n this paper we argue that very high marginal labor income tax rates are an effective tool for social insurance even when households have preferences with high labor supply elasticity, make dynamic savings decisions, and policies have general equilibrium effects. To make this point we construct...

In this paper we characterize quantitatively the optimal mix of progressive income taxes and education subsidies in a model with endogeneous human capital formation, borrowing constraints, income risk and incomplete financial markets. Progressive labor income taxes provide social insurance...

This paper studies the effect of top tax rates on inventors' mobility since 1977. We put special emphasis on”superstar" inventors, those with the most and most valuable patents. We use panel data on inventors from the United States and European Patent Offices to track inventors' locations over...

This paper posits a notion of the value of an individual’s human capital and the associated return on human capital. These concepts are examined using U.S. data on male earnings and financial asset returns. We decompose the value of human capital into a bond, a stock and a residual value...

How does the persistence of earnings change over the life cycle? Do workers at different ages face the same variance of idiosyncratic shocks? This paper proposes a novel specification for residual earnings that allows for an age profile in the persistence and variance of labor income shocks. We...

How does the persistence of earnings change over the life cycle? Do workers at different ages face the same variance of idiosyncratic shocks? This paper proposes a novel specification for residual earnings that allows for a lifetime profile in the persistence and variance of labor income shocks....

This paper proposes a novel specification for residual earnings that allows for a lifetime profile in the persistence and variance of labor income shocks. We show theoretically that the statistical model is identified and estimate it using data from the PSID. We strongly reject the hypothesis of...

A major virtue of von Neumann-Morgenstern utilities, for example, in the theory of general financial equilibrium (GFE), is that they ensure intertemporal consistency: consumption-portfolio plans (for the future) are in fact executed (in the future) — assuming that there is perfect foresight...

A major virtue of von Neumann-Morgenstern utilities, for example, in the theory of general financial equilibrium (GFE), is that they ensure time consistency: consumption-portfolio plans (for the future) are in fact executed (in the future) — assuming that there is perfect foresight about...

We study transactions that require investments before trading in a competitive market, when forward contracts fixing the transaction price are absent. We show that, despite the market being perfectly competitive and subject to arbitrarily little uncertainty, the inability to jointly determine...