Who's entitled?

For the first time, serious consideration has been given to whether well-off seniors should pay higher Medicare premiums. Fans and foes alike say that means-testing throws open for debate the very nature of the federal government's vast entitlement programs.     

Who's in charge?

President Clinton's health care reform plan avoids the appearance of government control by diffusing and delegating authority to a host of new institutions. The net result, ironically, may be a system that is less accountable to the public than one in which government's role is clearer.     

Who's in charge here?

In previous Congresses, the chairman of the House Ways and Means Subcommittee on Health would have been free to write the medicare restructuring bill of his dreams. But William M. Thomas, like other chairmen, will have to accommodate his vision to that of the Republican leadership.     

Is fiscal austerity really self-defeating?

This paper analyzes local and global equilibrium dynamics in an optimizing endogenous growth model under expenditure-based fiscal austerity feedback policies expressed relative to the private capital stock—prescribing spending cuts in reaction to public debt accumulation. Because the present value of equilibrium primary surpluses turns to be a nonlinear function of debt, two steady state equilibria are shown to emerge, one exhibiting low debt and high growth, one exhibiting high debt and low growth. Local analysis reveals that the low-debt/high-growth steady state is saddle-path stable while the high-debt/low-growth steady state is unstable—the latter thus indicating the possibility of self-defeating austerity, characterized by off-equilibrium upward spirals in debt because of persistent policy-induced adverse effects on growth dividends and fiscal revenues. However, when global nonlinear dynamics are taken into account, it is demonstrated that the two steady states are endogenously connected. In particular, global analysis reveals that even if the high-debt/low-growth steady state is locally unstable, there exists a unique and possibly nonmonotonic saddle connection making the economy converge to the low-debt/high-growth steady state. The existence of the saddle connection guarantees global determinacy of perfect foresight equilibrium should the high-debt/low-growth steady state be a node, ruling out multiple explosive paths incompatible with the government's intertemporal budget constraint and the private agents' transversality condition. The foregoing results are robust with respect to the adoption of an output-based—rather than a capital-based—policy function as long as the rule is nonlinear and sufficiently reactive to debt changes.     

Does the dutch model really exist?

The policy that led from the "Dutch disease" (in the 1980s) to the "Dutch miracle" (in the 1990s) consists of three tracks: wage moderation, retrenching public expenditure and reducing the tax burden, and slimming the welfare system. The wage moderation track seems to have been the most important. The term "Dutch model" refers to the socioeconomic system of the Netherlands. Most observers point particularly to the relatively low unemployment rate to indicate the success of this model. However, the economic inactivity rate in the Netherlands is not lower than in neighboring countries. This suggests that open unemployment in the Netherlands has been partly replaced with hidden unemployment. In particular, the disability scheme seems to contain a large component of hidden unemployment. Another feature of the Dutch model is its consensus-seeking nature, which is fostered by its institutional structure.     

Are distance effects really a puzzle?

Given the distance proxies for trade costs, the onset of globalization implies that geographical distance would matter less for trade. However, year-on-year regressions of a log-linearized gravity model estimated by the ordinary least squares (OLS) method usually suggest that the negative impact of distance on trade is rising since the 1950s during the late 20th century. These seemingly counter-intuitive results may occur due to the omission of the extensive margin as well as the neglect of the Jensen's inequality. This paper investigates these two potential solutions but that only the second seems to work. After considering Jensen's inequality, the distance effects declined over the period 1950–1999. In addition, this paper proposes a simple theoretical model to identify trade costs. The empirical results also show a declining trend of trade costs over the same time period.