This paper suggests that adverse selection problems in competitive annuity markets can generate quantity constrained equilibria in which some agents whose length of lifetime is uncertain find it advantageous to accumulate capital privately. This occurs despite the higher rates of return on...

In conducting empirical investigations of the permanent income model of consumption and the consumption-based intertemporal asset pricing model, various authors have imposed restrictions on the nature of the substitutability of consumption across goods and over time. In this paper we suggest a...

The marginal cost of plant capacity, measured by the price of equity is significantly procyclical. Yet, the price of a major intermediate input into expanding plant capacity, investment goods, is coutercyclical. The ratio of these prices is Tobin's q. We interpret the fact that Tobin's q differs...

Household investment leads nonresidential business fixed investment over the U.S. business cycle. Because real business cycle theory has not been able to account for this observation, it represents a potent challenge to the view that transitory productivity disturbances are the main source of...

This paper investigates the response of hours worked and real wages to fiscal policy shocks in the U.S. during the post World War II era. We identify these shocks with exogenous changes in military purchases and argue that they lead to a persistent increase in government purchases and tax rates...

This paper analyzes the ability of a general equilibrium efficiency wage model to account for the estimated response of hours worked and of real wages to a fiscal policy shock. Our key finding is that the model cannot do so unless we make the counterfactual assumption that marginal tax rates are...

This paper investigates the response of real wages and hours worked to an exogenous shock in fiscal policy. We identify this shock with the dynamic response of government purchases and tax rates to an exogenous increase in military purchases. The fiscal shocks that we isolate are characterized...