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We study the optimal path for capital and labor taxes in a dynamic economy with heterogeneous agents. In an otherwise standard model we concentrate on tax reforms that are both Pareto effcient and Pareto improving. Also, we assume the capital tax rate can never rise above its initial level and...
Persistent link: https://www.econbiz.de/10005857760
We introduce heterogeneity in agents’ risk aversion into a general equilibrium asset pricing framework with recursive preferences. Agents trade in a stock, whose dividend is the only source of consumption, and in a short-term bond in zero net supply. In equilibrium the less risk averse agents...
Persistent link: https://www.econbiz.de/10005857761
We study the transition dynamics and welfare effects of reducing unemployment benefits in a Mortensen-Pissarides matching model with precautionary savings. The dynamic analysis reveals significant transition costs that comparative statics would miss. The main reason is that initially individuals...
Persistent link: https://www.econbiz.de/10005857770