measuring the affordability of home ownership typical measures of the affordability of home ownership are based on aggregate data that ignore the distribution of incomes and wealth and the range of house prices an analysis of household survey

life cycle and housing adjustment as explanations of residential mobility the paper develops a typology of reasons for residential mobility and systematises the many survey analyses of reasons for moving the relative importance of life cycle and housing adjustment mecha

boom in bust out young households and the housing price cycle abstract the uk experienced a major residential real estate boom bust cycle from the mid 1980s to the mid 1990s accompanied by unprecedented shifts in the owner occupancy rate of young households previous empirical analyses have pointed toward income changes and financial deregulation as the likely causes of this episode with little to say about the differential effects on various age groups we show that in a life cycle model with income heterogeneity and credit constraints the observed co movements of housing prices and owner occupancy rates can be explained as an equilibrium response to income and credit market shocks our findings suggest that the financial liberalisation of the early 1980s was crucial for the unparalleled increase in the owner occupancy rate of young households during the boom

taxation and housing old questions new answers this paper sketches how the tax reforms of the 1980s affected the incentives and distortions associated with tax policy toward housing markets there are three principal conclusions 1 reductions in marginal tax rates particularly for high income households reduced the tax induced distortion in the user cost of owner occupied housing this lowered the deadweight losses associated with the favorable tax treatment of homeownership 2 the increase in the standard deduction in the tax reform act of 1986 tra86 removed several million middle income homeowners who previously itemized from the ranks of itemizers for these households tra86 raised the marginal cost of owner occupied housing these changes also exacerbated the regressive nature of the mortgage interest subsidy in 1988 more than half of the tax losses associated with mortgage interest deductions accrued to the 8 of taxpayers with the highest economic incomes 3 tra86 reduced incentives for rental housing investment contributing to the decline in new multifamily housing starts from 500 000 per year in 1985 to less than 150 000 in 1991 in the long run these policies will lead to higher rents this abstract was borrowed from another version of this item

self enforcing exchange among generations implications for consumption and mobility abstract a three generation olg model with one directional altruism and two directional intra family transfers is presented adults invest in their children s education and make transfers to their elderly parents however due to lack of altruism adults with high earnings do not share consumption equally with their elderly parents but spend a larger share of their earnings on own consumption and on their children s education this allows the model to be consistent with three empirical observations that are difficult to reconcile with traditional altruistic frameworks of intergenerational social interactions and mobility i consumption is not perfectly shared between members of an extended family ii consumption is not equally persistent over the lifecycle as across generations and iii the intergenerational persistence of earnings is particularly high at the top end of the earnings distribution

the austrian search for realistic foundations self designated austrian economists have two different views of modem neoclassical economics some such as f a hayek take issue with certain aspects of neoclassical economics without disputing its fundamentals others most notably ludwig von mises and murray rothbard explicitly reject the foundations of neoclassical consumer and welfare theory and construct a systematic alternative this paper analyzes the most distinctive features of the mises rothbard alternative to the neoclassical paradigm it also considers related positions defended by israel kirzner i argue that their effort to rebuild economics on nonneoclassical foundations fails and that their critique of neoclassical foundations is wrong or strongly overstated

taxation and excess burden a life cycle perspective a lifetime perspective is appropriate in assessing the welfare implications of government tax policies although a number of attempts have been made to ex amine the excess burden of taxation in life cycle models these have tended to ignore the role of human capital accumulation and or the leisure income choice in this paper we do numerical simulations with a model that takes both of these phenomena into account we find that under reasonable assumptions the failure to take into account distortions of human capital decisions produces substantial underestimates of the excess burden of income taxation in addition allowing for the endogeneity of human capital increases the efficiency of a personal consumption tax relative to that of an equal yield income tax this abstract was borrowed from another version of this item

local house prices parental background and young adults homeownership in england and wales this is the author accepted manuscript the final version is available from sage via https doi org 10 1177 0042098016668121

reconsidering the use of nonlinearities in intergenerational earnings mobility as a test for credit constraints intergenerational earnings regression among canadian men is nonlinear middle earning families experience slower regression this pattern appears to confirm economic models of educational choice with credit constraints this paper reexamines the economic model and finds no connection between credit markets and earnings regression nonlinearities in particular credit constraints need not produce concavity and concavity does not imply credit market failure despite the invalidity of the test data availability will likely lead to continued research along this path the paper proposes an amended test using quantile regressions applied to canadian data the simple liquidity constraint conclusion is rejected

social mobility and inequality in urban china understanding the role of intergenerational transmission of education china s rapid economic growth since the late 1980s has been accompanied by great economic and social transformations which have resulted in a sharp increase in income inequality this article contributes to the literature of social mobility in china by examining the impact of parental education on the education of their children using the 1990 and 2000 chinese population censuses we employ nonparametric estimation strategies to provide a systematic investigation of intergenerational transmission of education in urban china we find evidence of increasing parents children educational correlations our results raise concerns regarding economic inequality in urban china as high intergenerational persistence of education is expected to be a barrier to equal opportunities in children s education attainments and their future labour market outcomes

the transition from payroll to consumption receipts with endogenous human capital abstract the transition from payroll to consumption receipts is simulated in a life cycle growth model featuring adult human capital as in other studies savings are higher under the consumption base however unlike those studies much of the additional savings here take human form human capital production increases for all cohorts in or yet to join the labor market as of the tax change the additional human capital production tends to dampen physical capital accumulation when compared with otherwise identical simulations which hold human capital constant the implications for intergenerational incidence are similar to that found in other examinations of the transition to a consumption base

reducing housing subsidy swedish housing policy in an international context swedish housing policy was dramatically changed during the 1990s a traditional formally tenure neutral and generous subsidy system has been replaced by much lower levels of assistance more direct

rich dad smart dad decomposing the intergenerational transmission of income we construct a simple model consistent with becker and tomes that decomposes the intergenerational income elasticity into the causal effect of financial resources the mechanistic transmission of human capital and the role that human capital plays in the determination of fathers permanent incomes we show how a particular set of instrumental variables could separately identify the money and human capital transmission effects using data from a 35 percent sample of swedish sons and their fathers we show that only a minority of the intergenerational income elasticity can be plausibly attributed to the causal effect of fathers financial resources

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

micro and macro labor supply elasticities a reassessment of conventional wisdom the response of aggregate labor supply to various changes in the economic environ ment is central to many economic issues especially the optimal design of tax policies conventional wisdom based on studies in the 1980s and 1990s has long held that the analysis of micro data leads one to conclude that aggregate labor supply elasticities are quite small in this paper we argue that this conventional wisdom does not hold up to empirically reasonable and relevant extensions of simple life cycle models that served as the basis for these conclusions in particular we show that several pieces of conventional wisdom fail in the presence of human capital accumulation or labor supply decisions that allow for adjustment along both the extensive and intensive margin we conclude that previous estimates of small labor supply elasticities based on micro data are fully consistent with large aggregate labor supply elasticities jel d91 e24 j22

marginal welfare costs of taxation with human and physical capital i introduction marginal welfare cost of taxation is the amount by which the social cost of an additional tax dollar differs from 1 because of distortionary taxation browning and johnson 1984 stuart 1984 browning 1987 ballard 1988 and allgood and snow 1998 use static models of the u s economy in which labor supplies adjust but the stocks of human and physical capital are fixed to calculate estimates of this welfare cost relevant to cost benefit analysis the studies by lucas 1990 and perroni 1995 incorporate human and physical capital into calculations of excess burden for the purpose of comparing alternative tax systems but do not address the welfare costs of marginal tax and spending reforms ballard et al 1985 and judd 1987 provide estimates of welfare cost using models that allow the stock of physical capital to change in response to marginal reforms but the stock of human capital is exogenous in these studies however judd 2001 argues that there is ample evidence indicating that human capital investment decisions have a significant effect on the cost of altering the tax system which suggests that these decisions could also have an important influence on marginal welfare cost in this article we present estimates of welfare costs for marginal reforms to government tax and spending policies when labor supply saving and education decisions are all endogenous we focus our analysis on marginal reforms because as skinner and slemrod 1985 observe most policy reforms enacted do not involve replacing one tax or spending system with another but instead typically entail marginal adjustments in tax laws and government appropriations using a perfect foresight overlapping generations model with a three period life cycle we derive analytical expressions for the changes in labor supply saving and education and use them to calculate marginal welfare cost as shown by auerbach et al 1983 in overlapping generations models steady state welfare comparisons of alternative tax policies are biased unless households are compensated for intergenerational redistribution along the transition path to arrive at our steady state estimates of welfare costs we adapt the compensation method introduced by gravelle 1991 for analyzing fundamental tax reforms to the context of incremental tax and spending reforms in a static one consumer model triest 1990 has shown that marginal welfare cost mwc is positive solely because of tax leakage the decline in tax revenue caused by reductions in the tax base we extend this insight to an intertemporal context that incorporates tax leakage arising from changes in both human and physical capital investment we evaluate three sets of reforms first a revenue neutral reduction in the tax on capital income funded by a higher tax on labor income second spending on a public good financed by either a higher tax on labor or interest income third a per capita lump sum transfer or demogrant also funded by either a higher tax on labor or interest income we find that marginal welfare costs are uniformly lower in the dynamic model where investment decisions are endogenous than in the static model where investment decisions are fixed and that the majority of the difference between the dynamic and static estimates is attributable to human capital decisions the principal reason is that a reallocation of time between labor hours and human capital investment has opposing and potentially offsetting effects on effective labor supply as a result labor supply responds less elastically in the dynamic model and changes in labor supply are the main source of tax leakage because wage taxation is the main source of tax revenue we also find that shifting marginal financing from capital to labor results in a lower welfare cost the reason being that such a change encourages saving which increases wage rates and stimulates labor supply leading to a reduction in marginal welfare costs

on intergenerational immobility evidence that adult credit health reflects the childhood environment we examine the persistence of inequality through credit health linking administrative records from several sources we document that childhood circumstances are strongly predictive of financial fragility in adulthood with credit scores among those from disadvantaged backgrounds nearly 100 points lower and 20 percentage points more likely to qualify as subprime we find evidence this relationship reflects differences in human capital and debt management still neither appears to fully explain the relationship our results reveal another dimension along which childhood circumstances persist into adulthood and could mean the many settings that evaluate individuals based on their credit health help reinforce inequities jel d12 e24 i32

education policies and taxation without commitment we study the implications of limited commitment on education and tax policies set by benevolent governments consistent with real world practices a government can decide to subsidize different levels of education at different rates a lack of commitment however affects the optimal structure of education subsidies the direction of the effect depends on how labor taxes are designed with linear labor tax rates and a transfer for redistribution subsidies become more progressive by contrast if the government is only constrained by informational asymmetries when designing taxes subsidies become more regressive

efficient tax reform in a dynamic model of general equilibrium the welfare gain of a shift from capital to a labor income tax is determined in a model of intertemporal optimization with infinite horizon and variable labor supply the welfare impact of small tax changes is computed by an approximation method around the steady state when the difference between the growth rate and the discount rate is small the welfare impact of tax reform depends mainly on the parameters of the production function

nonlinearities in intergenerational earnings mobility consequences for cross country comparisons we show that the patterns of intergenerational earnings mobility in denmark finland and norway unlike those for the us and the uk are highly nonlinear the nordic relationship between log earnings of sons and fathers is flat in the lower segments of the fathers earnings distribution sons growing up in the poorest households have the same adult earnings prospects as sons in moderately poor households and is increasingly positive in middle and upper segments this convex pattern contrasts sharply with our findings for the us and the uk where the relationship is much closer to being linear as a result cross country comparisons of intergenerational earnings elasticities may be misleading with respect to transmission mechanisms in the central parts of the earnings distribution and uninformative in the tails of the distribution it is now a stylised fact that intergenerational earnings mobility is higher in the nordic welfare state economies than in more market oriented economies such as the us see

cross country differences in intergenerational earnings mobility international studies of the extent to which economic status is passed from one generation to the next are important for at least two reasons first each study of a particular country characterizes an important feature of that country s income inequality second comparisons of intergenerational mobility across countries may yield valuable clues about how income status is transmitted across generations and why the strength of that intergenerational transmission varies across countries the e rst section of this paper explains a benchmark measure of intergenerational mobility commonly used in u s studies the second section summarizes comparable empirical e ndings that have accumulated so far for countries other than the united states the third section sketches a theoretical framework for interpreting cross country differences in intergenerational mobility

housing decisions of american youth abstract prior studies of household tenure choice have not accounted for possible simultaneity with household formation and labor supply decisions we address these methodological issues and introduce new measures of the relative cost of homeowning and potential earnings capacity we also estimate the demand for the quantity of owner occupied housing accounting for the limitation of the sample to those choosing to live alone and be homeowners potential earnings and housing rental costs affect young adults decisions of whether to live alone as single or married or with parents or some other group of adults tenure choice is influenced by wealth the relative cost of homeowning and a number of demographic variables housing demand depends on owner costs elasticity near 0 5 and potential earnings elasticity near 0 5

the effect of taxation on human capital this study finds a significant negative effect of proportional income taxation on human capital of the few earlier studies to address this issue most suggested a negligible effect of taxation on investment in human capital this earlier conclusion is shown to be incorrect by using a model that is more general in several respects than the models used previously

on the taxation of human and physical capital in models of endogenous growth abstract this paper studies the effects of factor income taxation and of subsidies to human capital accumulation in models of endogenous growth it examines in particular how these effects depend on the specification of the leisure activity and on the technology and tax treatment of the sector producing human capital it shows that the negative effects of factor income taxes on economic growth are stronger when the human capital sector is a market good under these circumstances a subsidy to human capital accumulation can offset the direct growth effects of labor taxation making it akin to a consumption tax the paper then briefly discusses the normative implications of the analysis for the optimal taxation of factor incomes

intergenerational income mobility in the united states social scientists and policy analysts have long expressed concern about the extent of intergenerational income mobility in the united states but remarkably little empirical evidence is available the few existing estimates of the intergenerational correlation in income have been biased downward by measurement error unrepresentative samples or both new estimates based on intergenerational data from the panel study of income dynamics imply that the intergenerational correlation in long run income is at least 0 4 indicating dramatically less mobility than suggested by earlier research copyright 1992 by american economic association

equity and efficiency effects of redistributive policies abstract how do various forms of redistribution affect the distributions of earnings and consumption and their intergenerational mobility do redistributive policies enhance efficiency by mitigating market imperfections or do they create a trade off between equity and efficiency to address these issues a dynamic general equilibrium model is constructed and solved numerically the effects of the degrees of targeting of money transfers and educational transfers and the relative performance of the two types of transfers are examined

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

economic interpretations of intergenerational correlations science itself for example see galton s 1869 study of the eminence of relatives or his 1889 analysis of the heights of parents and children but extensive use of economic theory to interpret these correlations is much more recent using basic economic concepts such as supply demand investment incentives missing markets and so on theorists hope to explain how and why status is correlated across generations economic theory might provide a unified treatment of a variety of socioeconomic indicators such as earnings income occupation or wealth or it might predict how taxes subsidies and economic regulation affect intergenerational mobility and the operation of markets however while the subject matter earnings consumption wealth occupa tion is clearly interesting to economists it could nonetheless be the case that beyond basic questions of measurement economic theory has not improved our understanding of intergenerational mobility goldberger 1989 is quite explicit in this contention by emphasizing the distinction between genes and environment and by using statistical theory as its main analytical tool the paper by samuel bowles and herbert gintis in this issue implicitly concurs with goldberger we take this challenge very seriously what characterizes an economic approach to mobility while biologists and bowles and gintis distinguish endowments and investments by their source genetic versus environmental factors one focus of economic theorists is motiva

the intergenerational transmission of employers we find that about 40 of a cohort of young canadian men have been employed at some time with an employer for which their father also worked and 6 9 have the same employer in adulthood the intergenerational transmission of employers is positively related to paternal earnings particularly at the very top of the earnings distribution and to the presence of self employment income and the number of employers with which the father has had direct contact it has an important influence on nonlinear patterns in the intergenerational elasticity of earnings

welfare maximizing tax structure in a model with human capital abstract this paper studies the welfare maximizing tax structure in a two sector model of endogenous growth with human capital here tax structure refers to the mix of taxes which satisfy an exogenously given government budget constraint

fortunate sons new estimates of intergenerational mobility in the united states using social security earnings data previous studies relying on short term averages of fathers earnings have estimated the intergenerational elasticity ige in earnings to be approximately 0 4 due to persistent transitory fluctuations these estimates have been biased down by approximately 30 or more using administrative data containing the earnings histories of parents and children the ige is estimated to be around 0 6 this suggests that the united states is substantially less mobile than previous research indicated estimates of intergenerational mobility are significantly lower for families with little or no wealth offering empirical support for theoretical models that predict differences due to borrowing constraints

labor income taxation human capital and growth the role of childcare in this paper we examine the effects of labor income taxation on growth in an overlapping generations model in which schooling and childcare play a role in the production of human capital we compare such effects with those obtained in a model in which only schooling matters for skill formation we show that the omission of childcare from the technology of skill formation can bias the results related to the impact of labor income taxation on growth

human capital heterogeneity and estimated degrees of intergenerational mobility we study the parental investment model of intergenerational mobility where heterogeneity in innate earnings ability and parents altruism rate is explicitly modelled we show that heterogeneity increases the difficulty of detecting the existence of borrowing constrained families conversely the presence of heterogeneity means that economic and linear statistical models of inheritance generate similar intergenerational data on consumption and earnings we also suggest that nay cross country differences in intergenerational earnings mobility are more readily interpreted according to the heterogeneity of inherited ability rather than optimal family responses to countiy specific institutions for accumulating human capital the relationship between a citizen s economic status and his family background is an important clue for understanding and evaluating a country s economic performance some eg bowles 1972 have suggested a close relationship between economic status and family background indicates some failure of labour markets or of institutions fostering investment in human capital others eg altonji et al 1992 mulligan 1997 table 4 1 have offered an apparently contradictory suggestion that efficient allocations involve a very close relationship on some measures between the economic status of parents and children still others find family background effects to be the most offensive sources of inequality regardless of whether those effects are consistent with efficiency empirical studies of this relationship date back to the earliest days of statistical social science eg galton s 1869 british study of the success and eminence of relatives and many can be found outside the field of economics see goode s 1966 survey for a few examples but the increasing availability of new data sets for exploring the relationship between earnings income wealth and consumption of parents and years later of adult children has appropriately led to new and better econometric estimates of intergenerational mobility or the intergenerational auto regression of various measures of economic status and has even permitted some careful comparisons of those estimates across countries however fewer results are available on interpreting such estimates in terms of economic models of inheritance or of the labour market loury 1981 and becker and tomes 1986 are among the exceptions where they show how access to capital markets or other means of

beyond education and fairness a labor market taxation model for the great gatsby curve i introduction an intergenerational income elasticity he for a particular country can be thought of as the fraction of a 1 permanent income increase given to a parent that is observed on average in the permanent income of a child thus estimates of the iie are sometimes viewed as a summary measure of the intergenerational economic mobility in a particular country in a 2012 speech then chairman of the u s council of economic advisers alan krueger emphasized the importance of the strong positive cross country correlation between contemporary measures of economic inequality and economic mobility as measured by the iie he further dubbed a graph of this relationship the great gatsby curve although this witty designation is novel the correlation it refers to has been the subject of a great deal of economic research indeed even before the availability of reliable iie data for many countries seshadri and yuki 2004 as well as erosa and koreshkova 2007 provided intergenerational models calibrated to the u s economy that explored potential taxation and transfer mechanisms linking contemporary inequality and mobility however as accurate estimates of this relationship have become available for an increasing number of countries applied researchers investigating the cross country divergence of iies bjorklund and jantti 2009 blanden 2009 corak 2013b have been more heavily influenced by the theoretical model proposed by solon 1999 as later clarified and expanded in solon 2004 which builds on the fundamental model of human capital transmission proposed by becker and tomes 1979 the augmented solon model deliberately focuses on one potential mechanism underlying differences in the iie more specifically differential cross country intergenerational mobility primarily arises in the solon model from the differential government responses to the borrowing constraints faced by the parents of poor children while all parents can choose to make human capital investments in their children they can only finance these investments out of their own lifetime earnings and are unable to borrow against the future earnings of the child these borrowing constraints lead to less investment in human capital by poor parents and subsequently lower earnings for poor children the model also allows governments to address this inequality by investing in the human capital of the future generation in a progressive manner more investment at lower parental incomes thus variations in government policy choices over educational investment combine with existing constraints created by income inequality to produce varying mobility across countries this model is particularly attractive to applied researchers because it provides a clear policy relevant interpretation of the equation parameter most commonly used in the actual empirical estimation of iies another attractive feature of the solon model is that it makes a number of testable empirical claims about this he parameter intergenerational mobility should be positively correlated with cross sectional mobility as well as with government educational investment in the poor the he should also be higher in countries where labor markets provide greater returns to schooling empirical work in highly developed countries has provided preliminary evidence supporting these claims for example ichino karabarbounis and moretti 2011 find a negative relationship between government spending on education particularly at the primary level and he across a dozen countries while mayer and lopoo 2008 find the same pattern holds across u s states blanden 2009 also finds this pattern and goes further to show positive cross country correlations between he and both cross sectional inequality and the returns to education 1 while many predictions of this class of model are borne out in the data there is less evidence in support of the primary mechanism it articulates to produce cross country variation in intergenerational mobility namely a differential response to the borrowing constraints faced by some families in childhood human capital markets

the efficiency gains from dynamic tax reform this paper presents a new simulation methodology for determining the pure efficiency gains from tax reform along the general equilibrium rational expectations growth path of life cycle economies the principal findings concern the effects of switching from a proportional income tax with rates similar to those in the u s to either a proportional tax on consumption or a proportional tax on labor income a switch to consumption taxation generates a sustainable welfare gain of almost 2 percent of lifetime resources in contrast a transition to wage taxation generates a loss of greater than percent of lifetime re sources a second general result is that even a mild degree of progressivity in the income tax system imposes a very large efficiency cost this abstract was borrowed from another version of this item

how important is human capital a quantitative theory assessment of world income inequality we develop a quantitative theory of human capital investment in order to evaluate the magnitude of cross country dierences in total factor productivity tfp that explains the variation in per capita incomes across countries we build a heterogeneousagent economy with cross sectional variation in ability schooling and expenditures on schooling quality in our theory the parameters governing human capital production and random ability process have important implications for a set of cross sectional statistics mincer return variance of earnings variance of schooling and intergenerational correlation of earnings these restrictions of the theory and u s household data are used to pin down the key parameters driving the quantitative implications of the theory our main finding is that human capital accumulation strongly amplifies tfp dierences across countries in particular we find an elasticity of output per worker with respect to tfp of 2 8 a 3 fold dierence in tfp explains a 20 fold dierence in output per worker we argue that the cross country dierences in human capital implied by the theory are consistent with a wide array of evidence including earnings of immigrants in the united states average mincer returns across countries and the relationship between average years of schooling and per capita income across countries the theory implies that using mincer returns to measure human capital understates dierences across countries by a factor of 2

the welfare costs of deficit finance we analyze the welfare consequences of deficit finance in a general equilibrium model fit to the us economy current spending may be financed with current and or future distortionary taxes the economy is open to international capital flows the welfare costs of financing marginal current spending are substantial and are sensitive to the timing of the required taxes postponing a tax on labor income is advantageous but postponing a tax on asset income is not ricardian equivalence poorly approximates the economy we consider

intergenerational mobility new evidence from consumption data the intergenerational persistence of consumption describes the extent to which children inherit the living standards of their parents evidence on this parameter is scarce due to limited data on the joint consumption of parents and children this paper identifies parents who participated in the danish expenditure survey links them to their children through population wide danish registries and estimates the intergenerational elasticity of consumption in denmark the results suggest that consistent with intergenerational consumption smoothing the persistence of consumption across generations is higher than the persistence of earnings and income

tax changes and phase diagrams for an overlapping generations model the literature evaluating tax changes within an intertemporal general equilibrium framework subdivides into representative agent and overlapping generations formulations papers in the former class have developed techniques analogous to those routine for static analyses i show that the same general approach works for the overlapping generations model the context is the system from auerbach and kotlikoff s dynamic fiscal policy the proposed methodology allows one to examine stability and determinancy issues for the model it deals precisely with small policy changes and it can easily handle bundles of changes i present comparative static results for comparison with existing work

parental wealth and first time homeownership a cohort study of family background and young adults housing situation in sweden this paper investigates whether family background seems to have any influence on first time homeownership recent studies have indicated that it has become more difficult to become established in the housing market and such situations may increase the importance of parental wealth in this study parental wealth is estimated as family background information on parents homeownership father s socioeconomic status and single parenting unique cohort data for three birth cohorts suggest that there is a significant cohort effect in young adults tenure decision furthermore the results imply that parents homeownership has become a more important predictor of the transition to first time homeownership for those young adults facing increasing problems in the housing market

intertemporal substitution in labor supply evidence from micro data the sensitivity of the supply of labor to intertemporal variation in the wage is an important issue in macroeconomics the analysis of social security and pensions and the study of life cycle patterns of work this paper explores two approaches to the measurement of intertemporal substitution that have appeared in the literature the first approach is to use consumption to control for wealth and unobserved expectations about future wages in the labor supply equation the second approach is to estimate a first difference equation for hours in which labor supply from the previous period serves as a control for wealth and wage expectations the results indicate that intertemporal substitution elasticity for married men is positive but small

prices parents and young people s household formation an economic theory of young people s decision to live apart from parents is presented and used to structure econometric analyses of the processes of leaving the parental home and returning to it which employ data from the british household panel survey for the first half of the 1990s the econometric estimates support the predictions of the theory in particular tighter housing markets as indicated by higher regional relative house prices significantly retard home leaving especially the formation of partnerships and encourage returns to the parental home young people with larger current income are more likely to leave but less likely to return to the parental home

a new test of borrowing constraints for education we discuss a simple model in which parents and children make investments in the children s education investments for other purposes and parents can transfer cash to their children we show that for an identifiable set of parent child pairs parents will rationally under invest in their child s education for these parent child pairs additional financial aid will increase educational attainment the model highlights an important feature of higher education finance the expected family contribution efc that is based on income assets and other factors the efc is neither legally guaranteed nor universally offered our model identifies the set of families that are disproportionately likely to not provide their full efc using a common proxy for financial aid we show in data from the health and retirement study that financial aid increases the educational attainment of children whose families are disproportionately likely to under invest in education financial aid has no effect on the educational attainment of children in other families the theory and empirical evidence identifies a set of children who face quantitatively important borrowing constraints for higher education

financial market imperfections and home ownership a comparative study abstract we explore the determinants of the distribution of owner occupancy rates across age groups using a collection of microeconomic data on 14 oecd countries in most the survey is repeated over time this allows us to construct an international dataset merging data on 39 national household surveys with aggregate data on down payment ratios we find strong evidence that the availability of mortgage finance as measured by down payment ratios affects the distribution of owner occupancy rates across age groups especially at the young end the results are consistent with previous theoretical models and have important implications for the debate on the relation between saving and growth

tax policy and human capital formation missing from recent discussions of tax reform is any systematic analysis of the effects of various tax proposals on skill formation this gap in the literature in empirical public finance is due to the absence of any empirically based general equilibrium models with both human capital formation and physical capital formation that are consistent with observations on modern labor markets this paper is a progress report on our ongoing research on formulating and estimating dynamic general equilibrium models with endogenous heterogeneous human capital accumulation our model explains many features of rising wage inequality in the u s economy james heckman lance lochner and christopher taber 1998 in this paper we use our model to study the impacts on skill formation of proposals to switch from progressive taxes to flat income and consumption taxes for the sake of brevity we focus on steady states in this paper although we study both transitions and steady states in our research this abstract was borrowed from another version of this item

progressive taxation in a dynastic model of human capital abstract we develop a quantitative theory of economic inequality to investigate the effects of replacing the current u s progressive income tax system with a proportional one the cross sectional implications of the theory are used to discipline the assessment of the effects of tax policy and circumvent the lack of conclusive micro evidence on the parameterization of the human capital production technology we find that the elimination of progressive taxation increases steady state level of output by 12 6 capital by 21 8 and consumption by 13 2 moreover it increases economic inequality and its persistence across generations

tax revenue and the marginal cost of public funds in sweden abstract we assess the welfare cost of raising a marginal unit of tax revenue in a balanced budget general equilibrium framework the calculated social cost of an increment of public funds is sensitive to both the specific type of tax increase and the type of public spending used on the margin best guess assumptions on labor supply elasticities yield marginal costs of public funds for different fiscal mixes of between 0 67 and 4 51 at prevailing tax rates in sweden alternative labor supply assumptions well within the range of current estimates substantially affect the results and can imply infinite marginal welfare costs marginal welfare costs are also sensitive to assumptions about both the income and substitution effects of labor supply

positive time preference the case for positive time preference is absolutely compelling unless there is an infinite time horizon with the expectation of unending technological advance combined with what we call drastically diminishing marginal utility this finding holds both in the positive and normative senses a corollary is that savings are interest elastic

intergenerational transmission of homeownership the roles of gifts and continuities in housing market characteristics summary parental homeownership influences the younger generation s housing tenure through parental gifts and similarities in housing market circumstances for example urban rural differences among other mechanisms this paper contributes to the distinguishing of these mechanisms and their relative importance using the netherlands kinship panel study data and logistic regression analysis of housing tenure both gift giving and continuities in housing market characteristics appear to be important mechanisms underlying the intergenerational transmission of homeownership after controlling for these mechanisms and other individual and parental characteristics a strong effect of parents housing tenure on children s housing tenure remains which may be partly attributed to mechanisms such as socialisation

the welfare cost of factor taxation in a perfect foresight model this paper examines the marginal efficiency cost of various factor taxes in a dynamic general equilibrium model the au thor solves for the excess burden of anticipated and unanticipated t emporary and permanent tax policies using a range of estimates for taste and technology parameters he finds excess burdens larger than those indicated by previous studies that use static models these exc ess burdens are sensitive to parameter values and timing however th e rankings of alternative tax policies turn out to be insensitive to structural parameter values copyright 1987 by university of chicago press

government spending and intergenerational mobility abstract the standard model of intergenerational mobility suggests that holding constant endowments investments in children s human capital increases their future income if true the source of the investment should not matter even though almost all research on intergenerational mobility considers only parental investment much government spending is intended to reduce the investment gap between rich and poor children we assess the relationship between government spending and intergenerational economic mobility using data from the panel study of income dynamics and data on state spending from the u s census of governments we find greater intergenerational mobility in high spending states compared to low spending states two additional findings also suggest that government spending increases intergenerational mobility first the difference in mobility between advantaged and disadvantaged children is smaller in high spending compared to low spending states and second expenditures aimed at low income populations increase the future income of low income but not high income children

the persistence of power despite the changing meaning of homeownership an age period cohort analysis of urban housing tenure in china 1989 2011 using nine successive waves of the china health and nutrition survey chns data set this study employs hierarchical age period cohort logistic models hapc to analyse temporal patterns of urban homeownership from 1989 to 2011 with the changing meaning of homeownership due to housing reforms the strong period increases in homeownership track policy changes and the most dramatic increase occurs mainly in the era of housing privatisation rather than housing commodification the temporal analyses also offer insights into housing stratification from redistribution to markets the positive effect of education on homeownership is explained by period increases in homeownership whereas working in state sectors has persistently attached to preferred housing tenure choice before and after the housing reforms moreover the significant cohort effect lends support to strengthened temporal inequalities in the reform era these findings not only provide a dynamic understanding of housing stratification in post so

risky human capital and deferred capital income taxation abstract we study the structure of optimal wedges and capital taxes in a dynamic mirrlees economy with endogenous distribution of skills human capital is a private stochastic state variable that drives the skill process of each individual building on the findings of the labor literature we construct a tractable life cycle model of human capital evolution with risky investment and stochastic depreciation in this setting we demonstrate the optimality of a a human capital premium i e an excess return on human capital relative to physical capital b a large intertemporal wedge early in the life cycle and c a non zero intratemporal wedge even at the top of the skill distribution at all dates except the last date in the life cycle the main implication for the structure of optimal linear capital taxes is the necessity of deferred taxation of physical capital the average marginal tax rate on physical capital held in every period is zero in present value however expected capital tax payments do not equal zero in every period necessarily agents face negative expected capital tax payments early in the life cycle and positive expected capital tax payments late in the life cycle

testing the central prediction of housing tenure transition models abstract housing tenure choice is usually assumed to depend on relative tenure specific user costs controlling for the household s lifetime income these models assume perfect capital markets however there is substantial evidence that potential first time homebuyers face significant borrowing constraints this paper proposes a tenure choice model based on tenure transition theory principles that recognizes the existence of both exogenous and endogenous liquidity constraints it predicts that tenure choice depends centrally on a household s liquefiable wealth controlling for the asset price of housing this prediction is tested using household survey data from both the united states and canada

the trade off between equality and efficiency this paper uses a 1976 microdata base to estimate the marginal cost of reducing income inequality with a policy that has distributional effects similar to the present tax transfer system the analysis uses a simulation methodology in which only the labor supply effects are evaluated other behavioral effects are ignored the most striking finding is that marginal cost is quite high even for modest labor supply elasticities for example in the benchmark case with a weighted average economy wide uncompensated wage elasticity of 0 2 and compensated elasticity of 0 31 the disposable money income of upper income quintiles of households is depressed by 9 51 for each dollar increase in the disposable money income of lower income quintiles when income equivalent values that take account of the value of leisure are compared the marginal cost for this case is estimated to be 3 49

intergenerational top income mobility in sweden capitalist dynasties in the land of equal opportunity this paper presents new evidence on intergenerational mobility at the top of the income and earnings distributions using a large dataset of matched father son pairs in sweden we find that intergenerational transmission is very strong at the top more so for income than for earnings at the extreme top top 0 1 income transmission is remarkable with an intergenerational elasticity of approximately 0 9 we also study potential transmission mechanisms and find that iq non cognitive skills and education of the sons are all unlikely channels in explaining the strong transmission within the top percentile increases in the income of the fathers if they are related at all are negatively associated with these variables wealth on the other hand has a significantly positive association our results suggest that sweden known for having relatively high intergenerational mobility in general is a society in which transmission remains strong at the very top of the distribution and wealth is the most likely channel

analysis of the dynamics of housing tenure choice in britain abstract the study uses data from the 1958 birth cohort collected in the british national child development study to model the dynamics of people s first entry to either owner occupation or tenancy in social housing the two major tenures in britain the effects of lifetime earnings prospects family background a person s own spells of unemployment the regional unemployment rate and regional relative house prices on the timing and pattern of first entry are estimated in the context of a competing risk hazard model it also shows that given the observed matrix of subsequent tenure transitions these impacts on the timing and destination of first major tenure also have important effects on the number of years which a person spends in each tenure over his her life

the political economy of intergenerational income mobility the intergenerational elasticity of income is considered one of the best measures of the degree to which a society gives equal opportunity to its members while much research has been devoted to measuring this reduced form parameter less is known about its underlying structural determinants using a model with exogenous talent endowments endogenous parental investment in children and endogenous redistributive institutions we identify the structural parameters that govern the intergenerational elasticity of income the model clarifies how the interaction between private and collective decisions determines the equilibrium level of social mobility two societies with similar economic and biological fundamentals may have vastly different degrees of intergenerational mobility depending on their political institutions we offer empirical evidence in line with the predictions of the model we conclude that international comparisons of intergenerational elasticity of income are not particularly informative about fairness without taking into account differences in politico economic institutions jel e24 j62 j68 p16