The Economic and Policy Consequences of Catastrophes
308 AmEriCAN ECoNomiC JourNAL: ECoNomiC PoLiCy NoVEmBEr 2013 In Section I we lay out a parsimonious model with an AK production technology, adjustment costs (which we show are crucial), and shocks that arrive unpredictably. Each shock destroys a random fraction of the capital stock. We treat as catastrophic ................
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