There are large differences between the microeconometeric estimates of the Frisch labor supply elasticity (0-0.5) and the values used by macroeconomists to calibrate general equilibrium models (2-4). The microeconometric estimates of the Frisch are typically estimated by regressing changes in...

Previous literature demonstrates that in a standard life cycle model the optimal tax on capital is large. This paper highlights that after changing two assumptions in the standard model the optimal tax drops by almost half. First, the utility function is altered such that it implies that an...

This paper considers the impact on optimal tax policy of including endogenously determined retirement in a life cycle model. Allowing individuals to determine when they retire causes the optimal tax on capital to increase by 75% because of two implicit changes in the aggregate labor supply...

This paper quantifies the welfare implications of the U.S. Social Security program during the Great Recession. We find that the average welfare losses due to the Great Recession for agents alive at the time of the shock are notably smaller in an economy with Social Security relative to an...

This paper builds a computational life cycle model and simulates the Great Depression in order to assess the historical welfare implications of implementing Social Security during this business cycle episode. A well established result in the literature is that when comparing steady states with...

This paper considers the impact of endogenous human capital accumulation on optimal tax policy in a life cycle model. Including endogenous human capital accumulation, either through learning-by-doing or learning-or-doing, is analytically shown to create a motive for the government to use...

This paper studies the effectiveness of the social security program as an insurance mechanism against unanticipated catastrophic shocks to the household balance sheets. Our framework is an overlapping generations (OLG) life cycle model with uninsurable idiosyncratic earnings risk, lifetime...