Jim Tobin, who died on March 11, 2002 at the age of 84, was one of giants of economics of the second half of the twentieth century and the greatest macroeconomist of his generation. Tobin’s influence on macroeconomic theory is so pervasive - so much part of our professional ‘acquis’ - that...

Two issues related to mapping a multi-sector model into a reduced-form value-added model are often neglected: the composition of intermediate goods, and the distinction between value added productivity and gross output productivity. We demonstrate their quantitative significance for the case of...

A reduction in income tax rates generates substantial dynamic responses within the framework of the standard neoclassical growth model. The short-run revenue loss after an income tax cut is partly - or, depending on parameter values, even completely - offset by growth in the long-run, due to the...

In Part A of the present study, subtitled 'The Consumption Function as Solution of a Boundary Value Problem' Discussion Paper No. TE/96/297, STICERD, London School of Economics, we formulated a Brownian model of accumulation and derived sufficient conditions for optimality of a plan generated by...

This paper reviews the cross-country record of economic growth, using as organizing framework how economic theory has guided that empirical analysis. The paper argues that recent studies of economic growth—both empirical and theoretical—distinguish from previous work in three distinct...

Motivated by the success of internal habit formation preferences in explaining asset pricing puzzles, we introduce these preferences in a life-cycle model of consumption and portfolio choice with liquidity constraints, undiversifiable labor income risk and stock-market participation costs. In...

This paper derives optimal employment contracts when workers are risk averse and there are employment and unemployment risks. Without income insurance, consumption rises during employment and falls during unemployment. Optimal employment contracts offer severance compensation to smooth...

In 1997 Chancellor Kohl proposed a major pension reform: he pushed the law through Parliament explaining that the German PAYG system had become unsustainable. One limitation of the new law - one that is crucial for our identification strategy - is that it left the generous pension entitlements...