fiscal policy with agents differing in altruism and ability this paper presents an overlapping generations model of growth with individuals differing in productivity and altruism within such a model wealth is entirely held in the steady state by the families with the highest degree of altruism we then look at the macroeconomic and distributive effects of three fiscal policies public debt pay as you go social security and estate taxation under plausible assumption we show that both public debt and social security are neutral a la ricardo but increase inequality we also show that a estate taxation can be pareto worsening even though it can foster income equality

indeterminate steady state equilibria in a one sector model abstract this note introduces an overlapping generations with altruism model based on the assumption that the rich are more patient than the poor all consumers are identical in their exogenous parameters the division of the population into the rich and the poor occurs endogenously it is proved that steady state equilibria are indeterminate

tracing the dynamics of competition evidence from company profits this article proposes a simple approach to analyzing profit dynamics which allows for time varying persistence of profits the time series model is a simple autoregressive process where the dynamics of the persistence parameter follow an autoregressive process using the longest time series available on profits for more than a hundred u s firms we find that there is ample evidence of time variation in the persistence parameter jel l00 c22

the competitive environment hypothesis revisited non linearity nonstationarity and profit persistence much empirical literature dealing with the competitive environment hypothesis tends to find nonstationary behaviour and very high persistence in time series of company profits profit time series is modelled using a simple threshold autoregressive model that allows for nonstationary behaviour over subsamples using a new dataset consisting of profits for more than 150 us companies over a time period of 50 years statistical evidence is presented that the high persistence observed in profits when using linear autoregressive models is often due to the misspecification of the data generating process

the distribution of wealth with imperfect altruism abstract in this paper we study the distribution of wealth in an economy with infinitely lived families individual generations of each family may or may not be altruistic this is represented as a preference shock which follows a first order markov process within each family a feature representingimperfect altruism altruistic individuals care about the welfare of their children and are likely to leave bequests selfish ones do not this results in a non trivial distribution of wealth among families at any point in time we study an economy with a risk free linear production technology and show that a stationary distribution of wealth exists this distribution is discrete and approximates the pareto distribution under additional restrictions we also characterize conditions on the production technology which yields perpetual growth with increasing inequality journal of economic literatureclassification numbers d31 d91 e21

price discrimination in the airline market the effect of market concentration we test the hypothesis that price discrimination increases with competition in the airline market using a large cross section of tickets offered by several carriers on various routes we approximate price discrimination with marginal implicit prices of ticket restrictions that carriers typically use to price discriminate saturday night stayover re quirements and advanced purchase discounts we find that the restrictions are associated with lower airfares but that the discounts are smaller on routes with higher market concentration the results suggest that price dispersion attributed to ticket restrictions increases as markets becomemore competitive

determinacy of equilibrium in stationary economies with both finite and infinite lived consumers abstract we consider the determinacy of perfect foresight equilibrium near steady state equilibria of stationary infinite horizon economies the work of t j kehoe and d k levine econometrica 53 1985 433 453 is generalized by the inclusion of both infinite lived agents and overlapping generations of finite lived agents and the inclusion of production and non depreciating pure rents we show that indeterminacy is possible in robust examples and that the dimension of the indeterminacy can be as large as the number of goods per period we also discuss extreme cases in which determinacy is guaranteed

secular changes in wealth inequality and inheritance data suggest that the distribution of wealth among households in the usa and uk has become more equal over the last century though at least for the usa the pattern may have reversed recently this paper shows that a model in which all households save for life cycle reasons and some for dynastic purposes as well offers a possible or partial explanation the model predicts rising cross sectional equality of wealth when longevity increases there may also be implications about very recent changes expansion of social security programmes and government deficits can lead toward more wealth inequality slower growth may do the same

taxation bequests and short and long run timber supplies an overlapping generations problem this paper uses an overlapping generations model with one sided altruism to study the effects of several forest taxes that target bequests and affect timber supply unlike previous work we investigate bequests and timber supply in both the short and long run when bequests are costly e g taxed the landowner s problem is examined in the short run while the government s problem is examined in the long run assuming the existence of a steady state we also consider taxes targeting harvests growth savings and bequests several new results are established concerning the interactions of taxes that might be used by a government to alter short and long run forest capital stocks i the presence of a forest bequest tax affects the neutrality of harvest tax in both the short and long run ii in the long run the bequest tax decreases bequests and timber supplies when the bequest tax is not present the capital income tax is neutral with respect to bequest and timber supply while the harvest tax is neutral only if forest productivity is also not taxed finally iii in the short run the substitution and total effects of taxes in landowner decisions generally depend on the presence of the bequest tax the results have implications for pigouvian tax design and second best tax choice

altruism intergenerational transfers of time and bequests abstract this paper uses a standard two period overlapping generation model to examine the behavior of an economy where both intergenerational transfers of time and bequests are available while bequests have been examined extensively time transfers have received little or no attention in the literature assuming a log linear utility function and a cobb douglas production function we derive an explicit solution for the dynamics and show that altruistic intergenerational time transfers can take place in presence of a binding non negativity constraint on bequests we also show that with either type of transfers capital is an increasing function of the intergenerational degree of altruism however while with time transfers the labor supply of the young increases with the degree of altruism with bequests it may decrease

intensive and extensive margins of fertility capital accumulation and economic welfare abstract this paper investigates the impact of low fertility on long term capital accumulation and economic welfare we find that the impact differs depending on whether the low fertility arises from a decrease in the fertility of mothers the intensive margin of fertility or the motherhood rate the extensive margin of fertility we show that an increase in the fertility of mothers decreases the capital stock and economic welfare conversely we identify a u shaped relationship between the extensive margin of fertility and the capital stock because of the existence of two opposing effects such that the decline in fertility may reduce economic welfare furthermore we show that an intragenerational income redistribution policy can eliminate the welfare loss resulting from the incomplete market

public pensions and growth abstract this paper investigates the relationship between the size of an unfunded public pension system and economic growth in an overlapping generation economy in which altruistic parents finance the education of their children and leave bequests unlike the existing literature we model intergenerational altruism by assuming that children s income during adulthood is an argument of parental utility unfunded public pensions can promote growth when families face liquidity constraints preventing them from investing optimally in the education of their children we consider two alternative ways of financing a public pension system either by levying social contributions in a lump sum manner or in proportion to labour income we find that there is no case for unfunded public pensions in economies where bequests are operative by contrast there exists a growth maximising size of the public pension system in economies where bequests are not operative and individuals are sufficiently patient

transversality conditions budget constraints and the determinacy of a perfect foresight equilibrium in a monetary growth model the purpose of this paper is to analyze the number of perfect foresight equilibria in a monetary model where the consumer s behavior and the firm s behavior are explicitly derived from an intertemporal optimization we show that the relevant transversality conditions reduce to the satisfaction of the intertemporal budget constraint of the consumer or alternatively of the government the assumption of a separable utility function enables us to characterize completely the perfect foresight equilibria their number is shown to depend both on the specification of the government s policy instruments and on the utility function

renewable resource use and nonseparable amenity benefits we incorporate amenity benefits into an overlapping generations model with a renewable resource as a factor of production source of amenity benefits and store of value unlike the conventional renewable resource problems studied under the assumption of additive consumption and amenity benefits we let amenity benefits affect the utility of consumers in a nonseparable fashion we examine the role that weights given to consumption and amenities have for harvesting and the resource stock we characterize dynamics and stability of steady state equilibria with a logistic resource growth function we demonstrate in parametric and numerical models that the weights given to consumption and amenities in the utility function matter substantially for the steady state equilibrium stock and its stability and dynamics both conventional saddle point equilibria and indeterminacy with infinite number of equilibria and saddle node bifurcation is possible depending on the weights given to consumption and amenities in addition we show that for each inefficient equilibrium stock there is a unique subsidy rate that can move the economy from an inefficient equilibrium to an efficient one the presence of indeterminacy provides a challenge to resource policies because the system becomes unpredictable therefore expectations and market psychology may play an important role in resource utilization and provision of amenities

the power of love abstract we show that the presence of at least one individual who loves its children whatever the intensity of this love allows to avoid a possible global contraction of the economy

ricardian equivalence are the required assumptions defensible abstract ricardian equivalence re requires universal provision of bequests for purely altruistic reasons this paper argues that no defensible set of values for relevant parameters is consistent with this requirement hence observed bequests must at least partly reflect motives inconsistent with re

fiscal policy in a growth model with both altruistic and nonaltruistic agents this paper examines the long run behavior of an overlapping generations model with a population consisting of altruistic and nonaltruistic agents it also studies the effect of fiscal policy on aggregate capital accumulation and on the welfare of both types of agents it shows that an increase in the relative number of nonaltruists is pareto improving in the steady state it also shows that the introduction of public debt or unfunded social security has no effect on the longrun equilibrium but implies a transfer of resources from the nonaltruistic to the altruistic agents finally it indicates that inheritance taxation hurts not only the altruists but also the nonaltruists

the persistence of profit differentials in indian industry the competitive process in a market economy is expected to work to eliminate profit differentials between firms industries in the long run in the indian case we note that quite a large number of industries experience above average profits that persist over time our analysis show that such persistence is higher in fast growing industries with high strategic barriers on the other hand government controls seem to be very effective in discouraging such persistence

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

pay as you go social security and the distribution of altruistic transfers this paper studies the impact of an unfunded social security system on the distribution of altruistic transfers in a framework where savings are due to both life cycle and random altruistic motivations we show that the effect of social security on the distribution of these transfers depends crucially on the strength of the bequest motive in explaining savings behaviour we measure this strength by the expected weight that individuals attach to the utility of future generations on the one hand if the bequest motive is strong then an increase in the social security tax raises the bequests left by altruistic parents on the other hand when the importance of altruism in motivating savings is sufficiently low the increase in the social security tax could result in a reduction of the bequests left by altruistic parents under some conditions on the attitude of individuals toward risk and on the relative returns associated with private saving and social security some implications concerning the transitional effects of introducing an unfunded social security scheme are also discussed

social security reform with impure intergenerational altruism abstract this paper studies the long run aggregate and welfare effects of eliminating social security in a quantitative dynamic general equilibrium life cycle model where parents and their children are linked by voluntary and accidental bequests social security in this model with impure altruism has a smaller effect on capital accumulation than in a pure life cycle model a bigger effect than in a model with two sided altruism the welfare gain of eliminating social security system under impure altruism is smaller than that in a pure life cycle model and bigger than that in a model with two sided altruism

the persistence of profit a new empirical interpretation abstract inferences are drawn about the true coefficients which correspond to sample estimates of a persistence of profit model fitted over a large number of firms this is done by generating simulated sampling distributions for the estimators over various distributional assumptions profits seem to be stationary for all firms with an average short run persistence coefficient of 0 59 higher than most previous estimates long run profit rates differ between firms although by less than is suggested by direct observation of variations in mean profit rates calculated over time short run persistence appears to be inversely related to unsystematic variation in profit

calculating concentration index with repetitive values of indicators of economic welfare repetitive values of the ranking indicators of economic welfare are often introduced due to incidental ties or censoring in the welfare variable or the categorical nature of welfare variables used in numerous national surveys in calculating concentration index ci assigning different fractional ranks to observations that have same values of the welfare measure leads to unstable and inconsistent ci estimates when the welfare variable is categorical or censored in this paper we establish an interval within which the ci estimates lie and propose a solution which is an extension of kakwani n c wagstaff a van doorslaer e 1997 socioeconomic inequalities in health measurement computation and statistical inference journal of econometrics 77 87 103 for consistent and replicable estimates of ci when there are a substantial number of ties of the welfare indicator

on barro s theorem of debt neutrality the irrelevance of net wealth the effects of national debt on real economic activity has been a recurring topic in the literature on macroeconomic policy analysis since the time of adam smith the problem is usually stated as follows for a given level of government spending is the economy sensitive to the financing mix between tax and debt historically attention has focused on the question of whether or not individuals perceive government bonds as net wealth the link between wealth and real activity being taken as given the main point of debate is well established the issue of bonds raises private assets by the full value of the bonds the corresponding tax liabilities for interest payments and retirement of the debt extend indefinitely into the future the perception of bonds as net wealth would then appear to depend on the length of the individual s optimization horizon the most recent contribution to this debate was made by robert barro 1974 in which he argued that despite the limitation of finite lives bonds will not be regarded as net wealth in a system characterized by operative intergenerational transfers the essence of his argument is that inclusion of a bequest motive effectively converts a finite horizon into an infinite one in that paper barro acknowledged a potential limitation on his proof of the neutrality result it was only valid for bonds that are redeemed at a known point in the future this limitation was raised again in a subsequent exchange with martin feldstein in which barro 1976 agreed that for a growing economy an increase in steady state per capita debt will generate net wealth if the rate of growth is greater than the interest rate however he argued that such a steadystate growth situation would not be consistent with rational utility maximizing behavior the main theme of this paper is that the literature has focused attention on the wrong question the real effects of national debt are independent of whether or not individuals perceive the debt as net wealth the correct question is whether or not changes in the level of debt force individuals into patterns of intertemporal consumption that they are unable to neutralize by adjustments in their portfolio behavior viewing neutrality in this light leads to some reinterpretation of the conditions under which neutrality is likely to hold my analysis starts where barro and feldstein leave off within the framework of the overlapping generations model with gift and bequest motives i show that steady state equilibrium growth is consistent with a growth rate in excess of the interest rate indeed without specific knowledge of the parameters of the economy there are no a priori grounds on which to expect any particular relationship between the growth and interest rates more importantly so long as it is valid to view the aggregate economy as behaving like a composite individual changes in the steady state level of government debt are neutral regardless of which relationship prevails provided one or the other of the intergenerational transfer motives is operative i will refer to this as the extended neutrality theorem section i presents an analysis of steadystate growth with gift and bequest behavior the steady state growth path is shown to lie above the golden rule solution if the gift

dynamic efficiency in the gifts economy abstract in the standard analysis of overlapping generations economies with gifts from children to parents each generation takes the actions of other generations as given the resulting equilibrium is dynamically inefficient in reality however parents realize that children will respond to higher parental saving by reducing gifts for a broad class of gift economies this implicit tax on saving pushes the equilibrium to dynamic efficiency this result reestablishes the potential relevance of the gift model to the us economy renders moot an important part of the ricardian equivalence debate and provides a motivation for a type of social security system

political equilibrium income distribution and growth this paper analyzes the impact of income distribution on growth when investment in human capital is the source of growth and individuals vote over the degree of redistribution in the economy the model has three main features first very different patterns of income distribution are conducive to high growth at different levels of per capita income second growth is associated with an externality whereby investment in human capital by one group increases the productivity of other groups thus potentially enabling them to invest in human capital third the initial pattern of income distribution and the resulting political equilibrium are crucial in determining whether the transmission of this externality is promoted in which case growth is enhanced or prevented in which case growth is stopped using a non overlapping generations model with voting i derive several empirical implications in particular the model implies an inverted u relation between levels of inequality and levels of income in cross sections but not necessarily in time series a result that seems consistent with a number of empirical studies

inequality aversion health inequalities and health achievement this paper addresses two issues the first is how health inequalities can be measured in such a way as to take into account policymakers attitudes towards inequality the gini coefficient and the related concentration index embody one particular set of value judgements by generalising these indices alternative sets of value judgements can be reflected the other issue addressed is how information on health inequality can be used together with information on the mean of the relevant distribution to obtain an overall measure of health achievement

random earnings differences lifetime liquidity constraints and altruistic intergenerational transfers abstract this paper develops a model of private savings behavior in which households care about their descendants cannot have negative net worth and have lifetime earnings depending on random draws from an exogenous distribution of abilities the elements interact very lucky parents are likely to leave large estates constrained children are unusually likely to receive intergenerational transfers the paper proves the existence of a stationary cross sectional distribution of wealth endogenously determines where liquidity constraints will bind and shows that the long term interest rate must be such that ricardian neutrality fails its last section generates several illustrative numerical simulations

calculating the concentration index when income is grouped the problem introduced by grouping income data when measuring socioeconomic inequalities in health and health care has been highlighted in a recent study in this journal we re examine this issue and show there is a tendency to underestimate the concentration index at an increasing rate when lowering the number of income categories this tendency arises due to a form of measurement error and we propose two correction methods firstly the use of instrumental variables iv can reduce the error within income categories secondly through a simple formula for correction that is based only on the number of groups we find that the simple correction formula reduces the impact of grouping and always outperforms the iv approach use of this correction can substantially improve comparisons of the concentration index both across countries and across time

time preference and international labor migration abstract this paper analyzes the pattern and welfare implications of international labor migration within a dynamic general equilibrium model in a two country overlapping generations world labor migrates unilaterally from the high low to the low high time preference country if both countries under over invest relative to the golden rule bilateral migration a theoretical novelty occurs if the countries are on opposite sides of the golden rule steady state welfare analysis is conducted where in contrast to existing results unilateral migration immiserizes non migrants in the immigration country while making non migrants in the immigration country at least as well off bilateral migration may improve world welfare

a political theory of government debt and deficits in a neo ricardian framework in the presence of different abilities and therefore different bequests some individuals are bequest constrained even in a neo ricardian world such individuals vote for taxes on future generations through the issuance of bonds thereby increasing their current consumption this produces some crowding out of capital reduces wage rates and increases the interest rate as a consequence even unconstrained individuals are no longer indifferent to the size of government debt the paper derives conditions that are conducive to larger debt and deficits when each of the living generations determines current taxes social security benefits and the national debt by majority rule copyright 1989 by american economic association

determinacy of equilibrium in an overlapping generations model with heterogeneous agents abstract we study the determinacy of perfect foresight equilibrium near a steady state in an overlapping generations model with production and both altruistic and non altruistic agents having distinct utility functions the proportion of each type of consumer is exogenously given our main results show that when there are positive stationary bequests some standard assumptions on preferences and technology rule out local indeterminacy for any positive value of the proportions in the particular case of a separable utility function for altruistic agents we prove that the determinacy property does not depend on the size of the infinite lived altruistic dynasties journal of economic literature classification numbers c62 d91 o21 o41

a bequest constrained economy welfare analysis bequest constraints have played a major role in discussions of debt neutrality but their welfare implications were not sufficiently dealt with in the literature in this paper we focus on the welfare implications of bequest constraints we found that when institutional constraints to the transfer of resources from children to their parents exists the welfare of the parents generation may be improved by an old age security scheme such a scheme is justified not by income redistribution consideration as is typically the case but rather on pure efficiency grounds due to its intergenerational transfer role the social security scheme is pareto improving with altruistic parents if in addition the real income effect which tends to raise children consumption is relatively strong this abstract was borrowed from another version of this item

government debt redistributive fiscal policies and the interaction between borrowing constraints and intergenerational altrusim abstract we show how borrowing constraints intergenerational altruism and their interaction shape the aggregate savings response to government debt and fiscal policies that redistribute resources between living generations we also characterize the conditions under which borrowing constraints bind and the altruistic transfer motive operates in terms of the strength of the altruism motive the shape of the lifetime productivity profile the willingness to substitute consumption intertemporally and other factors finally we characterize the dynamic response of aggregate savings to nonneutral government debt policies in economies with binding borrowing constraints

persistence of profitability and competition in emerging markets abstract this paper reports on time series analyses of the persistence of profitability of firms in emerging markets its central result is that there is less persistence in developing than in advanced economies the implications for the intensity of competition in emerging markets are examined

efficiency in economic growth models under uncertainty abstract we consider an infinite horizon economy with stochastic production and consumption we define efficiency of feasible production consumption programs without referring to a particular utility function using stochastic ordering a complete characterization of inefficiency of type i is obtained equivalence between type ii efficiency and a certain optimality notion when decision makers are risk averse is proved when the number of states of nature is finite at each date

the role of altruism in economic interaction abstract this paper considers environments in which the population consists of a mix of altruists and egoists and asks under what situations do altruists have a disproportionately large effect on equilibrium and under what situations is it the egoists we begin by presenting a general framework for answering this question we then apply the framework to the analysis of three economic environments 1 the classic problem referred to as the prisoner s dilemma 2 a world where agents decide whether or not to pollute the environment and 3 a world where agents decide whether or not to donate blood

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

household response to government debt evidence from life insurance holdings we use state level panel data on life insurance in force in the united states and find that a 1 increase in government debt at either the state or federal level is associated with a 0 96 increase in the face value of the average life insurance holdings per capita for a household in the average state this increase represents an intention to save that would almost completely offset the government debt in specific states of the world i e if the insured dies because this state of the world is rare the immediate increase in actual savings is only about 0 03 the cost of the additional insurance we find in addition that this response occurs mainly on the intensive margin meaning that the size of the average life insurance policy increases when government debt increases along the extensive margin we find the number of policies in force falls slightly with federal debt and rises slightly with state debt increases the results show altruistic planning in response to changes in government debt that are consistent with ricardian equivalence and the long run neutrality of government debt

public debt positional concerns and wealth inequality abstract we consider an ak growth model with positional concerns and public debt financed by distortionary income taxes we show that if positional concerns are not too strong there is a threshold level of the debt to gdp ratio for the debt to gdp ratio below this level the economy converges to a unique egalitarian balanced growth equilibrium whereas if this ratio is above the threshold level the economy eventually settles on a two class balanced growth equilibrium the rate of growth in the egalitarian equilibrium is higher than that in any possible two class equilibrium thus a reduction in public debt may cause the economy to switch from the two class regime to the egalitarian regime and accelerate growth our results also suggest that policies aimed at reducing initial inequality using public debt may in fact increase wealth inequality in the long run

the timing of intergenerational transfers tax policy and aggregate savings the authors analyze an overlapping generations framework that accommodates two observations 1 the interest rate on consumption loans exceeds the rate of return to savings and 2 private intergenerational transfers primarily occur early in the life cycle assuming altruistically motivated transfers in at least some family lines and other plausible conditions the authors prove the invariance of capital s steady state marginal product to government debt government expenditures and the tax rates on labor and capital income the authors show that the tax treatment of household interest payments has powerful effects on capital intensity and aggregate savings in life cycle and especially altruistic linkage models copyright 1992 by american economic association

does the persistence of profits persist a study of company profits in japan 1964 97 abstract earlier in a time series study of the profit rates of japanese manufacturing firms odagiri and yamawaki concluded that profits persist with the addition of 15 more years of data up to 1997 this conclusion is shown to stand the test of time in particular those firms estimated to earn higher than average long run profit rates in the early study were again estimated to earn higher than average long run profit rates the force of convergence was also found to be at work for instance the firms most profitable in period 1 1964 82 were most likely to face a decline in estimated long run profit rates from period 1 to period 2 1983 97 with the use of two sets of data the firm s profit performance was found to be positively related to measures of market share first among a smaller sample of firms for which reliable market share data could be matched market share was estimated to have a significant positive effect on long run profit rate in either period secondly among the entire sample of 357 firms the long run profit rate in either period was estimated to be positively associated with firm sales relative to industry sales which presumably is a crude measure of market share

is there a causal effect of concentration on persistent profitability differentials this article searches for a causal effect of industry concentration on estimates of persistent profitability differentials i offer solutions to identification problems that plague related analyses by applying an iv and a natural experiment this is the first study that explains estimates of persistent profit differentials using business segments data allowing to match micro and industry level data more consistently testing linear relations critical concentration levels and interactions with mobility barriers i find no evidence that concentration has any positive effect on long run profitability differences results rather tend to point to a statistically and economically significant negative causal effect

a neoclassical perspective on budget deficits i n the 1988 presidential campaign virtually every serious candidate spoke of the urgent need to trim government budget deficits public opinion polls have identified federal deficits as a key economic issue second only to unemployment while many economists are relieved by what they perceive to be a long overdue political response to a critical economic problem others regard the fuss as much ado about nothing it is indeed remarkable that economists can disagree so severely over an issue which commands such a uniform reaction from laymen of widely different ideologies and political affiliations generally speaking there are three schools of thought concerning the economic effects of budget deficits neoclassical keynesian and ricardian before proceeding further it is useful to review the basic structure and implications of each paradigm the neoclassical paradigm envisions farsighted individuals planning consumption over their own life cycles budget deficits raise total lifetime consumption by shifting taxes to subsequent generations if economic resources are fully employed increased consumption necessarily implies decreased saving interest rates must then rise to bring capital markets into balance thus persistent deficits crowd out private capital accumulation in the current economic environment most economists would agree that these consequences would be highly detrimental

heterogeneous dynasties and the political economy of public debt we consider a small open overlapping generations economy with descending altruism heterogeneity is introduced by assuming that each parent procreates a fixed proportion of selfish children altruistic parents can recognize the type of each child there is no ricardian equivalence and an active public intergenerational transfer policy is attractive to altruistic dynasty members although there may be no unanimity among them we display reasonable conditions for indirect preferences to be single peaked and we apply the median voter theorem we then describe political equilibrium paths and discuss their compatibility with the steady path of an underlying closed economy with autonomous labor productivity growth

equilibrium existence in an overlapping generations model with altruistic preferences abstract we prove the existence of a competitive equilibrium in an overlapping generations model with altruistic preferences and nonnegative bequests in equilibrium some sequences of agents of successive generations may be continually linked by positive bequests and act as infinitely lived agents other sequences of agents may not be so linked and therefore behave as sequences of finite lived agents thus this paper adds to the literature on competitive equilibrium in dynamic models by endogenising the mix of finite and infinitely lived agents we also discuss optimality and provide some examples which exhibit interesting equilibria

profit persistence in the very long run evidence from survivors and exiters one of the main shortcomings of the profit persistence literature is the fact that it looks only at surviving companies this paper uses a unique dataset to analyse profit persistence in two different samples of stationary series 85 surviving us companies from 1950 1999 and 72 exiters while the exiters perform more competitively than the survivors there is still significant evidence for profit persistence in both samples concentration and growth of the industry as well as size and volatility of profits seem to play an important role in explaining persistence

government debt in an overlapping generations model with bequests and gifts in 1974 robert barro argued that if individuals in successive generations were linked by bequests changes in the stock of government debt or in social security programs would have no effect on the steady state capital stock barro assumed that individuals held static expectations and that the size of the population was constant martin feldstein 1974 1977 had concluded that social security would reduce the capital labor ratio in models that did not admit a bequest motive and in his 1976 comment on barro argued that the introduction of government debt or social security into a perfect foresight dynamic growth model with bequests would still reduce the capital labor ratio barro replied that feldstein s criticisms were invalid if the steady state capital labor ratio were smaller than the golden rule level but would be correct if the opposite were true barro did suggest however that the latter possibility with overaccumulation of capital might be ruled out in his model as it was in miguel sidrauski 1967 but he was unable to demonstrate that the required behavior would be consistent with utility maximization by finite lived individuals 1976 p 345 although recent work by willem buiter 1979 jeffrey carmichael 1979 1982 truman bewley 1981 a b and others has helped to elucidate the nature of overlapping generations models with bequests and gifts and the issues in the barro feldstein debate they remain far from clear the purpose of this paper is to shed a little more light on the subject in what follows i contend that some of the authors cited above either have specified the individual s optimization problem in an asymmetric way or have failed to impose necessary conditions for a sensible optimization problem or both there is a natural specification of the barro model 1 that emphasizes the similarity between this model and optimal growth models see for example david cass 1965 peter diamond 1973 here in steady state equilibrium the aftertax interest rate r must equal the rate at which individuals discount the utility of their heirs p r p has become known as the modified golden rule and a meaningful individual optimization problem requires that p exceed n the natural growth rate of the economy my results confirm barro s hunch about his model in a barro model r must exceed n much of the barro feldstein 1976 interchange which assumed that r could have any relation to n is wrong headed barro and feldstein reach different conclusions about the effects of government debt and social security because they assume different individual utility functions also my results contrast sharply with those of buiter and carmichael for example carmichael concluded that with intergenerational transfers from parents to children bequests r must exceed n but with transfers in the opposite direction n must exceed r 1982 pp 205 06 indeed i believe that the buiter carmichael representation of the barro model is logically faulty see section ii in section i i outline an overlapping generations model with gifts and bequests and derive its steady state properties in the next section i discuss the shortand long run effects of introducing government debt into the model and contrast my results with those

bequest motives social security and economic growth junxi zhang this article conducts a systematic analysis of four bequest motives in a simple model of endogenous growth it analyzes how bequest motives affect fertility savings growth and the effects of pay as you go social security it is found that altruistic and exchange motives give equivalent outcomes if the discount factors are set the same the outcome under the joy of giving motive may involve a higher bequest ratio higher saving and better growth rates than that under altruism if bequests are accidental the equilibrium values will depend on the probability of survival moreover the results provide testable implications on bequest motives jel d1 d9 h55 j1 i introduction although the importance of bequests in aggregate savings has been established by kotlikoff and summers 1981 who reported that 80 of u s household wealth is inherited wealth what bequest motives lead to inheritance remains an unsolved problem yet it is well known that bequest motives have important implications for the behavior of financial markets the macroeconomic impacts of fiscal policies and the intergenerational transmission of inequality in the distribution of wealth at least four hypotheses for the existence of bequests have been discussed in the literature 1 bequests may arise from intergenerational altruism that is parents obtain utility from their heirs utility as well as from their own consumption barro 1974 2 the prospect of bequests is used by parents to induce children to behave as desired by parents bernheim et al 1985 3 bequests may arise from the joy of giving that is parents leave bequests simply because they obtain utility directly from the bequest yaari 1964 1 and 4 bequests may be the unintentional by product of precautionary savings and a stochastic date of death in the absence of an annuity market abel 1985 following barro 1974 and becker 1974 the altruistic bequest motive has been used most frequently however the enormous empirical work using micro data has not led to conclusive evidence on the one hand bernheim et al 1985 cox 1987 and cox and rank 1992 show that bequests are more consistent with exchange than altruism altonji et al 1992 1997 also show that altruism is decisively rejected moreover wilhelm 1996 finds little support for an altruistic theory of bequests on the other hand a recent reexamination of the exchange motive by perozek 1998 shows that the finding of bernheim et al is not robust laitner and juster 1996 find some evidence of altruistic bequests therefore a definite conclusion on bequest motives seems far from over indeed though altruism has not been supported by most of those empirical studies it remains a plausible hypothesis and continues to be used frequently see e g coate 1995 and davies and zhang 1995 abel 1985 argues theoretically that although the simple life cycle model without bequest motives is an inadequate description of the savi ng behavior in the united states as found in kotlikoff and summers 1981 accidental bequests by selfish consumers can account for a sizable fraction of aggregate wealth however little formal empirical work has been done to test whether bequests are accidental or arise from joy of giving given the lack of consensus on bequest motives it is interesting to conduct a systematic theoretical analysis of different bequest motives in a particular context becker et al 1990 and caballe 1995 assume altruism in their models of economic growth wiedmer s 1996 analysis of social security and growth does not consider bequests except ihori 1994 there seems to be no analysis of other bequest motives in the context of economic growth the purpose of this article is to analyze how different bequest motives affect fertility savings and economic growth the article will also examine how the effects of pay as you go social security depend on bequest motives

love thy children abstract this paper proves that barro s 1974 debt neutrality proposition whose relevance hinges in an economy with bequest motives on bequests being operative in the economy without public debt is not applicable to a wide class of overlapping generation economies those with a weak bequest motive in particular it is shown that the bequest motive is always too weak and public debt therefore non neutral when non physical assets have a well defined function reducing oversavings in the corresponding economy without bequest motive i e when the non altruistic economy is dynamically inefficient

persistence of firm level profitability in turkey the dynamics of company profits for 172 of the largest manufacturing firms in turkey are studied a time series analysis is used to estimate the long run projected profits and firm specific speed of adjustment parameters that measures the rate at which short run rents are eroded while persistent profitability differences across firms are observed there is also a moderately quick erosion of rents except for the most highly profitable firms firm characteristics rather than industry effects account for the differences in permanent profits contrary to the widespread view that developing countries suffer from uncompetitive markets the results in this paper suggest that the intensity of competition in turkey is no less than in developed countries and similar to other developing countries

bequest motives a comparison of sweden and the united states this paper reviews four well known theoretical models of private bequest behavior notes their differing implications for public policy and discusses a way of empirically dis criminating among them then it implements the test with micro data from sweden lls and the u s psid the so called altruistic or dynastic model which among the four models has perhaps the most wide ranging implications for policy receives some support the sign pattern is as the model predicts while the magnitude is much smaller than the altruistic theory implies there is evidence of a potential complication due to a dependence of children s education on parents financial status in the case of the u s 2001 elsevier science b v all rights reserved

the dynamics of company profits an international comparison 1 profits and the process of competition dennis c mueller 2 modelling persistent profitability paul a geroski 3 the persistence of profits in the united states dennis c mueller 4 the persistence of profits in us manufacturing industries ioannis kessides 5 the persistence of profitability in canada r shyam khemani and d m shapiro 6 persistence of corporate profits in the federal republic of germany joachim schwalbach and talat mahmood 7 the persistence of profits in france frederic jenny and andre paul weber 8 the persistence of profits in japan hiroyuki odagiri and hideki yamawaki 9 the persistence of profits in the uk john cubbin and paul a geroski 10 the persistence of profits international comparison hiroyuki odagiri and hideki yamawaki 11 the persistence of profits in perspective paul a geroski and dennis c mueller