De la Croix is also affiliated with CORE; Malmberg is also affiliated with the Department of Geography, Stockholm University. De la Croix acknowledges financial support from the Belgian French speaking community (Grant ARC 03/08-235 ‘New macroeconomic approaches to the development problem’) and the Belgian Federal Government (Grant PAI P6/07 ‘Economic policy and finance in the global economy: equilibrium analysis and social evaluation’). We are grateful to two referees, Fati Shadman, and participants at seminars at IRES, European Central Bank, PAA 2006 (Population Association of America), and International Symposium for Forecasters for useful comments on an earlier draft.