Reto Foellmi

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Non-collusive corruption, i.e., corruption that imposes an additional burden on business activity, is particularly widespread in low-income countries. We build a macroeconomic model with credit market imperfections and heterogeneous agents to explore the roots and consequences of this type of corruption. We find that credit market imperfections, by(More)
We explore the role of the ownership structure of capital in an economy that suffers from barriers to entry and an imperfect financial system. In such an environment, an unequal distribution of capital provides an explanation for trade flows and trade gains even when countries do not differ in relative factor endowments or available technologies. Moreover,(More)
This paper studies the Cass-Koopmans-Ramsey model of optimal economic growth in the presence of loss aversion and habit formation. The representative agent’s preferences for consumption can be gradually varied between the standard constant intertemporal elasticity of substitution (CIES) case and Kahneman and Tversky’s prospect utility. We find that the(More)
  • Reto Foellmi, Christian Hepenstricky, Josef Zweimüllerz
  • 2007
We present a model of monopolistic competition and international trade in which income e¤ects play a crucial role. It is assumed that goods are indivisible and consumers decide whether or not to purchase a given variety. This provides us with a simple and tractable framework in which prices and mark-ups of monopolistic producers are determined by(More)
We introduce non-homothetic preferences into a general equilibrium model of monopolistic competition and explore the impact of income inequality on the medium-run macroeconomic equilibrium. We find that (i) a sufficiently high extent of inequality divides the economy into mass consumption sectors (where firms charge low prices and hire many workers) and(More)
This paper studies pension design from a risk management point of view using a lexicographic loss aversion model. Interest in this model stems from the fact that it explains income expansion paths of equity and total savings particularly well. I find that all income groups are likely to benefit from a PAYGO system, even in the absence of any redistribution.(More)
We study a model of growth and mass production. Firms undertake either product innovations that introduce new luxury goods for the rich; or process innovations that transform existing luxuries into mass products for the poor. A prototypical example for such a product cycle is the automobile. Initially an exclusive product for the very rich, the automobile(More)
We explore the relationship between inequality and demand structure in an endogenous growth model where consumers expand consumption along a hierarchy of needs and desires. The consumption hierarchy is captured by non-homothetic preferences implying that the shape of the demand curves for various goods depends on the distribution of income. This setting(More)