We build a two-sector dynamic general equilibrium model with one-sided substitutability between fossil carbon and biocarbon. One shock only, the discovery of the technology to use fossil fuels, leads to a transition from an inital pre-industrial phase to three following phases: a pure fossil...

We analyze a dynamic stochastic general-equilibrium (DSGE) model with an externality---through climate change---from using fossil energy. A central result of our paper is an analytical derivation of a simple formula for the marginal externality damage of emissions. This formula, which holds...

This Paper analyses an overlapping generation model of public good provision under repeated voting. The public good is financed through age-dependent taxation that distorts human capital investment. Taxes redistribute income both across different skill groups and across generations. We contrast...

We study optimal price setting by a monopolist in an infinite horizon model with stochastic costs, moderate inflation, and costly price adjustment. For realistic parameters, chosen to replicate observed frequencies of price changes, the model fits numerically several empirical regularities. In...

Two features distinguish European and US labour markets. First, most European countries have a considerably more generous unemployment insurance system. Second, the duration of unemployment and employment spells are substantially higher in Europe – employment turnover is lower. We show that...

Intelligent agents may contribute to higher technological growth if assigned appropriate positions in the economy. These positive effects on growth are unlikely to be internalized on a competitive labour market. The allocation of talent depends on the relative award the market assigns to...

We use a general equilibrium OLG model to analyse the relation between intergenerational social mobility and wage inequality. We show that the correlation between mobility and inequality depends on which factor caused the change in inequality. The model can thus help discriminate between...

In this paper, we incorporate a positive theory of unemployment insurance into a dynamic overlapping generations model with search-matching frictions and on-the-job learning-by-doing. The model shows that societies populated by identical rational agents, but differing in the initial distribution...

In an analysis of the risk-sharing properties of different types of pension systems, we show that only fixed-fee pay-as-you-go (PAYG) pension systems can provide risk sharing for living individuals. Under some circumstances, however, other PAYG pension systems can enhance the expected welfare of...

Evidence suggests that unemployed individuals can sometimes affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity only arises for some individuals and the identity of those may be unobservable ex-ante. The problem of...