In the New Keynesian model, even if the central bank does not have an over-ambitious output target, policy under discretion leads to an inefficiency known as the stabilisation bias. In this paper, using a New Keynesian model, we explore and quantify how various uncertainties such as an...

Wage posting models of job search typically assume that firms can commit to paying workers the posted wage. This paper investigates the consequences of relaxing this assumption. Under "downward" commitment firms can commit only to paying at least their advertised wage. We show that wage posting...

When the central banker’s loss function is asymmetric, changes in the volatility of inflation and/or unemployment affect equilibrium inflation. This suggests that changing macroeconomic volatilities may be an important driving force behind trends in observed inflation. Previous evidence, which...

There exists a large literature on the optimal deterrence of crime. Within the literature, however, there exists a controversy over what the appropriate criterion to determine optimality should be. While the most popular method is that of maximization of a utilitarian welfare function, another...

In Nash equilibrium, agents are autarchic in their optimization protocol, whereas in Kantian equilibrium, they optimize in an interdependent way. Typically, researchers into the evolution of homo economicus treat preferences as being determined by selective adaptation, but hold fixed the...

While Murphy, Zhang & Dionne (2012) report a slight decrease in the average duration of poverty spells in Canada over the past decade, little is understood about the factors associated with poverty duration in Canada, nor which factors, if any, may affect women and men differently. Moreover,...

We compare the returns to education between graduates of post secondary institutions who delayed their tertiary education for some time and those that proceeded with no delays. Using a unique survey that collects information on a representative cohort of graduates, we are able to estimate the...

Electoral systems promote strategic voting and aect party systems. Duverger (1951) proposed that plurality rule leads to bi-partyism and proportional representation leads to multi-partyism. We show that in a dynamic setting, these static eects also lead to a higher option value for existing...

The development of the welfare state in the Western economies between 1930 and 1990 coincided with a puzzling pattern in the taxation of top incomes. Effective tax rates at the top increased sharply but then gradually decreased, even as social transfers continued rising. We propose a new theory...

We illustrate the contrast between two sources of intergenerational disagreement when generations are overlapping and governments aggregate preferences in a utilitarian manner. Social preferences tend to exhibit a present-bias because generations are imperfectly altruistic about future...