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

on optimal non linear taxation and public good provision in an overlapping generations economy abstract using the self selection approach to tax analysis within an olg framework the paper examines optimal non linear labour and capital income taxation and the provision of a durable public good under endogenous wages the marginal tax rules depend on the influence of the tax instruments on self selection and on the income earning abilities of the households in particular we found that production inefficiency occurs in the model justifying capital income taxation for the public good the paper derives a dynamic analogue of the second best samuelson rule encompassing both inter and intragenerational redistributive considerations furthermore the usual conditions guaranteeing the efficiency of the first best samuelson rule are not sufficient in the present model

taxing capital not a bad idea after all we quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic uninsurable income shocks and permanent productivity difierences of households the optimal capital income tax rate is signiflcantly positive at 36 percent the optimal progressive labor income tax is roughly a at tax of 23 percent with a deduction of 7 200 relative to average household income of 42 000 the high optimal capital income tax is mainly driven by the life cycle structure of the model whereas the optimal progressivity of the labor income tax is attributable to the insurance and redistribution role of the tax system jel e62 h21 h24

a positive theory of social security based on reputation we construct a general equilibrium model in which a pay as you go social security system can be adopted and sustained as a political and economic equilibrium we alalyze the welfare implictions of this system and compare general equilibrium welfare measure to the commonly used notion of actuarial fairness

optimal capital income taxation with incomplete markets borrowing constraints and constant discounting for a wide class of infinitely lived agent models chamley has shown that the optimal capital income tax rate is zero in the long run lucas has argued that for the u s economy there is a significant welfare gain from switching to this policy this paper shows that for the bewley class of models with incomplete insurance markets and borrowing constraints the optimal tax rate on capital income is positive even in the long run therefore cutting the capital income tax to zero may well lead to welfare losses

income redistribution in a common labor market when households are mobile among jurisdictions income redistribution by individual jurisdictions creates fiscal externalities a model of interjurisdictional migration is used to study the nature of this redistributive externality analysis of optimal redistribution and optimal corrective subsidies from higher level governments shows that benefit levels for the recipients of income transfers and tax rates on mobile taxpayers should be equalized across jurisdictions a system of jurisdictions with a common labor market can achieve welfare improvements through coordination of domestic redistributive policy or through the intervention of a higher level government copyright 1991 by american economic association

fiscal federalism quantitative studies we often think of fiscal decisions as being made by a single government but in the united states the reality is that an astounding number of entities have the power to tax and spend state local and federal governments all play crucial roles in the u s fiscal system and the interrelation has been the source of continuing controversy this fact is the focus of the seven papers and commentaries presented in this volume the result of a conference sponsored by the nber the contributors use various quantitative tools to study policy issues obtaining results that will interest policymakers and researchers working in the areas of taxation and public finance the first three papers study the distribution of power and responsibilities among the various levels of government john joseph wallis and wallace e oates look at the extend and evolution of decentralization in the state and local sector robert p inman examines the growth of federal grants and the structure of congressional decision making and jeffrey s zax investigates the effects of the number of government jurisdictions on aggregate local public debt and expenditures the next three papers look at the deductibility of state and local taxes on federal tax returns using an econometric analysis douglas holtz eakin and harvey s rosen examine the effects of deductibility on revenue sources and level of expenditures lawrence b lindsey looks at how deductibility affects the level and type of taxation george r zodrow uses a two sector general equilibrium model to investigate revenue effects of deductibility finally charles r hulten and robert m schwab analyze the problem of developing an accurate estimate of income for the state and local sector finding that conventional accounting procedures have underestimated the income generated by a startling 100 billion

urban land supply natural and contrived restrictions abstract both large bodies of water and local governments restrict the supply of urban land in this paper we measure water s restriction on supply and test its effect on land price we then extend hamilton s and fischel s pioneering work on governmental restriction providing an improved test of the monopoly zoning hypothesis that such restriction further affects land price regression analysis of data from 45 urban areas suggests that the two restrictions combine to explain 40 of typical interurban price differentials

micro estimates of public spending demand functions and tests of the tiebout and median voter hypotheses responses to questions given to a random sample of michigan households are used to estimate public spending demand functions while income and price elasticities are similar to those obtained from aggregate data positive income elasticities appear to arise because public services are distributed in a prorich manner a relatively small variance in spending demands among urban and suburban communities in metropolitan areas with substantial public service variety suggests that the tiebout mechanism works this interpretation is supported by the fact that actual spending conforms substantially to desired levels in urban areas but less so in rural areas with little public sector choice

distributional effects of public education in an economy with public pensions we study how the allocation of government expenditures between two major outlays education and pay as you go social security affects human capital distribution in an economy with heterogeneous agents we consider an overlapping generations economy where the government maintains both programs and allocates tax revenues to finance them in our model human capital is one of the factors of production it is itself produced as a combined result of public inputs and private inputs parents decisions to invest time and material resources in education of their children are motivated by altruism heterogeneous in its strength across the population which leads to heterogeneity of incomes we investigate the effect of an increase in public funding for education on the human capital distribution we show that in this framework contrary to some earlier results increased spending on public education may lead to higher inequality our results depend crucially on the interaction of education funding with the social security budget and on the elasticity of substitution in the learning technology

capitalization and the theory of local public finance the tiebout literature is incomplete this paper argues because it has not fully accounted for the capitalization of local fiscal variables into house values the paper explains why capitalization arises why it persists in long run equilibrium how it affects both residential location and the outcome of local voting and why it interferes with the efficiency of a system of local governments the analysis which is based on the main tiebout assumptions plus a property tax combines a model of household bids in a housing market with a median voter model of local public service determination

institutional constraints and local community formation the interest of economists in alternative patterns of urban government stems primarily from the publication of papers by charles m tiebout and george j stigler while these papers were essentially positive in orientation subsequent work explored the normative properties of various models of urban government these normative models which have been surveyed exhaustively by kenan bulutoglu have predominantly focused on the external costs that units of government impose on one another while particular models vary the general framework is quite uniform a model is postulated in which the activity of one jurisdiction influences positively the utility level of residents of other jurisdictions the analyst then postulates an independent adjustment equilibrium and concludes that this equilibrium is inefficient because individual jurisdictions fail to take into account the impact of their actions on other jurisdictions albert breton wallace e oates mancur olson and gordon tullock attributed this nonoptimality to the inappropriate specification of boundaries for the benefit range of the publicly provided service fails to coincide with the boundary of the jurisdiction providing the service once it is suggested that some boundaries are better than others the principles of community formation or boundary selection come to the fore of the economic analysis of local government optimality models of club or community formation have been developed by such authors as martin c mcguire a mitchell polinsky and hirofumi shibata these various works all being inspired by james m buchanan s 1965 theory of clubs this paper advances the thesis that the economic analysis of local government and community formation should deemphasize the construction of normative models and should concentrate instead on the positive analysis of alternative institutional arrangements the first section of this paper argues that the economic analysis of urban government should become less neoclassical and more institutionalist because optimality models can never be related to social reality independently of the institutional framework within which collective choices emerge the second section moves beyond methodological exhortation to the description of some institutional research with this description serving to reinforce the theme of the first section

the role of income in the formation of new cities the richest neighborhoods in the unincorporated suburbs have a stronger incentive to form a new city to escape the redistribution that is occurring there wealthy families also may desire to establish a new city if this enables the provision of government services that middle income voters would not fund

optimal taxation in life cycle economies abstract we use a very standard life cycle growth model in which individuals have a labor leisure choice in each period of their lives to prove that an optimizing government will almost always find it optimal to tax or subsidize interest income the intuition for our result is straightforward in a life cycle model the individual s optimal consumption work plan is almost never constant and an optimizing government almost always taxes consumption goods and labor earnings at different rates over an individual s lifetime one way to achieve this goal is to use capital and labor income taxes that vary with age if tax rates cannot be conditioned on age a nonzero tax on capital income is also optimal as it can imperfectly mimic age conditioned consumption and labor income tax rates journal of economic literature classification numbers e62 h21

a quantitative analysis of capital income taxation this paper studies the quantitative impact of eliminating capital income taxation on capital accumulation and steady state welfare in a general equilibrium model with overlapping generations of sixty five period lived individuals who face idiosyncratic earnings risk borrowing constraints and life span uncertainty under a wide range of parameter configurations the capital income tax rate that maximizes steady state welfare is positive even though eliminating it completely would raise the steady state capital stock toward the golden rule this is because the tax burden is shifted toward the younger and liquidity constrained years reducing the individuals ability to self insure copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the intergenerational state education and pensions allocation is inefficient when generations overlap this failure can be mitigated by properly designed social arrangements we show that public financing of education and public pensions can be designed to implement an intergenerational transfer scheme supporting the complete market allocation neither the public financing of education nor the pension scheme we consider resemble standard ones in our mechanism via the public education system the young borrow from the middle aged to invest in human capital they pay back the debt via a social security tax the proceedings of which finance pension payments when the complete market allocation is achieved the rate of return implicit in this borrowinglending scheme should equal the market rate of return

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

redistribution within and across the regions of a federation the authors reconsider the literature on redistribution within a federation with mobile agents they conclude that redistribution is a function best assigned to the national government local governments with diverse preferences for redistribution distort individual migration decisions the authors also examine the fiscal externality literature which has made an efficiency argument for interregional transfers they show that if local governments have the same preferences for redistribution the nash equilibrium is efficient if preferences are diverse the authors show that nationally imposed interregional transfers do not address the source of the inefficiency nevertheless interregional transfers are shown to be a part of decentralized behavior

deciding to provide local decisions on providing social welfare fiscal federalism predicts local governments will avoid social welfare expenditures owing to capital mobility across local jurisdictions yet census of governments data consistently show that many local governments provide one or more social welfare functions and moreover many jurisdictions provide these functions without federal or state intergovernmental support this article finds evidence that while local expenditures are largely driven by fiscal capacity and federal and state assistance local decisions on providing social welfare functions and participating in intergovernmental revenues are primarily affected by degree of capital mobility and by local political factors consequently local governments exercise much greater autonomy over social welfare policymaking than fiscal federalism suggests

budget spillovers and fiscal policy interdependence evidence from the states abstract this paper formalizes and tests the notion that states expenditures depend on the spending of similarly situated states we find that even after allowing for fixed state effects year effects and common random shocks among neighbors a state government s level of per capita expenditure is positively and significantly affected by the expenditure levels of its neighbors ceteris paribus a one dollar increase in a state s neighbors expenditures increases its own expenditure by over 70 cents

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

self interest and public funding of education abstract the objective of this paper is to study whether publicly funded education can emerge as a political and economic equilibrium in an overlapping generations economy in which selfish agents vote for public funding of education the presence of complementarities between capital and labor in the production function implies that by improving the skills of next period s workers public funding of education increases the return on capital as a result savers will support a publicly financed education system in order to enhance their future income a version of the model calibrated using u s data generates large shares of gnp allocated to education hence the non altruistic incentive to support public education is quantitatively important

the fiscal effect of community composition on public services and welfare abstract i consider the changes in the public service level and in the utility of wealthy families when a community of wealthy families expands to include more poor families public expenditure is financed by a property tax and set by majority voting because adjustments in housing are sluggish families vote treating house sizes as fixed and utility is not maximized the model structure suggests that the signs of the changes are a priori ambiguous in particular the fiscal deterioration may cause the public service level to rise and the utility of the wealthy resident to be increased the changes are estimated in a model with typical parameter estimates

estimation of the depreciation rate of physical and r d capital in the u s total manufacturing sector i introduction numerous studies on production and cost the sources of productivity and endogenous growth have recognized the pivotal role of the physical capital stock studies at various levels of aggregation over assets and industries have emphasized the crucial role of investment in plant and equipment in the growth of demand and productive capacity it is clearly recognized by economists and policymakers that knowledge capital approximated by rd 1986 to measure the depreciation rates of the stock of rd 1980 in the literature on dynamic demand models such an approach was first adopted by epstein and denny 1980 and more recently by kollintzas and choi 1985 for a single capital good and on a theoretical level in bernstein and nadiri 1987a 1987b the paper is organized as follows the specification of the model is presented in section ii section iii is devoted to a discussion of the data and to the presentation of the parameter estimates of the model in section iv we present the empirical results for the depreciation rates for physical and r d capital and compare them with those reported in the literature we compare the physical capital stock estimates generated by our model with the official capital stock estimates produced by u s department of commerce bureau of economic analysis in this section we also present our estimates of the decomposition of gross investment into replacement and expansion investment for both physical and r d capital these decompositions are important from the vantage point of public policy analysis

economic influences on the structure of local government in u s metropolitan areas abstract there is a large degree of variation in the number of general purpose local governments and school districts per square mile and per person among united states metropolitan areas using data from 1982 this paper provides an empirical test of whether economic factors especially variation in demand for local government services partly account for these differences the empirical findings show that after controlling for political historic and institutional factors variations in the characteristics that affect demand for local government services do influence the number of local governments this result is consistent with the hypothesis first put forth by tiebout

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

oil vulnerability in the australian city assessing socioeconomic risks from higher urban fuel prices global oil prices have risen markedly over the past 18 months generating considerable speculation regarding their economic and social impacts cities that are highly dependent on petroleum for urban transport are likely to be most adversely affected by rising oil prices yet there has been little recent scholarly engagement with the socioeconomic implications of increasing oil prices this paper develops a basic framework and methodology for assessing the socioeconomic oil vulnerability of australian cities the paper demonstrates that there is wide spatial variability in the vulnerability of australia s urban populations to rising fuel costs which may compound existing socio spatial divisions and speculates on some underlying causal factors the paper calls for better data and new methods to understand the issue

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

expenditure spillovers and fiscal interactions empirical evidence from local governments in spain abstract the paper presents a framework for measuring spillovers resulting from local expenditure policies we identify and test for two different types of expenditure spillovers i benefit spillovers arising from the provision of local public goods and ii crowding spillovers arising from the crowding of facilities by residents in neighboring jurisdictions benefit spillovers are accounted for by assuming that the representative resident enjoys the consumption of a local public good in both his own community and in those surrounding it crowding spillovers are included by considering that a locality s consumption level is influenced by the population living in the surrounding localities we estimate a reaction function with interactions between local governments occurring not only between expenditure levels but also between neighbors populations and expenditures the equation is estimated using data on more than 2500 spanish local governments for the year 1999 the results show that both types of spillovers are relevant

accounting for the change in income disparities between us central cities and their suburbs from 1980 to 1990 in this paper we are concerned with the widely acknowledged policy problem of substantially higher levels of per capita income in suburban areas of us metropolitan areas compared to that of their central cities we focus on causes of changes in this per capita income gap from 1980 to 1990 for those metropolitan areas where such a gap existed in 1980 in an effort to determine what factors are associated with narrowing of these disparities we do so by first describing the relationship between central city and suburban per capita income across american metropolitan areas in 1980 and 1990 we review the connection between the operation of metropolitan labour markets and changes in suburban central city income disparities we then develop regression models of changes in income disparities for all 111 metropolitan statistical areas msas with populations of at least 250 000 in 1980 and where suburban per capita income exceeded central city per capita income in 1980 this is followed by a summary of the results

on fiscal disparities across cities abstract some cities have fewer taxable resources and higher costs for providing public services than do other cities the result which is widely regarded as unfair is a wide variation in the ability of cities to supply public services but our understanding of these fiscal disparities particularly on the cost side is limited this paper provides a general treatment of fiscal disparities by incorporating input and environmental costs into a model of local expenditure determination investigating the consequences of fiscal disparities in a system of local governments including housing price adjustments and migration and designing intergovernmental grants to offset fiscal disparities

poverty and urban public expenditures cities in the us bear a disproportionate responsibility for the public expenditures that grow out of poverty because they contain disproportionate numbers of the poor and because a substantial part

heterogeneity and intertemporal trade finding support for international credit contracts abstract this paper examines the role heterogeneity plays in supporting intertemporal trades between countries when no legal contracts bind sovereign debtors in a dynamic general equilibrium model countries smooth consumption over time by choosing optimal investment and bond sales or purchases countries which follow efficient investment plans and borrow with the intention of repaying debts may nevertheless find default to be in their best interest credit ceilings which eliminate default eliminate some if not all intertemporal trades positive credit ceilings arise only when there is sufficient intertemporal heterogeneity to insure that a country s future includes foreign and domestic investment jel f10 f30

on the optimal taxation of capital income abstract we show that in models in which labor services are supplied jointly with human capital the chamley and judd result on zero capital income taxation in the limit extends to labor taxes as long as accumulation technologies are constant returns to scale moreover for a class of widely used preferences consumption taxes are zero in the limit as well however we show by the construction of two examples that these results no longer hold for certains types of restrictions on tax rates or if there are profits generated journal of economic literatureclassification numbers e62 h21

optimal taxation in a life cycle model we extend deaton s atemporal optimal commodity tax model to a life cycle envi ronment in which the individual may choose to work in many periods we are able to con firm the corlett hague intuition goods that are more complementary with leisure should be taxed at higher rates in addition we prove that in the microeconomic framework under lying some popular general equilibrium models if real wage and interest rates are constant over the life cycle the addition of some interest taxation to a consumption tax regime would be welfare improving and that optimal labour tax rates decline with age

the linear expenditure system and the demand for municipal public services the median voter specification revisited following bergstrom and goodman 1973 this paper contributes to the set of studies estimating demand for publicly provided goods and services the main innovation in this paper is methodological as it uses a stone geary utility function to describe median voter preferences unlike in previous studies the local public expenditure function in a simplified linear expenditure system can be derived directly from the theoretical framework the translated expenditure function provides an estimate of the minimum required local public services in each municipality using cross sectional municipal data from france it is found to be at the most 30 per cent of the total per capita expenditure compared with the specification conventionally used in the literature linear and non linear expenditure systems show a greater sensitivity to price and income variations and reveal a greater number of significant variables

the macroeconomics of early retirement early retirement was introduced after the appearance of redundant middle aged workers not entitled to pensions this distortionary policy reduces human capital accumulation and economic growth but shifts part of the tax burden on future generations why was it adopted alternative policies which do not introduce long term distortions but impose a larger cost on the current generation of workers were blocked by a coalition of high income workers who did not plan to retire early but sought to reduce the current tax burden and low income workers who expected to retire early and to benefit from the early retirement pension

the environmental consequences of decentralizing the decision to decentralize abstract environmental statutes that initiate devolution frequently contain provisions that allow tiers of government to control the final assignment of policymaking authority these provisions may allow one tier of government to propose a re assignment of authority and may give other tiers of government the power to veto the proposed transfer of authority using data from the devolution of the resource conservation and recovery act in california we empirically model a dual selection process in which a lower tier government i e a city may assume policymaking authority from an upper tier government i e a county but only if the upper tier entity chooses not to veto the petition using simulation methods we compare the consequences of this policy with those of two alternative devolution policies each devolution policy results in the setting of different levels of public goods across tiers of government each policy also produces markedly different levels of compliance with state environmental standards

assessing the importance of tiebout sorting local heterogeneity from 1850 to 1990 this paper argues that long run trends in geographic segregation are inconsistent with models where residential choice depends solely on local public goods the tiebout hypothesis we develop an extension of the tiebout model that predicts as mobility costs fall the heterogeneity across communities of individual public good preferences and of public good provision must weakly increase given the secular decline in mobility costs these predictions can be evaluated using historical data we find decreasing heterogeneity in policies and proxies for preferences across i a sample of u s municipalities 1870 1990 ii all boston area municipalities 1870 1990 and iii all u s counties 1850 1990

the tiebout model bring back the entrepreneurs several recent papers in the literature have reformulltlated the nature of equilibrium in ifiebout mo lels by alssliuim ing an exogenous number of communities inflexible commullity l ou alaries anti in pirticular inactive lantlowners and developers ihis paper argues that these assumptions are unwarranted and resul1t iin in eterminate solutions and incorrect analyses determinate lon1g run1 solutions require equilibrium in intercommui land markets which in turn require giving lantlowners and or entrepreneurial leveloelers an active role in the models the role of politics in these models and its juxtaposition with entrepreneurial activities are also analyzed

how social security and medicare affect retirement behavior in a world of incomplete markets this paper provides an empirical analysis of how the u s social security and medicare insurance system affect the labor supply of older males in the presence of incomplete markets for loans annuities and health insurance we estimate a detailed dynamic programming dp model of the joint labor supply and social security acceptance decision focusing on a sample of males in the low to middle income brackets whose only pension is social security the dp model delivers a rich set of predictions about the dynamics of retirement behavior and comparisons of actual vs predicted behavior show that the dp model is able to account for wide variety of phenomena observed in the data including the pronounced peaks in the distribution of retirement ages at 62 and 65 the ages of early and normal eligibility for social security benefits respectively we identify a significant fraction of health insurance constrained individuals who have no form of retiree health insurance other than medicare and who can only obtain fairly priced private health insurance via their employer s group health plan the combination of significant individual risk aversion and a long tailed pareto distribution of health care expenditures implies that there is a significant security value for these individuals to remain employed until they are eligible for medicare coverage at age 65 overall our model suggests that a number of heretofore puzzling aspects of retirement behavior can be viewed as artifacts of particular details of the social security rules whose incentive effects are especially strong for lower income individuals and those who do not have access to fairly priced loans annuities and health insurance

the changing spatial concentration of income and poverty among suburbs of large us metropolitan areas after developing a longitudinal data base of civil divisions within 27 large metropolitan areas msas from the 1970 1990 us censuses this study examines changes in the spatial concentration of income and poverty within these msas a series of cross sectional analyses of geographical and social determinants of poverty rates and median household income are used to analyse whether the determinants are changing over time large older central cities in the north east and mid west have experienced increasing poverty and decreases in income relative to their own history and relative to their own suburbs there is some evidence of economic decline in the inner suburbs of these central cities relative to other suburbs but not relative to the central cities the geographical shifts in msa population among suburbs by income between 1970 and 1990 are analysed relative to initial social characteristics of civil divisions the study concludes that the filtering of older residential buildings to and the lower margi

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

aging population and education finance abstract conventional wisdom suggests that aging of population will increase political pressure to tilt the composition of social spending in favor of the elderly while potentially sacrificing other publicly provided goods such as education this view seems to be supported by recent empirical findings that per child public education spending tends to be lower in us jurisdictions with higher fraction of elderly residents do these cross sectional findings also carry the dynamic implication that longevity will lead over time to waning political support for funding of public education this paper challenges such implication we present a model that is consistent with the aforementioned cross sectional regressions yet predicts an overall positive impact of increasing longevity on public education funding and economic growth

sovereign debt as intertemporal barter author s kletzer kenneth m wright brian d abstract borrowing and lending between sovereign parties is modeled as intertemporal barter that smoothes the consumption of a risk averse party subject to endowment shocks the surplus anticipated in the relationship offers sufficient incentive for cooperation by all parties including any other competitive agents who are potential lenders to the sovereign the sole punishments consist of renegotiation proof changes in the path of future payments we show that intertemporal trade can be sustained in the absence of any exogenous enforcement of lending relationships whatsoever that is borrowing and lending are possible under anarchy and are supported by punishments that consist of cheating any cheater long term implicit relationships may be fulfilled as the continual renegotiation of simple incomplete short term loans the analysis suggests that the crucial role of the explicit loan contract is the identification of the relationship and the parties involved

the value of information in production economies abstract it is known that blackwell s 1953 ann math statist 24 265 272 theorem according to which more information always has positive value does not hold in many economic circumstances in particular in exchange economies with random endowments it may fail completely we show that in certain economies with risk averse consumers and risk neutral producers the blackwell theorem holds in competitive equilibrium given that risk sharing markets are absent however in the presence of a risk sharing market it is shown that for crra utility functions all agents may become weakly worse off with better information journal of economic literature classification numbers d51 d80 g14

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