393 results
Search Results
2. Hiding filthy lucre in plain sight : theory and identification of business-based money laundering
- Author
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Maskus, Keith E., Peri, Alessandro, and Rubinchik, Anna
- Subjects
G28 ,Offshore leaks ,Money laundering ,ddc:330 ,Panama papers ,K40 ,D58 ,H00 ,Anti-money-laundering regulations ,Monopolistic competition ,F30 ,Business establishment - Abstract
Proceeds from illicit activities percolate into the legal economy through several channels. We exploit international regulations targeting money laundering via the financial sector to identify the flows of “dirty money” into legitimate establishments: business-based money laundering (BBML). Our variant of the monopolistic competition model embeds a drug cartel that channels illicit proceeds into an offshore financial investment and into BBML. Tighter regulations in one channel increase the flow in the other. We use a research design that links U.S. county business activity to the evolution of anti-money-laundering regulations in Caribbean jurisdictions to provide the first empirical evidence of the phenomenon.
- Published
- 2022
3. An assessment of import tariff costs for Italian exporting firms
- Author
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Ilaria Fusacchia, Alessandro Antimiani, Luca Salvatici, Fusacchia, I., Antimiani, A., and Salvatici, L.
- Subjects
Computable general equilibrium ,Economics and Econometrics ,Index (economics) ,Trade policies ,Sociology and Political Science ,General equilibrium theory ,Tariff ,Context (language use) ,0502 economics and business ,Production (economics) ,media_common.cataloged_instance ,Global value chains (GVCs) ,D58 ,050207 economics ,European union ,F13 ,media_common ,Commercial policy ,Original Paper ,050208 finance ,Trade policie ,05 social sciences ,F17 ,Trade restrictiveness index (TRI) ,Value added trade ,International economics ,Global trade analysis project (GTAP) ,Business ,Finance - Abstract
Since production and trade are increasingly organized within global value chains (GVCs), assessing who effectively pays the cost of protection is not straightforward and since productive processes are internationally fragmented, quantifying the effects of trade policy requires an enhanced analytical framework that takes international input–output linkages into account to assess the implications trade costs have on competitiveness at national and sector levels. This paper defines a new synthetic measure of trade protection based on the value added in trade, capturing the effects that the tariff structure has on exporting firms that rely on imported intermediate inputs. The index, defined in a general equilibrium framework, provides a theoretically sound protection measurement in the context of GVCs. We assess trade protection by computing protection indexes at the bilateral level on both gross imports and imports to exports using the Global Trade Analysis Project computable general equilibrium model. These indexes are used to investigate the relationship between the European Union tariffs and integration of the Italian GVCs. In the case of Italy, imports to exports are overall less protected than gross imports with significant differences at the sector level. Despite the low levels of nominal protection, industrial sectors play a central role in explaining our results. EU tariffs mostly affect Italian exporting firms in the case of chemical products, wearing apparel and leather products. Electronic supplementary material The online version of this article (10.1007/s40888-020-00202-8) contains supplementary material, which is available to authorized users.
- Published
- 2019
4. Negishi's Theorem and Method: Computable and Constructive Considerations.
- Author
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Velupillai, K.
- Subjects
WELFARE economics ,ECONOMIC equilibrium ,COMPUTERS in economics ,ECONOMIC models ,MATHEMATICAL economics - Abstract
Negishi's remarkable youthful contribution to welfare economics, general equilibrium theory and, with the benefit of hindsight, also to one strand of computable general equilibrium theory, all within the span of six pages in one article, has become one of the modern classics of general equilibrium theory and mathematical economics. Negishi's celebrated theorem and what has been called Negishi's Method have formed one foundation for computable general equilibrium theory. In this paper I investigate the computable and constructive aspects of the theorem and the method. [ABSTRACT FROM AUTHOR]
- Published
- 2015
- Full Text
- View/download PDF
5. Rating systems, procyclicality and Basel II: an evaluation in a general equilibrium framework.
- Author
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Pederzoli, Chiara, Torricelli, Costanza, and Tsomocos, Dimitrios P.
- Subjects
BASEL II (2004) ,BUSINESS cycles ,EQUILIBRIUM ,BANKING industry ,FINANCE ,PROFIT - Abstract
The introduction of Basel II has raised concerns about the potential impact of risk-sensitive capital requirements on the business cycle. Several approaches have been proposed to assess the procyclicality issue. In this paper, we adopt a general equilibrium model and conduct comprehensive analysis of different proposals. We set out a model that allows to evaluate different rating systems in relation to the procyclicality issue. Our model extends previous models by analysing the effects of different rating systems on banks’ portfolios (as in Catarineu et al. in Econ Theory 26:537–557, 2005) and the contagion effects relevant to financial stability (as in Goodhart et al. in Ann Finance 1:197–224, 2005). The paper presents comparative statics results comparing a cycle-dependent and a neutral rating system from the point of view of banks profit maximization. Our results suggest that banks’ preferences about point in time or through the cycle rating systems depend on the banks’ characteristics and on the business cycle conditions in terms of expectations and realizations. [ABSTRACT FROM AUTHOR]
- Published
- 2010
- Full Text
- View/download PDF
6. A computable general equilibrium model for banking sector risk assessment in South Africa.
- Author
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Beyers, Conrad F. J., De Freitas, Allan, Essel-Mensah, Kojo A., Seymore, Reyno, and Tsomocos, Dimitrios P.
- Subjects
COMPUTABLE general equilibrium models ,RISK assessment ,BANK profits ,CAPITAL requirements - Abstract
In this article a banking sector Computable general equilibrium (CGE) model for South Africa is developed. The model is used to estimate the potential effect of regulatory policy on the economy and as a risk assessment tool to assess how changes in regulation affect the economy. The model provides a methodology for regulators of the banking sector and policy makers in South Africa to deal with risk assessment and future regulatory planning. The CGE model allows interactions amongst various entities of the economy so that policy makers could detect the risks in the banking sector. The CGE model used in this paper performed well as a risk assessment tool for the South African banking sector. The results of the various shocks from the model are consistent with the results obtained from similar shocks done in the UK. We establish that default penalty has a higher effect on the banks' profits and the interest rates than capital requirement infringement penalty. Our results also suggest that interest rate targeting has more controlled effects than monetary base targeting since pecuniary externalities are reduced. [ABSTRACT FROM AUTHOR]
- Published
- 2020
- Full Text
- View/download PDF
7. Sorting big data by revealed preference with application to college ranking.
- Author
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Hu, Xingwei
- Abstract
When ranking big data observations such as colleges in the United States, diverse consumers reveal heterogeneous preferences. The objective of this paper is to sort out a linear ordering for these observations and to recommend strategies to improve their relative positions in the ranking. A properly sorted solution could help consumers make the right choices, and governments make wise policy decisions. Previous researchers have applied exogenous weighting or multivariate regression approaches to sort big data objects, ignoring their variety and variability. By recognizing the diversity and heterogeneity among both the observations and the consumers, we instead apply endogenous weighting to these contradictory revealed preferences. The outcome is a consistent steady-state solution to the counterbalance equilibrium within these contradictions. The solution takes into consideration the spillover effects of multiple-step interactions among the observations. When information from data is efficiently revealed in preferences, the revealed preferences greatly reduce the volume of the required data in the sorting process. The employed approach can be applied in many other areas, such as sports team ranking, academic journal ranking, voting, and real effective exchange rates. [ABSTRACT FROM AUTHOR]
- Published
- 2020
- Full Text
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8. General equilibrium, preferences and financial institutions after the crisis
- Author
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Araujo, Aloisio
- Published
- 2015
- Full Text
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9. International monetary transmission with bank heterogeneity and default risk.
- Author
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Tsenova, Tsvetomira
- Subjects
BANKING industry ,COUNTERPARTY risk ,ECONOMIC efficiency ,MONETARY policy ,INTEREST rates ,ECONOMIC equilibrium ,TRANSMISSION mechanism (Monetary policy) - Abstract
This paper compares the effectiveness, efficiency and robustness of standard and non-standard monetary policy tools, such as the banks' refinancing interest rate, penalty interest rate on deposit facility holdings and minimum reserve requirements on attracted deposits. The assessment is performed on the basis of a numerically evaluated open economy general equilibrium model for macro-prudential analysis where optimal decisions by internationally linked banks are key determinants of international financial flows and wider economic outcomes. Banks differ in terms of balance sheet endowments and risk preferences and take decisions rationally and competitively. Default risk, borrowing and lending are endogenous results of individual decisions of private agents (banks and households), as well as systemic outcomes of market interaction. [ABSTRACT FROM AUTHOR]
- Published
- 2014
- Full Text
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10. Sequential Action and Beliefs Under Partially Observable DSGE Environments.
- Author
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Kim, Seong-Hoon
- Subjects
ECONOMIC equilibrium ,PARTIALLY observable Markov decision processes ,GENERALIZATION ,LINEAR systems ,KALMAN filtering ,ECONOMIC models ,ALGORITHMS - Abstract
This paper introduces a classification of DSGEs from a Markovian perspective, and positions the class of Partially Observable Markov Decision Process (POMDP) to the center of a generalization of linear rational expectations models. The analysis of the POMDP class builds on the previous development in dynamic controls for linear system, and derives a solution algorithm by formulating an equilibrium as a fixed point of an operator that maps what we observe into what we believe. [ABSTRACT FROM AUTHOR]
- Published
- 2012
- Full Text
- View/download PDF
11. Putting the New Keynesian DSGE Model to the Real-Time Forecasting Test.
- Author
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KOLASA, MARCIN, RUBASZEK, MICHAŁ, and SKRZYPCZYŃSKI, PAWEŁ
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ECONOMIC models ,ECONOMIC forecasting ,KEYNESIAN economics ,REAL-time computing ,ECONOMIC policy ,BENCHMARKING (Management) ,MATHEMATICAL models - Abstract
The paper compares the quality of real-time forecasts from a standard medium-scale New Keynesian dynamic stochastic general equilibrium (DSGE) model to those from the Survey of Professional Forecasters (SPF) and DSGE-VARs. It is shown that the DSGE model is relatively successful in forecasting the U.S. economy. This is especially true for forecasts conditional on SPF nowcasts, in which case the forecasting power of the DSGE turns out to be similar or better than that of the SPF for all the variables and horizons. An important weakness of the benchmark DSGE model is the poor absolute performance of its point forecasts and rather badly calibrated forecast densities. [ABSTRACT FROM AUTHOR]
- Published
- 2012
- Full Text
- View/download PDF
12. Exploring policy options in joint intertemporal-spatial trade models using an incomplete markets approach
- Author
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Huang, Hui, Whalley, John, and Zhang, Shunming
- Published
- 2009
- Full Text
- View/download PDF
13. Carbon leakages: a general equilibrium view.
- Author
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Burniaux, Jean-Marc and Oliveira Martins, Joaquim
- Subjects
GENERAL equilibrium theory (Economics) ,CLIMATE change ,INTERNATIONAL trade ,POWER resources ,SENSITIVITY analysis ,CARBON ,COUNTRIES - Abstract
The effectiveness of unilateral action to curb carbon emissions has been dismissed because of possible 'carbon leakages', this referring to the rise of emissions in non-participating countries. This paper offers a general equilibrium (GE) exploration of the key mechanisms and factors underlying the size of carbon leakages. We developed a two-region, two-goods simplified GE framework, incorporating three types of fossil fuels (coal, oil and low-carbon energy), international trade and capital mobility. The model was designed to make tractable extensive multidimensional sensitivity analysis. The results suggest that the coal supply elasticity plays a critical role, while substitution elasticities between traded goods and international capital mobility appear relatively less influential. The shape of the production function also matters for the size of the leakages. Confirming the results obtained with large computable GE models, for a wide range of parameters' values, carbon leakages appear to be small. Therefore, the argument that unilateral carbon abatement action taken by a large group of countries (such as the Annex 1 group) is flawed by significant carbon leakages is not supported by our sensitivity analysis. The likelihood of small leakages favours in fact the formation of a worldwide coalition to stabilise climate change. [ABSTRACT FROM AUTHOR]
- Published
- 2012
- Full Text
- View/download PDF
14. Should the US have locked heaven's door?
- Author
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Chojnicki, Xavier, Docquier, Frédéric, and Ragot, Lionel
- Subjects
ECONOMIC impact ,EMIGRATION & immigration ,ECONOMIC equilibrium ,LABOR market ,EQUALITY ,FISCAL policy - Abstract
This paper examines the economic impact of the second great immigration wave (1945-2000) on the US economy. Our analysis relies on a computable general equilibrium model combining the major interactions between immigrants and natives (labor market impact, fiscal impact, capital deepening, endogenous education, endogenous inequality). Contrary to recent studies, we show that immigration induced important net gains and small redistributive effects among natives. According to our simulations, the postwar US immigration is beneficial for all natives cohorts and all skill groups. Nevertheless, the gains would have been larger if the US had conducted a more selective immigration policy. [ABSTRACT FROM AUTHOR]
- Published
- 2011
- Full Text
- View/download PDF
15. Notes on a 'Constructive Proof of the Existence of a Collateral Equilibrium'.
- Author
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Ragupathy, Venkatachalam and Velupillai, K.
- Subjects
EXISTENCE value (Economics) ,UTILITY functions ,RECURSION theory ,COMPUTABLE functions ,MARKETING effectiveness ,CONSTRUCTIVE mathematics - Abstract
In an interesting article in this journal, Ma (Comput Econ 45:1-30, ), claims that a constructive proof of existence of a Collateral Equilibrium (with a Leontief utility function) is provided in the paper. Moreover, there is also the additional claim that 'on the basis of this proof, we can (and we shall) develop an algorithm for computing that equilibrium' ( ibid, p. 1). Thirdly, the statements that 'the algorithm is shown by simulation to be effective', and its effectiveness is demonstrated by 'the accuracy of the equilibrium it provided'. These claims are, from a recursion theoretic (or computability theory) point of view, meaningless. [ABSTRACT FROM AUTHOR]
- Published
- 2016
- Full Text
- View/download PDF
16. Spatial aspects of trade liberalization in Colombia: A general equilibrium approach.
- Author
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Haddad, E. A., Bonet, J., Hewings, G. J. D., and Perobelli, F. S.
- Subjects
- *
ECONOMIC geography , *ECONOMIC equilibrium , *FREE trade - Abstract
This paper offers some preliminary steps in the marriage of some of the theoretical foundations of new economic geography with spatial computable general equilibrium models. Modelling the spatial economy of Colombia using the traditional assumptions of computable general equilibrium (CGE) models makes little sense when one territorial unit, Bogotá, accounts for over one quarter of GDP and where transportation costs are high and accessibility low compared to European or North American standards. Hence, handling market imperfections becomes imperative as does the need to address internal spatial issues from the perspective of Colombia's increasing involvement with external markets. The paper builds on the Centro de Estudios de Economia Regional (CEER) model, a spatial CGE model of the Colombian economy; non-constant returns and non-iceberg transportation costs are introduced and some simulation exercises carried out. The results confirm the asymmetric impacts that trade liberalization has on a spatial economy in which one region, Bogotá, is able to more fully exploit scale economies vis-à-vis the rest of Colombia. The analysis also reveals the importance of different hypotheses on factor mobility and the role of price effects to better understand the consequences of trade opening in a developing economy. [ABSTRACT FROM AUTHOR]
- Published
- 2009
- Full Text
- View/download PDF
17. Approximate CAPM When Preferences are CRRA.
- Author
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Herings, P. and Kubler, Felix
- Subjects
CAPITAL assets pricing model ,ECONOMIC equilibrium ,FINANCIAL markets ,PRICING ,MARKETS - Abstract
In general equilibrium models of financial markets, the capital asset pricing formula does not hold when agents have von Neumann–Morgenstern utility with constant relative risk aversion. In this paper we examine under which conditions on endowments and dividends the pricing formula provides a good benchmark for equilibrium returns. While it is easy to construct examples where equilibrium returns are arbitrarily far from those predicted by CAPM, we show that there is a large class of economies where CAPM provides a very good approximation. Although the pricing formula does not hold exactly for the chosen specification, it turns out that pricing-errors are extremely small. [ABSTRACT FROM AUTHOR]
- Published
- 2007
- Full Text
- View/download PDF
18. An equilibrium approach to financial stability analysis: the Colombian case.
- Author
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Saade, Agustín, Osorio, Daniel, and Estrada, Dairo
- Subjects
FINANCIAL risk management ,MATHEMATICAL models of finance ,CAPITAL assets pricing model ,CENTRAL banking industry ,PRICE inflation ,MONETARY policy - Abstract
This paper studies in detail the performance of a general equilibrium model of the financial system when applied to the case of Colombia. This model was designed following closely the work by Goodhart et al. (Ann Fin 2, 1–21, 2006b). The results suggest that the model performs satisfactorily, especially in the prediction of short-run trends (2 years). A shortcoming of the results is a slight overestimation of several trends in the medium to long-term. There is however room to progress, particularly in terms of the incorporation of idiosyncratic features of the Colombian financial system into the model. [ABSTRACT FROM AUTHOR]
- Published
- 2007
- Full Text
- View/download PDF
19. RHOMOLO: A dynamic spatial general equilibrium model for assessing the impact of cohesion policy.
- Author
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Brandsma, Andries, Kancs, d'Artis, Monfort, Philippe, and Rillaers, Alexandra
- Subjects
- *
ECONOMIC models , *ECONOMIC statistics , *SOCIAL impact assessment , *ECONOMIC geography , *SOCIAL development - Abstract
The paper presents the newly developed dynamic spatial general equilibrium model of European Commission, RHOMOLO, and proposes its future extensions. The model incorporates several elements from economic geography in a novel and theoretically consistent way. It describes the location choice of different types of agents and captures the interplay between agglomeration and dispersion forces in determining the spatial equilibrium. The model is also dynamic as it allows for the accumulation of factors of production, human capital and technology. This makes RHOMOLO particularly suited for simulating policy scenario related to the EU cohesion policy and for the analysis of its impact on the regions and the Member States of the union. [ABSTRACT FROM AUTHOR]
- Published
- 2015
- Full Text
- View/download PDF
20. REDD in the Carbon Market: A General Equilibrium Analysis
- Author
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Bosello, Francesco, Parrado, Ramiro, Rosa, Renato, and Eboli, Fabio
- Published
- 2015
- Full Text
- View/download PDF
21. Impact and cost–benefit analysis: a unifying approach
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Scandizzo, Pasquale Lucio
- Published
- 2021
- Full Text
- View/download PDF
22. Can Inheritances Alleviate the Fiscal Burden of an Aging Population?
- Published
- 2003
23. "Big Bang" versus Gradualism in Economic Reforms: An Intertemporal Analysis with an Application to China
- Author
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Feltenstein, Andrew
- Published
- 2003
24. On the effects of public and private transfers on capital accumulation: some lessons from the NTA aggregates.
- Author
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Sánchez-Romero, Miguel, Patxot, Concepció, Rentería, Elisenda, and Souto, Guadalupe
- Subjects
SAVINGS ,ECONOMIC activity ,ECONOMIC decision making ,FINANCIAL markets ,ECONOMIC equilibrium ,CONSUMPTION (Economics) ,PER capita - Abstract
Intergenerational transfers are a very important part of our daily economic activity. These transfers, whether familial or public, may influence our economic decisions to the same extent that financial markets do. In this paper, we seek to shed some light on the effects of transfers on capital accumulation in the face of demographic aging. In particular, a general equilibrium overlapping generations model with realistic public and familial transfers drawn from the National Transfer Accounts project is implemented to Spain. Given that, in this case, net familial transfers mainly go from parents to children while public transfers go from children to parents, it is shown that the Spanish baby boom and baby bust could lead to capital depletion and a reduction in consumption per capita. [ABSTRACT FROM AUTHOR]
- Published
- 2013
- Full Text
- View/download PDF
25. The role of demography on per capita output growth and saving rates.
- Author
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Sánchez-Romero, Miguel
- Subjects
DEMOGRAPHY ,PER capita ,ECONOMIC development ,ECONOMIC equilibrium ,SAVINGS ,ECONOMIC convergence - Abstract
Computable general equilibrium (CGE) models and 'convergence models' differ in their assessment of the extent to which demography influences economic growth. Here, I show that CGE models produce results similar to those of convergence models when more detailed demographic information is used. To do so, I implement a CGE model to explain Taiwan's economic miracle during the period 1965-2005. I find that Taiwan's demographic transition accounts for 22 % of per capita output growth and 17.7 % of investment rate for the period 1965-2005. Moreover, this paper confirms most of the literature written on the role of demography on per capita output growth and saving rates since the seminar article by Coale and Hoover (). [ABSTRACT FROM AUTHOR]
- Published
- 2013
- Full Text
- View/download PDF
26. Germs, Globalization, and Trade Spillovers: How could COVID-19 affect African Economies and AfCFTA
- Author
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Das, Gouranga G., Maswana, Jean-Claude, and Hirano, Yumeka
- Subjects
I15 ,Digitization ,AfCFTA ,Pandemic ,China-shock ,Industrialization ,O24 ,Total Factor Productivity ,R13 ,Spillover ,GTAP ,ddc:330 ,Human capital ,Trade ,D58 ,Covid-19 ,CGE ,Inclusive Growth - Abstract
Drawing on selective stylized facts, the paper evaluates the growth-effects for African countries and the disruptive potentials resulting from the COVD-19 pandemic, as African countries are involved in intra-regional integration processes. As AfCFTA involving 55 countries (ratified by 22 countries) is an ambitious project for industrialization for achieving SDG targets of inclusive development via trade facilitation, and regional integration, the paper argues that given the Covid-19 setback full potential depends on trade-led spillover benefits and structural factors. Our objective is to show that: given the low labor-productivity growth in the African nations-without reinventing the wheel by estimating the impact of preferential access trade agreement--the ricochet effect of the trade-induced productivity benefits via intermediates in the presence of COVID-19-led trade disruptions is crucial. The study highlights the role of trade-growth-structural factors for providing basis to simulate scenarios of technology-imports contents in a global non-linear CGE model, viz., Global Trade Analysis Project (GTAP) with 27 sectors and 51 regions. The paper shows: (i) role of trade-mediated productivity benefits for facilitating regional supply chain, (ii) factors underlying absorption of such benefits for economic transformation; (iii) how trade and technology could boost trade not just trade-liberalization per se; (iv) given the region's weaker production basis, in the presence of Covid-19, how the risks posed by trade plus non-trade external shocks to African intra-regional integration matter. Findings also indicate that technological benefits due to trade liberalization under FTA may be hindered by non-trade factors like epidemic or pandemic resulting in skill deficiencies, and translating into productivity slowdown. The paper empirically shows that for realizing the enormous potential of AfCFTA as driver of industrialization deep policy reforms in the areas of technology, absorptive capacity, institutions, and infra- and info-structure for digitization are necessary for long-term development. Also, the result proves that: for effectiveness of AfCFTA to deliver benefits to poor countries via allocative efficiency and welfare, apart from improving the 'behind-the-border' factors, trade with not only emerging economies like China, but also with industrialized nations is important. Also, the research shows the necessity of formulating policies to develop targeted sectors for reaping substantial benefits via AfCFTA. Thus, AfCFTA is not a panacea for industrial development.
- Published
- 2023
27. Cost effectiveness of a combination of instruments for global warming: a quantitative approach for Spain
- Author
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Gallastegui, M. C., González-Eguino, M., and Galarraga, I.
- Published
- 2012
- Full Text
- View/download PDF
28. The importance of the design of market-based instruments for CO2 mitigation: An AGE analysis for Spain
- Author
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González-Eguino, Mikel
- Subjects
- *
CARBON dioxide mitigation , *CARBON offsetting , *COST effectiveness , *ECONOMIC equilibrium , *ENVIRONMENTAL economics , *ECONOMICS - Abstract
In the past few decades, economists have defended the use of market-based instruments (MBI) in environmental and climate policy. There have been many papers which have compared the costs of attaining environmental objectives with MBIs and with command and control instruments. However very few have compared different MBIs in examining these costs. This paper seeks to analyse various MBIs for CO2 mitigation from the viewpoint of cost-effectiveness, using an AGE (applied general equilibrium) model for the case of Spain. A distinction is drawn between (1) quantity instruments, which represent different extents of a market for emission permits; and (2) price instruments, which represent different types of tax. Each instrument can affect different segments of the emission sources and therefore can have very different effects on the economy as a whole. We show how MBI can help to minimise mitigation costs, but also how taxes and tradable emission permits that are limited or constrained by many exemptions and distortions can raise costs considerably. [Copyright &y& Elsevier]
- Published
- 2011
- Full Text
- View/download PDF
29. Educational disparity and the persistence of the black–white wage gap in the U.S.
- Author
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O’Gorman, Melanie
- Subjects
- *
RACIAL differences , *WAGE differentials , *UNITED States education system , *WAGES , *HUMAN capital , *EDUCATIONAL finance , *MATHEMATICAL models , *PROPERTY tax ,REVENUE - Abstract
Abstract: This paper examines the relationship between contemporary racial inequality of schooling and the black–white wage gap in the U.S. In particular I ask: what policies would be effective at reducing the black–white wage gap in the U.S.? In order to address this question, I develop a model of human capital accumulation in which agents differ by race. I calibrate the model to reflect the U.S. system of education financing since the mid-1950s, and find that more than half of the black–white wage gap in the U.S. in the early 1990s can be accounted for by differential human capital accumulation by race. This indicates an increased role for policy in addressing racial inequality in the U.S. The results of the policy experiments conducted in this paper indicate that a conditional cash transfer program and a policy of decreased reliance on local property tax revenue would be effective in reducing the black–white skill and wage gaps. [Copyright &y& Elsevier]
- Published
- 2010
- Full Text
- View/download PDF
30. Exploring policy options in joint intertemporal-spatial trade models using an incomplete markets approach.
- Author
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Hui Huang, Whalley, John, and Shunming Zhang
- Subjects
FINANCIAL services industry ,INTERMEDIATION (Finance) ,COMPUTER simulation ,SIMULATION methods & models - Abstract
In this paper we discuss the desirability of service trade liberlization in the presence of incompleteness of markets where there is both inter-spatial and intertemporal trade between countries. We use numerical simulation methods for insights and relate our discussion to the General Agreement on Trade in Services (GATS) in the WTO. We interpret the absence of intertemporal trade as an absence of intermediation services provided by both domestic and foreign service providers. For simplicity, we consider extreme cases where intertemporal intermediation services can only be provided by domestic providers, so that when intertemporal trade in services is not allowed, markets are not complete. To our knowledge, this type of models is not used in the trade literature as general comparative statics results are unavailable. We first consider the liberalization of trade in financial services in an inter-spatial and intertemporal model of two countries, and we show how services liberalization can be welfare worsening in the presence of a tariff on spatial trade in goods. We show that this can hold in an artificial world with no domestic financial services provider. We compare financial service trade autarky in which there is no intermediation to financial service trade liberalization which involves costless intertemporal intermediation provided by foreign service providers. We also consider a more complex (and realistic) world where costly intermediation services can be provided by both domestic and foreign providers. [ABSTRACT FROM AUTHOR]
- Published
- 2009
- Full Text
- View/download PDF
31. Illegal Disposal of Commercial Solid Waste: A Dynamic Analysis.
- Author
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Ferrara, Ida
- Subjects
INDUSTRIAL wastes ,SOLID waste ,REFUSE collection ,FINANCE ,USER charges ,ADMINISTRATIVE fees ,ENVIRONMENTAL quality ,ENVIRONMENTAL protection ,WASTE recycling ,WASTE management - Abstract
This paper is concerned with the waste stock externality associated with production decisions when garbage collection services are financed by means of user charges and illegal disposal is a viable option to firms. As waste accumulates over time, providing disutility not only to present generations but also to future generations by negatively affecting environmental quality, the private and social production choices are compared in the context of a dynamic (intertemporal) model. The inclusion of the dynamics of the waste stock, which translates into a function describing how the deterioration of environmental quality over time is linked to waste production as well as disposal mix (recycling, curbside disposal, and illegal disposal), enables the design of dynamic Pareto-efficient incentive mechanisms for optimal waste production and management. [ABSTRACT FROM AUTHOR]
- Published
- 2008
- Full Text
- View/download PDF
32. Regional macroeconomic outcomes under alternative arrangements for the financing of public infrastructure.
- Author
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Giesecke, James, Dixon, Peter B., and Rimmer, Maureen T.
- Subjects
INFRASTRUCTURE (Economics) ,MACROECONOMICS ,GOVERNMENT spending policy ,PUBLIC spending ,PUBLIC finance ,PAYROLL tax - Abstract
We use a dynamic multi-regional CGE model (MMRF) to evaluate the regional macroeconomic consequences of four methods of financing a program of regional government infrastructure provision. The methods are developer charges, debt, payroll tax and residential rates. We demonstrate that the net gains from a program of public infrastructure development are quite sensitive to the chosen financing means. The net gains are greatest under rates and debt financing, and least under developer charges and payroll tax financing. Usamos un modelo CGE multirregional dinámico (MMRF) para evaluar las consecuencias macroeconómicas regionales de cuatro métodos de financiación de un programa de financiamiento de infraestructura por parte de un gobierno regional. Los métodos son cargas al contratista ( developer charges), deuda, impuestos salariales y contribución urbana. Demostramos que el beneficio neto de un programa de desarrollo de infraestructura pública es bastante sensible a los medios de financiación elegidos. El beneficio neto es mayor mediante la financiación por contribución y deuda, y menor con la financiación por cargas al contratista e impuestos salariales. [ABSTRACT FROM AUTHOR]
- Published
- 2008
- Full Text
- View/download PDF
33. Environmental impact of household activity in Spain
- Author
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Sánchez-Chóliz, Julio, Duarte, Rosa, and Mainar, Alfredo
- Subjects
- *
POLLUTION , *WATER supply , *ENVIRONMENTAL impact analysis , *WATER pollution potential - Abstract
Abstract: The objective of this paper is to analyse the environmental impacts of the Spanish economy by way of water and atmospheric pollution on the basis of a Spanish Accounting Matrix for 1999. Only households were taken as an exogenous account. The pollution measures are estimated for seven categories of pollution: three atmospheric pollutants (CO2, NOx and SOx) and four indicators for water (waste water, nitrogen, metals and biological oxygen demand (BOD)). The environmental data base was obtained from the Spanish Statistical Institute. The analysis reveals that pollution in Spain is closely linked to food production, energy, extractive industries and paper manufacturing. We show that services, taken as a whole, are major polluters, though this is due to the volume of household expenditure they represent rather than their pollution potential as such. We also show that the Spanish economy avoids a great deal of pollution by importing inputs, which pollute where they are produced. Finally, the study also provides per capita pollution values for the aforementioned seven pollutants. [Copyright &y& Elsevier]
- Published
- 2007
- Full Text
- View/download PDF
34. Using Water Allocation in Israel as a Proxy for Imputing the Value of Agricultural Amenities.
- Author
-
Yerushalmi, Erez
- Subjects
- *
AGRICULTURAL water supply , *AGRICULTURE , *ECONOMIC equilibrium , *AGRICULTURAL wastes , *AGRICULTURAL policy - Abstract
This paper uses the water allocation economy in Israel as a proxy for imputing the value of agricultural amenities. A general equilibrium model is developed, and incorporates agricultural amenities as byproducts of agricultural production, water trade channels, and multiple water types. The premise is that until a decade ago, water policy in Israel was interlinked with agricultural land-use policy. Integrating a Monte-Carlo analysis, the model searches for a baseline minimum value of agricultural amenity that makes household, in the counterfactual scenario, indifferent between the administrative and market mechanisms. The minimum imputed value is around 109% agricultural output. The intuition is that the gains in economic welfare, from improved water use efficiency, are offset by the losses in social welfare due to a reduction in available agricultural amenities. [ABSTRACT FROM AUTHOR]
- Published
- 2018
- Full Text
- View/download PDF
35. Can Private Vehicle-augmenting Technical Progress Reduce Household and Total Fuel Use?
- Author
-
Figus, Gioele, Swales, J.Kim, and Turner, Karen
- Subjects
- *
HOUSEHOLDS , *TRANSPORTATION , *ENERGY consumption , *FUEL , *ECONOMIC equilibrium - Abstract
This paper demonstrates the importance of modelling energy-intensive household services in general, and private transportation in particular, as combinations of energy and other inputs. Initially a partial equilibrium approach is used to analyse private transport consumption as a self-produced commodity formed by household vehicle and fuel use. We particularly focus on the impact of private vehicle-augmenting technical progress in this framework. We show that household fuel use will fall if it is easier to substitute between vehicles and fuel in the household production of private transport services than it is to substitute between private transport and the composite of all other goods in overall household consumption. The analysis is then extended, through Computable General Equilibrium simulation, to investigate the wider implications of similar efficiency improvements when intermediate demand, prices and nominal income are endogenous. The subsequent reduction in the price of private transport service (not observable in market prices) allows the wage measured relative to the CPI to rise whilst the wage relative to the price of foreign goods falls. This simultaneously increases UK international competitiveness, encouraging increased exports and reduced import penetration whilst allowing employment to rise. This provides an additional supply-side stimulus to production, employment and household income. [ABSTRACT FROM AUTHOR]
- Published
- 2018
- Full Text
- View/download PDF
36. Convex and convex-like optimization over a range inclusion problem and first applications.
- Author
-
Mokhtar-Kharroubi, Hocine
- Subjects
CONVEX domains ,PROBLEM solving ,MATHEMATICAL optimization ,DISCRETE systems ,OPTIMAL control theory - Abstract
The paper deals with the minimization of a function over the solution set of a range inclusion problem determined by a multifunction. A strong Lagrange duality is provided first in terms of a quasirelative interior condition and then under a so-called Assumption (S) . When the function and the multifunction are convex, we improve this duality under a closed cone condition. The stability analysis is investigated. In addition, if the multifunction is a convex process, then the Fenchel dual is performed in terms of its conjugate. As a first application, we provide a unified approach to the optimization of general discrete inclusions systems; in particular, we improve several results on optimal control, strong Lagrange duality and Fenchel duality for some classes of convex controlled discrete processes. [ABSTRACT FROM AUTHOR]
- Published
- 2017
- Full Text
- View/download PDF
37. Incentives for Research Effort: An Evolutionary Model of Publication Markets with Double-Blind and Open Review.
- Author
-
Radzvilas, Mantas, De Pretis, Francesco, Peden, William, Tortoli, Daniele, and Osimani, Barbara
- Subjects
EVOLUTIONARY models ,MARKETING models - Abstract
Contemporary debates about scientific institutions and practice feature many proposed reforms. Most of these require increased efforts from scientists. But how do scientists' incentives for effort interact? How can scientific institutions encourage scientists to invest effort in research? We explore these questions using a game-theoretic model of publication markets. We employ a base game between authors and reviewers, before assessing some of its tendencies by means of analysis and simulations. We compare how the effort expenditures of these groups interact in our model under a variety of settings, such as double-blind and open review systems. We make a number of findings, including that open review can increase the effort of authors in a range of circumstances and that these effects can manifest in a policy-relevant period of time. However, we find that open review's impact on authors' efforts is sensitive to the strength of several other influences. [ABSTRACT FROM AUTHOR]
- Published
- 2023
- Full Text
- View/download PDF
38. Spatial impacts of fiscal stimulus policies during the 2009 global financial crisis in Indonesia
- Author
-
Arief Anshory Yusuf, Budy P. Resosudarmo, Abdurohman, and Djoni Hartono
- Subjects
Computable general equilibrium ,Macroeconomics ,Cash transfers ,Stimulus (economics) ,The Science of Space ,Macro–micro-economic model ,O23 ,Renewable Energy, Sustainability and the Environment ,Economic crisis ,H12 ,Economics, Econometrics and Finance (miscellaneous) ,Developing country ,Spatial general equilibrium model ,Development ,R13 ,Urban Studies ,Income tax ,Financial crisis ,Economics ,Fiscal stimulus ,C68 ,Economic impact analysis ,D58 ,E62 ,Aggregate demand - Abstract
In response to the 2008/2009 global financial crisis (GFC), many developing countries, including Indonesia, launched fiscal stimulus packages (FSP). These FSPs typically consist of several sophisticated fiscal policies that may not necessarily complement each other. While the impact of these policies at the aggregate country level in developed countries has been widely discussed, the spatial impact of these policies within developing countries is less understood. Utilizing an inter-regional computable general equilibrium (CGE) model, this paper aims to assess and understand the short- and long-term economic impacts of these stimulus policies using Indonesia as a case study. This paper, hence, provides a quantitative ex-post assessment of FSPs typically implemented during the 2009 GFC by developing economies. Overall, results, indicate that fiscal stimulus had a positive impact on aggregate demand and on poverty prevention, principally via stimulating private consumption. Corporate income tax cuts have the largest economic impact in the long-run, and cash transfers are the most useful policy tool for alleviating poverty. An FSP, however, could have an uneven spatial distributional effect on output across regions, particularly in the short-term.
- Published
- 2020
39. Pareto extrapolation: An analytical framework for studying tail inequality.
- Author
-
Gouin‐Bonenfant, Émilien and Toda, Alexis Akira
- Subjects
EXTRAPOLATION ,EXPONENTS ,PROBABILITY theory ,SPEED ,ALGORITHMS - Abstract
We develop an analytical framework designed to solve and analyze heterogeneous‐agent models that endogenously generate fat‐tailed wealth distributions. We exploit the asymptotic linearity of policy functions and the analytical characterization of the Pareto exponent to augment the conventional solution algorithm with a theory of the tail. Our framework allows for a precise understanding of the very top of the wealth distribution (e.g., analytical expressions for top wealth shares, type distribution in the tail, and transition probabilities in and out of the tail) in addition to delivering improved accuracy and speed. [ABSTRACT FROM AUTHOR]
- Published
- 2023
- Full Text
- View/download PDF
40. Sense and no(n)-sense of energy security indicators.
- Author
-
Böhringer, Christoph and Bortolamedi, Markus
- Subjects
- *
ENERGY security , *ECONOMIC indicators , *ENERGY policy , *RENEWABLE energy sources , *ENERGY consumption , *CARBON dioxide & the environment - Abstract
Energy security ranks high on the policy agenda of many countries. To improve on energy security, governments undertake regulatory measures for promoting renewable energy, increasing energy efficiency, or curbing carbon dioxide emissions. The impacts of such measures on energy security are typically monitored by means of so-called energy security indicators. In this paper, we show that the common use of wide-spread energy security indicators falls short of providing a meaningful metric. Regulatory measures to improve on energy security trigger ambiguous effects across energy security indicators. We conclude that a major pitfall of energy security indicators is the lack of a rigorous microeconomic foundation. [ABSTRACT FROM AUTHOR]
- Published
- 2015
- Full Text
- View/download PDF
41. Gas price caps and electricity production effects in the context of the Russo-Ukrainian War: modeling and new policy reforms
- Author
-
Roeger, Werner and Welfens, Paul J. J.
- Published
- 2022
- Full Text
- View/download PDF
42. Experiences with Occupational Pensions in Denmark
- Author
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Svend E. Hougaard Jensen, Tove Birgitte Foxman, and Torben Möger Pedersen
- Subjects
J26 ,saving ,Retirement ,050208 finance ,Saving ,H68 ,J11 ,Occupational pensions ,05 social sciences ,Occupational pension ,fiscal sustainability ,Fiscal sustainability ,retirement ,Political science ,0502 economics and business ,ddc:330 ,General Earth and Planetary Sciences ,D58 ,Pension taxation ,H55 ,050207 economics ,Humanities ,pension taxation ,E21 ,General Environmental Science - Abstract
This paper focuses on the development of the funded, occupational pension (OP) system in Denmark. Launched in 1987, as a grand agreement between social partners backed by the government, and as part of the collective wage bargaining process, the Danish OP system differs from the set-up in most other countries, where OP schemes typically have been introduced as part of the legislative process. The OP schemes, being a major component of the overall Danish pension system, have attracted a lot of international attention in recent years and play a key role behind the system’s success with respect to achieving satisfactory coverage, providing high replacement rates and not least, for keeping fiscal policy on a sustainable path. Finally, the paper discusses a number of future challenges, mainly related to the interaction between private and public pensions in a welfare state. Das Papier konzentriert sich auf die Entwicklung des Systems der kapitalgedeckten, betrieblichen Altersversorgung in Dänemark. Das dänische System, das 1987 als große Vereinbarung zwischen den Sozialpartnern, die von der Regierung unterstützt wird, und als Teil des Tarifverhandlungsprozesses eingeführt wurde, unterscheidet sich vom Aufbau in den meisten anderen Ländern, in denen Altersversorgungssysteme in der Regel im Rahmen des Gesetzgebungsprozesses eingeführt wurden. Die Altersversorgungssysteme, die ein wichtiger Bestandteil des gesamten dänischen Rentensystems sind, haben in den letzten Jahren große internationale Aufmerksamkeit erregt und spielen eine Schlüsselrolle für den Erfolg des Systems, wenn es darum geht, eine zufriedenstellende Abdeckung zu erreichen, hohe Ersatzraten zu erzielen und nicht zuletzt die Finanzpolitik auf einem nachhaltigen Weg zu halten. Schließlich wird in dem Papier auf eine Reihe künftiger Herausforderungen eingegangen, die sich vor allem auf die Wechselwirkung zwischen privater und staatlicher Altersvorsorge in einem Wohlfahrtsstaat beziehen.
- Published
- 2019
43. A DSGE model of fiscal stabilizers and informality in Sub-Sahara Africa
- Author
-
Eric Amoo Bondzie and Mark Kojo Armah
- Subjects
Fiscal policy ,automatic stabilizers ,informality ,DSGE models ,Sub-Sahara Africa ,D58 ,Finance ,HG1-9999 ,Economic theory. Demography ,HB1-3840 - Abstract
This paper investigates the effects of fiscal impulses on macroeconomic variables within a New-Keynesian DSGE framework featuring an informal economy that allows for the examination of the effectiveness of automatic stabilizers in stimulating some selected sub-Saharan African (SSA) economies during crises. Stabilizers were modelled such that fiscal instruments react to their own lagged values and the official sector output. The results indicate that tax hikes lead to sizeable tax evasion and reallocation of factor inputs from the official sector to the shadow sector making the standard aggregate estimates of fiscal policies ineffective while government spending shocks slow down activities in the shadow sector. The findings also showed that automatic stabilizers on government spending (income taxes) stabilized the economy by reducing (raising) output levels even in the presence of the shadow economy. For policy implications, effective implementation of government policies should incorporate the informal sector in macroeconomic modelling, especially for countries with a large informal sector.
- Published
- 2022
- Full Text
- View/download PDF
44. Green technology policies versus carbon pricing: An intergenerational perspective
- Author
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Rausch, Sebastian and Yonezawa, Hidemichi
- Subjects
Overlapping Generations ,Q54 ,H23 ,Q48 ,Green Technology Policy ,Intergenerational Distribution ,Q58 ,Climate policy ,ddc:330 ,D58 ,Carbon Pricing ,Social Welfare ,General Equilibrium - Abstract
Technology policy is the most widespread form of climate policy and is often preferred over seemingly efficient carbon pricing. We propose a new explanation for this observation: gains that predominantly accrue to households with large capital assets and that influence majority decisions in favor of technology policy. We study climate policy choices in an overlapping generations model with heterogeneous energy technologies and distortionary income taxation. Compared to carbon pricing, green technology policy leads to a pronounced capital subsidy effect that benefits most of the current generations but burdens future generations. Based on majority voting which disregards future generations, green technology policies are favored over a carbon tax. Smart “polluter-pays” financing of green technology policies enables obtaining the support of current generations while realizing efficiency gains for future generations., Economics Working Paper Series, 21/362
- Published
- 2021
45. Default and determinacy under quantitative easing.
- Author
-
Romanidis, Nikolaos and Tsomocos, Dimitrios P.
- Subjects
INTERTEMPORAL choice ,DEFAULT (Finance) ,BONDS (Finance) ,INTEREST rates ,PRICE inflation ,COUNTERPARTY risk - Abstract
We show that the path of inflation under quantitative easing policies that target interest rates, is determinate in the presence of default. We achieve this through different payoff profiles that a collateralised defaultable bond achieves in different states of nature with distinct default outcomes. In the model, heterogeneous households trade this bond and other shorter maturity risk-free bonds to maximize their intertemporal utility of consumption and labour. The differentiated payoffs of the collateralised bond, in an equilibrium with active default, span the full state space giving determinacy of prices and inflation as an outcome. This, implies that quantitative easing as implemented by the ECB in the recent years, can control the stochastic path of inflation. [ABSTRACT FROM AUTHOR]
- Published
- 2022
- Full Text
- View/download PDF
46. Costly Information in Markets with Heterogeneous Agents: A Model with Genetic Programming.
- Author
-
Hauser, Florian, Huber, Jürgen, and Kaempff, Bob
- Subjects
INFORMATION theory in economics ,HETEROGENEOUS computing ,GENETIC programming ,MATHEMATICAL models ,ECONOMIC equilibrium - Abstract
We analyze the value of costly information in agent-based markets with nine distinct information levels. We use genetic programming where agents optimize how much information to buy and how to process it. We find that most agents first buy high information levels, but in equilibrium buy either complete or no information, with the respective shares depending on the information costs. When information is auctioned, markets are first inefficient, so agents raise their bids to buy the highest information levels, before they learn to bid amounts that they can cover with their trading profits. In equilibrium, markets are not fully efficient, but contain just enough noise to allow informed agents to earn their information costs. [ABSTRACT FROM AUTHOR]
- Published
- 2015
- Full Text
- View/download PDF
47. International trade buffers the impact of future irrigation shortfalls.
- Author
-
Liu, Jing, Hertel, Thomas W., Taheripour, Farzad, Zhu, Tingju, and Ringler, Claudia
- Subjects
INTERNATIONAL trade ,ECONOMIC impact ,IRRIGATION water ,FOOD production ,WATER shortages ,AGRICULTURAL policy - Abstract
There is increasing interest in the water–food nexus, especially the restrictive effect of water on food production in hot spots where irrigation stress is growing. However, little is known about the larger-scale implications of future irrigation shortfalls for global trade and economic welfare, as well as of the potential buffering impacts of international trade on the local impacts of irrigation shortage. In this paper, we utilize a recently developed model, GTAP-BIO-W, to study the economic effects of changes in irrigation outlook for 126 river basins, globally by 2030. Projected irrigation availability is obtained from the IMPACT-WATER model, and imposed upon the present-day economy. Irrigation availability in 2030 is expected to drop by 30–60% in several key rivers basins, including: Hai He, Indus, Luni, and the Eastern Mediterranean basin, leading to significant output declines in China, South Asia, and the Middle East. We find that the regional production impacts of future irrigation water shortages are quite heterogeneous, depending on the size of the shortfall, the irrigation intensity of crop production, the possibility of expanding rainfed areas, as well as the crop mix. These changes in regional output significantly alter the geography of international trade. To compensate for the loss of productivity caused by the irrigation constraint, an estimated 7.6 million hectares of cropland expansion is needed to meet the demand for food. In spite of the remarkable reduction of irrigation in some basins, the resulting welfare impact is relatively modest as a result of the buffering capacity of global markets. The global welfare loss amounts to $3.7 billion (2001 prices) and results from a combination of the reduction in irrigation availability as well as the interplay with agricultural support policies. [ABSTRACT FROM AUTHOR]
- Published
- 2014
- Full Text
- View/download PDF
48. Give and take: How the funding of adaptation to climate change can improve the donor's terms-of-trade.
- Author
-
Schenker, Oliver and Stephan, Gunter
- Subjects
- *
CLIMATE change , *ECONOMICS , *INTERNATIONAL trade -- Econometric models , *INTERNATIONAL economic assistance , *TERMS of trade , *CLIMATE change mitigation , *TWENTY-first century , *INTERNATIONAL cooperation ,ECONOMIC conditions in developing countries - Abstract
This paper discusses the interplay between international trade, regional adaptation to climate change and financial transfers for funding adaptation. It combines insights from a theoretical model of North-to-South transfers with the findings of a calibrated dynamic multi-region multi-sector computable general equilibrium model that takes into account the impacts of climate change and the adaptation to it. Assessing the effects of adaptation funding indicates that funding of adaptation in developing regions can be Pareto-improving. Not only will developing regions, which do not own sufficient resources for adapting optimally, profit from receiving adaptation funding. Terms-of-trade improvements in the high and middle income donor countries can dominate transfer costs and hence lead to a net-welfare gain in almost any developed region except North America. As such our consideration adds a new argument for financially supporting adaptation in the developing world besides the well-known ones such as fairness and incentives for participation in a global climate treaty. [ABSTRACT FROM AUTHOR]
- Published
- 2014
- Full Text
- View/download PDF
49. The added value from a general equilibrium analysis of increased efficiency in household energy use.
- Author
-
Lecca, Patrizio, McGregor, Peter G., Swales, J. Kim, and Turner, Karen
- Subjects
- *
ECONOMIC equilibrium , *ENERGY consumption & economics , *HOUSEHOLDS , *TOTAL energy systems (On-site electric power production) , *SIMULATION methods & models , *ENDOGENEITY (Econometrics) - Abstract
Abstract: This paper investigates the economic impact of a 5% improvement in the UK household energy efficiency, focussing specifically on total energy rebound effects. The impact is measured through simulations using models that have increasing degrees of endogeneity but are calibrated on a common data set, moving from a basic partial equilibrium approach to a fully specified general equilibrium treatment. The size of the rebound effect is shown to depend on changes in household income, aggregate economic activity and relative prices that can only be captured through a general equilibrium model. [Copyright &y& Elsevier]
- Published
- 2014
- Full Text
- View/download PDF
50. Losers amongst the losers: The welfare effects of the Great Recession across cohorts
- Author
-
Ferrari, Alessandro
- Subjects
Overlapping Generations ,Inequality ,Portfolio choice ,ddc:330 ,D91 ,Youth Unemployment ,D58 ,D63 ,Aggregate Risk ,D31 ,E21 - Abstract
This paper studies the effect of deep recessions on intergenerational inequality by quantifying the welfare effects on households at different phases of the life cycle. Deep recessionary episodes are characterized by large declines in the prices of real and financial assets and in employment. The former levies high welfare costs on older households who own financial wealth, the latter determines labour income losses and destroys the human capital of younger cohorts, lowering their productivity. The paper extends previous analyses in the literature by including permanent labour income losses in an OLG model calibrated to match the Great Recession. The analysis shows that younger households lose more than double of all other living cohorts, as younger household become unemployed and experience a decline in their future income. The dynamics of households' consumption and portfolio composition between 2007 and 2013 in the US are consistent with the predictions of the model.
- Published
- 2020
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