Accounting for the Hidden Economy: Barriers to Legality and Legal Failures

This paper examines how much of the difference in the size of the informal sector and in per capita income across countries can be accounted by regulation costs (barriers to legality) and contractual imperfections in financial markets (legal failures). It constructs and solves numerically a general equilibrium model with credit constrained heterogeneous agents, occupational choices over formal and informal businesses, contractual imperfections and a government sector which imposes taxes and regulations on formal firms. The premium from formalization is better access to outside finance. differences in regulation costs and the degree of enforcement in financial contracts endogenously generate differences in the size of the informal sector and in total factor productivity (TFP). The numerical exercises suggest that: (i) regulation costs and not financial market imperfections account for the difference in the size of the informal sector between United States and Mediterranean Europe; (ii) this is not the case for countries with very weak enforcement systems, such as Peru, as both contractual imperfections and regulation costs account for the observed difference in the size of the informal sector. Regarding output per capita, regulation costs and the strength of enforcement explain roughly 60% of the difference in observed international incomes.

Corruption, Credit Market Imperfections, and Economic Development

This paper studies the role of credit market imperfections and corruption on the process of economic development. We address the question of how much of the differences in output per capita across countries can be attributed to differences in credit market policies and corruption. In order to accomplish that, we construct and solve numerically a general equilibrium model with heterogeneous agents, contractual imperfections and occupational choices. The quantitative exercises suggest that a country in which debt contracts are not enforced and corruption corresponds to 10% of output will be roughly 1/3 to 1/2 as rich as the United States. Though this is an important effect, it is a small fraction of the huge differences in income per capita across countries.

Intermediation costs, investor protection and economic development

This paper studies the effect of financial repression and contract enforcement on entrepreneurship and economic development. We construct and solve a general equilibrium model with heterogeneous agents, occupational choice and two financial frictions: intermediation costs and financial contract enforcement. Occupational choice and firm size are determined endogenously, and depend on agent type (wealth and ability) and credit market frictions. The model shows that differences across countries in intermediation costs and enforcement generate differences in occupational choice, firm size, credit, output and inequality. Counterfactual experiments are performed for Latin American, European, transition and high growth Asian countries. We use empirical estimates of each country's financial frictions, and United States values for all other parameters. The results allow us to isolate the quantitative effect of these financial frictions in explaining the performance gap between each country and the United States. The results depend critically on whether a general equilibrium factor price effect is operative.

Computing General Equilibrium Models with Occupational Choice and Financial Frictions

This paper establishes the existence of a stationary equilibrium and a procedure to compute solutions to a class of dynamic general equilibrium models with two important features. First, occupational choice is determined endogenously as a function of heterogeneous agent type, which is defined by an agent’s managerial ability and capital bequest. Heterogeneous ability is exogenous and independent across generations. In contrast, bequests link generations and the distribution of bequests evolves endogenously. Second, there is a financial market for capital loans with a deadweight intermediation cost and a repayment incentive constraint. The incentive constraint induces a non convexity. The paper proves that the competitive equilibrium can be characterized by the bequest distribution and factor prices, and uses the monotone mixing condition to ensure that the stationary bequest distribution that arises from the agent’s optimal behavior across generations exists and is unique. The paper next constructs a direct, non-parametric approach to compute the stationary solution. The method reduces the domain of the policy function, thus reducing the computational complexity of the problem.

Elastic properties of carbon nanotubes and their heterojunctions

Comprehensive studies on the modelling and numerical simulation of the mechanical behaviour under tension, bending and torsion of single-walled carbon nanotubes and their heterojunctions are performed. It is proposed to deduce the mechanical properties of the carbon nanotubes heterojunctions from the knowledge of the mechanical properties of the single-walled carbon nanotubes, which are their constituent key unit

Finite element modelling and analysis of crack shape evolution in mode-I fatigue Middle Cracked Tension specimens

A numerical procedure was employed to study the shape evolution of fatigue cracks in Middle Cracked Tension specimens. This iterative procedure consists of a 3D finite element analysis to obtain the displacement field in the cracked body, calculation of stress intensity factors along crack front and definition of local crack advances considering the Paris law. Numerical predictions were compared with experimental crack shapes with a good agreement. The evolution of crack shape was analysed for different propagation conditions considering robust dependent parameters. Two main propagation stages were identified: an initial transient stage highly dependent on initial crack shape and a stable stage where the crack follows preferred paths. Mathematical models were proposed for transient and stable stages consisting of exponential and polynomial functions, respectively. The transition between both stages was defined considering two criteria: the rate of shape variation and the distance to stable shape. Finally, the crack shape change was linked with the distribution of stress intensity factor along crack front.http://www.sciencedirect.com/science/article/B6V2R-4RGFD3P-1/1/e08212c92d2476b00aceb521ee4e521