ABSTRACT Ignoring the ebullient nature of the microeconomic world and the problems within it is likely to hamper severely our ability to give meaningful quantitative---and sometimes even qualitative--- answers to questions as central as: What are the costs of recessions? How do financial and contractual factors hamper aggregate economic performance? What is the natural rate of unemployment? What is a ``reasonable` level of job destruction and unemployment in the aftermath of structural adjustment? What is the cost and why do some countries experience technological sclerosis? Why are methods of production (e.g., capital/labor ratios) so different across economies that are, otherwise, at a similar stage of development? Why do some countries build social institutions that are later perceived as obstacles to flexible adjustment? Why do poor countries with cheap labor so often fail to attract capital and grow? What is the likely impact of investment incentives? Will workers benefit from such incentives? Why are capital flows so volatile? How should international liquidity be managed during currency and systemic crises? and so on. This purpose of this project is to address some of these questions, and to provide a macroeconomic framework of analysis which builds from a realistic description of microeconomic institutions and behavior. This project incorporates three closely connected themes. First is the connection between individual microeconomic decisions, many of which occur intermittently, and aggregate economic activity. This project develops and applies a methodological apparatus designed to keep track of the impact of aggregate shocks on underlying cross-sectional distributions and vice versa. Second is the relationship between microeconomic decisions, economic restructuring, and macro dynamics - the Churn. The process of creation and destruction of production sites depends on technology, adjustment costs, and institutional factors. Third is the problem of the decoupling of job creation and job destruction in many economies, and the institutional and other factors contributing to it. Six interrelated goals are pursued in this Accomplishment Based Renewal.
