This paper suggests a novel explanation of the steady rise in Germany's welfare recipient numbers. In the paper's model, there are disadvantaged households employed in a city with few amenities (a bad-amenity city) who would prefer to receive welfare in a city with many amenities (a good-amenity...

This paper adds to the literature by utilizing improved data on tax revenue decentralization to reexamine the relationship between fiscal decentralization and the size of government. An econometric analysis using panel data from 18 OECD countries shows that fiscal decentralization matters for...

Under adverse selection, redlining of borrowers may occur when their wealth is not sufficient to reach the collateral needed by creditors to separate types. In this paper, potential entrepreneurs can join in a peer group and voluntarily decide to collect and redistribute their endowments. If the...

I analyze a probabilistic voting model where two office-motivated candidates choose an indirect taxation policy to maximize the probability of winning the election, in a society divided into a finite number of groups, whose members have different preferences for the consumption of goods. Results...

We compare a social security system where people can retire at an age of their own choice with one in which there is a legal retirement age elected through a majority voting process. We show that individuals prefer a legal retirement age higher than the one they would choose in the flexible...

Adopting a portfolio choice approach to pension design, we derive illuminating closed form solutions for optimal pay-as-you-go social security programs. We demonstrate that the nature of the implied risk-sharing effects and their magnitudes are sensitive to the stochastic specification of...

This paper uses generational accounting to assess the fiscal impacts of Korean reunification. Our findings suggest that early reunification will result in a large increase in the fiscal burden for most current and future generations of South Koreans. The Korean reunification's fiscal impact...

In an occupational choice framework individuals can either become entrepreneurs (risky income) or employed workers (safe income). Their choice is affected by the design of the pension system which discriminates between entrepreneurs and workers. We explore the comparative statics of several...

This paper considers the tax evasion decision when taxes constitute contributions to the financing of social insurance programs, such as un employment insurance. We call this evasion contribution evasion and establish that critical differences exist between contribution evasion and tax evasion,...

We assess the political support for parametric reforms of the pay-as-you-go pension system following a drop in the fertility rate. Using a continuous-time overlapping-generations model, we argue that reforms that consist in cutting pension benefits or increasing the retirement age are likely to...