The presence of cross-sectionally correlated error terms invalidates much inferential theory of panel data models. Recently work by Pesaran (2006) has suggested a method which makes use of cross-sectional averages to provide valid inference for stationary panel regressions with multifactor error...

We develop a model that allows for public goods and status signaling through charitable contributions. This model provides a unified framework in which contributions are driven both by altruism and status signaling. We use this setup to re-examine the conventional practice of rendering a...

In this paper, we discuss a novel aspect of affirmative action policy. We examine its redistributive role, asking whether in an egalitarian society, supplementing the tax-transfer system with an affirmative action policy would enhance social welfare.

We consider the notion of welfare stigma à la Besley and Coate (1992b). This stigma is attributed to welfare claimants by society when they are perceived as undeserving in the sense that they falsely claim to be eligible for welfare benefits. However, due to imperfect information, this stigma...

In this paper, we challenge the conventional wisdom that due to the negative correlation between family size and earning ability, family size can be used as a 'tagging' device, and calls for subsidizing children (via child allowances) to enhance egalitarian objectives. We show that the case for...

Workfare policies are often introduced in labour market policies to improve the trade-off between incentives and insurance as an alternative to benefit reductions. Most of the debate on such policies has focussed on the direct effect of those participating in the scheme, and in particular the...

This paper revisits the role played by myopia in generating a theoretical rationale for pay-as-you-go social security in dynamically efficient economies. Contrary to received wisdom, if the real interest rate is exogenously fixed, enough myopia may justify public pensions but never alongside...

In this paper we employ a tax-competition model to demonstrate that in the presence of migration the re-distributive advantage of a non-linear income tax system over a linear (flat) one is significantly mitigated relative to the autarky (no-migration) equilibrium. When migration threats are...

Migration of young workers (as distinct from retirees), even when driven in by the generosity of the welfare state, slows down the trend of increasing dependency ratio. But, even though low-skill migration improves the dependency ratio, it nevertheless burdens the welfare state. Recent studies...

We model an overlapping-generations economy with two skill levels: skilled and unskilled. The welfare-state is modeled simply by a proportional tax on labor income to finance a demogrant in a balanced-budget manner. Therefore, some (the unskilled workers and old retirees) are net beneficiaries...