This paper models balanced-budget redistribution between socio-economic groups as the outcome of electoral competition between two political parties. Equilibrium is unique in the present model, and a sufficient condition for existence is given, requiring that there be enough ‘stochastic...

This paper focuses on the interaction of monetary policy and wage formation in economies with strong labor unions. Government and unions are viewed as endogenous utility maximizers and the macroeconomic consequences of their strategic interaction are explored with the aid of some elements of...

This paper offers a reappraisal of the inflation-unemployment tradeoff, based on ?frictional growth,? describing the interplay between nominal frictions and money growth. When the money supply grows in the presence of price inertia (due to staggered wage contracts with time discounting), the...

Appropriate policies to address the problem of toxic assets should act as automatic stabilizers, so that institutions who toxic assets turn out to be worthless receive more public support than institutions whose toxic assets have value. Furthermore, such policies should be frugal in their...

Now, at the end of the 20th century, many OECD countries face serious problems in achieving both prosperity and social cohesion. One important - and sadly neglected - source of these problems are the very policy systems that are meant to address them. I will argue that these policy systems -...

This manifesto challenges a pernicious orthodoxy that has gripped Europe's policy makers. It is that demand- and supply-side policies must have different aims, that a limited number of supply-side policies are to be devoted to fighting unemployment, and that demand management (and particularly...

This paper explores the optimal design of subsidies for hiring unemployed workers (?employment vouchers? for short) in the context of a dynamic model of the labor market. Focusing on the short-term and long-term effects of the vouchers on employment and unemployment, the analysis shows how the...