This paper advances the hypothesis that the EMS crisis was caused by German unification. Unification stimulated massive resource demand, which paralleled resource demand in the United States following Reagan’s tax reforms in the 1980s. The resource demand revised German interest rates relative...

This paper develops a model of a small open economy that produces an export good with domestic labour and imported energy and is stuck in an unemployment situation resulting from an excessive fixed net-of-tax wage rate. We study a revenue-neutral green tax reform that substitutes energy for wage...

The welfare state can be seen as an insurance device that makes lifetime careers safer, increases risk taking and suffers from moral hazard effects. Adopting this view, the paper studies the trade-off between average income and inequality, evaluating redistributive equilibria from an allocative...

This paper studies alternative methods of privatizing a formerly communist firm in the presence of imperfect risk markets. The methods include cash sales, a give-away scheme, and a participation contract where the government retains a sleeping fractional ownership in the firm. It is shown that...

The European Monetary Union will involve socialization of existing seigniorage wealth of national central banks. This socialization will create windfall gains for countries with relatively low monetary bases such as France and the United Kingdom and will be disadvantageous for countries like...

The paper argues that Lucas overestimates the Friedman-Bailey type of welfare cost of inflation and neglects other important welfare effects. With an alternative interpretation of the non-observability of low interest rates than the one Lucas gave and the introduction of taxes that reduce the...

It is argued that a PAYGO system may have useful allocative functions in that it serves as an insurance against not having children and as an enforcement device for 'rotten kids' who are unwilling to pay their parents a pension. It is true that the system has a moral hazard effect in terms of...

This paper attempts to give a meaning to the empty concept of subsidiarity. It examines various kinds of government activity with respect to the optimal layer of government in Europe at which these activities should be performed. The paper criticizes Europe's industrial policies and its...

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...

This paper argues that increased factor mobility incurs the risk of dismantling the welfare state, even though this state may have useful allocative functions. It will be difficult to finance the welfare state with taxes on capital and it may be necessary to subsidize this factor in the sense...