growth in the short and the long run, with Pietro Peretto [Draft coming soon]
This paper builds a quantitative general equilibrium model to study the effects of unconditional transfers on the welfare of households across the wealth distribution in the short run and in the long run. This distinction highlights the novelty of the analysis: in a fully dynamic and yet tractable specification, the model accounts for the temporary growth effects of a change in the incentive of firms to invest in research and development (R&D). Transfers reduce labor supply and thus produce a positive effect on welfare through increased leisure and a negative effect on income through permanently lower aggregate production and a temporary growth deceleration. They also reduce income inequality. In the short run, the leisure and redistribution effects dominate, increasing welfare across the wealth distribution. However, the smaller scale of production induces firms to invest less in R&D, as they now spread R&D costs on fewer units produced. Over time, as lower entry reduces the number of firms and thus
competition, growth reverts to its scale invariant steady state, and the productivity level converges to a path parallel to the baseline but with lower intercept. As a result of this transition, in the long run and in present value terms transfers reduce welfare for all households.
Current Account and Trade Balance Dynamics in a Schumpeterian Small Open Economy with Domenico Ferraro and Pietro Peretto [Online Appendix] [Updated: June 2026]
This paper studies current-account and trade-balance dynamics in a small open economy with Schumpeterian innovation, firm entry, and finite-horizon households under two alternative views of the world, while maintaining an exogenous world interest rate. In the canonical intertemporal approach, where exports are treated as residual, net foreign assets and the trade balance are entirely demand-driven and insulated from innovation and growth dynamics. When exports are modeled as an autonomous source of demand, foreign assets become a forward-looking valuation variable jointly determined by export demand and the allocation of output among consumption, innovation, and firm entry. Through the valuation channel, external shocks, such as export-demand shocks and world interest rate shocks, affect firm size and, through Schumpeterian mechanisms, feed back into the economy’s net foreign asset position and trade balance.