optimal social security in a dynastic model with investment externalities and endogenous fertility this paper studies optimal pay as you go social security with investment externalities positive bequests and endogenous fertility with an investment externality a competitive solution without social security suffers from under investment in capital and over reproduction of population we show the existence of time consistent optimal social security that improves welfare by reducing fertility and increasing capital intensity we also illustrate numerically that a small degree of this externality can justify the observed high ratios of social security spending to gdp

contracts as a barrier to entry it is shown that an incumbent seller who faces a threat of entry into his or her market will sign long term contracts that prevent the entry of some lower cost producers even though they do not preclude entry completely moreover when a seller possesses superior information about the likelihood of entry it is shown that the length of the contract may act as a signal of the true probability of entry

exclusive contracts and protection of investments we consider the effect of a renegotiable exclusive contract restricting a buyer to purchase from only one seller on the levels of noncontractible investments undertaken in their relationship contrary to some informal claims in the literature we find that exclusivity has no effect when all investments are fully specific to the relationship i e are purely internal exclusivity does matter when investments affect the value of the buyer s trade with other sellers i e have external effects we examine the effects of exclusivity on investments and aggregate welfare and the private incentives of the buyer seller coalition to use it

an example of nonlinear endogenous business cycle model build in the trade union abstract this paper exemplifies that a trade union may become a causal factor of the business cycle we construct an overlapping generations og model with a monopoly trade union which bargains about the wage and the employment rate if substitution between the wage and the employment rate for the trade union is elastic then the dynamic behavior around the steady state may be oscillatory

public pensions unemployment insurance and growth abstract we develop an overlapping generations model that highlights the interaction between an unfunded pension program and an unemployment insurance program in the presence of a labor market with union wage setting both programs are financed by earmarked proportional wage taxes levied on firms and their employees the equilibrium path entails endogenous growth and involuntary unemployment the presence of spillovers between pension programs and unemployment insurance programs has striking implications for growth policy efficiency issues and the transition to a fully funded pension system

long run effects of unfunded social security with earnings dependent benefits this paper examines the effects of unfunded social security with bequests fertility and human capital by considering a mix of earnings dependent and universal social security benefits we show that social security is more likely to promote growth by reducing fertility and increasing human capital investment if its benefits are more dependent on individuals own earnings through simulations we find that the differences in the effects of social security resulting from variations in the benefit formula can be too substantial to be ignored we also investigate the welfare effect in calibrated economies c 2003 elsevier b v all rights reserved

the tradeoff between wages and employment in trade union objectives this paper demonstrates that contrary to a widely held opinion the determination of the goals of unions is fully amenable to empirical analysis a characterization of the wage and employment setting process in unionized markets is adopted and its qualitative implications examined the first order condition for this model is fitted to time series data on the newspaper industry from ten cities the international typographical union s objective function reveals very restricted opportunities for substituting wages for employment in response to a change in the slope of the employer s labor demand function larger union locals place greater emphasis on wages versus employment than smaller union locals

coalitional bargaining with consistent counterfactuals abstract we propose a new solution concept for tu cooperative games in characteristic function form the scoop which builds on the symmetric nash bargaining solution nbs by adding a consistency requirement for negotiations inside every coalition the scoop specifies the probability of success and the payoffs to each coalition the players share the surplus of a coalition according to the nbs the disagreement payoffs are computed as the expectation of payoffs in other coalitions using a common probability distribution that is derived from the prior distribution the predicted outcome can be probabilistic or deterministic but only an efficient coalition can succeed with probability one we discuss the necessary and sufficient conditions for an efficient solution in either case the scoop always exists is generically unique for superadditive games and is easy to compute moreover in the spirit of the nash program we propose a non cooperative protocol whose stationary equilibrium identifies the scoop as the limit equilibrium outcome

banking deregulation allocational consequences of relaxing entry barriers abstract we present an equilibrium analysis to predict the long run allocational consequences and risk implications of banking deregulation loan demand and deposit supply functions are derived from primitive assumptions about the preferences of individuals and banks are viewed as differentiated competitors in a spatial context we find that a relaxation of entry barriers into banking improves the welfare of borrowers and savers at the expense of bank stockholders equilibrium loan interest rates fall and equilibrium deposit interest rates rise as banking becomes more competitive despite this the equilibrium debt equity ratios of banks increase as entry barriers are relaxed we also examine the implications of capital standards and find that an increase in the minimum capital requirement benefits borrowers but hurts depositors

tax push inflation in a unionized labour market in this paper the effect of changes in the average rate and in the progressivity of direct taxes on a the level of wages and b the extent to which cost of living increases are transmitted to wages are considered for a unionized labour market these effects are derived theoretically for different union objectives and the models applied to data for italian industry in a form which allows discrimination between these different objectives the empirical estimates for the preferred model are then used to determine the effects of the postulated tax changes

socially optimal social security and education subsidization in a dynastic model with human capital externalities fertility and endogenous growth abstract this paper considers socially optimal government policies in a dynastic family model with physical capital human capital endogenous fertility and positive spillovers from average human capital such spillovers reduce human capital investment but raise fertility from their social optimum we first characterize the social optimum with a non convex feasible set due to the quantity quality tradeoff concerning children we then show that social security and education subsidization together financed by labor income taxes can fully eliminate the efficiency losses of the spillovers and achieve the social optimum under plausible conditions however none of the policies can do so alone

coalition formation and bargaining protocols a review of the literature this paper offers a review of the vast literature regarding bargaining and coalition formation this topic has been generally described as the attempt to provide strategic foundations to cooperative solution concepts it can therefore be seen as the linking ring between the non cooperative and the cooperative game theoretic approach to coalition formation its central role in economic theory and its relatively long history that goes back to the nash program have fostered a large academic production including surveys nonetheless this paper will focus on an aspect that is often neglected in the dedicated surveys the specificities of the bargaining protocols leading to different outcomes although generally downgraded to the rank of details the differences in bargaining protocols even when minor can cause significant changes in fundamental aspects such as the possibility to reach full cooperation the distribution of final pay offs and the time taken to reach an agreement focused on externalities free games therefore on bargaining protocols sustaining solution concepts for cooperative games in characteristic function form the paper aims at providing a brief but exhaustive review of the topic that could result in a very useful tool for any researcher approaching the subject of coalitional bargaining

bidding for the surplus a non cooperative approach to the shapley value abstract we propose a simple mechanism to determine how the surplus generated by cooperation is to be shared in zero monotonic environments with transferable utility the mechanism consists of a bidding stage followed by a proposal stage we show that the subgame perfect equilibrium outcomes of this mechanism coincide with the vector of the shapley value payoffs we extend our results to implement the weighted shapley values finally we generalize our mechanism to handle arbitrary transferable utility environments the modified mechanism generates an efficient coalition structure and implements the shapley values of the super additive cover of the environment journal of economic literature classification numbers c71 c72

cross country differences in unemployment fiscal policy unions and household preferences in general equilibrium we develop a five period overlapping generations model with individuals who differ by ability and with an imperfect labour market union wage setting for the individuals of lower ability the model explains human capital formation hours worked and unemployment within one coherent framework its predictions match the differences in the unemployment rate across 12 oecd countries remarkably well a shapley decomposition of these differences reveals an almost equal role for fiscal policy variables and union preferences as to fiscal policy differences in unemployment benefits play a much more important role than tax differences differences in households taste for leisure are unimportant

can immigrant employment alleviate the demographic burden the role of union centralization this paper investigates the effect of labor immigration on public pensions when wage setting by a centralized trade union leads to unemployment it is shown that immigration improves the financial soundness of pay as you go pensions if and only if it diminishes total employment this occurs if the absolute value of the elasticity of labor demand exceeds the unemployment rate

coalitional bargaining with competition to make offers abstract the paper analyzes a simple discrete time noncooperative coalitional bargaining game in which at each stage there is a contest for the right to make a proposal the pure stationary subgame perfect equilibrium payoff set is equal to the core journal of economic literature classification numbers 026

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

and a vision appeared unto them of a great profit evidence of self deception among the self employed evidence is presented that the self employed expect better financial outcomes than do employees but experience worse realisations this is consistent with theories that entrepreneurship is driven by unrealistic optimism

proposal rights and political power in a canonical model of sequential collective bargaining over a divisible good we show that equilibrium expected payoffs are not restricted by players voting rights or their impatience for all monotonic voting rules and discount factors and for all divisions of the good among players there exists a stationary proposal making rule such that this division represents players expected payoffs in a stationary subgame perfect nash equilibrium in pure strategies the result highlights the significance of proposal rights in determining political power in collective deliberations t he purpose of this article is to further our understanding of political power in a committee environment we consider the problem of a group of two or more agents who must split a fixed divisible good agents cannot use physical force to divide this good our goal is to clarify the role and relative significance of other features of the political environment such as voting rights proposal rights agents patience etc in determining political power following shapley and shubik 1954 we gauge political power in terms of expected outcomes rather than a priori equate it with individual prerogatives 1 in that spirit political power is the share of the divisible good that agents can expect to obtain when their behavior conforms to an appropriately defined equilibrium notion 2 we model committee interaction using a canonical sequential bargaining game in each period a member of the committee is recognized with some probability that is fixed across periods and proposes a division of the good committee members then vote on the proposal if the proposal is approved in accordance with the underlying voting rule the proposed division is implemented and the

the coalitional nash bargaining solution the coalitional nash bargaining solution is defined to be the core allocation for which the product of players payoffs is maximal we consider a non cooperative model with discounting in which one team may form and every player is randomly selected to make a proposal in every period the grand team consisting of all players generates the largest surplus but a smaller team may form we show that as players get more patient if an efficient and stationary equilibrium exists it must deliver payoffs that correspond to the coalitional nash bargaining solution we also characterize when an efficient and stationary equilibrium exists which requires conditions that go beyond the nonemptiness of the core

asymmetric valuations and the role of collateral in loan agreements loan contracts with provision for collateral are of two general types in one the collateral may be an existing asset of the borrowing firm which is pledged to a lender in the event of default in this case collateral does not increase the assets that the borrower would lose if there is default since all the borrower s assets are attachable therefore the expected marginal cost to the borrower of providing an additional unit of collateral includes principally transactions costs associated with the collateral l this describes the usual type of commercial loan arrangement with the collateral being either equipment real estate accounts receivable or inventories in the other type of loan contract the collateral is an additional asset that is given up by the borrower if there is default that is in addition to the usual assets that are available to its lenders the borrower assigns as collateral to a creditor an asset that would normally not be legally attachable this arrangement is more common in small business loans that are secured by a personal asset e g a house of the entrepreneur likewise debt issued by a legally separate subsidiary may be secured by an asset of the parent firrn in these cases the expected marginal cost to the borrower the owner manager of the small firm or the parent corporation in the latter example of providing an additional unit of collateral

beyond nash bargaining theory the nash set abstract we extend nash s bargaining theory to non convex and coalitional problems this paper investigates the implications of nash like axioms for bilateral problems and the properties of consistency and converse consistency over multilateral settings the result is a characterization of the nash set of ntu games defined as the solution concept where each pair of players is splitting the gains from trade at a point where the nash product of their utilities subject to efficiency is critical the intersection of the nash set and the core is also characterized with the same axioms for the class of games where the core is non empty journal of economic literatureclassification numbers c71 c78

multilateral bargaining problems abstract in many situations in economics and political science there are gains from forming coalitions but conflict over which coalition to form and how to distribute the gains this paper presents an approach to such multilateral bargaining problems a solution to a multilateral bargaining problem specifies an agreement for each coalition that is consistent with the bargaining process in every coalition we establish the existence of such solutions show that they are determined by reservation prices and characterize these reservation prices as the payoffs of subgame perfect equilibrium outcomes of a non cooperative bargaining model journal of economic literature classification numbers c71 c72 c78

coalition theory and its applications a survey we survey some of the major advances in coalition theory in recent years we then look at the recent applications of the theory in the area of political economy and touch upon some important theoretical and applied open questions in the field

endogenous fertility ricardian equivalence and debt management policy abstract the paper develops a model in which dynastic families optimally determine fertility government debt represents a tax on future generations and on childbearing the ricardian equivalence hypothesis does not hold debt is welfare reducing in that it distorts the fertility decision an increase in government debt induces a decline in fertility and an increase in the steady state capital labor ratio if a government inherits an existing stock of debt the first best policy is to eliminate the debt immediately in other situations the optimal debt management policy will not in general entail a total elimination of the debt

spatial competition in the banking system localization cross subsidies and the regulation of deposit rates abstract the paper analyses a spatial competition model of the banking sector banks offer two kind of services deposits and credit and can either borrow or lend on the money market we investigate the consequences of the regulation of rates paid on deposits the main conclusions are as follows regulation first increases network size beyond social optimum in the long run it results in lower equilibrium credit rates because of increased competition secondly regulation generates tied sales contracts by which banks propose bundles of credit and deposit services tied sales in turn motivate the introduction of cross subsidies between the two activities the rent levied upon regulated deposits financing lower rates in the credit market finally it is shown that in a regulated environment the effectiveness of monetary policy is reduced in the sense that fluctuations of money market rates are less than fully transmitted in credit rates

proposal power and majority rule in multilateral bargaining with costly recognition this paper studies a sequential bargaining model in which agents expend efforts to be the proposer in equilibrium agents effort choices are influenced by the prize and cost effects the endogenous prize is 9

social security and endogenous growth abstract this paper examines the effects of social security on the steady state growth of per capita income in an endogenous growth model in which agents care about their own consumption the number of children and the welfare of each child it shows that an unfunded program may simulate growth by reducing fertility and increasing the ratio of human capital investment per child to per family income when bequests are positive also it may cause faster growth than funded programs especially when receipts from funded programs are independent of contributions when voluntary saving is positive funded social security is neutral if receipts are linked to contributions and most likely depresses growth if receipts are independent of contributions

a noncooperative theory of coalitional bargaining the authors explore a sequential offers model of n person coalitional bargaining with transferable utility and with time discounting their focus is on the efficiency properties of stationary equilibria of strictly superadditive games when the discount factor delta is sufficiently large it is shown that delay and the formation of inefficient subcoalitions can occur in equilibrium the latter for some or all orders of proposer however efficient stationary equilibrium payoffs converge to a point in the core as delta approaches one strict convexity is a sufficient condition for there to exist an efficient stationary equilibrium payoff vector for sufficiently high delta

asset bubbles labour market frictions and r d based growth employing an overlapping generations model of research and development r d based growth with labor market frictions this paper examines how employment changes induced by labor market frictions influence asset bubbles and long run economic growth asset bubbles can cannot exist when the employment rate is high low which leads to higher lower economic growth through labor market efficiency we also explore the steady state and transitional dynamics of bubbles economic growth and employment furthermore we show that policy or parameter changes that have a negative influence on the labor market can lead to a bubble burst

fiscal policy in an endogenous growth model in a neoclassical growth model it is possible to make a case for public debt because a balanced growth path may be dynamically inefficient this paper shows that this possibility no longer holds in an endogenous growth model with constant external returns to capital it is shown that an increase in public debt reduces the growth rate so there always exists a future generation that will be harmed and that a reduction in public debt although it increases the growth rate cannot be pareto improving one current generation must be harmed

recognition for sale abstract i examine the consequences of letting players compete for bargaining power in a multilateral bargaining game in each period the right to propose an offer is sold to the highest bidder and all players pay their bids if players vote according to any rule in which no player has veto power then the first proposer captures the entire surplus if a full consensus is needed for an offer to be accepted then the first proposer shares the surplus with at most one other player and as the period length between offers vanishes one player may capture virtually the entire surplus in settings with a stochastic or an endogenous surplus players are unwilling to efficiently delay agreement or invest in the surplus

loan market equilibrium with difference of opinion and imperfect competition abstract difference of opinion between banks and borrowers influences the competitiveness of loan markets the more optimistic the borrowers the more elastic the demand for loans this reduces lending rates decreases the expected profits of banks and discourages entry by banks

wage setting and the tax system theory and evidence for the united kingdom abstract this paper analyses the effects of a non linear tax system on wage bargaining the main conclusions are an increase in the marginal income or payroll tax rate reduces the pre tax wage in the isoelastic case an increase in the average tax rate increases the pre tax wage by more than the tax increase and a measure of the progressivity of the tax system residual income progression is a sufficient measure of the effect of the tax system on wage pressure empirical evidence is presented to support these propositions and the predictions of the model regarding the effect of recent changes to the u k tax system on the distribution of earnings discussed

the timing of redistribution we investigate whether late redistribution programs that can be targeted toward low income families but that may distort savings decisions can dominate early redistribution programs that cannot be targeted as a result of information constraints we use simple two period overlapping generations models with heterogeneous agents under six policy regimes a model calibrated to the u s economy benchmark two early redistribution lump sum regimes two targeted late redistribution regimes and finally a model without taxes and redistribution redistribution programs are financed by a labor tax on the young generation and a capital tax on the old generation we argue that if the programs are small in size late redistribution can dominate early redistribution in terms of welfare but not in terms of real output better targeting of low income households cannot completely offset savings distortions in addition we find that the optimal transfer and tax policy implies a capital tax of 100 and transfers exclusively to the young generation

social security and endogenous fertility pensions and child allowances as siamese twins abstract this paper analyses public pensions and child support in a model with endogenous fertility we show that the individual fertility choice may not coincide with the social optimum due to the existence of external effects of children on society as a whole the market outcome without government intervention is efficient however as the externalities exactly cancel out in that case if the government wants to redistribute towards the old it cannot replicate the command optimum by merely applying lump sum transfers but rather needs a child allowance scheme to effectively alter the number of offspring finally we analyse whether a pareto improving social security reform is possible it is shown that merely reducing the payg scheme cannot be pareto improving but the introduction of a child allowance scheme can be