buffer stocks and precautionary savings with loss aversion abstract this paper reexamines buffer stocks and precautionary savings in the presence of loss aversion we assume that agents are disappointment averse as in gul econometrica 59 1991 667 686 we show that the concavity of the marginal utility continues to determine precautionary saving but its effect is of a second order magnitude proportional to the square of the coefficient of variation compared to the first order effect proportional to the coefficient of variation induced by loss aversion we show that a stabilization fund that is rather small when agents are maximizing the conventional expected utility turns out to be rather large with loss aversion

limit order submission strategies under asymmetric information abstract this paper provides evidence that informed traders dominate the response of limit order submissions to shocks in a pure limit order market in the market we study informed traders are highly sensitive to spreads volatility momentum and depth by contrast uninformed traders are relatively insensitive to all these market conditions the dominance of the informed over limit order submissions is magnified by contrasts between them and the uninformed in the use of aggressively priced limit orders

the political economy of public income volatility with an application to the resource curse abstract in recent years many countries have witnessed a great deal of volatility in public budgets be it due to volatility in the access to foreign loans in greece or to unstable oil prices in venezuela we study the political consequences of such public income volatility as is standard in our model political incentives create inefficient policies to increase re election probabilities but we show that making public income uncertain creates specific new effects future volatility reduces the benefit of being in power making policy more efficient yet at the same time it also reduces the re election probability of an incumbent and since some of the policy inefficiencies are concentrated in the future this makes inefficient policy such as patronage public employment less costly our model highlights a new political economy connection between the volatility of the public budget and economic growth in the case where volatility comes from natural resource prices a characteristic of many developing countries we show that volatility in itself may be a source of inefficient resource extraction jointly interacting with increased patronage employment

the political economy of public savings and the role of capital mobility abstract this paper explains public saving and investment in economies where many groups compete for scarce public funds we show that there is a collective action problem if there is no strong center then this problem manifests itself in a very low savings and investment rates in the extreme current spending may be determined simply by the current tax income and access to borrowing this explains why in the face of a temporary boom governments may not save but may even borrow more to finance even higher levels of expenditure we deal also with several mitigating factors repetition insiders outsiders interaction elections

common property resources storage facilities and ownership structures a cournot model of the oil market during the last decade economists have tried hard to convince meadows and his followers that market forces do not tend to exhaust our natural resources too rapidly as compared with the requirements of an intertemporal pareto optimum it is well known now that under well defined property rights and correct price expectations a competitive extraction industry brings about a pareto optimal depletion path and it has been shown that oligopolistic and monopolistic market structures may even produce a bias towards conservation 1 it is still an unresolved issue however which extraction path will result if property rights are imperfectly defined following the pioneering work of gordon 1954 there has been a large body of literature demonstrating that in the extreme case of free entry and myopic profit maximization there are strong reasons for excessive extraction 2 but this literature hardly yields reliable conclusions for the perhaps more realistic case where firms derive their behaviour from intertemporal optimization and where there is a common ownership but limited access to the resource the basic intuition behind the common pool problem is that the individual agent chooses an extraction policy other than the one he would choose under well defined property rights since he is afraid that part of the resource he leaves underground will be extracted and sold by others 3 despite the simplicity of this intuition there does not seem to be any publication that analyses it within an intertemporal equilibrium model with rational and far sighted agents this is the motivation for the present approach the approach studies the common pool problem in the context of an oligopolistic world market for oil it posits a given number of identical firms extracting oil from holdings between some of which there is mutual seepage the firms sell the extracted oil in the same market or they store it in privately owned seepage proof tanks each firm derives its behaviour from intertemporal optimization under perfect foresight of the time paths of the model variables but cournotesque conjectures about the reactions of its competitors except for the assumption of storage facilities this specification is closely related to models previously studied by khalatbari 1977 and kemp and long 1980 essay 10 4 the two models are very similar but they yield strikingly different conclusions while kemp and long find that the extraction path chosen by the firms is pareto optimal i e that the price of the resource rises at a rate given by the market rate of interest khalatbari contends that there is over extraction kemp and long convincingly demonstrate that khalatbari s model suffers from an inconsistency in the way the individual firm expects its rivals to respond to its own actions and they argue that this inconsistency is the reason for the divergence in results thus the casual reader gets the

oligopoly equilibria in nonrenewable resource markets abstract most nash cournot oligopoly models of nonrenewable resources apply open loop equilibrium concepts and are based on physical resource depletion this paper studies feedback equilibria and economic depletion assuming affine quadratic functional forms the existence uniqueness and explicit solutions for the equilibria are derived for duopoly and n player oligopoly with multiple resource stocks for the cases of nonquadratic criteria we develop a numeric solution scheme for the nash feedback equilibrium this scheme is an application of a discrete time discrete state controlled markov chain approximation method originally developed for solving deterministic and stochastic dynamic optimization problems in our nash cournot equilibrium the degree of concentration in supply declines over time whereas the previous models with physical depletion and open loop equilibrium concepts predict that a nash cournot resource market will develop in the direction of monopoly supply

uncertain lifetime and intertemporal choice risk aversion as a rationale for time discounting this article makes explicit the links between preferences over lotteries on length of life and intertemporal choice it shows that the approach used by traditional life cycle models to account for uncertain survival corresponds to a strong assumption of risk neutrality with respect to length of life relaxing such an assumption leads us to develop a more general formulation of lifetime utility in which time discounting is directly related to preferences over length of life exponential and hyperbolic discounting are found to result in a first approximation from constant and hyperbolic risk aversion with respect to length of life

strong time consistency in the cartel versus fringe model due to developments on the oil market in the 1970s the theory of exhaustible resources was extended with the cartel versus fringe model to characterize markets with one big coherent cartel and a large number of small suppliers called the fringe because cartel and fringe are leader and follower the von stackelberg solution concept is appropriate for the supply side of this market the solution for the cartel versus fringe model presented in the previous literature proved to be time inconsistent for a large plausible range of values for extraction costs and initial reserves this paper provides a strongly time consistent solution for the cartel versus fringe model

oil depletion and development in cameroon a critical appraisal of the permanent income hypothesis this paper focuses on medium term policy options in the economic context of natural resource depletion in particular a novel approach for analyzing the impact of the permanent income hypothesis pih with a dynamic recursive computable general equilibrium cge model is employed the model is benchmarked in an oil producing country with declining production namely cameroon the results show that the pih renders public finances less vulnerable during the post oil transition however adopting the pih is not associated with substantial improvements in growth and household welfare in cameroon therefore the pih cannot be the only basis for better management of oil revenues in the country

a closed form solution for a model of precautionary saving this paper analyses life cycle consumption plans and distinguishes between temporal risk aversion and intertemporal substitution the results assume that felicity functions are quadratic and that income follows a linear model with normally distributed errors stochastic dynamic programming then yields closed loop linear decision rules certainty equivalence no longer holds but instead households play a min max strategy against nature one finds a rationale for precautionary saving and a larger sensitivity of changes in consumption to income innovations

the employment effects of low wage subsidies abstract low wage subsidies are often proposed as a solution to the unemployment problem among the low skilled but the empirical evidence on their effects is still scarce this paper examines the employment effects of a finnish payroll tax subsidy scheme which is targeted at the employers of older full time low wage workers the system s clear eligibility criteria open up an opportunity for a reliable estimation of the causal impacts of the subsidy scheme our results indicate that the subsidy system had no effect on the employment rate or wages of the eligible groups but it increased slightly working hours among those already at work

a theory of disappointment aversion an axiomatic model of preferences over lotteries is developed it is shown that this model is consistent with the allais paradox includes expected utility theory as a special case and is only one parameter beta richer than the expected utility model allais paradox type behavior is identified with positive values of beta preferences with positive beta are said to be disappointment averse it is shown that risk aversion implies disappointment aversion and that the arrow pratt measures of risk aversion can be generalized in a straight forward manner to the current framework copyright 1991 by the econometric society

how to eat a cake of unknown size a reconsideration abstract the paper revisits the issue of the optimal depletion of an exhaustible resource stock of uncertain size by recasting it in terms of the hazard function in addition to re establishing some of the existing results it obtains a complete qualitative characterization of the optimal depletion program for a fairly large array of continuous probability distributions that are likely to describe the initial stock distribution it turns out that an important feature of the optimal program is the eventual monotonicity of the optimal extraction cum consumption rate so characteristic of the certainty scenario additional results regarding the duration of the optimal planning horizon and comparison with the situation of perfect certainty provide further insight into the nature of the optimal depletion program for the iso elastic utility function

on the optimal order of natural resource use when the capacity of the inexhaustible substitute is limited consider a general equilibrium framework where the marginal cost of extraction from several deposits of an exhaustible resource is constant in terms of an inexhaustible perfect substitute and differs between deposits the instantaneous rate of production form the inexhaustible resource is subject to a capacity constraint

the demand for enhanced annuities abstract this paper examines market reaction to the introduction of enhanced annuities in a market for deferred standard annuities the previous literature shows that individuals can try to avoid risk classification by contracting a standard annuity earlier in their life this paper offers a new perspective to the timing of the annuity purchase under the assumption that individuals already have an idea about their future risk type when young which becomes clearer over time it shows that enhanced annuities can crowd out earlier standard annuities completely if the individuals have incomplete knowledge of their future risk type however if individuals are sufficiently risk averse and there is a sufficiently high proportion of low risks in the population both products can remain in the market where lower risk types buy enhanced annuities while the higher risks stick to the early standard annuities the paper identifies the equilibrium candidate with both annuity types to be pareto superior and the unique equilibrium

redistribution by insurance market regulation analyzing a ban on gender based retirement annuities we illustrate how equilibrium screening models can be used to evaluate the economic consequences of insurance market regulation we calibrate and solve a model of the united kingdom s compulsory annuity market and examine the impact of gender based pricing restrictions we find that the endogenous adjustment of annuity contract menus in response to such restrictions can undo up to half of the redistribution from men to women that would occur with exogenous social security like annuity contracts our findings indicate the importance of endogenous contract responses and illustrate the feasibility of employing theoretical insurance market equilibrium models for quantitative policy analysis

the individual life cycle annuity market imperfections and economic growth we study the effects of an annuity market imperfection on individual agents life cycle decisions and on the macroeconomic growth rate in an overlapping generations model with single sector endogenous growth our model features both age dependent mortality and labour productivity we model imperfect annuities by introducing a load factor on the annuity rate faced by finitely lived agents our main finding is that annuity market imperfections decrease economic growth because less assets are necessary for consumption late in life in addition we find that both the quantitative and qualitative effects of annuity market imperfections are grossly overestimated in a partial equilibrium analysis because it disregards general equilibrium repercussions

capital accumulation and annuities in an adverse selection economy this paper suggests that adverse selection problems in competitive annuity markets can generate quantity constrained equilibria in which some agents whose length of lifetime is uncertain find it advantageous to accumulate capital privately this occurs despite the higher rates of return on annuities the welfare properties of these allocations are analyzed it is shown that the level of capital accumulation is excessive in a paretian sense policies that eliminate this inefficiency are discussed copyright 1987 by university of chicago press

a theory of oil igopoly cournot equilibrium in exhaustible resource markets with fixed supplies the emergence of an effective and powerful cartel in the international petroleum market has stimulated considerable effort among economists to develop models of pricing and supply behavior for this industry 2 this modeling task poses two basic difficulties first as in the standard oligopoly problem one must characterize the behavior of several sellers in a market aware of each other and of their effect on market price second there is here the added difficulty of treating the explicitly intertemporal nature of suppliers decision wherein a limited stock must be optimally allocated over time this paper studies the implications of the simplest non trivial postulates about these two aspects of the problem it is assumed that suppliers are non cooperative cournot nash players each of whom is imagined to select an optimal supply strategy taking as given the strategies of the others moreover it is hypothesized that the feasible strategies are limited to open loop paths chosen at the initial date to maximize the present value of profits in light of the paths of supply which the others have chosen 3 these basic postulates together with a few technical assumptions concerning the structure of resource demand permit one to demonstrate the existence of at least one non cooperative equilibrium concerning thisequilibrium we show that 1 the average and marginal return on resource stocks is inversely related to the size of a player s initial endowment 2 aggregate production decreases over time until all stocks are exhausted while firms with smaller stocks exhaust their supplies no later than firms with larger stocks do 3 the present value of price net of extraction cost declines over time 4 industry production maximizes a weighted average of intertemporal consumer s surplus and producers profits

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

international investment and colonial control a new interpretation the impact of economic factors on colonial imperialism in the late nineteenth century has long been a topic of debate this article examines the expected relationship between different forms of international investment and different patterns of political ties between developed and developing countries drawing on the literature on relational contracts and collective action it argues that direct colonial control was likely to be associated with cross border investments whose rents were particularly easy to seize or protect and whose protection did not require multilateral action where such rents were difficult to seize or protect unilaterally colonialism is expected to be less likely the most common example of the former sort of investment is primary raw materials or agricultural investment of the latter multinational manufacturing affiliates the argument is weighed against both a survey of the qualitative evidence and some simple quantitative evaluations the approach also has potential applications to more general problems of international conflict and cooperation

the optimal production of an exhaustible resource when price is exogenous and stochastic this paper examines the optimal production of a resource such as oil when its price is determined exogenously e g by a cartel such as opec and is subject to stochastic fluctuations away from an expected growth path we first examine the dependence of production on extraction cost and show that the conventional exponential decline curve is indeed optimal if marginal cost is constant with respect to the rate of extraction but is a hyperbolic function of the reserve level we next show that uncertainty about future price affects the optimal production rate in two ways first if marginal cost is a convex concave function of the rate of production stochastic fluctuations in price raise lower average cost over time so that there is an incentive to speed up slow down production second the option value of the reserve i e the ability to withhold production indefinitely and never incur the cost of extraction provides an incentive to slow down the rate of production

adverse selection in the annuity market and the role for social security i study the role of social security in providing insurance when there is adverse selection in the annuity market i calculate welfare gain from mandatory annuitization in the social security system relative to a laissez faire benchmark using a model in which individuals have private information about their mortality i estimate large heterogeneity in mortality using the health and retirement study despite that i find small welfare gain from mandatory annuitization social security has a large effect on annuity prices because it crowds out demand by high mortality individuals welfare gain would have been significantly larger in the absence of this effect

volatility transmission in emerging european foreign exchange markets abstract this paper studies the dynamics of volatility transmission between central european ce currencies and the eur usd foreign exchange using model free estimates of daily exchange rate volatility based on intraday data we formulate a flexible yet parsimonious parametric model in which the daily realized volatility of a given exchange rate depends both on its own lags as well as on the lagged realized volatilities of the other exchange rates we find evidence of statistically significant intra regional volatility spillovers among the ce foreign exchange markets with the exception of the czech and prior to the recent turbulent economic events polish currencies we find no significant spillovers running from the eur usd to the ce foreign exchange markets to measure the overall magnitude and evolution of volatility transmission over time we construct a dynamic version of the diebold yilmaz volatility spillover index and show that volatility spillovers tend to increase in periods characterized by market uncertainty

social welfare in a common property oligopoly output in a markov nash cournot equilibrium to a noncooperative differential game in which in oligopolists extract a common property nonrenewable resource is bounded by the output of in firm and in i firm static oligopolies we discuss the welfare effects of the number of firms and of the divergence between private and social discount rates we compare extraction under the markov and open loop equilibria and then offer an explanation for the possibility that the resource is exhausted instantaneously in a continuous time game this explanation does not depend on the fact that the period of commitment is infinitesimal this essay models the extraction by an oligopolistic industry of a common property nonrenewable resource we characterize the markov perfect equilibrium mpe in a game amongst firms and then provide general conditions under which the resource is exhausted instantaneously if there is unrestricted access to a resource agents perceive its shadow value to be 0 and extract too rapidly when access is restricted to a finite number of agents in none of whom possess exclusive property rights an additional complication may arise if firms behave as oligopolists in the product market they have an incentive to extract the resource too slowly in order to increase the price thus where m firms exploit a resource in the absence of property rights there are conflicting tendencies the absence of property rights encourages excessive exploitation whereas the finite number of firms encourages insufficiently rapid exploitation there are a number of situations where the lack of property rights and the presence of market power coexist examples include i national fisheries which are large enough to affect fish populations and output prices ii common exploitation of aquifers or rivers where individual use affects the price of an agricultural output or of another input iii production by oligopolistic firms which degrades the environment we consider the case of nonrenewable resources such as oil this implies a simple equation of motion for the stock of the resource and emphasizes the role of the number of firms and the stock size such models are often appropriate even if the resource is not literally nonrenewable for example tropical forests or groundwater aquifers are potentially renewable given enough time as indeed oil deposits may be however the rate of replenishment may be insignificant given

aggressive oil extraction and precautionary saving coping with volatility the effects of stochastic oil demand on optimal oil extraction paths and tax spending and government debt policies are analyzed when the oil demand schedule is linear and preferences quadratic without prudence optimal oil extraction is governed by the hotelling rule and optimal budgetary policies by the tax and consumption smoothing principle volatile oil demand brings forward oil extraction and induces a bigger government surplus with prudence the government depletes oil reserves even more aggressively and engages in additional precautionary saving financed by postponing spending and bringing taxes forward especially if it has substantial monopoly power on the oil market gives high priority to the public spending target is very prudent and future oil demand has high variance uncertain economic prospects induce even higher precautionary saving and if non oil revenue shocks and oil revenue shocks are positively correlated even more aggressive oil extraction in contrast prudent governments deliberately underestimate oil reserves which induce less aggressive oil depletion and less government saving but less so if uncertainty about reserves and oil demand are positively correlated

inefficiency of credible strategies in oligopolistic resource markets with uncertainty abstract the implications of different information patterns for firms in oligopolistic resource markets are considered the traditional open loop nash equilibrium with static information sets is one of many possible nash equilibria and is not suitable for stochastic environments when shocks to resource growth are serially uncorrelated there are no gains from conditioning the harvest on past stock levels and the feedback or credible nash equilibrium is the appropriate nash equilibrium concept this credible equilibrium assumes that firms have knowledge of current stocks of reserves which typically leads to more rapid extraction of the resource and possibly extinction since the open loop nash equilibrium is efficient when demand is iso elastic and extraction costs are zero it is clear that an increase in information can be detrimental to firms in the industry

the distribution of wealth and welfare in the presence of incomplete annuity markets this paper examines the implications of the absence of complete annuity markets on the distribution of wealth and welfare of agents whose saving decisions are obtained under uncertainty regarding the length of their life the absence of annuities is shown to yield a unique nondegenerate intragenerational distribution of wealth which is fully characterized this characterization is then used to evaluate the pareto desirability of an annuity system alternative welfare criteria that can be used when the proposed change has differential impacts on the initial state of subsequent generations are considered

accounting for non annuitization why don t people buy annuities several explanations have been provided by the previous literature large fraction of preannuitized wealth in retirees portfolios adverse selection bequest motives and medical expense uncertainty this paper uses a quantitative model to assess the importance of these impediments to annuitization and also studies three newer explanations government safety net in terms of means tested transfers illiquidity of housing wealth and restrictions on minimum amount of investment in annuities this paper shows that quantitatively four explanations play a big role in reducing annuity demand preannuitized wealth minimum annuity purchase requirement illiquidity of housing wealth and bequest motives the annuity purchase involves big upfront investment especially if there is a minimum purchase restriction this is binding for many especially if housing is illiquid and part of wealth is preannuitized while bequest motives significantly reduce the overall annuity demand the model with a strong bequest motive cannot match the empirical fact that high income people have the highest demand for annuities

harnessing windfall revenues optimal policies for resource rich developing economies a windfall of natural resource revenue or foreign aid faces government with choices of how to manage public debt investment and the distribution of funds for consumption particularly if the windfall is both anticipated and temporary we show that the permanent income hypothesis prescription of an ever lasting increase in consumption financed by borrowing ahead of the windfall and then accumulating a sovereign wealth fund swf is not optimal for capital scarce developing economies such countries should accumulate public and private capital to accelerate their development and only if the windfall is large relative to initial foreign debt is it optimal to build a swf the optimal time profile of consumption is biased towards the near future as compared to the permanent income hypothesis outcomes depend on instruments available to government we study cases where the government can make lump sum transfers to consumers where such transfers are impossible so optimal policy involves cutting distortionary taxation in order to raise investment and wages and where ricardian consumers can borrow against future revenues in which case the policy response to possible over consumption is a high level of investment in infrastructure

social security longevity and moral hazard abstract recently several authors have argued that social security can have positive effects on savings and welfare when individuals possess hidden information about their longevity that is when there is adverse selection in annuity markets this paper considers the related problem of the effects of social security when individuals can take hidden actions to affect their longevity that is when there is moral hazard in annuity markets in contrast to the adverse selection models we show that social security never raises welfare in a pure moral hazard economy as well social security may either increase or reduce longevity depending on the characteristics of the health related goods consumed it is suggested that a complete analysis of social security needs to consider both adverse selection and moral hazard

precautionary savings and the permanent income hypothesis this paper derives the explicit solution of a dynamic stochastic optimal consumption problem for infinitely lived agents whose preferences exhibit in the presence of non diversifiable labour income uncertainty a constant elasticity of intertemporal substitution and constant absolute risk aversion the constancy of the elasticity of intertemporal substitution which implies that marginal utility at zero consumption is infinite guarantees that the non negativity constraint on consumption is never binding along the optimal path the assumption of constant absolute risk aversion allows an explicit computation of human wealth and provides a simple representation of the precautionary savings motive

on the economic determinants of oil production theoretical analysis and empirical evidence for small exporting countries abstract in this paper decisions regarding production in oil exporting countries are studied by means of theoretical analysis and empirical investigation in particular we aim at describing the relationship between oil production levels and changes in the world oil demand and prices intertemporal production decisions by a representative oil producer are modeled by means of a partial equilibrium model in this theoretical model oil producers are subject to exogenous shocks in world oil consumption and prices oil companies can change output levels only by incurring a fixed cost results from the simulation of this model show a strong relationship between oil production and changes in world oil consumption on the contrary the effects of changes in real oil prices on oil production decisions seem to be much lower results from the simulation of the theoretical model are then empirically investigated using time series econometric techniques the empirical evidence supports the hypothesis that oil producing countries are characterized by different responses to changes in world oil demand and in real oil prices for many countries production rapidly adjusts to changes in consumption whereas responses of oil production to innovations in real oil prices are found to be not statistically significant in addition when non linearities in the relationship between world oil demand prices and output levels are allowed for evidence of asymmetric effects of shocks to exogenous variables on output levels is found for some countries

adverse selection aggregate uncertainty and the role for mutual insurance companies a model of insurance markets analogous to that of rothschild and stiglitz 1976 is considered with the additional feature that risk neutral insurers face aggregate undiversifiable risk in the presence of adverse selection and aggregate uncertainty and under a simple nondegeneracy condition on loss probabilities the authors show that any equilibrium has the feature that some agents purchase participating policies from mutual insurers while others purchase nonparticipating policies and hence do not share risk with their insurer specifically agents with low loss probabilities signal their type by sharing aggregate risks with their insurer some empirical support for this prediction is provided copyright 1990 by the university of chicago

are windfalls a curse abstract a puzzling feature of temporary terms of trade booms is that some countries have responded to such windfalls by running current account deficits furthermore those countries that ran current account deficits failed to attain greater post boom growth rates indicating the deficits were consumed or invested in low quality projects the point we make is that the structure of the fiscal process is critical in determining outcomes if fiscal control is unitary then the consumption smoothing effect is operative and representative agent models of the current account have predictive power however if control is divided among several fiscal claimants a voracity effect appears which counteracts the consumption smoothing effect leading to a deterioration of the current account in response to a positive temporary shock we model the interaction among fiscal claimants as a dynamic game and show that in equilibrium aggregate appropriation increases more than the windfall itself this results in a deterioration of the current account we also show that all the windfall is dissipated with the country experiencing no increase in welfare 1998 elsevier science b v

disadvantageous oil tariffs and dynamic consistency a large importer who places relatively greater weight on future than current oil consumption will import less oil in the future than if it were able to commit itself in advance to future tariffs and may find itself worse off than if it were unable to impose tariffs at all futures markets and storage modify these adverse effects and may avoid the problem of dynamic inconsistency copyright 1990 by american economic association

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

has the euro affected the choice of invoicing currency we present a new approach to study empirically the effect of the introduction of the euro on the pattern of currency invoicing our approach uses a compositional multinomial logit model in which currency choice is explained by both currency specific and country specific determinants we use unique quarterly panel data on the invoicing of norwegian imports from oecd countries for the 1996 2006 period we find that eurozone countries have substantially increased their share of home currency invoicing after the introduction of the euro whereas the home currency share of non eurozone countries fell slightly in addition the euro as a vehicle currency has overtaken the role of the us dollar in norwegian imports the substantial rise in producer currency invoicing by eurozone countries is primarily caused by a drop in inflation volatility and can only to a small extent be explained by an unobserved euro effect

precautionary saving and the timing of taxes this paper analyzes the effects of government debt and income taxes on consumption and saving in a world of infinitely lived households having uncertain and heterogeneous incomes the special structure of the model allows exact aggregation across households despite incomplete markets the effects of government debt are shown to be substantial roughly comparable to those resulting from finite horizons and crucially dependent on the length of time until the debt is repaid also anticipated changes in taxes are shown to cause anticipated changes in consumption finally an index of fiscal stance is derived

marginal tax rates and tax favoured pension savings of the self employed evidence from sweden in recent years the study of how individuals respond to policies that aim at promoting pension savings has emerged as a vital area of economic research this paper adds to this body of literature by estimating the tax price elasticity of contributions to tax favoured pension savings accounts on a population of self employed individuals i exploit a unique total database over the swedish population that covers the years 19992005 using instrumental variables i obtain a tax price elasticity estimate of 0 51 and an income elasticity estimate of 0 13 whereas ordinary least squares ols produces estimates that conflict with consumer theory

precautionary saving in the small and in the large the theory of precautionary saving is shown to be isomorphic to the arrow pratt theory of risk aversion making possible the application of a large body of knowledge about risk aversion to precautionary saving and more generally to the theory of optimal choice under risk in particular a measure of the strength of the precautionary saving motive analogous to the arrow pratt measure of risk aversion is used to establish a number of new propositions about precautionary saving and to give a new interpretation of the dreze modigliani substitution effect copyright 1990 by the econometric society