This paper examines the competition between money and credit in a search model with divisible commodities. It is shown that fiat money can be valuable even though it yields a lower rate of return than the coexisting credit. The competition between money and credit increases efficiency. The monetary equilibrium with credit Pareto dominates the monetary equilibrium without credit whenever the two coexist. When a credit is repaid with money, the competition also bounds the purchasing power of money from below by that of credit and so eliminates the weak inefficient monetary equilibrium found in previous search models. With numerical examples, three different monetary equilibria are ranked and the properties of the interest rate are examined.

This paper examines how interaction between endogenous human capital accumulation and technological change affects relative wages and economic growth. Private incentives to invest in human capital finance the employment of skilled labour in the education sector, while non-rival technology is a by-product of the education process. The absorption of new technologies into production is skill intensive, creates skill-biased labour demand, and increases the relative wage of skilled to unskilled labour. In contrast to recent models of endogenous growth, higher rates of technological change and growth may be accompanied by a higher relative wage but lower relative supply of skilled labour. Thus the model provides a theoretical foundation for the empirically observed relation between technological change and relative demand, supply and wages of skilled labour.

This paper examines strategic trade policy under asymmetric information with publicly observable contracts. We analyse both the cases of unilateral and bilateral intervention. We find that the requirement of incentive compatibility undermines the strategic precommitment effect when public funds are costly, even with no restrictions on the form of the policies. Second, when firms sell substitute goods, the introduction of a rival interventionist government may reduce the cost of informational rents to each government. Third, it turns out that under bilateral intervention there exists a continuum of symmetric equilibria with levels of output and corresponding levels of welfare in the exporting countries which can be ranked. The requirement of ex post participation constraints for the firm limits the set of subsidies which can be offered to the firm. In particular, under bilateral intervention, the equilibrium levels of output which are implemented under adverse selection are below their values under ex ante uncertainty, i.e., below the equilibrium levels of output which are achieved when firms sign their contracts before the realization of their costs.