In the industrialized world the population is aging over time, reducing the fraction of the population in working age. Consequently labor is expected to be scarce, relative to capital, with an ensuing decline in the real return on capital. This paper uses demographic projections together with a...

In this paper we characterize quantitatively the optimal mix of progressive income taxes and education subsidies in a model with endogenous human capital formation, borrowing constraints, income risk and incomplete fi…nancial markets. Progressive labor income taxes provide social insurance...

In this paper we …rst document inequality trends in wages, hours worked, earnings, consumption, and wealth for Germany from the last twenty years. We generally …nd that inequality was relatively stable inWest Germany until the German uni…cation (which happened politically in...

We develop a simple overlapping generations model to analytically show that population aging leads to increased educational efforts through a general equilibrium effect. The key mechanism at work in the model is that scarcity of raw labor increases the rate of return to human capital relative to...

This paper employs a large scale overlapping generations (OLG) model with endogenous human capital formation using a Ben-Porath (1967) technology to evaluate the quantitative role of human capital adjustments for the economic consequences of demographic change. We find that endogenous human...

Psychological evidence suggests that people’s learning behavior is often prone to a “myside bias†or “irrational belief persistence†in contrast to learning behavior exclusively based on objective data. In the context of Bayesian learning such a bias may result in...

Public pensions – the primary pillar of old-age income provision – will, in the future, be less generous than they have been in the past, in particular owing to the impact of demographic change. The pension gap is supposed to be plugged by the second and third pillars of pension...

We define pessimistic, respectively optimistic, investors as CEU (Choquet expected utility) decision makers who update their pessimistic, respectively optimistic, beliefs according to a pessimistic (Dempster-Shafer), respectively optimistic, update rule. This paper then demonstrates that, in...

This paper employs a large scale overlapping generations (OLG) model with endogenous education to evaluate the quantitative role of human capital adjustments for the economic consequences of demographic change. We find that endogenous human capital formation is an important adjustment mechanism...