We study the effects of credit shocks in a model with heterogeneous entrepreneurs, financing constraints, and a realistic firm-size distribution. As entrepreneurial firms can grow only slowly and rely heavily on retained earnings to expand the size of their business, we show that, by reducing...

When young individuals face binding debt constraints, their human capital investments will be insufficiently financed by private creditors. If generations overlap, then a well-designed fiscal policy may be able to improve human capital investments by replacing missing capital markets with an...

This paper analyzes the effects of intergenerational conflict on capital and labor income tax rates, transfers, and government spending in a model of multidimensional policy choice. The different nature of tax liabilities for the young and the old can explain why the old receive large gross...

This paper proposes a new equilibrium concept organizational equilibrium for models with state variables that have a time inconsistency problem. The key elements of this equilibrium concept are: (1) agents are allowed to ignore the history and restart the equilibrium; (2) agents can wait for...

In this paper, we assess the empirical relationship between population growth, mobility, and state-level capital spending in the United States. To evaluate the magnitude of the coefficients, we introduce an explicit, quantitative political-economy model of government spending determination,...

Across different layers of the U.S. government there are surprisingly large differences in institutional provisions that impose fiscal discipline, such as constitutionally mandated deficit or debt limits, or specific tax bases. In this paper we develop a framework that can be used to...

A central equation for the fiscal theory of the price level (FTPL) is the government budget constraint (or "government valuation equation"), which equates the real value of government debt to the present value of fiscal surpluses. In the past decade, the governments of most developed economies...

This paper considers an optimal taxation environment where household income is private information, and the government randomly audits and punishes households found to be underreporting. We prove that the optimal mechanism derived using standard mechanism design techniques has a bad equilibrium...