Recent developments in public finance in the analysis of dynamic government debt policies have emphasized effects on the distribution of real resources across generations. At the same time, macroeconomists have emphasized the importance of the length of the time horizon over which agents...

Many issues in macroeconomics, such as the level of the steady state interest rate, or the dynamic effects of government deficit finance, depend crucially on the horizon of economic agents. This paper develops a simple analytical model in which such issues can be examined and in which the...

We introduce a solution technique for the study of discrete time stochastic models populated by long-lived agents. We introduce aggregate uncertainty and complete markets into a 'perpetual-youth' model of a kind first studied by Olivier Blanchard and we show that the pure-trade version of the...

This paper develops a tractable overlapping generations model that is useful for analyzing both the short and long run impact of fiscal policy and social security. It modifies the Blanchard (1985)/Weil (1987) framework to allow for life/cycle behavior. This is accomplished by introducing random...

We investigate how the ability of the government to depart from budget balance and issue debt expands the set of equilibria that can be supported using lump-sum tax-transfer instruments. We show how this depends on the restrictions that exist on the capacity to tax and make transfer payments,...

This paper considers the effects of fiscal and financial policy on economic growth in open and closed economies, when human capital formation by young households is constrained by the illiquidity of human wealth. Both endogenous and exogenous growth versions of the basic OLG model are analyzed....

In traditional societies it is often argued that parents' desire for old age security in the form of transfers from their children provides an important motive for childbearing. Some doubt has been cast on this "old age security hypothesis" by recent estimates which suggest that the rate of...

Using two unifying models and an empirical exercise, this paper present and extends the main theories linking income distribution and growth, as well as the relevant empirical evidence. The first model integrates the political economy and imperfect capital markets theories. It allows for...

This paper formulates and estimates an open-economy overlapping generation general-equilibrium model of endogenous heterogeneous human capital in the form of schooling and on-the-job training. Physical capital accumulation is also analyzed. We use the model to explain rising wage inequality in...