What is the basic economic decision-making unit? Is it the household or the extended family? This question is fundamental to economic analysis and policy design. The answer given by the Life Cycle and Keynesian models is that the economic unit is the household. According to these models, members...

This paper examines the bequest\gift behavior of altruistic parents who do not know their children's abilities and cannot observe their children's work effort. Parents are likely to respond to this information problem by making larger bequests to higher earning children and by using their...

This article demonstrates that Ricardian Equivalence does not necessarily hold in models with altruistic transfers once one takes into account the strategic behavior of recipients as well as donors. To influence the final allocation of consumption in altruistic settings, potential recipients can...

This paper shows that in American states balanced budget rules are effective in enforcing fiscal discipline but they have no costs in terms of increased output variability. More specifically, we show that tighter fiscal rules are associated with larger average surplus and lower cyclical...

This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. In particular, we investigate how different types of fiscal policy affect profits and , as a result, investment. We find a sizable negative effect of public spending -- and in particular of its...

This paper develops, calibrates, and simulates a dynamic 88-period OLG model to study the intergenerational transmission of U.S. wealth inequality via bequests. The model features marriage, realistic fertility patterns, random death, assortative mating based on skills, heterogeneous skill...

This paper studies both theoretically and empirically the determinants of group formation and of the degree of participation when the population is heterogeneous, both in terms of income and race or ethnicity. We are especially interested in whether and how much the degree of heterogeneity in...

This paper presents a new solution to the time-consistency problem that appears capable of enforcing ex ante policy in a variety of settings in which other enforcement mechanisms do not work. The solution involves formulating a law, institution, or agreement that specifies the optimal ex ante...

This paper questions the widely accepted view that deficits have real effects in the life cycle model. Standard analyses of deficits within life cycle models treat the government as a dictatorial entity that can effect any intergenerational redistribution it desires. In contrast, this paper...

The precautionary motive for saving is an important issue that is receiving increasing attention. Part of the motivation for this interest stems from the post war coincidence of two trends, one a decline in the U.S. rate of saving and the other an increase in insurance of various types,...