Why don't all countries converge rapidly to the use of most efficient or best practice technologies? Micro level studies suggest managerial skills play a key role in the adoption of modern technologies. In this paper we model the interactive process between on-the-job managerial skill acquisition and the adoption of modern technology. We use the model to illustrate why some countries develop managerial skills quickly and adopt best practice technologies, while others stay backwards. The model also explains why managers will not migrate from rich countries to poor countries, as would be needed to generate convergence. Finally we show why standard growth accounting exercises will incorrectly attribute a large proportion of managerial skills' contribution to total factor productivity and we quantify the importance of this bias.

When and how do democratic institutions deliver accountable government? In addressing this broad question, we focus on the role played by political norms—specifically, the extent to which leaders abuse office for personal gain and the extent to which citizens punish such transgressions. We show how qualitatively distinct political norms can coexist because of a dynamic complementarity, in which citizens’ willingness to punish transgressions is raised when they expect such punishments to be used in the future. We seek to understand the emergence of accountability by analysing transitions between norms. To do so, we extend the analysis to include the possibility that, at certain times, a segment of voters are (behaviorally) intolerant of transgressions. Our mechanism highlights the role of leaders, offering an account of how their actions can instigate enduring change, within a fixed set of formal institutions, by disrupting prevailing political norms. We show how such changes do not depend on “sun spots” to trigger coordination, and are asymmetric in effect—a series of good leaders can (and eventually will) improve norms, whereas bad leaders cannot damage them.

We show how a Schumpeterian process of creative destruction can induce rational, herd behavior by entrepreneurs across diverse sectors as if fueled by “animal spirits.” Consequently, a multisector economy, in which productivity improvements are made by independent, profit-seeking entrepreneurs, exhibits regular booms, slowdowns, and downturns as part of the long-run growth process. Our cyclical equilibrium has higher average growth, but lower welfare than the corresponding acyclical one. We show how a negative relationship can emerge between volatility and growth across cycling economies, and assess the extent to which our model matches several features of actual business cycles.

This paper analyses the interactions between growth and the contracting environment in production. With incompleteness in contracting, viable production relationships between firms and workers, and therefore the profitability of industries, depend on the rates of innovation and growth. The speed at which new innovations arrive in turn depends on the profitability of production, for the usual reasons examined in the endogenous growth literature. We show that these interactions can have important implications which are consistent with observed phenomena in both the micro and macro environments. In particular, we demonstrate that a technological shock (increasing productivity of research) can, through this interaction, lead to a productivity slowdown and a shift in labour market contracts away from firms providing implicit guarantees of lifetime employment and towards shorter-term “contractor” type arrangements. We show the consistency of an increase in the proportion of the labour force under short-term employment, increased relative returns of workers in high-productivity sectors, and increased income inequality, with a productivity slowdown of finite duration.