In this paper we describe how to optimally design a disability insurance system. The key friction in the model is imperfectly observable disability. We solve a dynamic mechanism design problem and provide a theoretical and numerical characterization of the social optimum. We then propose a...

In this paper, we consider an environment in which agents’ productivities are private information, potentially multi-dimensional, and follow arbitrary stochastic processes. We allow for arbitrary incentive-compatible and physically feasible tax schemes. We prove that it is typically Pareto...

Innovative activities have public good characteristics in the sense that the cost of producing the innovation is high compared to the cost of producing subsequent units. Moreover, knowledge of how to produce subsequent units is widely known once the innovation has occurred and is, therefore,...

In this paper, we generalize the notion of Pareto-efficiency to make it applicable to environments with endogenous populations. Two efficiency concepts are proposed, P-efficiency and A-efficiency. The two concepts differ in how they treat people who are not born. We show how these concepts...