Old‐age Social Security versus Forward Intergenerational Public Goods Provision

This paper introduces an overlapping‐generations model with earnings heterogeneity and borrowing constraints. The labour income tax and the allocation of tax revenue between social security and forward intergenerational public goods are determined in a bidimensional majoritarian voting game played by successive generations. The political equilibrium is characterized by an ends‐against‐the‐middle equilibrium where low‐income and high‐income individuals form a coalition in favour of a lower tax rate and less social security while middle‐income individuals favour a higher tax rate and greater social security. Government spending then shifts from social security to public goods provision if higher wage inequality is associated with a borrowing constraint and a high elasticity of marginal utility of youth consumption.     

Regular Distributive Efficiency and the Distributive Liberal Social Contract

We consider abstract social systems of private property, made of n individuals endowed with nonpaternalistic interdependent preferences, who interact through exchanges on competitive markets and Pareto‐improving lump‐sum transfers. The transfers follow from a distributive liberal social contract defined as a redistribution of initial endowments such that the resulting market equilibrium allocation is both: (i) a distributive optimum (i.e., is Pareto‐efficient relative to individual interdependent preferences) and (ii) unanimously weakly preferred to the initial market equilibrium. We elicit minimal conditions for meaningful social contract redistribution in this setup, namely, the weighted sums of individual interdependent utility functions, built from arbitrary positive weights, have suitable properties of nonsatiation and inequality aversion; individuals have diverging views on redistribution, in some suitable sense, at (inclusive) distributive optima; and the initial market equilibrium is not a distributive optimum. We show that the relative interior of the set of social contract allocations is then a simply connected smooth manifold of dimension n ? 1. We also show that the distributive liberal social contract rules out transfer paradoxes in Arrow–Debreu social systems. We show, finally, that the liberal social contract yields a norm of collective action for the optimal provision of any pure public good.     

Voluntary Contributions to a Mutual Insurance Pool

We study mutual‐aid games in which individuals choose to contribute to an informal mutual insurance pool. Individual coverage is determined by the aggregate level of contributions and a sharing rule. We analyze theoretically and experimentally the (ex ante) efficiency of equal and contribution‐based coverage. The equal coverage mechanism leads to a unique no‐insurance equilibrium while contribution‐based coverage develops multiple equilibria and improves efficiency. Experimentally, the latter treatment reduces the amount of transfers from high contributors to low contributors and generates a “dual interior equilibrium.” That dual equilibrium is consistent with the co‐existence of different prior norms which correspond to notable equilibria derived in the theory. This results in asymmetric outcomes with a majority of high contributors less than fully reimbursing the global losses and a significant minority of low contributors less than fully defecting. Such behavioral heterogeneity may be attributed to risk attitudes (risk tolerance vs risk aversion) which is natural in a risky context.     

The Political Economy of Social Security in a Borrowing‐Constrained Economy

This paper introduces a three‐income class, overlapping‐generations model with borrowing constraints. The labor income tax for financing pay‐as‐you‐go social security is determined in a majoritarian voting game played by successive generations. When the interest‐rate elasticity of consumption is low, the political equilibrium might be characterized by an equilibrium where the old and the middle‐income young individuals form a coalition in favor of a higher tax rate and greater social security, while the low‐ and the high‐income young individuals favor a lower tax rate and less social security. In this equilibrium, the size of social security is decreased by the mean‐preserving reduction of a decisive voter's wage if he/she is borrowing‐constrained.     

Unit Versus Ad Valorem Taxes: The Private Ownership of Monopoly in General Equilibrium

Employing a general equilibrium framework, Blackorby and Murty prove that, with a monopoly and under 100% profit taxation and uniform lump‐sum transfers, the utility possibility sets of economies with unit and ad valorem taxes are identical. This welfare equivalence is in contrast to most previous studies, which demonstrate the superiority of the ad valorem tax in a partial equilibrium framework. In this paper, we relax the assumption of 100% profit taxation and allow the consumers to receive profit incomes from ownership of shares in the monopoly firm. We find that, under certain regularity conditions, for any fixed vector of profit shares, the utility possibility sets of economies with unit and ad valorem taxes are not generally identical. But it does not imply that one completely dominates the other. Rather, the two utility possibility frontiers cross each other. Additionally, employing a standard partial equilibrium welfare analysis, we show that the Marshallian social surpluses resulting from the two tax structures are identical when the government can implement unrestricted transfers.     

Correlated Equilibrium,Conformity, and Stereotyping in Social Groups

We argue that a social norm and the coordination of behavior within social groups can be expressed by a correlated equilibrium. Given a social group structure (a partition of individuals into social groups), we propose four conditions that one may expect of a correlated equilibrium consistent with social norms. These are: (1) within‐group anonymity (conformity within groups), (2) group independence (no conformity between groups), (3) homophily (individuals in the same group have similar attributes), and (4) predictable group behavior (ex post stability). We demonstrate that correlated equilibrium satisfying (1)–(3) exist very generally and equilibrium satisfying (1)–(4) exist in games with many players. We also consider stereotyped beliefs—beliefs that all individuals in a social group can be expected to behave in the same way—and show that stereotyping is not costly to the person who stereotypes but may or may not be beneficial to society.     

SOCIAL NORMS,LOCAL INTERACTION,AND NEIGHBORHOOD PLANNING*

This article examines optimal social linkage when each individual's repeated interaction with each of his neighbors creates spillovers. Each individual's discount factor is randomly determined. A planner chooses a local interaction network or neighborhood design before the discount factors are realized. Each individual then plays a repeated Prisoner's Dilemma game with his neighbors. A local trigger strategy equilibrium (LTSE) describes an equilibrium in which each individual conditions his cooperation on the cooperation of at least one “acceptable” group of neighbors. Our main results demonstrate a basic trade‐off in the design problem between suboptimal punishment and social conflict. Potentially suboptimal punishment arises in designs with local interactions since in this case monitoring is imperfect. Owing to the heterogeneity of discount factors, however, greater social conflict may arise in more connected networks. When individuals' discount factors are known to the planner, the optimal design exhibits a cooperative “core” and an uncooperative “fringe.”“Uncooperative” (impatient) types are connected to cooperative ones who tolerate their free riding so that social conflict is kept to a minimum. By contrast, when the planner knows only the ex ante distribution over individual discount factors, then in some cases the optimal design partitions individuals into maximally connected cliques (e.g., cul‐de‐sacs), whereas in other cases incomplete graphs with small overlap (e.g., grids) are possible.     

团队生产的纳什均衡及合作博弈空间

本文在霍姆斯特姆所做贡献的基础上认为团队生产问题在本质上等同于囚徒困境问题,并指出霍姆斯特姆的实施强制契约的解决方法存在逻辑漏洞,在现实社会中一般是无效的.本文依据社会经济人个人效用最大化的条件定义了团队生产的合作战略博弈空间,合作战略博弈空间的均衡极点(即个人效用最大化点)就是团队生产收益分配博弈的纳什均衡解.如果个人收益的总和等于集体收益的最优值,那么个人理性与集体理性之间就达到统一,处于帕累托最优状态,即不存在道德风险;反之,则说明存在道德风险.并给出了在团队生产中通过改变合作战略博弈空间达到帕累托最优的一个特例,指出了科学合理地改变合作战略博弈空间在社会经济发展中的重要作用     

The assumption of equal marginal utility of income: how much does it matter?

In most applied cost–benefit analyses, individual willingness to pay (WTP) is aggregated without using explicit welfare weights. This can be justified by postulating a utilitarian social welfare function along with the assumption of equal marginal utility of income for all individuals. However, since marginal utility is a cardinal concept, there is no generally accepted way to verify the plausibility of this latter assumption, nor its empirical importance. In this paper, we use data from seven contingent valuation studies to illustrate that if one instead assumes equal marginal utility of the public good for all individuals, aggregate monetary benefit estimates change dramatically.     

Nash equilibrium and party polarization in an electoral model with mixed motivations

We study the existence problem of Nash equilibrium as well as the patterns of equilibrium policy outcomes in an electoral competition model with mixed motivations. Each party maximizes a sum of party members’ expected utility and office rent. The inclusion of office rent renders the payoff of each party discontinuous. This makes it difficult to apply usually fixed point arguments to prove the existence of Nash equilibria. By using a recently developed concept, multiple restrictional security (MR‐security) we provide conditions under which a pure‐strategy Nash equilibrium exists within fairly general settings, and further the analysis by presenting conditions under which various patterns of policy choices, including polarization, arise in equilibrium.     

RESTRICTING EMPLOYMENT OF LOW‐PAID IMMIGRANTS: A GENERAL EQUILIBRIUM ASSESSMENT OF THE SOCIAL WELFARE IMPLICATIONS FOR LEGAL U.S. WAGE‐EARNERS

This paper builds on earlier work that used a general‐equilibrium model to show that reducing employment of unauthorized immigrants in the United States through a tighter border‐security policy lowers the average income of legal residents. Here we exploit further the detail available in the general‐equilibrium model to look at distributional effects, recognizing that the policy increases wage rates for low‐paid legal workers. We assess the social welfare effect on legal workers using a constant elasticity of substitution social welfare function. We contrast our general‐equilibrium approach to immigration analysis with the more commonly used partial‐equilibrium, econometric approach. (JEL D63, J61, C68)     

Teach a man to fish? Education vs. optimal taxation

Abstract In models of redistribution, differences in human capital are often the relevant source of heterogeneity among individuals. Presumably, the distribution of human capital can be manipulated through education spending. This paper examines the use of education as a redistributive tool when there is a non‐linear tax system in place. The results show that taxation, whether under full or asymmetric information, substantially reduces the redistributive role of education spending in maximizing social welfare. This points to a conflict between the equalization of utility and human capital outcomes.     

Conditions for Sustainable Optimal Economic Development

This paper shows that, for dynamic optimizing economies with different types of natural resource, environmental, and human‐made capital stocks, a necessary and sufficient condition for permanently sustaining an optimal utility/consumption level is the stationarity of the current‐value Hamiltonian. For economies whose development is not exogenously and directly affected by time (i.e., time‐autonomous economies), this stationarity condition generalizes Dixit et al.’s (1980 ) “zero‐net‐aggregate‐investment” rule of sustain‐ability, which in turn generalizes Solow‐Hartwick’s sustainability rule. For non‐autonomous economies, the stationarity condition is not generally fulfilled, and the current‐value Hamiltonian under (over) estimates the true welfare level by an amount equal to the discounted value of the net “pure time effect.” For the non‐autonomous case of a time‐dependent utility discount rate, a general condition on the discount rate function (of which the hyperbolic discount rate function is a special case) upholds the results obtained for autonomous cases. The paper concludes with a discussion of policies that promote both optimality and sustainability objectives.     

ENDOGENOUS TIME PREFERENCE,INTEREST‐RATE RULES,AND INDETERMINACY*

This paper extends the Benhabib et al. flexible‐price, money‐in‐the‐utility‐function model by considering endogenous time preference and re‐examines equilibrium indeterminacy in response to alternative interest‐rate rules. We show that either an active or a passive interest‐rate feedback rule can generate local indeterminacy even if consumption and real money balances are Edgeworth independent. This result is in sharp contrast to that in the related literature. We also find that in the presence of endogenous time preference, local indeterminacy may occur regardless of whether the monetary policy is based on the interest‐rate feedback rule or money growth‐rate targeting.     

Ecosystems,externalities, and economies

This paper incorporates an ecosystem model into a model of a simple economy. The decisionmaking agents in the ecosystem are individual organisms aggregated to the species level. A species may provide utility directly to humans, or it may provide utility indirectly because it is used either as a raw material in goods fabrication or as sustenance for other species. We describe a comparative static equilibrium of the ecosystem where species' demands for other species are equal to the supplies of those other species, and energy is conserved. The ecosystem is then embedded in the economy so that the effects of human intervention can be traced through both the ecosystem and the economy. Human intervention creates ecosystem externalities such that ecosystem equilibria are shifted and the new equilibria affect the utility or the production processes of other humans. This framework allows us to describe in principle which ecosystem services can be efficiently usurped by humans, which waste flows can be efficiently allowed into ecosystems, and which ecosystem organisms and physical attributes can be efficiently maintained.     

MONEY,SOCIAL STATUS AND ENDOGENOUS GROWTH IN A GENERALIZED CASH‐IN‐ADVANCE MODEL

This paper analytically examines the equilibrium growth effect of money/inflation in a standard one‐sector AK model of endogenous growth with the most generalized cash‐in‐advance constraint and relative wealth‐induced preferences for social status. We show that on the economy's unique balanced growth equilibrium path, the sign of the correlation between money and output growth depends crucially on: (i) the intertemporal elasticity of substitution in consumption; and (ii) the liquidity‐constrained ratio of consumption to investment expenditure. Moreover, our model economy always exhibits a positive output–growth effect in response to changes of the strength for social status. We also undertake numerical experiments to assess the quantitative importance of our theoretical results under an empirically plausible set of parameters.     

The Important Thing Is Not (Always) Winning but Taking Part: Funding Public Goods with Contests

This paper considers a public good game with heterogeneous endowments and incomplete information affected by extreme free riding. I overcome this problem through the implementation of a deterministic contest in which several prizes may be awarded. I identify a monotone equilibrium, in which the contribution is strictly increasing in the endowment. I prove that it is optimal for the social planner to set the last prize equal to zero, but otherwise total expected contribution is invariant to the prize structure. Finally, I show that private provision via a contest Pareto‐dominates public provision and is higher than the total contribution raised through a lottery.     

To Trade Or Not To Trade: Economies With A Variable Number Of Tradeables*

We present a general equilibrium model that encompasses the endogenous selection and shadow‐pricing of a set of tradeable commodities, with home‐based and social production activities. In the model, a market system is a set of costly social institutions which embody the trade and production technologies available in the economy. Our equilibrium concept describes the pricing of market institutions, thus pricing the tradeability of a commodity. We obtain the existence and the decentralization of Pareto‐efficient allocations. We discuss an example regarding the transition of a guild‐based economy into a market‐based economy.