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We survey the latest research on the linkages between international trade, regional integration, poverty and food security in developing economies and draw out its implications for East Africa and future research. While there is now an extensive literature on the impacts of trade reform on poverty outcomes, research on the actual and potential effects of trade and regional integration on food security is much more limited. This reflects inconsistencies in the definition and measurement of food security, substantial data limitations, and the complexity of food systems themselves. Nevertheless, we argue that there is an urgent need and considerable scope for further research on these linkages.

A model of the distribution of home-ownership in a city is developed. Heterogeneous houses are built by a competitive development industry and either rented competitively or sold through directed search to households which differ in wealth and sort over housing types. In the absence of both financial restrictions and constraints on house characteristics, higher income households are more likely to own and lower quality housing is more likely to be rented. Calibrated to match average features of housing markets within U.S. cities, the model is qualitatively consistent with U.S. data on the relationships between observed differences in median income, inequality, median household age, and construction/land costs across cities and both home-ownership and the average cost of owning vs. renting. Policies designed to improve housing affordability raise both housing quality and ownership for lower income households while lowering housing quality (but not ownership) for high income ones.

A theory of the distribution of housing tenure in a city is developed. Het- erogeneous houses are built by a competitive development industry and either rented competitively or sold to households which dier in their income and sort over housing types through a directed search process. In the absence of either nancial or supply restrictions, higher income households are more likely to own and lower quality housing is more likely to be rented. The composition of the housing stock and the rate of home-ownership depend on the distribution of income, the age of the population and construction costs. When calibrated to match average features of housing markets within U.S. cities, observed dif- ferences in these variables account well for the variation observed across cities in home-ownership and the price-rent ratio. A policy designed to improve housing aordability signicantly raises home-ownership among lower income households while lowering the quality supplied to high income households.

The dramatic rise in Canada's average house price to average rent ratio has induced some commentators to argue that a speculative bubble is under way the collapse of which will have a calamitous effect on the economy. Others have argued, however, that the currently high level of house prices may be rationalized by the low cost of financing, given the decline in interest rates over the last two decades. In this article, we assess these arguments through the lens of a simple asset pricing model applied to city-level data. We quantify the etxent to which excess growth in Canadian house prices depends on the nature of the current regime governing real interest rates, expections of rent growth in different cities and variations in property taxes.

We characterize the dynamics of relative house prices, housing sales, construction rates and population growth in response to city-specific income shocks for 106 US cities. We then develop a dynamic search model of the housing market in which construction, the entry of buyers, house prices and sales are endogenously determined in equilibrium. Our theory generates dynamics that are qualitatively consistent with our empirical observations and a version of the economy calibrated to match long-run features of the housing market in U.S. cities offers a substantial quantitative improvement over similar models with no search. In particular, variation in the time it takes to sell a house (i.e. the house's liquidity) induces house values and transaction prices to exhibit momentum, or serially correlated growth.

We characterize the dynamics of relative house prices, construction rates and population growth across US cities. In response to fluctuations in relative incomes, we find that population growth rates adjust more rapidly than construction rates in the short run and that price appreciation exhibits considerable serial correlation in the shortrun and mean reversion in the long-run. We develop a competitive search model of the housing market in which construction, the entry of buyers, house prices and rents are endogenously determined in equilibrium. Our theory generates dynamics that are qualitatively consistent with our empirical observations. In particular, in a version of the economy calibrated to match long-run features of the housing market in U.S. cities, variation in the time it takes to sell a house (i.e. the house's liquidity) induces house values and transaction prices to exhibit momentum, or serially correlated growth.

We study the interactions among geographical mobility, unemployment and home- ownership in an economy with heterogeneous locations, endogenous construction and search frictions in the markets for both labour and housing. The decision of home- owners to accept job offers from other cities depends on how quickly they can sell their houses (i.e. their liquidity), which in turn depends on local labour market conditions. Consequently, home-owners accept job offers from other cities at a lower rate than do renters, generating a link between home-ownership and aggregate unemployment. When calibrated to match aggregate U.S. statistics on mobility, housing and labour flows, our model predicts that the effect of home-ownership on aggregate unemployment is small. When unemployment is high, however, changes in the rate of home-ownership can have economically significant effects.

The relationships among geographical mobility, unemployment and the value of owner-occupied housing are studied in an economy with heterogeneous locations and search frictions in the markets for both labour and houses. Differences in labour market conditions between cities affect the speed with which houses may be sold - that is, the liquidity of housing. At the same time housing market conditions affect employment decisions and thus the allocation of labour across cities. In equilibrium, unemployment rates for home-owners are higher than for otherwise identical renters. Unemployment and home-ownership rates are, however, negatively correlated across cities. In a parameterized example we find that, although renters are much more mobile than owners, the impact of home-ownership on aggregate unemployment is quantitatively small.

Recent empirical work finds that R&D expenditures are quite procyclical, even for firms that are not redit-constrained during downturns. This has been taken as strong evidence against Schumpeterian-style theories of business cycles that emphasize the idea that downturns in production may be good times to allocate labor towards innovative activities. Here we argue that the procyclicality of R&D investment is, in fact, quite consistent with at least one of these theories. In our analysis, we emphasize three key features of R&D investment relative to other types of innovative activity: (1) it uses knowledge intensively, (2) it is a long-term investment with uncertain applications and (3) it suffers from diminishing returns over time.

We use a Schumpeterian model in which both the economy's growth rate and its volatility are en- dogenously determined to assess some welfare and policy implications associated with business cycle ßuctuations. Because it features a higher average growth rate than its acyclical counterpart, steady- state welfare is higher along the cyclical equilibrium growth path of the model. We assess the impact of alternative stabilization policies designed to smooth cyclical ßuctuations. Although, it is possible to signiÞcantly reduce the variance of output growth via simple policy measures, the welfare benefits are at best negligible and at worst completely offset by the resulting reduction long-term productivity growth.

We develop a Shumpeterian theory of business cycles that relates job creation, job destruction and wages over the cycle to the processes of firm restructuring, innovation and implementation that drive long-run growth. Due to incentive problems, production workers are employed via relational contracts and experience involuntary unemployment. Job destruction and firm turnover are counter-cyclical, but labour productivity growth and job creation are pro-cyclical. Endogenous fluctuations in job creation on the intensive margin are the dominant source of changes in employment growth. Our framework also highlights the counter-cyclical forces on wages due to restructuring, and illustrates the relationship between the cyclicality of wages and long-run productivity growth. 052

We develop a model of "intrinsic" business cycles, driven by the decentralized behaviour of entrepreneurs and firms making continuous, divisible improvements in their productivity. We show how equilibrium cycles, associated with strategic delays in implementation and endogenous innovation, arise even in the presence of reversible investment. We derive the implications for the cyclical evolution of both tangible (physical) and intangible (knowledge) capital. In particular, our framework is consistent with key aspects of the somewhat puzzling relationship between fixed capital formation and the stockmarket at business cycle frequencies.

In this article we argue that the evaluation and implementation of Canadian fiscal policy could be significantly improved through the systematic use of information provided by global financial markets. In particular, we show how the information contained in internationally traded asset returns can be used to (1) provide a more meaningful cyclical—adjustment of the budget deficit, (2) assess the sustainability of the public debt, and (3) reduce the risk of the debt becoming unsustainable without having to run excessively large surpluses.

We develop a dynamic general equilibrium model of economic development with altruism in which the evolution of the extent of entrepreneurship, the rate of rural-urban migration, the scale and structure of production and the degree of income and wealth inequality are endogenously determined. The model generates a development process that has distributional characteristics consistent with those of the Kuznets hypothesis. In early stages of development, agents face binding financing constraints so that production is only carried out on a small scale. Few agents earn entrepreneurial profits and the lack of competition for labor keeps the wage low. The scale of production gradually expands as the descendants of entrepreneurs 'face less stringent financing constraints. Income and wealth inequality become increasingly acute as the entrepreneurial rich get richer and the poor remain so. Eventually, competition for workers drives up wages. As the labor share of income rises, the quality of entrepreneurs improves and the scale of production and the profits of an entrepreneur, controlling for wealth and ability, fall. Consequently, as the development process continues, income and wealth disparities eventually decline. With no engine for technological advancement, the economy converges to an invariant, non-degenerate wealth and income distribution. The economy may even be asymptotically efficient, as the 'right' entrepreneurs take on investment projects. We derive the time path of the optimal redistribution policy and detail the impact of aggregate shocks at different stages. Finally, we provide insight into why the `Kuznets curve' may appear in some economies but not in others, and how long-run fluctuations in economic activity can arise endogenously.