transactions costs and the optimal quantity of money this paper models a physical environment in which agents rationally choose to hold both fiat money and higher return capital this occurs because information barriers permit bona fide capital to be distinguished from bogus titles to capital and bogus ious only at a cost one implication is that the holding period for capital is greater than that for fiat money the information barriers also limit the government interventions that are feasible and in so doing overturn standard notions concerning the optimal quantity of money in this paper i model a physical environment in which agents rationally choose to hold both fiat money and a productive asset with a greater rate of return moreover the fiat money in this model circulates with a greater velocity than does the productive asset in this model agents live 3 period lives and are members of generations that overlap they receive an endowment of the model s single consumption good only in the first period of life and must therefore hold assets to provide for consumption in other periods of life when the consumption good is stored it only yields a return 2 periods after it was stored as a result storage can be used to provide for consumption in the third period of life the crucial assumptions of the model are restrictions on the infor

the influence of probability on risky choice a parametric examination abstract the appeal of expected utility theory as a basis for a descriptive model of risky decision making has diminished as a result of empirical evidence which suggests that individuals do not behave in a manner consistent with the prescriptive tenets of eut in this paper we explore the influence of probability on risky choice by proposing and estimating a parametric model of risky decision making our results suggest that models which provide for probability transformations are most appropriate for the majority of subjects further we find that the transformation differs for most subjects depending upon whether the risky outcomes are gains or losses most subjects are considerably less sensitive to changes in mid range probability than is proposed by the expected utility model and risk seeking behavior over long shot odds is common

macro implications of government redistributive tax transfer policies how do macro variables such as aggregate consumption aggregate money demand prices and interest rates vary in response to government attempts to redistribute income across agents through selective tax transfer policies this question is investigated for an overlapping generations model consisting of heterogeneously endowed three period lived agents in the presumably most favorable case for invariance identical log linear utility functions it is shown that positive interest rate macro equilibria are invariant with respect to redistributions in social security benefits if and only if all agents initially exhibit qualitatively identical liquidity preference behavior i e positive money holding only in youth only in middle age or never

optimal growth with many consumers abstract a method is described for constructing all pareto optimal allocations for a dynamic economy with many heterogeneous consumers under certainty in which both the technology and consumer preferences are recursive but preferences need not be additively separable over time optimal perfect foresight competitive equilibrium allocations are obtained through the study of a dynamic program for an economy with one consumption good sufficient conditions are given for the existence of a unique interior stationary distribution of consumption and wealth for a two person exchange economy sufficient conditions are given for the global asymptotic stability of the unique interior stationary point

public versus private investment in human capital endogenous growth and income inequality in this paper we present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth we use simple functional forms for preferences technologies and income distribution to highlight the distinction between economies with public education and those with private education we find that income inequality declines more quickly under public education on the other hand private education yields greater per capita incomes unless the initial income inequality is sufficiently high we also find that societies will choose public education if a majority of agents have incomes below average

learning by doing and the introduction of new goods a dynamic general equilibrium model is developed in which goods are valued according to the characteristics they contain the set of goods produced in any period is endogenously determined and learning by doing is the force behind sustained growth it is shown that the set of produced goods changes in a systematic way over time with goods of higher quality entering each period and those of lower quality dropping out the model is then used to study the effect of introducing a traditional sector in which there is no learning

asymmetric effects of favorable and unfavorable information on decision making under ambiguity most daily decisions involve uncertainty about outcome probabilities arising from incomplete knowledge i e ambiguity we explore how the addition of partial information affects these types of choices using theoretical and empirical methods our experiments in both gain and loss domains demonstrate that when such information supports a favorable outcome it strongly increases valuation of an ambiguous financial prospect however when information supports an unfavorable outcome it has significantly less impact we find that two mechanisms drive this asymmetry first unfavorable information decreases estimates of a good outcome occurring but also reduces aversive uncertainty these factors act in opposition minimizing the effects of unfavorable information second when information can be subjectively interpreted unfavorable information is less likely to be integrated into evaluations our findings reveal mechanisms not captured by traditional models of decision making under uncertainty and highlight

the 6lucas critique a generalisation the extraordinarily influential lucas critique of various familiar econometric practices is generalized the intention though is not to argue against the possibility of economics as science but to hasten its widespread realization to this end it is argued that a quite significant change of direction in economic practice is warranted and an outline of a sustainable potentially fruitful alternative approach is indicated c 1995 academic press ltd copyright 1995 by oxford university press

contract complexity and performance under asymmetric demand information an experimental evaluation exploring the tension between theory and practice regarding complexity and performance in contract design is especially relevant the goal of this paper is to understand why simpler contracts may commonly be preferred in practice despite being theoretically suboptimal we study a two tier supply chain with a single supplier and a single buyer to characterize the impact of contract complexity and asymmetric information on performance and to compare theoretical predictions to actual behavior in human subject experiments in the experiments the computerized buyer faces a newsvendor setting and has better information on end consumer demand than the human supplier the supplier offers either a quantity discount contract with two or three price blocks or a price only contract contracts that are commonplace in practice yet different in complexity results show that contrary to theoretical predictions quantity discounts do not necessarily increase the supplier s profits we also observe a more equitable distribution of profits between the supplier and the buyer than what theory predicts these observations can be described with three decision biases the probabilistic choice bias the reinforcement bias and the memory bias and can be modeled using the experience weighted attraction learning model our results demonstrate that simpler contracts such as a price only contract or a quantity discount contract with a low number of price blocks are sufficient for a supplier designing contracts under asymmetric demand information this paper was accepted by christian terwiesch operations and supply chain management

the effects of inflation on real interest rates one of the most obvious facts of recent monetary history is that high inflation is associated with high nominal interest rates this association has been interpreted by many as supporting a superneutrality hypothesis that an increase in inflation will not affect real interest rates in the long run however the bulk of the evidence contradicts superneutrality beginning with irving fisher 1896 1930 most empirical investigations have found that fully anticipated inflation has less than a unit effect on nominal interest rates and thus reduces real interest rates even in the longest of runs this has been shown under the assumption that expectations are formed rationally douglas pearce 1979 that they take the form of an arbitrary distributed lag on past inflation rates fisher 1930 william gibson 1970 or that they are accurately represented by the livingstone expectations data pearce kajal lahiri 1976 lawrence summers 1983 attempted to measure the long run effect without an explicit theory of expectations regressing long swings in various nominal interest rates against long swings in inflation over various subintervals from 1860 to 1979 he found coefficients consistently less than unity for the post world war ii era as a whole the coefficients were in the range of 0 5 to 0 75 with standard deviations of 0 08 to 0 33 a few studies have found coefficients close to unity william yohe and denis karnosky 1969 martin feldstein and otto eckstein 1970 gibson 1972 lucas but as several authors have observed thomas sargent 1976 robert shiller 1980 john wood 1981 summers these findings are limited to a particular period of u s history approximately 1953 71 furthermore even a unitcoefficient would contradict superneutrality of the after tax real interest rate which would require a coefficient substantially greater than unity even taking into account the other inflation distortions in the tax system summers calculated that the coefficient ought to lie in the range of 1 3 to 1 5 far higher than observed these empirical findings pose a challenge to traditional monetary theory much of which implies that superneutrality should hold at least approximately for example the model of miguel sidrauski 1967 implies that the real interest rate should equal the marginal product of capital which in the long run should equal the representative household s marginal rate of time preference if this rate of time preference is a constant then in particular it will be independent of the rate of inflation if it is positively related to the household s wealth or utility then inflation can reduce the marginal product of capital somewhat through what are commonly called mundell tobin effects that is higher inflation can reduce the demand for real balances which reduces real wealth which lowers the rate of time preference and leads to further capital accumulation 2 but this real balance effect on saving is commonly recognized to be too small to make department of economics social science centre university of western ontario london canada n6a 5c2 we are grateful to charles adams norman cameron john chilton jacob frenkel david laidler ben mccallum baldev raj brad reid jack weldon john whalley ron winrck and two anonymous referees for helpful discussions and comments on earlier drafts all errors are attributable to transaction costs robert lucas 1980 finds empirical support for the hypothesis which he calls one of the central implications of the quantity theory of money it has also been adopted by a wide range of more eclectic economists as evidenced by its endorsement in two of the most popular macroeconomics textbooks rudiger dornbusch and stanley fischer 1981 pp 454 58 robert j gordon 1978 pp 289 91 2these implications of variable time preference can be drawn almost immediately from the work of hirofumi uzawa 1968 a graphical analysis is presented by david laidler 1969b who focuses on the logically equivalent question of the effects of paying interest on money

existence and uniqueness of steady state equilibrium in a two sector overlapping generations model abstract in his seminal paper galor a two sector overlapping generations model a global characterization of the dynamical system econometrica 60 1992 1351 1386 establishes conditions for the existence of equilibrium in the two sector overlapping generations olg model although appealing theoretically these conditions are implicit and not easy to apply this paper develops new theorems on the existence and uniqueness of steady state equilibrium in the two sector olg model we provide explicit conditions on the utility and production functions for the existence and uniqueness of equilibrium with which one only needs to check the derivatives of the production and utility functions and their interactions without requiring solving for the savings function and its derivatives we present detailed steps to check the existence and uniqueness of equilibrium and provide illustrative examples

increasing returns and crowding out abstract this paper explores how public debt interferes with the accumulation of physical capital when the technology displays a production externality of the arrow romer type we identify conditions under which a small positive amount of debt will prevent the economy from ever approaching the stock of capital that it would achieve if public debt were zero we also show that the interaction of debt and production externalities may produce bounded possibly cycling capital stock sequences in economies where sustained growth rates are possible with zero national debt finally welfare issues concerning the relation between static and dynamic inefficiencies are discussed

a nominal theory of the nominal rate of interest and the price level this paper develops a simple theory of nominal income and interest determination under the assumption that the only relevant distinction between money and bonds lies in their holding periods individuals take full account of the government budget constraint and do not concern themselves with discounting future tax liabilities associated with the issue of government bonds according to this theory the price of bonds is analogous to the price level and the nominal rate of interest is determined by the bond money ratio and bears no close relationship to the rate of expansion of the price level

the fisher hypothesis a critique of recent results and some new evidence the fisher hypothesis 5 that nominal interest rates should respond point for point to changes in the expected inflation rate while theoretically appealing has had limited success in explaining actual interest rate movements most empirical work has shown that net after tax nominal interest rates are not as sensitive to changes in expected inflation as the hypothesis suggests they should be more troublesome still are the results of two recent studies carmichael and stebbing 3 4 hereafter cs and amsler 1 turn the fisher hypothesis on its head by demonstrating that net nominal yields on financial assets do not respond at all to changes in the expected inflation rate rather the net real yield on these assets falls point for point with increases in the expected inflation rate

from unemployed to entrepreneur the role of the absolute bequest motive abstract using the british household panel survey this paper finds that inheritance has a concave effect on the hours worked by male entrepreneurs receiving an inheritance increases the labor supply of unemployed male entrepreneurs however this effect becomes smaller for higher inheritances

crime confiscation and frowth for and against leviathan this paper presents a dynamic general equilibrium model ofrent seeking in which the payoffs and the choices between productiveand non productive activity are endogenous the economy has the potential for endogenous growth but when agents can choose between confiscation and productive investment growth is no longer possible

productive government expenditures and long run growth the purpose of this paper is to review some of the recent developments in endogenous growth models specifically our focus is on the growth effects of productive government spending in dynamic general equilibrium models we use a simple overlapping generations model as our basic framework and illustrate the role of taxes and spending we then examine several related issues nonrivalry in publicly provided goods existence and uniqueness of competitive equilibrium endogenous public policy ways of financing public expenditures composition of publicly provided goods and services and private alternatives finally we review some empirical results related to output elasticity of public capital and educational expenditures

the impact of policy actions and future energy prices on the cost optimal development of the energy system in norway and sweden abstract this paper studies the effects of policy actions on the energy systems in norway and sweden including a nuclear shutdown a cancelation of restricted hydropower and an expansion of export capacity to europe this study apply a stochastic times model that considers the short term uncertainty in electricity supply and value the flexibility of hydro reservoirs it is the first time this approach is used to quantify the effects of these policy actions on cost optimal investments and operations to consider the uncertainty of the energy market we analyse the policy actions under four different price developments for biomass fossil fuels and electricity the results demonstrate that our stochastic approach provides different model decisions compared to the traditional deterministic approach further we show that the future role of the large hydro reservoirs in norway and sweden depends both on the adopted policy actions and on future energy prices and that the policy actions have a significant impact on the development of the energy system this insight is valuable when considering the development and management of the hydro reservoirs it is also valuable for other european countries so that they can evaluate the interplay of the hydro reservoirs with other energy storage options

ambiguity about audit probability tax compliance and taxpayer welfare we show that an increase in uncertainty about the probability of being audited ambiguity increases tax compliance for ambiguity averse taxpayers but reduces compliance for ambiguity lovers because experimental evidence reveals considerable heterogeneity with respect to ambiguity preferences we conclude that fostering uncertainty about the probability of being audited may not be an effective policy for increasing taxpayer compliance moreover because the tax authority can neither categorize nor screen taxpayers on the basis of their preferences for ambiguity it is not likely to be either a useful or a desirable instrument for increasing taxpayer welfare jel h26 d81

income taxes public investment and welfare in a growing economy abstract in a growth model with public capital and a spillover externality from private capital we find that income taxes as part of an optimal fiscal policy is a more common result than usually thought the commitment to finance an exogenous component of public expenditures in the form of an exogenous fraction of output may lead to the optimality of positive income taxes this result is robust to alternative assumptions on depreciation rates and preferences we show that welfare losses from deviations from the optimal policy are always smaller when compensated with changes in income taxes than when adjusting lump sum taxes

life cycle savings bequest and a diminishing impact of scale on growth the present paper shows that the savings motive critically affects the size and sign of scale effects in standard endogenous growth models if the bequest motive dominates the scale effect is positive if the life cycle motive dominates the scale effect is ambiguous and may even be negative

the real bills doctrine versus the quantity theory a reconsideration two competing monetary policy prescriptions are analyzed within the context of overlapping generations models the real bills prescription is for unfettered private intermediation or central bank operations designed to produce the effects of such intermediation the quantity theory prescription in contrast is for restrictions on private intermediation designed to separate money from credit although our models are consistent with quantity theory predictions about money supply and price level behavior under these two policy prescriptions the models imply that the quantity theory prescription is not pareto optimal and the real bills prescription is

lucas on involuntary unemployment the aim of this paper is to examine critically lucas arguments against keynes s general theory and in particular against keynes s concept of involuntary unemployment it comprises two main parts in the first i question lucas s claim that keynes betrayed the equilibrium discipline by freeing himself from the postulates of optimising behaviour and market clearing in the second i discuss lucas three arguments against the involuntary unemployment concept first that there is no rationale for drawing a distinction between two sorts of unemployment second that every economic outcome features voluntarity and involuntarity jointly and third that alternatives to unemployment are always present

finite lifetimes and growth abstract in this paper we study the long run growth property of overlapping generations models it is shown that in one sector models with convex technologies the asymptotic growth rate must be zero this results because the young do not have sufficient income to purchase a large capital stock thus a policy of income redistribution to the young can generate growth even if financed by income taxation additionaly it is shown that two sector models and one sector models with nonconvex technologies are consistent with growth

parametric study of variable renewable energy integration in europe advantages and costs of transmission grid extensions abstract wind and solar energy will play an important role in the decarbonization of the european electricity generation however high shares of these variable renewable energies vres challenge the power system considerably due to their temporal fluctuations and geographical dispersion in this paper we systematically analyze transmission grid extensions as an integration measure for vres in europe we show the effects of grid extensions for fundamental properties of the power system as a function of the penetration and mix of wind and solar energy backup capacity requirements and overproduction are reduced with a powerful overlay transmission grid we determine the costs of the grid extensions in dependence of the vre penetration and mix and find that the grid integration costs remain below 25 of the vre investment costs for all conceivable vre configurations furthermore robust design features of future power systems in terms of grid geometry and flexibility requirements for backup technologies are identified we apply a spatially and temporally highly resolved techno economic model of the european power system for our analysis

growth trade and international transfers abstract this paper analyzes the simplest neoclassical economy in which agents have finite lives and there is sustained per capita growth the growth rate of the world economy depends upon countries savings propensities and common technology trade can reverse an economy s autarkic growth trajectory and a country with a high savings rate runs a current account surplus if a surplus country expands aggregate demand while a deficit country contracts analogously world growth increases an appropriate international policy can change the path of the world economy from stagnation to growth

factor income taxation and growth under asymmetric information abstract this paper studies the growth effects of factor income taxation on capital and labor in an endogenous growth model with overlapping generations capital accumulation in our model takes place through credit financed investments in a market with asymmetric information between lenders and borrowers we show that in the presence of asymmetric information capital income taxation worsens the adverse selection problem in the credit market which in turn introduces an additional adverse effect on growth in so doing our analysis provides a new argument in favor of a lower higher capital labor income taxation in funding public expenditures

electricity market integration redistribution effect versus resource reallocation in countries with a significant amount of low variable cost generation capacity the integration of electricity markets poses a real problem with respect to consumers interests in such cases consumers face a significant price rise compared with consumers in countries where low cost capacities are lacking this paper analyses this problem both in the short and long term focusing on a market dominated by nuclear and hydro production when there are too many restrictions on new capacity developments in low cost technologies market integration will lead to surplus redistribution without any production reallocation this really makes it legitimate to contemplate redistributive compensations towards local consumers in countries which benefited from low variable cost generators at the moment of liberalisation this paper examines two alternative ways of rent reallocation one by income with a windfall tax on nuclear producers and the allocation of this revenue to energy efficiency policy funds and another by price by giving drawing rights on the existing nuclear generators production to small commercial and domestic consumers at a level equivalent to the one necessary to maintain regulated prices 2009 elsevier ltd all rights reserved

the effects of asymmetric information on economic growth it has been widely recognized that asymmetric information affects investment and investment is of course in turn important to economic growth knowledge of the mechanisms by which asymmetric information affects economic growth however appears incomplete there are two types of asymmetric information namely hidden information and hidden action 1 although azariadis and smith have studied how hidden information adverse selection may affect economic growth with a monetary growth model 3 and a non monetary growth model 2 the effects of hidden action and costly state verification have been ignored there have been many studies which at least suggest links between asymmetric information and economic growth diamond 6 boyd and prescott 5 and williamson 16 show that asymmetric information between borrowers and lenders gives rise to financial intermediation diamond 6 and williamson 16 show how financial intermediation can promote economic growth by reducing monitoring costs and channeling funds to the most efficient users greenwood and jovanovic 9 show how collection and analysis of information by financial intermediaries can help investors resources to flow to the place in the economic system where the funds will yield the highest social return bencivenga and smith 4 show how a reduction of the fraction of savings held in the form of unproductive liquid assets is favorable to capital accumulation and economy growth while contributing to the literatures of financial intermediation and economic growth greatly these studies however do not specifically examine the relationship of asymmetric information to economic growth this paper attempts to explore how hidden action moral hazard and costly state verification affect economic growth hidden action is incorporated into a neoclassical growth model in which people invest for future consumption and investment leads to capital accumulation and thus economic growth borrowers have an informational advantage over lenders ex post concerning the outcome of investment project though verification can overcome such asymmetry it is costly the results of this paper suggest that the effect of hidden action is to alter the path of economic growth in the neoclassical growth model without asymmetric information the economy

social learning in networks of friends versus strangers networks and the embedded relationships are critical determinants of how people communicate and form beliefs the explosion of social media has significantly increased the scope and impact of social learning among consumers this paper studies observational learning in networks of friends versus strangers a consumer decides whether to adopt a product after receiving a private signal about product quality and observing the actions of others the preference for the product has greater heterogeneity in the stranger network than in the friend network we show that when the network is small observing friends actions helps the consumer make more accurate inferences about quality as the network grows however the stranger network becomes more effective underlying these results are two competing effects of network heterogeneity on social learning these are the individual preference effect which allows one to make a better quality judgment when the preference element of past actions is more certain and the social conforming effect wherein private signals are underused in quality judgment as people follow others actions we find cascading is more likely to occur in the friend network than in the stranger network for a high quality firm the stranger network generates greater sales than the friend network when the network size is sufficiently large or the private signal is sufficiently accurate we also examine the existence of experts and firms using advertising to influence consumers finally we show how networks that are highly homogeneous or heterogeneous could impede observational learning

the role of intergenerational transfers in aggregate capital accumulation this paper uses historical u s data to directly estimate the contribution of intergenerational transfers to aggregate capital accumulation the evidence presented indicates that intergenerational transfers account for the vast majority of aggregate u s capital formation only a negligible fraction of actual capital accumulation can be traced to life cycle or hump savings a major difference between this study and previous investigations of this issue is the use of more accurate longitudinal age earnings and age consumption profiles these profiles are simply too flat to generate substantial life cycle savings this paper suggests the importance of and need for substantially greater research and data collection on intergenerational transfers life cycle models of savings that emphasize savings for retirement as the dominant form of capital accumulation should give way to models that illuminate the determinants of intergenerational transfers

the economic impacts of a submarine hvdc interconnection between norway and great britain in the present paper we analyze the profitability of different hvdc interconnection alternatives between norway and great britain for present and future scenarios the analysis is done from a merchant and a social welfare perspective the analyses include interconnections between norway and scotland and southern great britain respectively as well as an alternative link to a future offshore wind farm from a social welfare perspective the northern interconnection alternative is profitable under all sets of assumptions the southern alternative is profitable under present conditions but less than the northern alternative the alternative link to the offshore wind park is not profitable but this result is highly dependent on market conditions from a merchant perspective none of the alternatives is profitable clearly illustrating that leaving investments to commercial parties does not realize all projects that increase social welfare

dynamic externalities multiple equilibria and growth abstract i consider an olg model with production and a single commodity i show that in such an environment unbounded growth of income per capita is not possible if the aggregate technology is of the constant returns to scale type i introduce an external effect in the aggregate production function and derive conditions under which persistent growth is an equilibrium outcome the introduction of an external effect also creates poverty traps and open sets of initial conditions for which there exists an infinite multiplicity of equilibria when such a multiplicity exists equilibria with the same initial position will display different asymptotic behaviors finally i show that by introducing appropriate tax schemes a unique equilibrium path can be selected

the effects of annuities bequests and aging in an overlapping generations model of endogenous growth we examine the effects of introducing actuarially fair annuity markets into an overlapping generations model of endogenous growth the complete annuitisation of agents wealth is not in general dynamically optimal the degree of annuitisation that is dynamically optimal depends nonmonotonically on the expected length of retirement and on the pay as you go social security tax rate the government has an incentive to restrict the availability of actuarially fair annuities contracts and can often move the economy from a pay as you go to a fully funded social security system via voluntary contributions to a government sponsored actuarially fair pension today accompanied by reductions in social security taxes tomorrow

the new classical macroeconomics comprises articles published between 1972 and 1992 on new classical macroeconomics it starts by examining the rational expectations hypothesis and the application of general equilibrium to labour markets and continues with various arguments for the ineffectiveness of government policy

economic growth with finite lifetimes abstract finite lifetimes do not preclude sustained growth with a convex technology when agents are finitely lived and formulate their bequeathing decisions in terms of an absolute bequest motive in this model the presence of government debt adversely affects the equilibrium rate of growth of the capital stock

growth with unintended bequests abstract in an overlapping generations model with finite lifetimes sustained growth is possible if there is a positive risk of death a redistribution occurs when non altruistic parents leave unintended bequests to their children

the role of rents to human capital in economic development abstract we study the role of rents to human capital in economic development in an overlapping generations model rents to human capital play a key role in increasing savings in the absence of such rents the return to human capital is entirely appropriated by the old and accumulation is entirely determined by the income to fixed factors if rents are introduced by setting a ceiling on human capital accumulation the economy may achieve a larger income level even though the ceiling reduces the economy s feasibility set threshold effects and multiple steady states arise because rents to human capital are self perpetuating inequality in abilities may be good for growth because it allows inframarginal workers to earn rents on their human capital which then increase savings public education is also good for growth because it gives the young property rights over their own human capital thus being equivalent to rents

pricing strategies and mechanism choice in reward based crowdfunding abstract with consideration of the ambiguity and overfunding effects this study develops generalized models to compare the sequential and simultaneous mechanisms in reward based crowdfunding ambiguity effect is a negative psychological perception of customers since they lack the information to infer the product s quality however overfunding effect is a positive psychological perception that enhances customers confidence in the product s quality theoretically we show that the two mechanisms may dominate each other in terms of entrepreneur and the two opposite effects can play significant roles in deciding the optimal crowdfunding mechanism furthermore we propose a simple compensation mechanism to improve entrepreneur s expected payoff and the crowdfunding s success rate under both mechanisms finally we analyse the informational cascade in crowdfunding and show how entrepreneur can use this phenomenon to maximize her expected payoff

sustained growth in the model of overlapping generations abstract this paper analyzes endogenous economic growth in the model of overlapping generations there is no bequest motive nor are there any externalities if the technology is convex per capita growth can occur only if the economy has at least two sectors this paper shows that the limiting marginal efficiency of investment determines the potential for growth and that the rate of growth depends upon the share of the capital stock devoted to investment sustained consumption growth can occur only under a fairly restrictive set of assumptions there is an equilibrium with growth only if the marginal propensity to save is sufficiently high

bundling information aggregation and entry deterrence abstract this paper provides an explanation for bundling based on its information aggregation effect using bundling the monopolist can hide the information of each monopoly market by aggregating information we show that the monopolist chooses bundling in an early period because bundling removes potential competition in the following period

an overlapping generations model of growth and the environment this article analyzes the potential conflict between economic growth and the maintenance of environmental quality in an overlapping generations model short lived individuals make decisions which have long lasting effects on both factor productivity and the environment the model provides a theoretical explanation of observed correlations between environmental quality and income whereby economic growth is associated first with declines then improvements in environmental quality it suggests circumstances in which multiple pareto ranked steady state equilibria may arise and in which sustained growth of both capital and environmental quality may occur overmaintenance of the environment analogous to dynamically inefficient overaccumulation of capital may emerge copyright 1994 by royal economic society

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

two illustrations of the quantity theory of money of two central implications of the quantity theory of money that a given change in the rate of change in the quantity of money induces i an equal change in the rate of price inflation and ii an equal change in nominal rates of interest the illustrations were obtained by comparing moving averages of the three variables in question using quarterly u s time series for the period 1953 77 readers may find the results of interest as additional confirmation of the quantity theory as an example of one way in which the quantity theoretic relationships can be uncovered via atheoretical methods from time series which are subject to a variety of other forces or as a measure of the extent to which the inflation and interest rate experience of the postwar period can be understood in terms of purely classical monetary forces the theoretical background of the study is reviewed very briefly as it is familiar material in the next section the data processing methods are described and rationalized in section ii the illustrations

evidence of the fisher effect from u k indexed bonds newly available data from the u k market for indexed securities are used to test the fisher hypothesis for monthly observations of interest rates at 14 maturities the hypothesis that the after tax nominal interest rate is a constant plus anticipated inflation proves to be a reasonable approximation of reality for longer maturities the coefficients on the expected rate of inflation are approximately equal to one the mundell tobin effect is in evidence for shorter maturities the inverted fisher effect is in evidence for shorter maturities the inverted fisher effect is decisively rejected the evidence suggests that past difficulties encountered in trying to prove the fisher effect have been due to the lack of a direct measure of inflation expectations and real interest rates copyright 1992 by mit press