Risk-sharing implications of alternative fiscal policies are compared in a stochastic production economy with overlapping generations. Ex ante efficiency is shown to be achievable with optimal transfers, regardless of distributional concerns. For CRRA preferences, stylized real-world policies...

Using a sample of the 48 mainland US states for the period 1973–2009, we study the ability of US states to expand their own state employment through the use of state deficit policies. The analysis allows for the facts that US states are part of a wider monetary and economic union with free...