economic dynamics in the malthusian era evidence from the 1609 spanish expulsion of the moriscos we investigate economic dynamics in the malthusian era using the 1609 expulsion of moriscos from spain sharp population declines in former morisco districts were accompanied by decreased output and increased per capita output while these short run results are consistent with standard malthusian predictions malthusian convergence was delayed up to 1786 in former morisco districts archival sources and historical accounts suggest extractive institutions and cultural differences may have contributed to delayed convergence in population and output per capita this historic episode provides an unusually rich setting to examine malthusian dynamics highlighting the potential for sustained differences in per capita output in the malthusian era

aggregate income shocks and infant mortality in the developing world health and income are strongly correlated both within and across countries yet the extent to which improvements in income have a causal effect on health status remains controversial the authors investigate whether short term fluctuations in aggregate income affect infant mortality using an unusually large data set of 1 7 million births in 59 developing countries the authors show a large negative association between per capita gdp and infant mortality female infant mortality is more sensitive than male infant mortality to negative economic shocks suggesting that policies that protect the health status of female infants may be especially important during economic downturns

supply side interventions and redistribution we evaluate the eect on welfare of shifting the burden of capi tal income taxes to labor taxes in a dynamic equilibrium model with heterogeneous agents and constant tax rates we calibrate and simu late the economy we nd that lowering capital taxes has two eects i it increases e ciency in terms of aggregate production and ii it redistributes wealth in favor of those agents with a low wage wealth ratio when the parameters of the model are calibrated to match the distribution of income in terms of the wage wealth ratio the redis tributive eect dominates and agents with a high wage wealth ratio would experience a large loss in utility if capital income taxes were eliminated

implicit contracts and the cyclicality of the skill premium to examine the cyclical behavior of the skill premium this paper introduces implicit labor contracts in a dsge model where production is characterized by capital skill complementarity and the utilization of capital is endogenous it is shown that this model can reproduce the observed cyclical patterns of wages and the skill premium the feature of capital skill complementarity coupled with variable capital utilization rates does not come at odds with the acyclical behavior of the skill premium the paper argues that the skill complementarity of capital is not a quantitatively significant factor at high frequencies the key aspects are the contracts and the capital utilization margin

fiscal implications of aids in south africa abstract the number of people living with hiv is alarmingly large in addition to the incomprehensible human suffering of those directly affected aids also has large negative economic effects in this paper i study the fiscal implications of the hiv aids epidemic in south africa in a standard neo classical growth model i find that an antiretroviral program is to a large extent self financing improvement in dependency ratios and health care cost savings would pay for rand 144 billion of a full epidemiological intervention the indirect effect through the changing demographic structure will be more important than the direct health care cost saving effect i also explore different taxation policies the households would be willing to sacrifice an amount equal to 12 of gdp in the first period to be subject to an optimal ramsey fiscal policy rather than an alternative fixed debt to gdp policy the optimal policy implies an increase in government debt during the peak of the epidemic

the role of investment specific technological change in the business cycle this is a quantitative investigation of the importance of technological change speci c to new investment goods for postwar us aggregate uctuations a growth model that incorporates this form of technological change is calibrated to us data and simulated using the relative price of new equipment to identify the process driving investmentspeci c technology shocks the analysis suggests that this form of technological change is the source of about 30 of output uctuations 2000 elsevier science b v all rights reserved

an intertemporally quasi separable demand system on the assumption that the natural root of dynamics lies in the intertemporal dimension of the optimization process and that an operational and meaningful solution has to be found by appropriately placing restrictions on preferences this paper develops and tests on u k 1952 81 data a dynamic demand system exploiting w m gorman s concept of quasi separability comparison with a static intertempora lly weakly separable alternative provides further evidence for the i dea that dynamic modeling can overcome the usual rejection of theoret ical constraints in demand analysis copyright 1987 by mit press

growth and enduring epidemic diseases abstract this paper analyzes the interplay of human capital formation and economic growth when there is premature adult mortality failing adequate insurance arrangements a long wave of such mortality can so undermine human capital formation as to induce an economic collapse in nuclear family structures random matching of partners is superior to assortative mating only if the shock is not too big and initial levels of human capital are not too low full pooling of mortality risks with equal treatment of all children in extended families may fend off a general collapse depending on the initial conditions and the size and duration of the shock to avoid undesirable effects on expectations awareness campaigns should be complemented by policies that credibly promise to reduce future mortality if mortality depends on the general level of human capital indeterminacy can arise in the form of more than one rational expectations path

interpreting econometric evidence the behaviour of consumers expenditure in the uk abstract the dynamic models of consumers expenditure proposed by davidson et al 1978 and hendry and von ungern sternberg 1979 are re appraised in the light of hall s 1978 analysis of the empirical implications of the life cycle permanent income hypothesis in particular that the series for consumption should obey a random walk apart from trend in an attempt to reconcile the conflicting findings monte carlo experiments are used to demonstrate that if the davidson et al model were actually correct the hall model would appear to give a good description of the data and would probably not be rejected all the models are re estimated with new data for the uk and these data do reject a modified random walk specification in conclusion we discuss the issue of income exogeneity and comment on questions of model selection and interpretation

on the distributional consequences of epidemics we develop a tractable general theory for the study of the economic and demographic impact of epidemics notably its distributional consequences to this end we build up a three period overlapping generations model where altruistic parents choose optimal health expenditures for their children and themselves the survival probability of adults and children depends on such investments agents can be skilled or unskilled in this paper epidemics are modeled as one period exogenous shocks to the adults survival rates we first show that such epidemics have permanent effects on the size of population and on the level of output however the income distribution is shown to be unaltered in the long run second we show that this distribution may be significantly altered in the medium term in particular the proportion of the unskilled will necessarily increase at that term if orphans are too penalized in the access to education c 2009 elsevier b v all rights reserved

life expectancy and human capital investments evidence from maternal mortality declines longer life expectancy should encourage human capital accumulation since a longer time horizon increases the value of investments that pay out over time previous work has been unable to determine the empirical importance of this life expectancy effect due to the difficulty of isolating it from other effects of health on education we examine a sudden drop in maternal mortality risk in sri lanka between 1946 and 1953 which creates a sharp increase in life expectancy for school age girls without contemporaneous effects on health and which also allows for the use of boys as a control group using additional geographic variation we find that the 70 reduction in maternal mortality risk over the sample period increased female life expectancy at age 15 by 4 1 female literacy by 2 5 and female years of education by 4 0 authors

hiv status and labor market participation in south africa abstract we use econometric methods based on the propensity score to estimate the causal effect of hiv status on employment outcomes in south africa relying on rich data from a national survey which included hiv testing we control for systematic differences between hiv positive and hiv negative individuals we provide the first nationally representative estimates of the impact of hiv status on employment outcomes for southern africa being hiv positive is associated with an increase of 6 to 7 percentage points in the likelihood of unemployment overall and 10 to 11 percentage points for those who are less educated this disadvantage reinforces existing inequalities in south africa

optimal fiscal policy in a business cycle model this paper develops the quantitative implications of optimal fiscal policy in a business cycle model in a stationary equilibrium the ex ante tax rate on capital income is approximately zero there is an equivalence class of ex post capital income tax rates and bond policies that support a given allocation within this class the optimal ex post capital tax rates can range from close to independently and identically distributed to close to a random walk the tax rate on labor income fluctuates very little and inherits the persistence properties of the exogenous shocks thus there is no presumption that optimal labor tax rates follow a random walk most of the welfare gains realized by switching from a tax system like that of the united states to the ramsey system come from an initial period of high taxation on capital income

pandemics of the poor and banking stability we first develop a theoretical model that shows that the likelihood of a collapse of the banking industry of a developing country increases as the joint prevalence of large pandemics such as aids and malaria increases we also show that the optimal bank reserves increase as the prevalence increases in the empirical part of the paper we consider a large dataset of developing countries and we exhibit a causality effect from combined prevalence to deposit turnover as well as causality effect from an increase of combined prevalence to an increase in bank reserves those empirical facts therefore support our theoretical findings

the long run economic costs of aids a model with an application to south africa primarily a disease of young adults acquired immuno deficiency syndrome aids imposes economic costs that could be devastatingly high in the long run by undermining the transmission of human capital the main driver of long run economic growth across generations aids makes it harder for victims children to obtain an education and deprives them of the love nurturing and life skills that parents provide these children will in turn find it difficult to educate their children and so on an overlapping generations model is used to show that an otherwise growing economy could decline to a low level subsistence equilibrium if hit with an aids type increase in premature adult mortality calibrating the model for south africa where the hiv prevalence rate is over 20 percent simulations reveal that the economy could shrink to half its current size in about four generations in the absence of intervention programs to combat the disease and to support needy families could avert such a collapse but they imply a fiscal burden of about 4 percent of gross domestic product gdp

tax smoothing in a business cycle model with capital skill complementarity this paper undertakes a normative investigation of the quantitative properties of optimal tax smoothing in a business cycle model with state contingent debt capital skill complementarity and endogenous skill acquisition under technology and public expenditure shocks we find that skilled and unskilled labour tax smoothing maintain quantitatively under externalities and exogenous shocks in skill acquisition as well as when the relative skill supply is exogenously determined we further find that the government finds it optimal to reduce both the size of the wedge between the marginal rates of substitution and transformation in skill attainment in the long run and the standard deviation of this wedge over the business cycle this is achieved by subsidising skill creation and taxing both types of labour income

optimal taxation without state contingent debt in an economy studied by lucas and stokey tax rates inherit the serial correlation structure of government expenditures belying barro s earlier result that taxes should be a random walk for any stochastic process of government expenditures to recover a version of barro s random walk tax smoothing outcome we modify lucas and stokey s economy to permit only risk free debt having only risk free debt confronts the ramsey planner with additional constraints on equilibrium allocations beyond one imposed by lucas and stokey s assumption of complete markets the ramsey outcome blends features of barro s model with lucas and stokey s in our model the contemporaneous effects of exogenous government expenditures on the government deficit and taxes resemble those in lucas and stokey s model but incomplete markets put a near unit root component into government debt and taxes an outcome like barro s however we show that without ad hoc limits on the government s asset holdings outcomes can diverge in importa

optimal maturity of government debt without state contingent bonds abstract this paper shows that state contingent debt can be synthetically constructed using non contingent debt of different maturities a main policy implication of this principle is that the ramsey allocation with complete markets can be sustained with non contingent debt only by properly managing its maturity structure the numerical experiments however suggest that this policy implication ought to be taken with care we find that the debt positions that sustain the ramsey allocation are very high on the order of a few hundred times total gdp for a very simple four state economy and increasing in the number of states in addition they are very sensitive to small variations in the parameters of the model

on the consequences of eliminating capital tax differentials in the united states structure and equipment capital are eectively taxed at dierent rates recently president obama joined the group of policy makers and economists who propose to eliminate these dierentials this paper analyzes the consequences of such a reform using an incomplete markets model with equipment skill complementarity we nd that the reform increases average welfare by 0 1 importantly we nd that the reform does not involve the usual eciency vs equality trade o it improves both jel classication e62 h21

public saving and policy coordination in aging economies in the coming decades the share of people of working age will fall significantly in most developed countries according to optimal taxation theory public debts should be reduced before the baby boom generation retires i find that if debts are instead maintained at current levels welfare may be reduced substantially in countries with a large public sector and or a large demographic change since population aging will be less dramatic in the united states than in europe and japan capital will move from europe and japan to the united states these capital movements will facilitate the us demographic transition but aggravate the transition in most european countries

consumer behaviour theory and empirical evidence a survey this survey is designed to emphasize the relationship between empirical a nd theoretical considerations in the analysis of consumer behavior a lthough it focuses primarily on analysis at the individual or micro l evel it tries where possible to draw implications for the estimati on of aggregate relationships the importance of micro level analysis stems from the rapid expansion in available panel and survey data se ts this development has generated its own theoretical and empirical issues many of which are raised in this survey copyright 1988 by royal economic society

the 2005 lawrence r klein lecture emergent class structure this article presents a model of the emergent class structure in which a society inhabited by inherently identical households may be endogenously split into the rich bourgeoisie and the poor proletariat for some parameter values the model has no steady state where all households remain equally wealthy in this case the model predicts emergent class structure or the rise of class societies even if every household starts with the same amount of wealth the society will experience symmetry breaking and will be polarized into two classes in steady state where the rich maintain a high level of wealth partly due to the presence of the poor who have no choice but to work for the rich at a wage rate strictly lower than the fair value of labor the nonexistence of the equal steady state means that a one shot redistribution of wealth would not be effective as wealth inequality and the class structure would always reemerge thus the class structure is an inevitable feature of capitalism for other parameter values on the other hand the model has the unique steady state which is characterized by perfect equality in this case the model predicts dissipating class structure or the fall of class societies even if the society starts with significant wealth inequality labor demand by the rich employers pushes up the wage rate so much that workers will escape from the poverty and eventually catch up with the rich eliminating wealth inequality and the class structure in the long run in an extension we introduce self employment which not only provides the poor with an alternative to working for the rich but also provides the rich with an alternative to investment that creates jobs due to this dual nature of self employment the effects of self employment turn out to be quite subtle yet within the present framework it is possible to offer a complete characterization of the steady states even in the presence of self employment

the gift of the dying the tragedy of aids and the welfare of future african generations this paper simulates the impact of the aids epidemic on future living standards in south africa i emphasize two competing effects on the one hand the epidemic is likely to have a detrimental impact on the human capital accumulation of orphaned children on the other hand widespread community infection lowers fertility both directly through a reduction in the willingness to engage in unprotected sexual activity and indirectly by increasing the scarcity of labor and the value of a woman s time i find that even with the most pessimistic assumptions concerning reductions in educational attainment the fertility effect dominates the aids epidemic on net enhances the future per capita consumption possibilities of the south african economy

tests of competing theories of consumer choice and the representative consumer hypothesis tests of competing theories of consumer choice and the representative consumer hypothesis in this paper the authors estimate demand functions for individual agents they test if commonly used functions are consisten t with the data and if parameters are the same across subjects the y examine decision rules based on random choice psychological and bi ological models of choice and utility functions commonly employed in the economics literature a generalized minimum needs hypothesis per forms well across experimental conditions and individual subjects st atistically significant differences in tastes across subjects were id entified in the data copyright 1987 by royal economic society

aids crisis and growth abstract we investigate an olg economy where an aids epidemic influences human capital accumulation and growth through the creation of large numbers of orphans we study how intra family allocations regarding school and work time of children are adjusted in the face of aids within a family and how in turn these adjustments influence accumulation of physical and human capital we compute the aggregate effects of an aids epidemic on human and physical capital accumulation and growth we find that growth effects of an aids epidemic are large some policies such as subsidization of aids medication have relatively small effects

the macroeconomics of targeting the case of an enduring epidemic what is the right balance among policy interventions in order to ensure economic growth over the long run when an epidemic causes heavy mortality among young adults we argue that in general policies to combat the disease and promote education must be concentrated in certain ways at first on some subgroups of society this concentration involves what we term the macroeconomics of targeting the central comparison is then between programs under which supported families enjoy the benefits of spending on health and education simultaneously dt and those under which the benefits in these two domains are sequenced st when levels of human capital are uniformly low at the outbreak dt is superior to st if the mortality rate exceeds some threshold value outside aid makes dt more attractive but dt restricts support to fewer families initially and so increases inequality a summary account of the empirical evidence is followed by an application of the framework to south africa

a simple nonadditive preference structure for models of household behavior over time intertemporal separability is an almost universal assumption in empirical work on household behavior but a good deal of recent work on consumption and labor supply suggests that it may not be tenable the traditional weakening of this assumption is to allow for habit formation i propose an alternative structure for intertemporal preferences that nests intertemporal additivity in a simple way and yields closed form solutions for demand functions this structure includes the neoclassical durables model as a special case i derive a demand system that nests the almost ideal system as its time separable counterpart this model is estimated on u k aggregate time series data for seven goods time separability is decisively rejected moreover i find that ignoring temporal dependencies leads to considerable bias in the estimates of elasticities of the seven goods durables display the strongest nonseparable effect the estimated reactions are consistent with the neoclassical durables model

adult mortality and consumption growth in the age of hiv aids the authors use a 13 year panel of individuals in tanzania to assess how adult mortality shocks affect both short and long run consumption growth of surviving household members using unique data which tracks individuals from 1991 to 2004 they examine consumption growth controlling for a set of initial community household and individual characteristics the effect is identified using the sample of households in 2004 which grew out of baseline households the authors find robust evidence that an affected household will see consumption drop 7 percent within the first five years after the adult death with high growth in the sample over this time period this creates a 19 percentage point growth gap with the average household there is some evidence of persistent effects of these shocks for up to 13 years but these effects are imprecisely estimated and not significantly different from zero the impact of female adult death is found to be particularly severe

migration as a tool in development policy caution ahead the world bank and undp have proposed that migration and mobility facilitate economic development yet the epidemiological and public health literature has often associated migration and population mobility with the extension and intensification of infectious diseases most recently epitomised by the aids pandemic within the context of the well documented negative developmental impact of aids this suggests a potential clash in perspectives on the role of migration however if insights from public health can be incorporated into broader development perspectives it may be possible to realise the developmental benefits of migration while mitigating or avoiding any associated health concerns

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

eating drinking smoking and testing the lifecycle hypothesis this paper presents some evidence on expenditure patterns over the lifecycle that has a direct bearing on the question of whether households are significantly credit constrained our particular test looks at the consumption of food alcoholic beverages and tobacco to see whether the consumption of the latter two goods falls as couples have children the latter usually involves a decrease in household current income and an increase in needs if households are not credit constrained they should maintain their consumption of alcoholic beverages and tobacco we find no significant decrease in the consumption of these goods

the impact of aids on income and human capital this paper studies the impact of hiv aids on per capita income and education it explores two channels on how hiv aids affects income that have not been sufficiently stressed by previous literature the reduction of the incentives to stay in school due to shorter expected longevity and the reduction in productivity of experienced workers in the model individuals live for three periods may get infected in the second period and with some probability die of aids before reaching the third period of their lives parents care for the welfare of the future generations so that they will maximize lifetime utility of their dynasty the simulations predict that the most affected countries in sub saharan africa in the future will be on average 30 poorer than they would be without aids schooling will decline in some cases by 40 these figures are dramatically reduced with widespread medical treatment as it increases the survival probability and productivity of infected individuals

does prime age mortality reduce per capita household income evidence from rural zambia summary this paper evaluates the impact of prime age mortality on per adult equivalent incomes of surviving household members in rural zambia the analysis uses difference in difference matching techniques and controls for spillover effects by excluding households from the control group if members departed or joined for reasons related to prime age mortality the latter is required because per adult equivalent incomes of non afflicted households may be indirectly affected e g by hosting orphans we find evidence of negative spillover effects on non afflicted households however the death of a prime age member has no significant short run effect on per adult equivalent income of afflicted households

tax smoothing in frictional labor markets we re examine the optimality of tax smoothing from the point of view of frictional labor markets our central result is that whether or not this cornerstone optimal scal policy pre

diseases infection dynamics and development abstract the relationship between health and development is a subject of ongoing debate this paper contributes to the debate by proposing a general equilibrium theory of infectious disease transmission prevention investment and rational behavior diseases cause premature death labor productivity loss and lower quality of life higher disease prevalence lowers the average saving investment propensity the model offers two insights first infectious disease can plausibly generate an unconventional growth trap where income alone cannot push an economy out of underdevelopment second even when countries converge to the same balanced growth path the disease ecology significantly impairs the pace of economic development

assessing the impact of aids on the growth path of the malawian economy abstract a modified solow growth model is used to simulate the impact of the aids epidemic on output capacity and other key macroeconomic aggregates in malawi comparing a counterfactual no aids scenario to medium and extreme aids projections suggests that average real gdp growth over the 1985 2010 period will be 0 2 0 3 1 2 1 5 percentage points lower in the medium extreme case relative to the no aids case as a result the size of the economy by the year 2010 will be reduced from a real gdp of 5 03 billion constant 1985 kwacha without aids to 4 81 4 77 3 80 3 46 billion kwacha in the medium extreme scenario

tax reforms under market distortions in product and labour markets using a two agent model comprised of capitalists and workers this paper examines the importance of imperfect competition in product and labour markets in determining the welfare effects of tax reform the reform considered consists of eliminating the capital tax alongside a concurrent rise in the labour tax in contrast to the perfectly competitive model models with product or labour market failures each result in welfare losses for the workers in the long run in a realistic calibration to the uk economy combining these imperfections implies that this tax reform will be pareto improving in the long run however these welfare gains over longer time horizons come at the cost of short run losses which consistent with previous research result in welfare losses for workers post reform

growth and welfare under endogenous lifetime we study the role of endogenous healthcare choices by households to extend their expected lifetimes on economic growth and welfare in a decentralized overlapping generations economy with the realistic feature that households savings are held in annuities we characterize healthcare spending in the decentralized market equilibrium and its effects on economic growth we then identify the moral hazard effect in healthcare investments when annuity rates are conditioned on average mortality and explain the conditions under which it will lead to over investment in healthcare moreover we specify the general equilibrium effects and macroeconomic repercussions associated with this moral hazard effect calibrating our model to oecd data we find that the moral hazard effect may be substantial and implies sizeable welfare losses of approximately 1 5 at a more general level our study suggests that welfare improvements from longevity increases may be quite lower than sometimes assumed when considered in planner economies

the sensitivity of consumption to transitory income estimates from panel data on households we investigate the stochastic relation between income and consumption specifically consumption of food within a panel of about 2 000 households our major findings are 1 consumption responds much more strongly to permanent than to transitory movements of income 2 the response to transitory income is nonetheless clearly positive 3 a simple test independent of our model of consumption rejects a central implication of the pure life cycle permanent income hypothesis the observed covariation of income and consumption is compatible with pure life cycle permanent income behavior on the part of80 percent of families and simple proportionality of consumption and income among the remaining 20 percent as a general matter our findings support the view that families respond differently to different sources of income variations in particular temporary income tax policies have smaller effects on consumption than do other more permanent changes in income of the same magnitude this abstract was borrowed from another version of this item

capital taxation and ownership when markets are incomplete this paper is a normative investigation of the properties of optimal capital taxation in the neoclassical growth model with aggregate shocks and incomplete markets the model features a representative agent economy with linear taxes on labor and capital i first allow the government to trade only a real risk free bond optimal policy has the following features labor taxes fluctuate very little capital taxes are volatile and feature a positive negative spike after a negative positive shock to the government budget and capital taxes average to roughly zero across periods i then consider the implications of allowing the government to trade capital

aids mortality and its effect on the labor market evidence from south africa abstract this paper investigates how hiv aids has impacted the labor market in south africa focusing on its effect on wages and employment this is done by matching individual level data with group specific cumulative aids mortality rates exploiting the panel nature of the data i remove individuals whose productivity is most likely impacted by hiv aids and find evidence that cumulative aids mortality has led to reductions in wages of between 3 and 6 for the african population group black south africans furthermore i also find evidence that the epidemic has lowered employment in south africa this result is concentrated among those with the lowest levels of education and employment although not large in magnitude these effects are widespread across a significant portion of the population contributing to a substantial loss of income throughout the south african economy

can public spending boost private consumption this paper analyses the effects on private consumption from an increase in productive and unproductive public spending a new keynesian model incorporating price and wage rigidities monetary policy and various fiscal rules is developed and estimated using bayesian techniques to capture the key cyclical characteristics of the us economy we find that price and wage rigidities along with a positive shock to the part of public spending that is productive are suficient to boost private consumption moreover we show that this initial positive reaction of private consumption is adequate to create a positive present value consumption multiplier for more than five years finally we show that our main results remain robust to changes in the monetary rule and the various methods of deficit financing

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

optimal fiscal policy with redistribution i study the optimal taxation oflabor and capital in a dynamic economy subject to government expenditure and technology shocks unlike representative agent ramsey models workers are heterogenous and lump sum taxation is not ruled out i consider two tax scenarios a linear taxation with a lump sum intercept and b nonlinear mirrleesian taxation when taxes are linear i derive a partial equivalence result with ramsey settings that provides a reinterpretation of such analyses i find conditions for perfect tax smoothing oflabor income taxes and zero capital taxation implications that contrast with ramsey are derived for public debt management for the nature of the time inconsistency problem and for the viability of replicating complete markets without state contingent bonds shifts in the distribution of skills provide a novel source for variations in tax rates for the nonlinear tax scenario i show that taxation based on income averages is optimal

imperfect capital markets in empirical life cycle models abstract in the context of frisch demand functions that have prices and the marginal utility of income as independent variables we show how to incorporate imperfect capital markets into empirical models the analysis is for rational agents in an uncertain world

modeling the macroeconomic effects of aids with an application to tanzania a solow style model is developed to study the effects of the aids epidemic on the growth path of the economy and gdp per capita the model uses conjectures about the demographic effects of aids in tanzania to estimate the macroeconomic effects on the economy the findings suggest that without decisive policy action aids may reduce tanzanian gdp in the year 2010 by 15 to 25 percent in relation to a counterfactual no aids scenario per capita income levels are expected to fall by 0 to 10 percent by 2010

reasonable expectations and the first millennium development goal how much can aid achieve summary using a calibrated neoclassical growth model we address three questions i how much growth should aid flows have produced in sub saharan africa over the last three decades ii how much aid would be needed to attain the first millennium development goal mdg 1 of cutting poverty in half by 2015 iii taking proposed aid flows as given how much would structural characteristics such as domestic savings rates and productivity have to change in order to reach the mdg 1 our analysis indicates that past and future expectations for aid in fostering growth and poverty reduction have been too high

optimal fiscal policy in a stochastic growth model although most neoclassical growth models focus on competitive equilibria which are pareto optimal and ignore the role of government recent works by romer 28 29 judd 20 baxter and king s and bizer and judd 7 have shown that government can be introduced into and suboptimal equilibria can be studied in these models as well their studies however are positive analyses of the effects of fiscal policy in competitive equilibria the purpose of this paper is to apply ramsey s 27 theory of optimal taxation to the normative study of fiscal policy in a stocastic growth model ramsey studied a static representative consumer economy with many goods in his formulation a government consumes a fixed amount of these goods which it purchases at market prices and finances by levying flat rate excise taxes prices and quantities are determined in a competitive equilibrium the government is benevolent and its objective is to choose the optimal tax rates to maximize the representative consumer s utility a number of economists among them kydland and prescott 23 barro 3 turnovsky and brock 31 and lucas and stockey 26 have noted that ramsey s formulation can be applied to dynamic economies with uncertainty if one reinterprets the goods in static problems as dated state contingent goods in this framework a fiscal policy is a rule which specifies state contingent tax rates and the amount of public debt issue in each date the optimal fiscal policy is defined as the one which leads to a quantity