How do reshoring policies affect the decisions of intangible-intensive offshoring firms, and what are the macroeconomic consequences? This incorporates intangible scalability into a two-country general equilibrium model with firm heterogeneity and endogenous entry, and evaluate lump-sum subsidies, tax credits, and tariffs. All three raise consumption over the medium run despite eroding offshore cost advantages, but through different channels: tax credits maximize reshoring value-added by attracting high-productivity firms, lump-sum subsidies deliver the largest transitional welfare gains through wage growth, and tariffs depress output by shrinking foreign demand and offshore value-added. The Ramsey-optimal policy mix pairs a lump-sum reshoring subsidy equal to 8.4% of offshore profits with a 13.1% tariff and raises Home welfare by 4.0%. Because offshoring intangible investment entails high fixed costs that amplify location and entry distortions, reshoring intangibles can raise welfare even as it fragments global production.

This paper analyzes the impact of intangible capital on firms' offshoring decisions, aggregate productivity, and external competitiveness. I develop a two-country offshoring model with endogenous intangible investment that captures its unique scalability in a framework featuring heterogeneous firm entry and exit. The model successfully replicates the key post-GFC U.S. empirical regularities—the coexistence of aggregate productivity gains and real exchange rate appreciation. Following a positive productivity shock, the entry of domestic firms lowers average firm productivity and raises domestic prices, thereby amplifying the Harrod–Balassa–Samuelson effect. Furthermore, incorporating intangibles yields substantially larger aggregate productivity gains than non-intangible models by improving resource allocation. This research contributes by endogenously modeling the scalability of intangible capital—a crucial yet previously understudied factor in offshoring models.

We develop a dynamic, stochastic, general equilibrium model of war and macroeconomic dynamics. In our model, Home is at war with Foreign. The population of each country is split between the army and civilians. Each army has access to a stock of weapons. Civilians provide labor for production of new weapons or of goods. These can be consumed or invested to accumulate capital that will be used in future goods or weapons production. In each country, a planner allocates civilian and military resources with the goal of winning the war. This happens when one of the following outcomes materializes: The opponent's army or stock of weapons fall below certain thresholds, or consumption or civilian population in the opponent country fall below certain thresholds. We interpret the latter outcomes as situations in which a country loses the war because of loss of political support for it. The rest of the world can affect the outcome of the war by providing weapons aid to one of the countries or imposing sanctions on the other. Starting from a situation of lull in the war, we study the consequences of events that upset the balance and result in one or the other country winning the war. Possible events include changes in military efficiency (the ability of an army to inflict losses in an offensive or to defend against attack), changes in productivity in weapons or goods production, injections of reinforcements, and changes in the allocation of civilian labor to weapons versus goods production, goods output to consumption versus investment, and/or investment in capital for weapons or goods production. We study several possible scenarios taking these events as exogenous and then move on to the situation in which instruments of war and economy management are optimally determined by forward-looking planners.